FIRST DEFINED PORTFOLIO MANAGEMENT FUND LLC, 497, 2000-05-08

FIRST DEFINED PORTFOLIO MANAGEMENT FUND LLC
497, 2000-05-08

Previous: DAIMLER BENZ VEHICLE OWNER TRUST 1998-A, 8-K, 2000-05-08

Next: INVESTORS PARTNER LIFE SEPARATE ACCOUNT IPL-1, 497J, 2000-05-08

FIRST DEFINED PORTFOLIO FUND, LLC

April 28, 2000

Prospectus

_________________________________________________________________________

This prospectus is intended for use in connection with variable annuity
policies offered by American Skandia Life Assurance Corporation ("American
Skandia"). This prospectus provides important information to help you evaluate
whether one of the funds listed below may be right for you.

The Dow (sm) Target 5 Portfolio
The Dow (sm) DART 10 Portfolio
Global Target 15 Portfolio
S&P Target 10 Portfolio
NASDAQ Target 15 Portfolio
First Trust 10 Uncommon Values Portfolio
First Trust Energy Portfolio
First Trust Financial Services Portfolio
First Trust Internet Portfolio First
Trust Pharmaceutical Portfolio First
Trust Technology Portfolio

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.

Page 1

TABLE OF CONTENTS

PAGE

THE DOW(SM) TARGET 5 PORTFOLIO 3
Fund Overview 3
THE DOW(SM) DART 10 PORTFOLIO 4
Fund Overview 4
GLOBAL TARGET 15 PORTFOLIO 5
Fund Overview 5
S&P TARGET 10 PORTFOLIO 6
Fund Overview 6
NASDAQ TARGET 15 PORTFOLIO 7
Fund Overview 7
FIRST TRUST 10 UNCOMMON VALUES PORTFOLIO 8
Fund Overview 8
FIRST TRUST ENERGY PORTFOLIO 9
Fund Overview 9
FIRST TRUST FINANCIAL SERVICES PORTFOLIO 10
Fund Overview 10
FIRST TRUST INTERNET PORTFOLIO 11
Fund Overview 11
FIRST TRUST PHARMACEUTICAL PORTFOLIO 12
Fund Overview 12
FIRST TRUST TECHNOLOGY PORTFOLIO 13
Fund Overview 13
FUND ORGANIZATION 14
FUND MANAGEMENT 14
MANAGEMENT FEES AND EXPENSES 15
FUND INVESTMENTS 15

HOW SECURITIES ARE SELECTED 16

DESCRIPTION OF INDICES 17

RISK FACTORS 18

INVESTMENT IN FUND INTERESTS 20

INTEREST REDEMPTION 20

DISTRIBUTIONS AND TAXES 20

12B-1 PLAN 21

NET ASSET VALUE 21

FUND SERVICE PROVIDERS 22
SHAREHOLDER INQUIRIES 22
FINANCIAL HIGHLIGHTS 22

Page 2

The Dow (sm) Target 5 Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing in common stocks
issued by companies that are expected to provide income and to have the
potential for capital appreciation. To select the stocks for the fund,
the investment adviser follows a disciplined investment strategy that
invests primarily in the common stocks of the five companies with the
lowest per share stock prices of the ten companies in the Dow Jones
Industrial Average (sm) ("DJIA") that have the highest dividend yields as
of the close of business on or about the applicable stock selection
date. The portfolio will be adjusted annually on or about December 31 in
accordance with the investment strategy. See "Description of Indices"
for a description of the DJIA.

Each year, on or about the annual stock selection date (December 31),
the fund expects to invest in the securities determined by the strategy
in relatively equal amounts. At that time, the percentage relationship
among the number of shares of each issuer held by the fund is
established. Through the next one-year period that percentage
relationship will be maintained as closely as practicable when the fund
makes subsequent purchases and sales of the securities.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. As with any mutual fund investment,
loss of money is a risk of investing. An investment in the fund is not a
deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation ("FDIC") or any other government agency.

Because the fund is non-diversified, the fund is exposed to additional
market risk. A non-diversified fund may invest a relatively high
percentage of its assets in a limited number of issuers. Non-diversified
funds are more susceptible to any single political, regulatory or
economic occurrence and to the financial condition of individual issuers
in which it invests. The fund is also exposed to additional market risk
due to its policy of investing in accordance with an investment
strategy. As a result of this policy, securities held by the 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, including technology. The fund's relative lack of diversity,
possible concentration in a particular industry and limited management
may subject investors to greater market risk than other mutual funds.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

"Dow Jones Industrial Average (sm)", "DJIA(sm)", "Dow Industrials(sm)", "Dow
30(sm)," "The Dow(sm)" and "The Dow 10(sm)" are service marks of Dow Jones &
Company, Inc. ("Dow Jones") and have been licensed for use for certain
purposes by First Trust Advisors L.P. ("First Trust"). None of the
funds, including, and in particular, The Dow(sm) Target 5 Portfolio, and
The Dow (sm) DART 10 Portfolio, are endorsed, sold, or promoted by Dow
Jones, and Dow Jones makes no representation regarding the advisability
of investing in such products.

Page 3

The Dow (sm) DART 10 Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing in common stocks
issued by companies that are expected to provide income and to have the
potential for capital appreciation. To select the stocks for the fund,
the investment adviser follows a disciplined investment strategy that
invests primarily in the common stocks of the ten companies in the DJIA
that have the highest combined dividend yields and buyback ratios as of
the close of business on or about the applicable stock selection date.
Buyback ratio is determined by subtracting one from the ratio of the
company's common shares outstanding 12 months prior to the applicable
stock selection date divided by the common shares outstanding on or
about the applicable stock selection date. The portfolio will be
adjusted annually on or about December 31 in accordance with the
investment strategy. See "Description of Indices" for a description of
the DJIA.

The fund invests in stocks with relatively high dividend yields and
relatively high buyback ratios. Investing in stocks with high dividend
yields and buyback ratios may be effective in achieving the fund's
investment objective. This is because regular dividends are common for
established companies and have typically accounted for a large portion
of the total return on stocks. Historically, companies rewarded
shareholders in the form of dividend payments. By selecting the DJIA
stocks with the highest dividend yields, the fund seeks to uncover
stocks that may be out of favor or undervalued. More recently, many
companies have turned to stock reduction programs as a tax efficient way
to bolster their stock prices and reward shareholders. Companies which
have reduced their shares through a share buyback program may provide a
strong cash flow position and, in turn, high quality earnings.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 4

Global Target 15 Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing in common stocks
issued by companies that are expected to provide income and to have the
potential for capital appreciation. To select the stocks for the fund,
the investment adviser follows a disciplined investment strategy that
invests primarily in the common stocks of the companies which are
components of the DJIA, the Financial Times Industrial Ordinary Share
Index ("FT Index") and the Hang Seng Index. The fund primarily consists
of common stocks of the five companies with the lowest per share stock
price of the ten companies in each of the DJIA, FT Index and Hang Seng
Index, respectively, that have the highest dividend yields in the
respective index as of the close of business on or about the applicable
stock selection date. The portfolio will be adjusted annually on or
about December 31 in accordance with the investment strategy. See
"Description of Indices" for a description of the DJIA, FT Index and
Hang Seng Index.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's investment in foreign
stock presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. The fund's
concentration in securities of United Kingdom and Hong Kong issuers also
exposes the fund to additional risk. As with any mutual fund investment,
loss of money is a risk of investing. An investment in the fund is not a
deposit of a bank and is not insured or guaranteed by the FDIC or any
other government agency.

Fund Performance

The fund has not been in operation for a full calendar
year; therefore, no performance information is provided.

Page 5

S&P Target 10 Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing in common stocks
issued by companies that have the potential for capital appreciation. To
select the stocks for the fund, the investment adviser follows a
disciplined investment strategy that invests primarily in the common
stocks of the ten companies selected from a subset of the stocks
included in the Standard & Poor's 500 Composite Stock Price Index ("S&P
500 Index") as of the close of business on or about the applicable stock
selection date. See "Description of Indices" for a description of the
S&P 500 Index.

The fund primarily consists of a portfolio of 10 common stocks selected
each year through the following three-step process from a subset of the
stocks listed on the S&P 500 Index as of close of business on or about
the applicable stock selection date. The first step begins by selecting
the 250 largest companies based on market capitalization in the S&P 500
Index. From the 250 companies identified in the first step, the second
step selects the 125 companies with the lowest price to sales ratios.
Finally, of the remaining companies, the 10 companies which had the
greatest 1-year stock price appreciation are selected for the fund. The
portfolio will be adjusted annually on or about December 31 in
accordance with the investment strategy.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

"Standard & Poor's", "S&P" "S&P 500", "Standard & Poor's 500" and "500"
are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by First Trust on behalf of the fund. The fund is not sponsored,
endorsed, managed, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing
in the fund. Please see the Statement of Additional Information which
sets forth certain additional disclaimers and limitations on behalf of
Standard & Poor's.

Page 6

NASDAQ Target 15 Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average total return.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing in common stocks
issued by companies that are expected to have the potential for capital
appreciation. To select the stocks for the fund, the investment adviser
follows a disciplined investment strategy that invests primarily in the
common stocks of fifteen companies selected from a subset of the stocks
included in the Nasdaq-100 Index as of the close of business on or about
the applicable stock selection date. See "Description of Indices" for a
description of the Nasdaq-100 Index.

The fund primarily consists of a portfolio of fifteen common stocks
selected each year through the following multi-step process from a
subset of the stocks listed on the Nasdaq-100 Index as of the close of
business on or about the applicable stock selection. The first step
begins by removing from the index all companies that are the subject of
an announced business combination which is expected to occur within six
months of the applicable stock selection date. The second step ranks
each remaining security by price appreciation over the prior twelve-
month period. The third step ranks the same securities by price
appreciation over the prior six-month period. The combined effect of the
second and third step is to select stocks which have shown consistent
growth over the past year. The fourth step numerically ranks the stocks
by return on assets ratio. The fifth step numerically ranks each
security by their ratio of cash flow per share to stock price. This is a
common indication of value. After ranking each of the securities in each
of the second through fifth criteria, the resulting four rankings are
added up for each security. Those fifteen securities with the lowest
sums are selected for the portfolio. The portfolio will be adjusted
annually on or about December 31 in accordance with the investment
strategy.

Each year, on or about the stock selection date (December 31), the fund
expects to invest in the securities determined by the strategy. These
securities will be weighted by market capitalization subject to the
restriction that no stock will comprise less than 1% or more than 25% of
the portfolio on or about the stock selection date. At that time, the
percentage relationship among the number of shares of each issuer held
by the fund is established. Through the next one-year period that
percentage relationship will be maintained as closely as practicable
when the fund makes subsequent purchases and sales of the securities.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

"The Nasdaq 100(registered trademark)", "Nasdaq-100 Index(registered trade
mark)", "Nasdaq Stock Market(registered trademark)" and "Nasdaq(registered
trademark)" are trade or service marks of The Nasdaq Stock Market, Inc. (which
with its affiliates are the "Corporations") and have been licensed for use by
First Trust. The fund has not been passed on by the Corporations as to its
legality or suitability. The fund is not issued, endorsed, sponsored,
managed, sold or promoted by the Corporations. THE CORPORATIONS MAKE NO
WARRANTIES AND BEAR NOT LIABILITY WITH RESPECT TO THE FUND.

Page 7

First Trust 10 Uncommon Values Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in the
ten common stocks selected by the Investment Policy Committee of Lehman
Brothers Inc. ("Lehman Brothers") with the assistance of the Research
Department of Lehman Brothers which, in the opinion of Lehman Brothers,
have the greatest potential for capital appreciation during the next
year. The portfolio will be adjusted annually on or about July 1 in
accordance with the investment strategy.

Each year, on or about the annual stock selection date (July 1), the
fund expects to invest in the securities determined by Lehman Brothers
in relatively equal amounts. At that time, the percentage relationship
among the number of shares of each issuer held by the fund is
established. Through the next one-year period that percentage
relationship will be maintained as closely as practicable when the fund
makes subsequent purchases and sales of the securities.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 8

First Trust Energy Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in common
stocks issued by companies involved in the energy industry. The fund may
hold securities of issuers in many energy sectors including, among
others, integrated oil, oil field services and equipment, oil and gas
production, and natural gas. The companies selected for the fund are
researched and evaluated using database screening techniques,
fundamental analysis and the judgment of the investment adviser. The
investment adviser seeks companies that it believes have above-average
growth prospects.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 9

First Trust Financial Services Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in common
stocks issued by companies involved in the financial services industry,
including, among others, money center banks, major regional banks,
financial and investment service providers and insurance companies. The
companies selected for the fund are researched and evaluated using
database screening techniques, fundamental analysis and the judgment of
the investment adviser. The investment adviser seeks companies that it
believes have above-average growth prospects.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 10

First Trust Internet Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in common
stocks issued by companies involved in the internet industry. The
companies selected for the fund are researched and evaluated using
database screening techniques, fundamental analysis and the judgment of
the investment adviser. The investment adviser seeks companies that it
believes have above-average growth prospects.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 11

First Trust Pharmaceutical Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in common
stocks issued by companies involved in the pharmaceutical industry. The
fund may hold securities of issuers in many pharmaceutical sectors
including, among others, medical supplies, drugs and biotech. The
companies selected for the fund are researched and evaluated using
database screening techniques, fundamental analysis, and the judgment of
the investment adviser. The investment adviser seeks companies that it
believes have above-average growth prospects.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 12

First Trust Technology Portfolio

Fund Overview

Investment Objective

The fund seeks to provide above-average capital appreciation.

How the Fund Pursues its Objective

The fund seeks to achieve its objective by investing primarily in common
stocks issued by companies involved in the technology industry
including, among others, companies that offer computers, computer
networking, software, semiconductor equipment and semiconductors. The
companies selected for the fund are researched and evaluated using
database screening techniques, fundamental analysis, and the judgment of
the investment adviser. The investment adviser seeks companies that it
considers to have above-average growth prospects.

The fund may also invest in futures, options, warrants, forward
contracts and repurchase agreements.

What are the Risks of Investing in the Fund?

The principal risk of investing in the fund is market risk. Market risk
is the risk that a particular stock in the fund, the fund itself or
stocks in general may fall in value. The fund's potential investment in
foreign stocks presents additional risk including currency risk. Foreign
companies may be affected by adverse political, diplomatic and economic
developments, changes in foreign currency exchange rates, taxes, less
publicly available information and other factors. As with any mutual
fund investment, loss of money is a risk of investing. An investment in
the fund is not a deposit of a bank and is not insured or guaranteed by
the FDIC or any other government agency.

Fund Performance

The fund has not been in operation for a full calendar year; therefore,
no performance information is provided.

Page 13

Fund Organization

Each fund is a series of the First Defined Portfolio Fund, LLC (the
"Registrant"), a non-diversified open-end management investment company
registered under the Investment Company Act of 1940. Each fund
constitutes a separate mutual fund with its own investment objective and
policies. The Registrant is organized as a Delaware limited liability
company. Its Board of Trustees is responsible for its overall management
and direction. The Board elects the Registrant's officers and approves
all significant agreements including those with the investment adviser,
custodian and fund administrative and accounting agent. Board members
are elected by owners of the Registrant's membership interests (the
"interests").

Under Delaware law, a limited liability company does not issue shares of
stock. Instead, ownership rights are contained in "membership
interests". Each interest of a fund represents an undivided interest in
the securities held in the fund's portfolio. The funds are not offered
directly to the public. Interests of the funds are sold only to American
Skandia Life Assurance Corporation Variable Account B ("Account B") to
fund the benefits of variable annuity policies (the "Policies") issued
by American Skandia. Account B is the sole member of the Registrant.
Account B's variable annuity owners who have Policy values allocated to
any of the funds have indirect rights in the Registrant's interests. The
funds may be divided into two general categories: Strategy Funds and
Sector Funds.

Strategy Funds

The Strategy Funds are: The Dow (sm) Target 5 Portfolio, The Dow(sm) DART 10
Portfolio, Global Target 15 Portfolio, S&P Target 10 Portfolio, NASDAQ
Target 15 Portfolio and First Trust 10 Uncommon Values Portfolio. The
Strategy Funds seek their investment objectives by investing their
assets primarily in accordance with a particular investment strategy.
The Strategy Funds' portfolios are generally adjusted annually to
reflect the strategies most recent selections. (See "Fund Overview" for
each fund for a description of the investment strategies).

Sector Funds

The Sector Funds are: First Trust Energy Portfolio, First Trust
Financial Services Portfolio, First Trust Internet Portfolio, First
Trust Pharmaceutical Portfolio and First Trust Technology Portfolio. The
Sector Funds invest primarily in the common stocks of companies that
represent each funds' specific sector or industry.

Fund Management

The overall management of the business and affairs of the funds is the
responsibility of the Board of Trustees of the funds.

First Trust Advisors L.P. ("First Trust"), 1001 Warrenville Road, Lisle,
Illinois, 60532, is the investment adviser to the funds. In this
capacity, First Trust is responsible for the selection and ongoing
monitoring of the securities in the funds' portfolios, managing the
funds' business affairs and providing certain clerical, bookkeeping and
other administrative services.

First Trust is a limited partnership with one limited partner, Grace
Partners of DuPage L.P., and one general partner, Nike Securities
Corporation. Grace Partners of DuPage L.P. is a limited partnership with
one general partner, Nike Securities Corporation, and a number of
limited partners. Nike Securities Corporation is an Illinois corporation
controlled by the Robert Donald Van Kampen family. First Trust
discharges its responsibilities subject to the policies of the Board of
Trustees of the funds.

First Trust serves as adviser or subadviser for over 50 mutual funds and
is also the portfolio supervisor of unit investment trusts sponsored by
Nike Securities L.P. ("Nike Securities"), some of which are
substantially similar to the funds. Nike Securities, 1001 Warrenville
Road, Lisle, Illinois 60532, specializes in the underwriting, trading
and distribution of unit investment trusts and other securities. Nike
Securities is the sponsor and principal underwriter of the funds'
interests and has sponsored or underwritten over $25 billion of
investment company shares.

Page 14

There is no one individual primarily responsible for portfolio
management decisions for the funds. Investments are made under the
direction of a committee. For additional information concerning First
Trust, including a description of the services provided, see the
Statement of Additional Information.

Management Fees and Expenses

For providing management services, First Trust is paid an annual fund
management fee by each fund of 0.60% of average daily net assets.

Each fund pays for its own operating expenses such as custodial,
transfer agent, administrative, accounting and legal fees; brokerage
commissions; distribution and service fees; licensing fees (if
applicable); extraordinary expenses; and its portion of the Registrant's
operating expenses. First Trust has agreed to waive fees and
reimburse expenses through September 30, 2001 to prevent a fund's Total
Annual Fund Operating Expenses (excluding brokerage expenses and
extraordinary expenses) from exceeding 1.47% of the average daily net
asset value of such fund. However, with respect to the First Trust 10
Uncommon Values Portfolio, First Trust has agreed to waive fees and
reimburse expenses to prevent the fund's Total Annual Operating Expenses
(excluding brokerage expenses and extraordinary expenses) from exceeding
1.47% and 1.37% of the average daily net asset value of the fund through
July 1, 2000 and September 30, 2001, respectively.

Fund Investments

Equity Securities

Each fund invests primarily in equity securities. Eligible equity
securities include common stocks; warrants to purchase common stocks;
and securities convertible into common stocks, such as convertible bonds
and debentures. In addition, each of the Sector Funds, the First Trust
10 Uncommon Values Portfolio, the Global Target 15 Portfolio and the
NASDAQ Target 15 Portfolio may invest in equity securities of foreign
issuers, including depositary receipts that represent foreign common
stocks deposited with a custodian.

Short-Term Investments

Each fund may invest in cash equivalents or other short-term investments
including U.S. government securities, commercial paper, repurchase
agreements, money-market funds or similar fixed-income securities with
remaining maturities of one year or less. For more information on short-
term investments, see the Statement of Additional Information.

Futures and Options

Each fund may invest in various investment strategies designed to hedge
against changes in the values of securities the fund owns or expects to
purchase or to hedge against interest rate or currency exchange rate
changes. The securities used to implement these strategies include
financial futures contracts, options, forward contracts, options on
financial futures and stock index options.

Delayed Delivery Securities

Each fund may buy or sell securities on a when-issued or delayed-
delivery basis, paying for or taking delivery of the securities at a
later date, normally within 15 to 45 days of the trade. Such
transactions involve an element of risk because the value of the
securities to be purchased may decline before the settlement date.

Page 15

How Securities Are Selected

Strategy Funds

To select securities for the Strategy Funds, First Trust primarily
follows a disciplined investment strategy that invests in the common
stocks determined by the strategy. The portfolio of each Strategy Fund
is adjusted annually on or about the funds' annual stock selection date
of December 31 (other than the First Trust 10 Uncommon Values Portfolio
which is adjusted on or about each July 1), in accordance with the
applicable investment strategy. On or about the annual stock selection
date for a fund, a percentage relationship among the number of
securities in the fund will be established. When additional assets are
deposited into the fund, additional securities will be purchased in such
numbers that reflect as nearly as practicable the percentage
relationship of the number of securities established on or about the
annual stock selection date. First Trust will likewise attempt to
replicate the percentage relationship of securities when selling
securities for a fund. The percentage relationship among the number of
securities in a fund should therefore remain relatively stable. However,
given the fact that the market price of such securities will vary
throughout the year, the value of the securities of each of the
companies as compared to the total assets of a fund will fluctuate
during the year, above and below the proportion established on the
annual stock selection date. On or about the annual stock selection date
for a fund, new securities will be selected and a new percentage
relationship will be established among the number of securities for the
fund.

It is generally not possible for First Trust to purchase round lots
(usually 100 shares) of stocks in amounts that will precisely duplicate
the prescribed mix of securities. Also, it usually is impossible for a
fund to be 100% invested in the prescribed mix of securities at any. To
the extent that a fund is not fully invested, the interests of variable
annuity Policy owners may be diluted and total return may not directly
track the investment results of the prescribed mix of securities. To
minimize this effect, First Trust will generally try, as much as
practicable, to maintain a minimum cash position at all times. Normally,
the only cash items held by a fund are amounts expected to be deducted
as expenses, amounts too small to purchase additional round lots of the
securities and amounts held during the settlement of portfolio
transactions.

Sector Funds

The companies selected for the Sector Funds are researched and evaluated
by First Trust by using database screening techniques, fundamental
analysis, and the judgment of its research analysts. First Trust seeks
companies that it believes have above-average growth prospectus within
the respective industry or sector.

Investment Limitations

The funds have adopted certain investment limitations (based on total
assets) that cannot be changed without interest holder approval and are
designed to limit your investment risk. Such limitations are described
in the Statement of Additional Information.

Hedging and Other Defensive and Temporary Investment Strategies

Although the Strategy Funds have no present intentions to vary from
their investment strategies under any circumstances, all of the funds
may invest up to 100% of their assets in cash equivalents and short-term
investments as a temporary defensive measure in response to adverse
market conditions, or to keep cash on hand fully invested. During these
periods, a fund may not be able to achieve its investment objective.

First Trust may also use various investment strategies designated to
hedge against changes in the value of securities a fund owns or expects
to purchase or to hedge against interest rate changes or currency
fluctuations during the settlement of portfolio transactions. These
hedging strategies include using financial futures contracts, options,
options on financial futures, foreign currency forward contracts or
stock index options. The ability of a fund to benefit from options and
futures is largely dependent on First Trust's ability to use such
strategies successfully. A fund could lose money on futures transactions
or an option can expire worthless.

Page 16

Each fund's investment objective may not be changed without interest
holder approval. The above investment policies may be changed by the
Board of Trustees without interest holder approval unless otherwise
noted in this prospectus or the Statement of Additional Information.

Portfolio Turnover

A fund buys and sells portfolio securities in the normal course of its
investment activities. The proportion of the fund's investment portfolio
that is sold and replaced with new securities during a year is known as
the fund's portfolio turnover rate. The Strategy and Sector Funds
anticipate that their annual portfolio turnover rates will generally be
between 20% and 100%. A turnover rate of 100% would occur, for example,
if a fund sold and replaced securities valued at 100% of its net assets
within one year. Active trading would result in the payment by the fund
of increased brokerage costs and expenses.

Description of Indices

The portfolios of certain of the Strategy Funds consist of the common
stocks of companies listed on various indices. A description of certain
of the indices is provided below.

The Dow Jones Industrial Average(sm)

The stocks included in the DJIA are chosen by the editors of The Wall
Street Journal as representative of the broad market and of American
industry. The companies are major factors in their industries and their
stocks are widely held by individuals and institutional investors.

The Financial Times Industrial Ordinary Share Index

The FT Index is comprised of 30 common stocks chosen by the editors of
The Financial Times as representative of British industry and commerce.
This index is an unweighted average of the share prices of selected
companies. These companies are highly capitalized and major factors in
their industries. In addition, their stocks are widely held by
individuals and institutional investors.

The Hang Seng Index

The Hang Seng Index presently consists of 33 stocks currently listed on
the Stock Exchange of Hong Kong Ltd. (the "Hong Kong Stock Exchange"),
and it includes companies intended to represent four major market
sectors: commerce and industry, finance, properties and utilities. The
Hang Seng Index is a recognized indicator of stock market performance in
Hong Kong. It is computed on an arithmetic basis, weighted by market
capitalization, and is therefore strongly influenced by stocks with
large market capitalizations.

The Nasdaq-100 Index

The Nasdaq-100 Index represents the largest non-financial domestic and
international issues listed on the Nasdaq Stock Market(R). The index is
calculated based on a modified capitalization weighted methodology. The
Nasdaq Stock Market lists approximately 5,000 companies and trades more
shares per day than any other major U.S. market.

The Standard & Poor's 500 Index

Widely regarded as the standard for measuring large-cap U.S. stock
market performance, the S&P 500 Index includes a representative sample
of leading U.S. companies in leading industries. The S&P 500 Index
consists of 500 stocks chosen for market size, liquidity and industry
group representation. It is a market-value weighted index with each
stocks' weight in the Index proportionate to its market value.

Except as described in the Prospectus or Statement of Additional
Information, the publishers of the indices have not granted the funds or
First Trust a license to use their respective index. The funds are not

Page 17

designed so that prices will parallel or correlate with the movements in
any particular index or a combination of indices and it is expected that
their prices will not parallel or correlate with such movements. The
publishers of the indices have not participated in any way in the
creation of the funds or in the selection of stocks in the funds.

Risk Factors

Risk is inherent in all investing. Investing in the funds involves risk,
including the risk that you may lose all or part of your investment.
There can be no assurance that a fund will meet its stated objective.
Before you invest, you should consider the following risks.

Market risk: Market risk is the risk that a particular stock, an
industry, a mutual fund or stocks in general may fall in value.

Small-cap company risk: Certain funds may invest in small 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 capitalization companies as a
result of several factors, including limited trading volumes, products
or financial resources, management inexperience and less publicly
available information. Accordingly, such companies are generally subject
to greater market risk than larger capitalization companies.

Inflation risk: Inflation risk is the risk that the value of assets or
income from investments will be less in the future as inflation
decreases the value of money. As inflation increases, the value of the
funds' assets can decline as can the value of the funds' distributions.
Common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase.

Foreign investment risk: Certain funds may invest in foreign securities.
Securities issued by foreign companies or governments present risks
beyond those of securities of U.S. issuers. Risks of investing in
foreign securities include higher brokerage costs; different accounting
standards; expropriation, nationalization or other adverse political or
economic developments; currency devaluation, blockages or transfer
restrictions; changes in foreign currency exchange rates; taxes; restrictions
on foreign investments and exchange of securities; inadequate financial
information; lack of liquidity of certain foreign markets; and less
government supervision and regulation of exchanges, brokers, and issuers
in foreign countries. Prices of foreign securities also may be more
volatile.

Concentration risk: Each fund is classified as "non-diversified." As a
result, each fund is only limited as to the percentage of its assets
which may be invested in the securities of any one issuer by its own
investment restrictions and by the diversification requirements imposed
by the Internal Revenue Code of 1986, as amended. Since each fund may
invest a relatively high percentage of its assets in a limited number of
issuers, each fund may be more susceptible to any single economic,
political or regulatory occurrence and to the financial conditions of
the issuers in which it invests.

In addition, the Sector Funds are considered to be concentrated in the
securities of their respective industries and the Strategy Funds may be
concentrated in the securities of a given industry if the applicable
investment strategy selects such securities. A concentration makes a
fund more susceptible to any single occurrence affecting the industry
or sector and may subject the fund to greater market risk than more
diversified funds. Particular risk factors for certain sectors are
provided below.

Energy Sector: Companies involved in the energy industry are subject to
changes in value and dividend yields which depend to a large extent on
the price and supply of unpredictable energy fuels and consumer demand.
Also, international politics may cause cost and supply fluctuations, and
increasing sensitivity to environmental concerns will likely pose
serious challenges to the industry over the coming decade. Energy
conservation, taxes and regulatory policies of various governments may
also affect the industry.

Financial Services Sector: Companies involved in the financial services
industry are generally subject to the adverse effects of economic
recession, volatile interest rates, portfolio concentrations in
geographic markets, commercial and residential real estate loans and
competition. In addition, such companies are subject to extensive
regulation and tax law changes. Brokerage firms compete with banks and
thrifts to provide traditional financial service products in addition to
their traditional services, such as brokerage and investment advice.

Page 18

Insurance companies are also subject to the imposition of premium rate
caps, pressure to compete globally, weather catastrophes and other
disasters that require payouts and mortality rates.

Pharmaceutical Sector: Companies involved in the pharmaceutical industry
are subject to governmental regulation of their products and services,
increasing competition, termination of patent protections for drug
products, litigation, the high costs of research and development and the
risk that technological advances will render their products or services
obsolete.

Technology and Internet Sectors: Companies involved in the technology and
Internet industries must contend with rapidly changing technology,
worldwide competition, including aggressive pricing and reduced profit
margins, rapid obsolescence of products and services, loss of patent
protections, cyclical market patterns, evolving industry standards and
frequent new product introductions. Technology companies may be smaller
and less experienced companies, with limited product lines, markets or
financial resources and fewer experienced management or marketing
personnel. Also, the stocks of many technology companies have
exceptionally high price-to-earning ratios with little or no earnings
histories. Many technology companies, particularly those involved with
the Internet, have experienced extreme price and volume fluctuations
that often have been unrelated to their operating performance. Because
of the components of the Nasdaq 100 Index, the Nasdaq Target 15
Portfolio is likely to be concentrated in the technology industry.

The Global Target 15 Portfolio is considered to be concentrated in the
securities of United Kingdom and Hong Kong issuers. Particular risk
factors follow.

United Kingdom: The United Kingdom is one of 15 members
of the European Union ("EU") which was formed by the Maastricht Treaty
on European Union. It is expected that the Treaty will have the effect
of eliminating most remaining trade barriers between the member nations
and make Europe one of the largest common markets in the world. However,
the uncertain implementation of the Treaty provisions and recent rapid
political and social change throughout Europe make the extent and nature
of future economic development in the United Kingdom and Europe and
their effect on securities issued by U.K. issuers impossible to predict.

Unlike a majority of EU members, the United Kingdom did not convert its
currency to the new common European currency, the euro, on January 1,
1999. All companies with significant markets or operations in Europe
face strategic challenges as these entities adapt to a single currency.
The euro conversion may materially impact revenues, expenses or income;
increase competition; affect issuers' currency exchange rate risk and
derivatives exposure; cause issuers to increase spending on information
technology updates; and result in potentially adverse tax consequences.
We cannot predict when or if the United Kingdom will convert to the euro
or what impact the implementation of the euro throughout a majority of
EU countries will have on U.K. or European issuers.

Hong Kong: Hong Kong issuers are subject to risks related to Hong Kong's
political and economic environment, the volatility of the Hong Kong
stock market, and the concentration of real estate companies in the Hang
Seng Index. Hong Kong reverted to Chinese control on July 1, 1997 and
any increase in uncertainty as to the future economic and political
status of Hong Kong, or a deterioration of the relationship between
China and the United States, could have negative implications on stocks
listed on the Hong Kong stock market. Securities prices on the Hong Kong
Stock Exchange, and specifically the Hang Seng Index, can be highly
volatile and are sensitive to developments in Hong Kong and China, as
well as other world markets.

Investment strategy risk: The Strategy Funds are exposed to additional
market risk due to their policy of investing in accordance with an
investment strategy. As a result of this policy, securities held by a
Strategy Fund will generally not be bought or sold in response to market
fluctuations. This policy may subject investors to greater market risk
than other mutual funds.

Page 19

Investment in Fund Interests

Interests of the funds are sold only to Account B to fund the benefits
of the Policies issued by American Skandia. Account B purchases
interests of the funds in accordance with variable account allocation
instructions received from owners of the Policies. First Trust then uses
the proceeds to buy securities for the funds. Account B, as an interest
holder, has an ownership in the funds' investments.

The funds do not issue interest certificates. Individual investors may
not purchase or redeem interests in the funds directly; interests may be
purchased or redeemed only through the Policies. There are no minimum
investment requirements. All investments in a fund are credited to the
interest holder's account in the form of full and fractional interests
of the designated fund (rounded to the nearest 1/1000 of a share). For a
discussion of how Policy owners may purchase fund interests, please
refer to the prospectus for Account B. Owners of the Policies may direct
purchase or redemption instructions to American Skandia at 1 Corporate
Drive, Shelton, CT 06484-0883, 1-(800) 752-6342.

The price received for purchase requests will depend on when the order
is received. Orders received before the close of trading on a business
day will receive that day's closing price, otherwise the next business
day's price will be received. A business day is any day the New York
Stock Exchange is open for business and normally ends at 4 p.m. New York
time. See "Net Asset Value" for a discussion of how interests are priced.

Interest Redemption

Each fund offers to buy back (redeem) interests of the fund from Account
B at any time at net asset value. Account B will redeem interests to
make benefit or surrender payments under the terms of the Policies or to
effect transfers among investment options. Redemptions are processed on
any day on which the funds are open for business and are effected at the
net asset value next determined after the redemption order, in proper
form, is received. Orders received before the close of trading on a
business day will receive that day's closing price, otherwise the next
business day's price will be received. For a discussion of how Policy
owners may redeem interests, please refer to the prospectus for Account B.

A fund may suspend the right of redemption only under the following
unusual circumstances:

- - when the New York Stock Exchange is closed (other than weekends and
holidays) or trading is restricted;

- - when trading in the markets utilized is restricted, or when an
emergency exists so that disposal of the Fund's investments or
determination of its net assets is not reasonably practicable; or

- - during any period when the SEC may permit.

Distributions and Taxes

Automatic Reinvestment

All dividends received by a fund will be reinvested into additional fund
interests.

Taxes and Tax Reporting

The Registrant is a limited liability company with all of its interests
owned by a single entity (Account B). Accordingly, the Registrant is
part of the operations of American Skandia and is not taxed separately.
The Registrant does not intend to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. Under current
tax law, interest, dividend income and capital gains of the Registrant
are not currently taxable when left to accumulate within a variable
annuity contract. For a discussion of the tax status of the variable
annuity Policy, please refer to the prospectus for Account B.

Internal Revenue Service Diversification Requirements

Page 20

The funds intend to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts
of insurance companies as a condition of maintaining the tax deferred
status of the variable annuity Policies issued by Account B. First Trust
reserves the right to depart from the investment strategy of a fund in
order to meet these diversification requirements. See the Statement of
Additional Information for more specific information.

12b-1 Plan

Nike Securities serves as the selling agent and distributor of the
funds' interests. In this capacity, Nike Securities manages the offering
of the funds' interests and is responsible for all sales and promotional
activities. In order to reimburse Nike Securities for its costs in
connection with these activities, each fund has adopted a service plan
under Rule 12b-1 under the Investment Company Act of 1940. Each fund may
spend up to 0.25% per year of its daily net assets as a service fee.
Nike Securities uses the service fee to compensate American Skandia for
providing account services to Policy owners. These services include
establishing and maintaining Policy owners' accounts, supplying
information to Policy owners, delivering fund materials to Policy
owners, answering inquiries, and providing other personal services to
Policy owners. Because these fees are paid out of the fund's assets on
an on-going basis, over time these fees will increase the cost of your
investment any may cost you more than paying other types of sales
charges. In addition, the Plan allows First Trust to use a portion of
its advisory fee to compensate Nike Securities for other expenses,
including printing and distributing prospectuses to persons other than
interest holders or Policy owners, and the expenses of compensating its
sales force and preparing, printing and distributing advertising, sales
literature and reports to interest holders and Policy owners used in
connection with the sale of interests.

Net Asset Value

The price of fund interests is based on a fund's net asset value per
interest which is determined as of the close of trading (normally 4:00
p.m. eastern time) on each day the New York Stock Exchange is open for
business. Net asset value is calculated for each fund by taking the
market price of the fund's total assets, including interest or dividends
accrued but not yet collected, less all liabilities, and dividing by the
total number of interests outstanding. The result, rounded to the
nearest cent, is the net asset value per interest. All valuations are
subject to review by the funds' Board of Trustees or its delegate.

In determining net asset value, expenses are accrued and applied daily
and securities and other assets are generally valued as set forth below.
Common stocks and other equity securities listed on any national or
foreign exchange or on the Nasdaq will be valued at the closing sale
price on the exchange or system in which they are principally traded on
the valuation date. If there are no transactions on the valuation day,
securities traded principally on a national or foreign exchange or on
Nasdaq will be valued at the mean between the most recent bid and ask
prices. Equity securities traded in the over-the-counter market are
valued at their closing bid prices. Fixed income securities with a
remaining maturity of 60 days or more will be valued by the fund
accounting agent using a pricing service. When price quotes are not
available, fair market value is based on prices of comparable
securities. Fixed income securities maturing within 60 days are valued
by the fund accounting agent on an amortized cost basis. Foreign
securities, currencies and other assets denominated in foreign
currencies are translated into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar as provided by a pricing service. All
assets denominated in foreign currencies will be converted into U.S.
dollars at the exchange rates in effect at the time of valuation. The
value of any portfolio security held by a fund for which market
quotations are not readily available will be determined in a manner that
most fairly reflects fair market value of the security on the valuation
date.

For funds that hold securities that trade primarily on foreign
exchanges, the net asset value of a fund's interests may change on days
when interest holders will not be able to purchase or redeem the fund's
interests.

Fund Service Providers

The custodian of the assets of the funds is The Chase Manhattan Bank, 4
New York Plaza, New York, NY 10004- 2413. Chase also provides certain
accounting services to the funds. The funds' transfer, shareholder

Page 21

services, fund accounting and dividend paying agent, PFPC Inc., 4400
Computer Drive, Westborough, Massachusetts 01581, performs bookkeeping,
data processing, accounting and administrative services for the
operation of the funds and the maintenance of shareholder accounts.

Each fund pays an administrative fee of 0.325% of average daily net
assets to cover expenses incurred by American Skandia in connection with
the administration of the funds, Account B and the Policies. See the
Statement of Additional Information for an additional discussion of fund
expenses.

Shareholder Inquiries

All inquiries regarding the funds should be directed to the applicable
fund at 1001 Warrenville Road, Suite 300, Lisle, Illinois 60532, 1-(800)
621-1675.

Financial Highlights Information

The financial highlights table is intended to help you understand each
fund's financial performance from inception, October 6, 1999, until
December 31, 1999. Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate
that you would have earned, or lost, on an investment in a fund
(assuming reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young, LLP, whose report, along
with the Registrant's financial statements, is included in the Statement
of Additional Information and annual report, which is available upon
request.

Page 22

Financial Highlights
The Dow(sm) Target 5 Portfolio

Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.05
Net unrealized loss on investments (2.01)
Total from investment operations (1.96)
Net asset value, end of period $8.04

Total return + (19.60)%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $80
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets 2.28%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 215.88%**

___________________________________________________

* The Fund commenced operations on October 6, 1999.

** Annualized.

+ Total return is not annualized for periods less than one
year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor.

Page 23

Financial Highlights
The Dow(sm) DART 10 Portfolio

Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income 0.02
Net unrealized loss on investments (0.80)
Total from investment operations (0.78)
Net asset value, end of period $ 9.22
Total return + (7.80)%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $101
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets 1.01%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 182.94%**

___________________________________________________

* The Fund commenced operations on October 6, 1999.
** Annualized.
+ Total return is not annualized for periods less than one
year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor.

Page 24

Financial Highlights
Global Target 15 Portfolio

Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income *.0.06
Net unrealized loss on investments (0.35)
Total from investment operations (0.29)
Net asset value, end of period $9.71

Total return + (2.90)%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $252
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets 2.77%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 51.39%**

___________________________________________________

Page 25

Financial Highlights
S&P Target 10 Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income (0.02)
Net unrealized loss on investments 1.85
Total from investment operations 1.83
Net asset value, end of period $11.83

Total return 18.30%

Ratios to average net assets/supplemental data:

Net assets, end of period (in 000's) $273
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (1.04)%**
Portfolio turnover rate: 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 96.12%**

___________________________________________________

Page 26

Financial Highlights
NASDAQ Target 15 Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income (0.05)++
Net unrealized loss on investments 4.65
Total from investment operations 4.60
Net asset value, end of period $14.60

Total return + 46.00%

Ratios to average net assets/supplemental data:

Net assets, end of period (in 000's) $410
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (1.44)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets
without fee waivers and expenses reimbursed 90.16%**

___________________________________________________

Page 27

Financial Highlights
First Trust 10 Uncommon Values Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:
Net investment income (0.02)
Net unrealized loss on investments 1.42
Total from investment operations 1.40
Net asset value, end of period $11.40

Total return + 14.00%

Ratios to average net assets/supplemental data:

Net assets, end of period (in 000's) $125
Ratio of operating expenses to average net assets (0.65)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets
without fee waivers and expenses reimbursed 144.82%**

___________________________________________________

Page 28

Financial Highlights
First Trust Energy Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income (0.01)
Net unrealized loss on investments 1.24
Total from investment operations 1.23
Net asset value, end of period $11.23

Total return + 12.30%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $114
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (0.50)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets
without fee waivers and expenses reimbursed 111.63%**

___________________________________________________

Page 29

Financial Highlights
First Trust Financial Services Portfolio

Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:
Net investment income (0.00)#
Net unrealized loss on investments 0.49
Total from investment operations 0.49
Net asset value, end of period $10.49

Total return + 4.90%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $130
Ratio of operating expenses to average net assets (0.19)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 115.6%**

___________________________________________________

* The Fund commenced operations on October 6, 1999.
** Annualized. +Total return is not annualized for periods less than one
year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor.
# Amount represents less than $0.01 per share.

Page 30

Financial Highlights First Trust
Internet Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:
Net investment income (0.04)
Net unrealized loss on investments 6.37
Total from investment operations 6.33
Net asset value, end of period $16.33

Total return + 63.30%

Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $187
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (1.37)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 136.02%**

___________________________________________________

Page 31

Financial Highlights
First Trust Pharmaceutical Portfolio
Period Ended
12/31/99*
____________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income (0.02)
Net unrealized loss on investments 0.39
Total from investment operations 0.37
Net asset value, end of period $10.37

Total return + 3.70%

Ratios to average net assets/supplemental data:

Net assets, end of period (in 000's) $135
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (0.79)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without
fee waivers and expenses reimbursed 147.68%**

___________________________________________________

* The Fund commenced operations on October 6, 1999.
** Annualized. +Total return is not annualized for periods less than one
year. The total return would have been lower if certain fees had not
been waived and expenses reimbursed by the investment advisor.

Page 32

Financial Highlights
First Trust Technology Portfolio
Period Ended
12/31/99*
___________
Net asset value, beginning of period $10.00

Income from investment operations:

Net investment income (0.03)
Net unrealized loss on investments 3.44
Total from investment operations 3.41
Net asset value, end of period $13.41

Total return + 34.10%

Ratios to average net assets/supplemental data:

Net assets, end of period (in 000's) $162
Ratio of operating expenses to average net assets 1.47%**
Ratio of net investment income to average net assets (1.38)%**
Portfolio turnover rate 0
Ratio of operating expenses to average net assets without fee
waivers and expenses reimbursed 115.26%**

___________________________________________________

Page 33

FIRST DEFINED PORTFOLIO FUND, LLC

The Dow(sm) Target 5 Portfolio
The Dow(sm) DART 10 Portfolio
Global Target 15 Portfolio
S&P Target 10 Portfolio
NASDAQ Target 15 Portfolio
First Trust 10 Uncommon Values Portfolio
First Trust Energy Portfolio
First Trust Financial Services Portfolio
First Trust Internet Portfolio
First Trust Pharmaceutical Portfolio
First Trust Technology Portfolio

______________________________________________________________________________

Several additional sources of information are available to you. The
most recent annual report contains performance data and information on
portfolio holdings and operating results for the most recently completed
fiscal year. Also, the Statement of Additional Information (SAI),
incorporated by reference into this prospectus, contains detailed
information on the funds' policies and operation. The SAI and the
prospectus are intended for use in connection with variable annuity
policies offered by American Skandia Life Assurance Corporation. Call
the fund at 1-(800) 621-1675 for shareholder inquiries or to request a
free copy of the SAI, the annual report or for other fund information.

You may obtain this and other fund information directly from the
Securities and Exchange Commission (SEC). The SEC may charge a copying
fee for this information. Visit the SEC on-line at http://www.sec.gov or
in person at the SEC's Public Reference Room in Washington, D.C., or
call the SEC at 1-202-942-8090 for room hours and operation. You may
also request fund information by writing to the SEC's Public Reference
Section, Washington, D.C. 20549-0102 or by sending an electronic
request, along with a duplication fee to [email protected].

______________________________________________________________________________

First Defined Portfolio Fund, LLC
1001 Warrenville Road, Suite 300
Lisle, Illinois 60532
(800) 621-1675
www.nikesec.com

SEC file #: 811-09235

Page 34

STATEMENT OF ADDITIONAL INFORMATION

April 28, 2000

First Defined Portfolio Fund, LLC

This Statement of Additional Information is not a prospectus. It
contains information in addition to and more detailed than set forth in
the Prospectus and should be read in conjunction with the First Defined
Portfolio Fund, LLC Prospectus, dated April 28, 2000, which is incorporated
by reference herein. The Prospectus may be obtained by calling (800) 621-
1675, or writing 1001 Warrenville Road, Suite 300, Lisle, Illinois 60532.

Table of Contents

PAGE

General Information and History 2
Investment Policies 2
Description of Strategy Funds 14
Description of Indices 15
Investment Risks 18
Additional Strategy Fund Risks 20
Additional Fund Industry Risks 20
Additional Foreign Issuer Risks 26
Fund Management 30
Performance 33
Performance Data of Investment Strategies 35
Investment Advisory and Other Services 37
Purchases, Redemptions and Pricing of Interests 40
12b-1 Plan 42
Additional Information 42
Tax Status 42
Financial Statements 42

The audited financial statements for the Registrant for the fiscal year
ended December 31, 1999, included in the Annual Report to Shareholders,
are incorporated into this SAI by reference. The Annual Report
accompanies this SAI.

Page 1

General Information and History

First Defined Portfolio Fund, LLC (the "Registrant") is a non-
diversified, open-end management series investment company organized as
a Delaware limited liability company on January 8, 1999. Currently, the
Registrant has eleven series authorized and outstanding (each a "Fund").
Each series of the Registrant represents membership interests (the
"interests") in a separate portfolio of securities and other assets,
with its own objectives and policies. The series of the Fund comprise
two categories-Strategy Funds and Sector Funds. The Strategy Funds are:
The Dow (sm) Target 5 Portfolio (the "Target 5 Portfolio"), The Dow (sm) DART
10 Portfolio (the "DART 10 Portfolio"), Global Target 15 Portfolio, S&P
Target 10 Portfolio, NASDAQ Target 15 Portfolio and First Trust
10 Uncommon Values Portfolio. The Sector Funds are: First Trust Energy
Portfolio, First Trust Financial Services Portfolio, First Trust
Internet Portfolio, First Trust Pharmaceutical Portfolio, and First
Trust Technology Portfolio. Interests of the Funds are sold only to
American Skandia Life Assurance Corporation Variable Account B ("Account
B") to fund the benefits of variable annuity policies (the "Policies")
issued by American Skandia Life Assurance Corporation ("American
Skandia").

Investment Policies

The Prospectus describes the investment objectives and strategies of
each of the Funds. Each Fund is also subject to the following
fundamental policies which may not be changed without approval of the
holders of a majority of the outstanding voting interests of the Fund:

1) A Fund may not issue senior securities, except as permitted under the
Investment Company Act of 1940.

2) A Fund may not borrow money, except that a Fund may (i) borrow money
from banks for temporary or emergency purposes (but not for leverage or
the purchase of investments) and (ii) engage in other transactions
permissible under the Investment Company Act of 1940 that may involve a
borrowing (such as, obtaining short-term credits as are necessary for
the clearance of transactions, engaging in delayed- delivery
transactions, or purchasing certain futures, forward contracts and
options), provided that the combination of (i) and (ii) shall not exceed
33-1/3% of the value of the Fund's total assets (including the amount
borrowed), less the Fund's liabilities (other than borrowings).

3) A Fund will not underwrite the securities of other issuers except to the
extent the Fund may be considered an underwriter under the Securities
Act of 1933 in connection with the purchase and sale of portfolio
securities.

4) A Fund will not purchase or sell real estate or interests therein,
unless acquired as a result of ownership of securities or other
instruments (but this shall not prohibit a Fund from purchasing or
selling securities or other instruments backed by real estate or of
issuers engaged in real estate activities).

5) A Fund may not make loans to other persons, except through (i) the
purchase of debt securities permissible under the Fund's investment
policies, (ii) repurchase agreements, or (iii) the lending of portfolio
securities, provided that no such loan of portfolio securities may be
made by a Fund if, as a result, the aggregate of such loans would exceed
33-1/3% of the value of the Fund's total assets.

6) A Fund may not purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent a Fund from purchasing or selling options, futures
contracts, forward contracts or other derivative instruments, or from
investing in securities or other instruments backed by physical
commodities).

7) A Fund may not pledge, mortgage or hypothecate any of its assets except
as may be necessary in connection with permissible borrowings or
investments and then such pledging, mortgaging, or hypothecating may not
exceed 33-1/3% of the Fund's total assets at the time of the borrowing
or investment.

8) A Strategy Fund may invest more than 25% of its assets in the securities
of issuers in any single industry if the applicable investment strategy
for the Fund selects securities in a manner that results in such a

Page 2

concentration. A Sector Fund may invest more than 25% of its assets in
the securities of issuers in the industry represented by the Fund.
Notwithstanding the foregoing, there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. (See "Risk Factors" in the Prospectus and
"Additional Fund Industry Risks" herein for a discussion of the
risks associated with the concentration of a Fund's holdings in a given
industry.)

Except for restriction (2), if a percentage restriction is adhered to at
the time of investment, a later increase in percentage resulting from a
change in market value of the investment or the total assets will not
constitute a violation of that restriction.

The foregoing fundamental policies and the investment objective of a
Fund may not be changed without the affirmative vote of the majority of
the outstanding voting interests of the Registrant (or of a particular
Fund, if appropriate). The Investment Company Act of 1940 ("1940 Act")
defines a majority vote as the vote of the lesser of (i) 67% of the
voting interests represented at a meeting at which more than 50% of the
outstanding interests are represented or (ii) more than 50% of the
outstanding voting interests. With respect to the submission of a change
in an investment policy to the holders of outstanding voting interests
of a particular Fund, such matter shall be deemed to have been
effectively acted upon with respect to such Fund if a majority of the
outstanding voting interests of such Fund vote for the approval of such
matter, notwithstanding that (1) such matter has not been approved by
the holders of a majority of the outstanding voting interests of any
other Fund affected by such matter, and (2) such matter has not been
approved by the vote of a majority of the outstanding voting Registrant
interests.

In addition to the foregoing fundamental policies, the Funds are also
subject to strategies and policies discussed herein which, unless
otherwise noted, are non-fundamental restrictions and policies which may
be changed by the Board of Trustees.

Warrants

Each Fund may invest in warrants. Warrants acquired by a Fund entitle it
to buy common stock from the issuer at a specified price and time. They
do not represent ownership of the securities but only the right to buy
them. Warrants are subject to the same market risks as stocks, but may
be more volatile in price. A Fund's investment in warrants will not
entitle it to receive dividends or exercise voting rights and will
become worthless if the warrants cannot be profitably exercised before
their expiration date.

Securities Lending

Each Fund may also lend portfolio securities to broker-dealers and
financial institutions to realize additional income. A Fund will not
lend its portfolio securities or other assets, if as a result, more than
33 1/3% of the Fund's total assets, including collateral received, would
be lent to broker-dealers or other parties. Such loans will be secured
continuously by collateral at least equal to the value of the securities
lent by "marking-to-market" daily. The Fund will continue to receive the
equivalent of the interest or dividends paid by the issuer of the
securities lent and will retain the right to call, upon notice, the lent
securities. The Fund may also receive interest on the investment of the
collateral or a fee from the borrower as compensation for the loan.
Securities loaned by a Fund remain subject to fluctuations in market
value. A Fund may pay reasonable finders, custodian and administrative
fees in connection with a loan. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially.
However, loans will be made only to firms deemed by First Trust to be of
good standing.

During the period that a Fund seeks to enforce its rights against the
borrower, the collateral and the securities loaned remain subject to
fluctuations in market value. A Fund may also incur expenses in
enforcing its rights. If a Fund has sold a loaned security, it may not
be able to settle the sale of the security and may incur potential
liability to the buyer of the security on loan for its costs to cover
the purchase.

Delayed-Delivery Transactions

A Fund may from time to time purchase securities on a "when-issued" or
other delayed-delivery basis. The price of securities purchased in such
transactions is fixed at the time the commitment to purchase is made,
but delivery and payment for the securities take place at a later date.

Page 3

Normally, the settlement date occurs within 45 days of the purchase.
During the period between the purchase and settlement, no payment is
made by a Fund to the issuer and no interest is accrued on debt
securities or dividend income is earned on equity securities. Delayed-
delivery commitments involve a risk of loss if the value of the security
to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of a Fund's other assets. While
securities purchased in delayed-delivery transactions may be sold prior
to the settlement date, the Funds intend to purchase such securities
with the purpose of actually acquiring them. At the time a Fund makes
the commitment to purchase a security in a delayed-delivery transaction,
it will record the transaction and reflect the value of the security in
determining its net asset value. The Funds do not believe that net asset
value will be adversely affected by purchases of securities in delayed-
delivery transactions.

Each Fund will maintain in a segregated account cash, U.S. government
securities, and high grade liquid debt securities equal in value to
commitments for delayed-delivery securities. Such segregated securities
will mature or, if necessary, be sold on or before the settlement date.
When the time comes to pay for delayed-delivery securities, a Fund will
meet its obligations from then-available cash flow, sale of the
securities held in the segregated account described above, sale of other
securities, or, although it would not normally expect to do so, from the
sale of the delayed-delivery securities themselves (which may have a
market value greater or less than the Fund's payment obligation).

Illiquid Securities

Each Fund may invest in illiquid securities (i.e., securities that are
not readily marketable). For purposes of this restriction, illiquid
securities include, but are not limited to, restricted securities
(securities the disposition of which is restricted under the federal
securities laws), securities that may only be resold pursuant to Rule
144A under the Securities Act of 1933, as amended (the "Securities
Act"), but that are deemed to be illiquid; and repurchase agreements
with maturities in excess of seven days. However, a Fund will not
acquire illiquid securities if, as a result, such securities would
comprise more than 15% of the value of the Fund's net assets. The Board
of Trustees or its delegates has the ultimate authority to determine, to
the extent permissible under the federal securities laws, which
securities are liquid or illiquid for purposes of this 15% limitation.
The Board of Trustees has delegated to First Trust the day-to-day
determination of the illiquidity of any equity or fixed-income security,
although it has retained oversight and ultimate responsibility for such
determinations. Although no definitive liquidity criteria are used, the
Board of Trustees has directed First Trust to look to such factors as
(i) the nature of the market for a security (including the institutional
private resale market; the frequency of trades and quotes for the
security; the number of dealers willing to purchase or sell the
security; and the amount of time normally needed to dispose of the
security, the method of soliciting offers and the mechanics of
transfer), (ii) the terms of certain securities or other instruments
allowing for the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand instruments), and (iii)
other permissible relevant factors.

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a
registration statement is in effect under the Securities Act. Where
registration is required, a Fund may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between
the time of the decision to sell and the time a Fund may be permitted to
sell a security under an effective registration statement. If, during
such a period, adverse market conditions were to develop, a Fund might
obtain a less favorable price than that which prevailed when it decided
to sell. Illiquid securities will be priced at fair value as determined
in good faith by the Board of Trustees or its delegate. If, through the
appreciation of illiquid securities or the depreciation of liquid
securities, a Fund should be in a position where more than 15% of the
value of its net assets are invested in illiquid securities, including
restricted securities which are not readily marketable, the affected
Fund will take such steps as is deemed advisable, if any, to protect
liquidity.

Security-related Issuers

The S&P Target 10 Portfolio may seek exemptive relief from the
Securities and Exchange Commission to allow the Fund to invest more than
5% of its assets in the securities of any issuer that derives more than
15 percent of its gross revenue from "securities related activities" (as
defined in Rule 12d3-1 under the Investment Company Act of 1940). Until
such relief is received, despite any investment strategy, the Fund will
not be able to invest more than 5% of its assets in such issuers.

Page 4

Money Market Funds

Each Fund may invest in shares of money market funds to the extent
permitted by the Investment Company Act of 1940.

Temporary Investments

Each Fund may, without limit as to percentage of assets, purchase U.S.
government securities or short-term debt securities to keep cash on hand
fully invested or for temporary defensive purposes. Short-term debt
securities are securities from issuers having a long-term debt rating of
at least A or higher by Standard & Poor's Ratings Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's") or Fitch IBCA, Inc. ("Fitch"), or A-
or higher by Duff & Phelps, Inc. ("D&P") and having a maturity of one
year or less.

Short-term debt securities are defined to include, without limitation,
the following:

(1) U.S. government securities, including bills, notes and bonds differing
as to maturity and rates of interest, which are either issued or
guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United
States; (b) the Federal Home Loan Banks, Federal Intermediate Credit
Banks, and the Tennessee Valley Authority, whose securities are
supported by the right of the agency to borrow from the U.S. Treasury;
(c) the Federal National Mortgage Association, whose securities are
supported by the discretionary authority of the U.S. government to
purchase certain obligations of the agency or instrumentality; and (d)
the Student Loan Marketing Association, whose securities are supported
only by its credit. While the U.S. government provides financial support
to such U.S. government-sponsored agencies or instrumentalities, no
assurance can be given that it always will do so since it is not so
obligated by law. The U.S. government, its agencies, and
instrumentalities do not guarantee the market value of their securities,
and consequently, the value of such securities may fluctuate.

(2) Certificates of deposit issued against funds deposited in a bank or
savings and loan association. Such certificates are for a definite
period of time, earn a specified rate of return, and are normally
negotiable. If such certificates of deposit are non-negotiable, they
will be considered illiquid securities and be subject to a Fund's 15%
restriction on investments in illiquid securities. Pursuant to the
certificate of deposit, the issuer agrees to pay the amount deposited
plus interest to the bearer of the certificate on the date specified
thereon. Under current FDIC regulations, the maximum insurance payable
as to any one certificate of deposit is $100,000; therefore;
certificates of deposit purchased by a Fund may not be fully insured.

(3) Bankers' acceptances which are short-term credit instruments used to
finance commercial transactions. Generally, an acceptance is a time
draft drawn on a bank by an exporter or an importer to obtain a stated
amount of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to pay
the face value of the instrument on its maturity date. The acceptance
may then be held by the accepting bank as an asset or it may be sold in
the secondary market at the going rate of interest for a specific
maturity.

(4) Repurchase agreements which involve purchases of debt securities. In
such an action, at the time the Fund purchases the security, it
simultaneously agrees to resell and redeliver the security to the
seller, who also simultaneously agrees to buy back the security at a
fixed price and time. This assures a predetermined yield for a Fund
during its holding period since the resale price is always greater than
the purchase price and reflects an agreed-upon market rate. The period
of these repurchase agreements will usually be short, from overnight to
one week. Such actions afford an opportunity for a Fund to invest
temporarily available cash. A Fund may enter into repurchase agreements
only with respect to obligations of the U.S. government, its agencies or
instrumentalities; certificates of deposit; or bankers acceptances in
which the Funds may invest. In addition, the Funds may only enter into
repurchase agreements where the market value of the purchased
securities/collateral equals at least 100% of principal including
accrued interest and is marked-to-market daily. The risk to a Fund is

Page 5

limited to the ability of the seller to pay the agreed-upon sum on the
repurchase date; in the event of default, the repurchase agreement
provides that the affected Fund is entitled to sell the underlying
collateral. If the value of the collateral declines after the agreement
is entered into, however, and if the seller defaults under a repurchase
agreement when the value of the underlying collateral is less than the
repurchase price, a Fund could incur a loss of both principal and
interest. The Funds, however, intend to enter into repurchase agreements
only with financial institutions and dealers believed by First Trust to
present minimal credit risks in accordance with criteria established by
the Fund's Board of Trustees. First Trust will review and monitor the
creditworthiness of such institutions. First Trust monitors the value of
the collateral at the time the action is entered into and at all times
during the term of the repurchase agreement. First Trust does so in an
effort to determine that the value of the collateral always equals or
exceeds the agreed-upon repurchase price to be paid to a Fund. If the
seller were to be subject to a federal bankruptcy proceeding, the
ability of a Fund to liquidate the collateral could be delayed or
impaired because of certain provisions of the bankruptcy laws.

(5) Bank time deposits, which are monies kept on deposit with banks or
savings and loan associations for a stated period of time at a fixed
rate of interest. There may be penalties for the early withdrawal of
such time deposits, in which case the yields of these investments will
be reduced.

(6) Commercial paper, which are short-term unsecured promissory notes,
including variable rate master demand notes issued by corporations to
finance their current operations. Master demand notes are direct lending
arrangements between a Fund and a corporation. There is no secondary
market for the notes. However, they are redeemable by the Fund at any
time. The portfolio manager will consider the financial condition of the
corporation (e.g., earning power, cash flow, and other liquidity ratios)
and will continuously monitor the corporation's ability to meet all of
its financial obligations, because a Fund's liquidity might be impaired
if the corporation were unable to pay principal and interest on demand.
A Fund may only invest in commercial paper rated A-1 or better by S&P,
Prime-1 or higher by Moody's, Duff 2 or higher by D&P or Fitch 2 or
higher by Fitch.

Hedging Strategies

General Description of Hedging Strategies

A Fund may engage in hedging activities. First Trust may cause a Fund to
utilize a variety of financial instruments, including options, forward
contracts, futures contracts (sometimes referred to as "futures"), and
options on future contracts to attempt to hedge the Fund's holdings.

Hedging or derivative instruments on securities generally are used to
hedge against price movements in one or more particular securities
positions that a Fund owns or intends to acquire. Such instruments may
also be used to "lock-in" realized but unrecognized gains in the value
of portfolio securities. Hedging instruments on stock indices, in
contrast, generally are used to hedge against price movements in broad
equity market sectors in which a Fund has invested or expects to invest.
Hedging strategies, if successful, can reduce the risk of loss by wholly
or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies
can also reduce the opportunity for gain by offsetting the positive
effect of favorable price movements in the hedged investments. The use
of hedging instruments is subject to applicable regulations of the
Securities and Exchange Commission (the "SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures
Trading Commission (the "CFTC") and various state regulatory
authorities. In addition, a Fund's ability to use hedging instruments
may be limited by tax considerations.

General Limitations on Futures and Options Transactions

The Registrant has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the CFTC and the
National Futures Association, which regulate trading in the futures
markets. Pursuant to Section 4.5 of the regulations under the Commodity
Exchange Act (the "CEA"), the notice of eligibility for a Fund includes
the representation that the Fund will use futures contracts and related
options solely for bona fide hedging purposes within the meaning of CFTC
regulations. A Fund will not enter into futures and options transactions
if the sum of the initial margin deposits and premiums paid for
unexpired options exceeds 5% of a Fund's total assets. In addition, a
Fund will not enter into futures contracts and options transactions if
more than 30% of its net assets would be committed to such instruments.

The foregoing limitations are not fundamental policies of a Fund and may
be changed without shareholder approval as regulatory agencies permit.
Various exchanges and regulatory authorities have undertaken reviews of
options and futures trading in light of market volatility. Among the

Page 6

possible actions that have been presented are proposals to adopt new or
more stringent daily price fluctuation limits for futures and options
transactions and proposals to increase the margin requirements for
various types of futures transactions.

Asset Coverage for Futures and Options Positions

Each Fund will comply with the regulatory requirements of the SEC and
the CFTC with respect to coverage of options and futures positions by
registered investment companies and, if the guidelines so require, will
set aside cash, U.S. government securities, high grade liquid debt
securities and/or other liquid assets permitted by the SEC and CFTC in a
segregated custodial account in the amount prescribed. Securities held
in a segregated account cannot be sold while the futures or options
position is outstanding, unless replaced with other permissible assets,
and will be marked-to-market daily.

Stock Index Options

A Fund may purchase stock index options, sell stock index options in
order to close out existing positions, and/or write covered options on
stock indexes for hedging purposes. Stock index options are put options
and call options on various stock indexes. In most respects, they are
identical to listed options on common stocks. The primary difference
between stock options and index options occurs when index options are
exercised. In the case of stock options, the underlying security, common
stock, is delivered. However, upon the exercise of an index option,
settlement does not occur by delivery of the securities comprising the
index. The option holder who exercises the index option receives an
amount of cash if the closing level of the stock index upon which the
option is based is greater than, in the case of a call, or less than, in
the case of a put, the exercise price of the option. This amount of cash
is equal to the difference between the closing price of the stock index
and the exercise price of the option expressed in dollars times a
specified multiple.

A stock index fluctuates with changes in the market values of the stock
included in the index. For example, some stock index options are based
on a broad market index, such as the Standard & Poor's 500 or the Value
Line Composite Indices or a more narrower market index, such as the
Standard & Poor's 100. Indexes may also be based on an industry or
market segment. Options on stock indexes are currently traded on the
following exchanges: the Chicago Board of Options Exchange, the New York
Stock Exchange, the American Stock Exchange, the Pacific Stock Exchange,
and the Philadelphia Stock Exchange.

A Fund's use of stock index options is subject to certain risks.
Successful use by a Fund of options on stock indexes will be subject to
the ability of First Trust to correctly predict movements in the
directions of the stock market. This requires different skills and
techniques than predicting changes in the prices of individual
securities. In addition, a Fund's ability to effectively hedge all or a
portion of the securities in its portfolio, in anticipation of or during
a market decline through transactions in put options on stock indexes,
depends on the degree to which price movements in the underlying index
correlate with the price movements of the securities held by a Fund.
Inasmuch as a Fund's securities will not duplicate the components of an
index, the correlation will not be perfect. Consequently, each Fund will
bear the risk that the prices of its securities being hedged will not
move in the same amount as the prices of its put options on the stock
indexes. It is also possible that there may be a negative correlation
between the index and a Fund's securities which would result in a loss
on both such securities and the options on stock indexes acquired by the
Fund.

The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the
options markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
markets that cannot be reflected in the options markets. The purchase of
options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary
portfolio securities transactions. The purchase of stock index options
involves the risk that the premium and transaction costs paid by a Fund
in purchasing an option will be lost as a result of unanticipated
movements in prices of the securities comprising the stock index on
which the option is based.

Certain Considerations Regarding Options

There is no assurance that a liquid secondary market on an options
exchange will exist for any particular option, or at any particular
time, and for some options no secondary market on an exchange or
elsewhere may exist. If a Fund is unable to close out a call option on
securities that it has written before the option is exercised, the Fund

Page 7

may be required to purchase the optioned securities in order to satisfy
its obligation under the option to deliver such securities. If a Fund is
unable to effect a closing sale transaction with respect to options on
securities that it has purchased, it would have to exercise the option
in order to realize any profit and would incur transaction costs upon
the purchase and sale of the underlying securities.

The writing and purchasing of options is a highly specialized activity
which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. Imperfect
correlation between the options and securities markets may detract from
the effectiveness of attempted hedging. Options transactions may result
in significantly higher transaction costs and portfolio turnover for the
Fund.

Futures Contracts

Each Fund may enter into futures contracts (hereinafter referred to as
"Futures" or "Futures Contracts"), including index Futures as a hedge
against movements in the equity markets, in order to hedge against
changes on securities held or intended to be acquired by a Fund or for
other purposes permissible under the CEA. Each Fund's hedging may
include sales of Futures as an offset against the effect of expected
declines in stock prices and purchases of Futures as an offset against
the effect of expected increases in stock prices. The Fund will not
enter into Futures Contracts which are prohibited under the CEA and
will, to the extent required by regulatory authorities, enter only into
Futures Contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument.
The principal interest rate Futures exchanges in the United States are
the Board of Trade of the City of Chicago and the Chicago Mercantile
Exchange. Futures exchanges and trading are regulated under the CEA by
the CFTC.

An interest rate futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument (e.g., a debt security) or currency for a specified
price at a designated date, time and place. An index Futures Contract is
an agreement pursuant to which the parties agree to take or make
delivery of an amount of cash equal to the difference between the value
of the index at the close of the last trading day of the contract and
the price at which the index Futures Contract was originally written.
Transaction costs are incurred when a Futures Contract is bought or sold
and margin deposits must be maintained. A Futures Contract may be
satisfied by delivery or purchase, as the case may be, of the instrument
or by payment of the change in the cash value of the index. More
commonly, Futures Contracts are closed out prior to delivery by entering
into an offsetting transaction in a matching Futures Contract. Although
the value of an index might be a function of the value of certain
specified securities, no physical delivery of those securities is made.
If the offsetting purchase price is less than the original sale price, a
gain will be realized. Conversely, if the offsetting sale price is more
than the original purchase price, a gain will be realized; if it is
less, a loss will be realized. The transaction costs must also be
included in these calculations. There can be no assurance, however, that
a Fund will be able to enter into an offsetting transaction with respect
to a particular Futures Contract at a particular time. If a Fund is not
able to enter into an offsetting transaction, the Fund will continue to
be required to maintain the margin deposits on the Futures Contract.

Margin is the amount of funds that must be deposited by each Fund with
its custodian in a segregated account in the name of the futures
commission merchant in order to initiate Futures trading and to maintain
the Fund's open positions in Futures Contracts. A margin deposit is
intended to ensure the Fund's performance of the Futures Contract. The
margin required for a particular Futures Contract is set by the exchange
on which the Futures Contract is traded and may be significantly
modified from time to time by the exchange during the term of the
Futures Contract. Futures Contracts are customarily purchased and sold
on margins that may range upward from less than 5% of the value of the
Futures Contract being traded.

If the price of an open Futures Contract changes (by increase in the
case of a sale or by decrease in the case of a purchase) so that the
loss on the Futures Contract reaches a point at which the margin on
deposit does not satisfy margin requirements, the broker will require an
increase in the margin. However, if the value of a position increases
because of favorable price changes in the Future Contract so that the
margin deposit exceeds the required margin, the broker will pay the
excess to the respective Fund. In computing daily net asset value, each
Fund will mark to market the current value of its open Futures
Contracts. Each Fund expects to earn interest income on their margin
deposits.

Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial
loss, as well as gain, to the investor. For example, if at the time of

Page 8

purchase, 10% of the value of the Futures Contract is deposited as
margin, a subsequent 10% decrease in the value of the Futures Contract
would result in a total loss of the margin deposit, before any deduction
for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin
deposit, if the Future Contracts were closed out. Thus, a purchase or
sale of a Futures Contract may result in losses in excess of the amount
initially invested in the Futures Contract. However, a Fund would
presumably have sustained comparable losses if, instead of the Futures
Contract, it had invested in the underlying financial instrument and
sold it after the decline.

Most United States Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day. The
day limit establishes the maximum amount that the price of a Futures
Contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been
reached in a particular type of Futures Contract, no trades may be made
on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures Contract prices have occasionally moved
to the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of Futures positions
and subjecting some Futures traders to substantial losses.

There can be no assurance that a liquid market will exist at a time when
a Fund seeks to close out a Futures position. The Fund would continue to
be required to meet margin requirements until the position is closed,
possibly resulting in a decline in the Fund's net asset value. In
addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there
can be no assurance that an active secondary market will develop or
continue to exist.

A public market exists in Futures Contracts covering a number of
indexes, including, but not limited to, the Standard & Poor's 500 Index,
the Standard & Poor's 100 Index, the Nasdaq 100 Index, the Value Line
Composite Index and the New York Stock Exchange Composite Index.

Options on Futures

Each Fund may also purchase or write put and call options on Futures
Contracts and enter into closing transactions with respect to such
options to terminate an existing position. A futures option gives the
holder the right, in return of the premium paid, to assume a long
position (call) or short position (put) in a Futures Contract at a
specified exercise price prior to the expiration of the option. Upon
exercise of a call option, the holder acquires a long position in the
Futures Contract and the writer is assigned the opposite short position.
In the case of a put option, the opposite is true. Prior to exercise or
expiration, a futures option may be closed out by an offsetting purchase
or sale of a futures option of the same series.

A Fund may use options on Futures Contracts in connection with hedging
strategies. Generally, these strategies would be applied under the same
market and market sector conditions in which the Fund use put and call
options on securities or indexes. The purchase of put options on Futures
Contracts is analogous to the purchase of puts on securities or indexes
so as to hedge a Funds' securities holdings against the risk of
declining market prices. The writing of a call option or the purchasing
of a put option on a Futures Contract constitutes a partial hedge
against declining prices of a securities which are deliverable upon
exercise of the Futures Contract. If the futures price at expiration of
a written call option is below the exercise price, a Fund will retain
the full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's holdings of
securities. If the futures price when the option is exercised is above
the exercise price, however, the Fund will incur a loss, which may be
offset, in whole or in part, by the increase in the value of the
securities held by the Fund that were being hedged. Writing a put option
or purchasing a call option on a Futures Contract serves as a partial
hedge against an increase in the value of the securities the Fund
intends to acquires.

As with investments in Futures Contracts, each Fund is required to
deposit and maintain margin with respect to put and call options on
Futures Contracts written by it. Such margin deposits will vary
depending on the nature of the underlying Futures Contract (and the
related initial margin requirements), the current market value of the
option, and other futures positions held by the Fund. Each Fund will set
aside in a segregated account at the Fund's custodian liquid assets,
such as cash, U.S. government securities or other high grade liquid debt
obligations equal in value to the amount due on the underlying
obligation. Such segregated assets will be marked-to-market daily, and
additional assets will be placed in the segregated account whenever the
total value of the segregated account falls below the amount due on the
underlying obligation.

Page 9

The risks associated with the use of options on Futures Contracts
include the risk that a Fund may close out its position as a writer of
an option only if a liquid secondary market exists for such options,
which cannot be assured. A Fund's successful use of options on Futures
Contracts depends on First Trust's ability to correctly predict the
movement in prices of Futures Contracts and the underlying instruments,
which may prove to be incorrect. In addition, there may be imperfect
correlation between the instruments being hedged and the Futures
Contract subject to the option. For additional information, see "Futures
Contracts." Certain characteristics of the futures market might increase
the risk that movements in the prices of futures contracts or options on
futures contracts might not correlate perfectly with movements in the
prices of the investments being hedged. For example, all participants in
the futures and options on futures contracts markets are subject to
daily variation margin calls and might be compelled to liquidate futures
or options on futures contracts positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations
could increase the price volatility of the instruments and distort the
normal price relationship between the futures or options and the
investments being hedged. Also, because of initial margin deposit
requirements in markets, there might be increased participation by
speculators in the futures markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in
both the futures and securities markets involving arbitrage, "program
trading," and other investment strategies might result in temporary
price distortions.

Risks and Special Considerations Concerning Derivatives

In addition to the foregoing, the use of derivative instruments involves
certain general risks and considerations as described below.

(1) Market Risk. Market risk is the risk that the value of the underlying
assets may go up or down. Adverse movements in the value of an
underlying asset can expose a Fund to losses. Market risk is the primary
risk associated with derivative transactions. Derivative instruments may
include elements of leverage and, accordingly, fluctuations in the value
of the derivative instrument in relation to the underlying asset may be
magnified. The successful use of derivative instruments depends upon a
variety of factors, particularly the
portfolio manager's ability to predict movements of the securities,
currencies, and commodities markets, which may require different skills
than predicting changes in the prices of individual securities. There
can be no assurance that any particular strategy adopted will succeed. A
decision to engage in a derivative transaction will reflect the
portfolio manager's judgment that the derivative transaction will
provide value to a Fund and its shareholders and is consistent with a
Fund's objectives, investment limitations, and operating policies. In
making such a judgment, the portfolio manager will analyze the benefits
and risks of the derivative transactions and weigh them in the context
of a Fund's overall investments and investment objective.

(2) Credit Risk. Credit risk is the risk that a loss be sustained as a
result of the failure of a counterparty to comply with the terms of a
derivative instrument. The counterparty risk for exchange-traded
derivatives is generally less than for privately-negotiated or OTC
derivatives, since generally a clearing agency, which is the issuer or
counterparty to each exchange-traded instrument, provides a guarantee of
performance. For privately-negotiated instruments, there is no similar
clearing agency guarantee. In all transactions, a Fund will bear the
risk that the counterparty will default, and this could result in a loss
of the expected benefit of the derivative transactions and possibly
other losses to the Fund. The Fund will enter into transactions in
derivative instruments only within counterparties that First Trust
reasonably believes are capable of performing under the contract.

(3) Correlation Risk. Correlation risk is the risk that there might be an
imperfect correlation, or even no correlation, between price movements
of a derivative instrument and price movements of investments being
hedged. When a derivative transaction is used to completely hedge
another position, changes in the market value of the combined position
(the derivative instrument plus the position being hedged) result from
an imperfect correlation between the price movements of the two
instruments. With a perfect hedge, the value of the combined position
remains unchanged with any change in the price of the underlying asset.
With an imperfect hedge, the value of the derivative instrument and its
hedge are not perfectly correlated. For example, if the value of a
derivative instrument used in a short hedge (such as writing a call
option, buying a put option or selling a futures contract) increased by
less than the decline in value of the hedged investments, the hedge
would not be perfectly correlated. This might occur due to factors
unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which these instruments

Page 10

are traded. The effectiveness of hedges using instruments on indices
will depend, in part, on the degree of correlation between price
movements in the index and the price movements in the investments being
hedged.

(4) Liquidity Risk. Liquidity risk is the risk that a derivative instrument
cannot be sold, closed out, or replaced quickly at or very close to its
fundamental value. Generally, exchange contracts are very liquid because
the exchange clearinghouse is the counterparty of every contract. OTC
transactions are less liquid than exchange-traded derivatives since they
often can only be closed out with the other party to the transaction. A
Fund might be required by applicable regulatory requirements to maintain
assets as "cover," maintain segregated accounts, and/or make margin
payments when it takes positions in derivative instruments involving
obligations to third parties (i.e., instruments other than purchase
options). If a Fund is unable to close out its positions in such
instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expires, matures, or
is closed out. These requirements might impair a Fund's ability to sell
a security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security
at a disadvantageous time. A Fund's ability to sell or close out a
position in an instrument prior to expiration or maturity depends upon
the existence of a liquid secondary market or, in the absence of such a
market, the ability and willingness of the counterparty to enter into a
transaction closing out the position. Due to liquidity risk, there is no
assurance that any derivatives position can be sold or closed out at a
time and price that is favorable to a Fund.

(5) Legal Risk. Legal risk is the risk of loss caused by the
unenforceability of a party's obligations under the derivative. While a
party seeking price certainty agrees to surrender the potential upside
in exchange for downside protection, the party taking the risk is
looking for a positive payoff. Despite this voluntary assumption of
risk, a counterparty that has lost money in a derivative transaction may
try to avoid payment by exploiting various legal uncertainties about
certain derivative products.

(6) Systemic or "Interconnection" Risk. Systemic or interconnection risk is
the risk that a disruption in the financial markets will cause
difficulties for all market participants. In other words, a disruption
in one market will spill over into other markets, perhaps creating a
chain reaction. Much of the OTC derivatives market takes place among the
OTC dealers themselves, thus creating a large interconnected web of
financial obligations. This interconnectedness raises the possibility
that a default by one large dealer could create losses for other dealers
and destabilize the entire market for OTC derivative instruments.

Foreign Currency Transactions. The Global Target 15 Portfolio, NASDAQ
Target 15 Portfolio, First Trust 10 Uncommon Values Portfolio and the
Sector Funds may engage in foreign currency forward contracts, options,
and futures transactions. Such Funds may enter into foreign currency
transactions for hedging and other permissible risk management purposes
only. Foreign currency futures and options contracts are traded in the
U.S. on regulated exchanges such as the Chicago Mercantile Exchange, the
Mid-America Commodities Exchange, and the Philadelphia Stock Exchange.
If the Funds invest in a currency futures or options contract, they must
make a margin deposit to secure performance of such contract. With
respect to investments in currency futures contracts, the Funds may also
be required to make a variation margin deposit because the value of
futures contracts fluctuates from purchase to maturity. In addition, the
Funds may segregate assets to cover its futures contracts obligations.

Risks and Special Considerations Concerning Foreign Currencies

(1) Currency Risks. The exchange rates between the U.S. dollar and foreign
currencies depend upon such factors as supply and demand in the currency
exchange markets, international balances of payments, governmental
intervention, speculation, and other economic and political conditions.
Although each Fund values its assets daily in U.S. dollars, a Fund may
not convert its holdings of foreign currencies to U.S. dollars daily. A
Fund may incur conversion costs when it converts its holdings to another
currency. Foreign exchange dealers may realize a profit on the
difference between the price at which a Fund buys and sells currencies.
Funds may engage in foreign currency exchange transactions in connection
with its portfolio investments. A Fund will conduct its foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through
forward contracts to purchase or sell foreign contracts.

(2) Forward Foreign Currency Exchange Contracts. The Global Target 15
Portfolio, NASDAQ Target 15 Portfolio, First Trust 10 Uncommon Values
Portfolio and the Sector Funds may enter into forward foreign currency

Page 11

exchange contracts. Forward foreign currency exchange contracts may
limit potential gains that could result from a positive change in such
currency relationships. First Trust believes that it is important to
have the flexibility to enter into forward foreign currency exchange
contracts whenever it determines that it is in a Fund's best interest to
do so. The Funds will not speculate in foreign currency exchange.

The Funds will not enter into forward currency exchange contracts or
maintain a net exposure in such contracts that it would be obligated to
deliver an amount of foreign currency in excess of the value of their
portfolio securities or other assets denominated in that currency or, in
the case of a "cross-hedge," denominated in a currency or currencies
that First Trust believes will tend to be closely correlated with that
currency with regard to price movements. Generally, the Funds will not
enter into a forward foreign currency exchange contract with a term
longer than one year.

(3) Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency
at the exercise price on a specified date or during the option period.
The owner of a call option has the right, but not the obligation, to buy
the currency. Conversely, the owner of a put options has the right, but
not the obligation, to sell the currency. When the option is exercised,
the seller (i.e., writer) of the option is obligated to fulfill the
terms of the sold option. However, either the seller or the buyer may,
in the secondary market, close its position during the option period at
any time prior to expiration.

A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on a foreign
currency generally rises in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect the
Fund against an adverse movement in the value of a foreign currency, the
option will not limit the movement in the value of such currency. For
example, if a Fund held securities denominated in a foreign currency
that was appreciating and had purchased a foreign currency put to hedge
against a decline in the value of the currency, the Fund would not have
to exercise its put option. Likewise, if a Fund entered into a contract
to purchase a security denominated in foreign currency and, in
conjunction with that purchase, purchased a foreign currency call option
to hedge against a rise in value of the currency, and if the value of
the currency instead depreciated between the date of purchase and the
settlement date, the Fund would not have to exercise its call. Instead,
the Fund could acquire in the spot market the amount of foreign currency
needed for settlement.

(4) Special Risks Associated with Foreign Currency Options. Buyers and
sellers of foreign currency options are subject to the same risks that
apply to options generally. In addition, there are certain risks
associated with foreign currency options. The markets in foreign
currency options are relatively new, and the Fund's ability to establish
and close out positions on such options is subject to the maintenance of
a liquid secondary market. Although a Fund will not purchase or write
such options unless and until, in the opinion of the First Trust, the
market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in
connection with the underlying currency, there can be no assurance that
a liquid secondary market will exist for a particular option at any
specific time.

In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those
that may be involved in the use of foreign currency options, investors
may be disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e., less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies
remain open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until
they reopen.

Page 12

(5) Foreign Currency Futures Transactions. By using foreign currency futures
contracts and options on such contracts, a Fund may be able to achieve
many of the same objectives as it would through the use of forward
foreign currency exchange contracts. The Funds may be able to achieve
these objectives possibly more effectively and at a lower cost by using
futures transactions instead of forward foreign currency exchange
contracts.

(6) Special Risks Associated with Foreign Currency Futures Contracts and
Related Options. Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use of futures
generally. In addition, there are risks associated with foreign currency
futures contracts and their use as a hedging device similar to those
associated with options on currencies, as described above.

Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
To reduce this risk, a Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the opinion of
First Trust, the market for such options has developed sufficiently that
the risks in connection with such options are not greater than the risks
in connection with transactions in the underlying foreign currency
futures contracts. Compared to the purchase or sale of foreign currency
futures contracts, the purchase of call or put options on futures
contracts involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the option (plus transaction
costs). However, there may be circumstances when the purchase of a call
or put option on a futures contract would result in a loss, such as when
there is no movement in the price of the underlying currency or futures
contract.

Foreign Investments

Indirect Foreign Investment-Depositary Receipts. Global Target 15
Portfolio, NASDAQ Target 15 Portfolio, First Trust 10 Uncommon Values
Portfolio and the Sector Funds may invest in foreign securities by
purchasing depositary receipts, including American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs"), or Global Depositary
Receipts ("GDRs"), or other securities representing indirect ownership
interests in the securities of foreign issuers. Generally, ADRs, in
registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets, while EDRs and GDRs, in bearer form,
may be denominated in other currencies and are designed for use in
European and other markets. For purposes of such Fund's investment
policies, ADRs, EDRs, and GDRs are deemed to have the same
classification as the underlying securities they represent, except that
ADRs, EDRs, and GDRs shall be treated as indirect foreign investments.
Thus, an ADR, EDR, or GDR representing ownership of common stock will be
treated as common stock. ADRs, EDRs, and GDRs do no eliminate all of the
risks associated with directly investing in the securities of foreign
issuers.

Other types of depositary receipts include American Depositary Shares
("ADSs"), Global Depositary Certificates ("GDCs"), and International
Depositary Receipts ("IDRs"). ADSs are shares issued under a deposit
agreement representing the underlying ordinary shares that trade in the
issuer's home market. An ADR, described above, is a certificate that
represents a number of ADSs. GDCs and IDRs are typically issued by a
foreign bank or trust company, although they may sometimes also be
issued by a U.S. bank or trust company. GDCs and IDRs are depositary
receipts that evidence ownership of underlying securities issued by
either a foreign or a U.S. corporation.

Direct Foreign Investments. The Global Target 15 Portfolio, NASDAQ
Target 15 Portfolio, First Trust 10 Uncommon Values Portfolio and the
Sector Funds may invest directly in the securities of foreign issuers.
In consideration of whether to invest in the securities of a foreign
company, First Trust considers such factors as the characteristics of
the particular company, differences between economic trends, and the
performance of securities markets within the U.S. and those within other
countries. First Trust also considers factors relating to the general
economic, governmental, and social conditions of the country or
countries where the company is located.

Securities transactions conducted outside the U.S. may not be regulated
as rigorously as in the U.S., may not involve a clearing mechanism and
related guarantees, and are subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be
adversely affected by (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on
which to make trading decisions, (iii) delays in a Fund's ability to act
upon economic events occurring in foreign markets during non-business

Page 13

hours in the U.S., (iv) the imposition of different exercise and
settlement terms and procedures and the margin requirements than in the
U.S., and (v) lower trading volume and liquidity.

Insurance Law Restrictions

In connection with the Registrant's agreement to sell shares to Account
B, American Skandia and First Trust may enter into agreements, required
by certain state insurance departments, under which First Trust may
agree to use its best efforts to assure and to permit American Skandia
to monitor each Fund for compliance with the investment restrictions and
limitations prescribed by state insurance laws and regulations
applicable to the investment of separate account assets in shares of
mutual funds. If a Fund failed to comply with such restrictions or
limitations, American Skandia would take appropriate action which might
include ceasing to make investments in the Fund or withdrawing from the
state imposing the limitation. Such restrictions and limitations are not
expected to have a significant impact on the Registrant's operations.

Description of Strategy Funds

As described in the Funds' Prospectus, the portfolio of the Dow (sm) Target
5 Portfolio consists primarily of common stocks of the five companies
with the lowest per share stock price of the ten companies in the Dow
Jones Industrial Average (sm) ("DJIA") that have the highest dividend
yields as of the date specified in the prospectus (the "Stock Selection
Date"). The portfolio of the Dow (sm) DART 10 Portfolio consists
primarily of the common stocks of the ten companies in the DJIA that
have the highest combined dividend yields and buyback ratios on or about
the Stock Selection Date. The portfolio of the Global Target 15
Portfolio consists primarily of common stocks of the five companies with
the lowest per share stock price of the ten companies in each of the
DJIA, the Financial Times Industrial Ordinary Share Index ("FT Index")
and the Hang Seng Index, respectively, that have the highest dividend
yield in the respective index on or about the Stock Selection Date. The
portfolio of the S&P Target 10 Portfolio consists primarily of the
common stocks of the ten companies selected from a pre-screened subset
of the stocks included in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index") on or about the Stock Selection Date. The
portfolio of the First Trust 10 Uncommon Values Portfolio is primarily
the ten common stocks selected annually by the Investment Policy
Committee of Lehman Brothers, Inc. with the assistance of the Research
Department of Lehman Brothers which, in the opinion of Lehman Brothers,
have the greatest potential for capital appreciation during the next
year. Finally, the Nasdaq Target 15 Portfolio consists primarily of
the common stocks of fifteen companies selected from a pre-screened
subset of the stocks included in the Nasdaq-100 Index on or about the
Stock Selection Date. Each year, as discussed in the Prospectus, the
portfolio of each Fund is adjusted in accordance with its investment
strategy. See "Fund Overview" in the Prospectus for the relevant Fund
for a more detailed description of its investment strategy.

The dividend yield for each equity security contained in the Dow Target
5 Portfolio, Dow DART 10 Portfolio and the securities based on the DJIA
in the Global Target 15 Portfolio is calculated by annualizing the last
quarterly or semi-annual ordinary dividend declared and dividing the
result by the market value of such equity security on or about the Stock
Selection Date. The yield for each equity security listed on the FT
Index or the Hang Seng Index in the Global Target 15 Portfolio is
calculated by adding together the most recent interim and final dividend
declared and dividing the result by the market value of such equity
security on or about the Stock Selection Date.

The publishers of the S&P 500 Index, FT Index and the Hang Seng Index
are not affiliated with First Trust and have not participated in the
creation of the Fund or the selection of the equity securities included
therein. There is, of course, no guarantee that the objective of any
Fund will be achieved.

Any changes in the components of any of the respective indices or in the
composition of the stocks listed on the New York Stock Exchange,
American Stock Exchange or Nasdaq Stock Market made after the respective
Stock Selection Date will not cause a change in the identity of the
common stocks included in the applicable Fund, including any additional
equity securities deposited thereafter until the next Stock Selection
Date when the portfolio of the each Fund will be adjusted in accordance
with its investment strategy.

Investors should note that each Fund's investment criteria is applied
and will in the future be applied to the equity securities selected for
inclusion in the Fund as of the applicable Stock Selection Date.

Page 14

Additional equity securities which were originally selected through this
process may be purchased throughout the year, as investors may continue
to invest in the Fund, even though the yields on these equity securities
may have changed subsequent to the previous Stock Selection Date. These
equity securities may no longer be included in the index, or may not
meet a Fund's selection criteria at that time, and therefore, such
equity securities would no longer be chosen for inclusion in the Fund if
the selection process were to be performed again at that time.
Accordingly, the equity securities selected and the percentage
relationship among the number of shares will not change for purchases or
sales by a Fund until the next annual Stock Selection Date.

Licensing Arrangements with Lehman Brothers, Inc.

As noted in the Prospectus, the objective of the First Trust 10 Uncommon
Value Portfolio is to provide the potential for above-average capital
appreciation by investing the Fund's portfolio in the ten common stocks
selected by the Investment Policy Committee of Lehman Brothers Inc. with
the assistance of the Research Department of Lehman Brothers Inc. which,
in the opinion of Lehman Brothers Inc., have the greatest potential for
capital appreciation during the next year. The selection was based upon
a determination by Lehman Brothers Inc. that the selected stocks are
deemed to have an above-average appreciation potential against the S&P
500 Index over the 12 months following the selection of the portfolio.
The stocks included in this Fund are adjusted annually in accordance
with the new selections of Lehman Brothers for subsequent years. Lehman
Brothers Inc. is one of the leading global investment banks serving
institutional, corporate, government and high net worth individual
clients and customers. Lehman Brothers' business includes capital
raising for clients through securities underwriting and direct
placements; corporate finance and strategic advisory services; merchant
banking; securities sales and trading; research; and the trading of
foreign exchange, derivative products and certain commodities. The Fund
is not sponsored, advised, or created by Lehman Brothers Inc. Lehman
Brothers Inc.'s only relationship to First Trust is the licensing of
certain trademarks and tradenames of Lehman Brothers Inc. and of the "10
Uncommon Values" and the sale to First Trust of research which is
determined, composed and calculated by Lehman Brothers Inc. without
regard to First Trust or the Fund. In addition, Lehman Brothers Inc. may
also receive fees for brokerage services provided to this Fund as well
as unit investment trusts sponsored by Nike Securities L.P. Lehman
Brothers Inc., in its general securities business acts, as agent or
principal in connection with the purchase and sale of equity securities,
including the equity securities held in the Fund and may act as a market
maker in certain of the equity securities.

Description of Indices

Certain Funds invest in stocks included in the DJIA, the FT Index, the
Hang Seng Index, the Nasdaq Index, and the S&P 500 Index. The following
is a description of these indices.

The Dow Jones Industrial Average(SM)

The DJIA was first published in The Wall Street Journal in 1896.
Initially consisting of just 12 stocks, the DJIA expanded to 20 stocks
in 1916 and to its present size of 30 stocks on October 1, 1928. The
stocks are chosen by the editors of The Wall Street Journal as
representative of the broad market and of American industry. The
companies are major factors in their industries and their stocks are
widely held by individuals and institutional investors. Changes in the
components of the DJIA are made entirely by the editors of The Wall
Street Journal without consultation with the companies, the stock
exchange or any official agency. For the sake of continuity, changes are
made rarely. Most substitutions have been the result of mergers, but
from time to time, changes may be made to achieve a better
representation. The components of the DJIA may be changed at any time
for any reason. Any changes in the components of the DJIA made after the
Stock Selection Date will not cause a change in the identity of the
equity securities involved in the applicable Fund, including any equity
securities deposited in a Fund, except when the Fund is periodically
adjusted.

"Dow Jones Industrial Average (sm)", "DJIA (sm)", "Dow Industrials (sm)", "Dow
30 (sm)," "The Dow (sm)" and "The Dow 10(sm)" are service marks of Dow Jones &
Company, Inc. ("Dow Jones") and have been licensed for use for certain
purposes by First Trust. None of the Funds, including, and in
particular, The Dow (sm) Target 5 Portfolio, and The Dow (sm) DART 10
Portfolio, are endorsed, sold, or promoted by Dow Jones, and Dow Jones
makes no representation regarding the advisability of investing in such
products.

The Funds are not sponsored, endorsed, sold or promoted by Dow Jones.
Dow Jones makes no representation or warranty, express or implied, to a
Fund's interest holders or any member of the public regarding the

Page 15

advisability of purchasing a Fund. Dow Jones' only relationship to the
Funds, American Skandia, or First Trust is the licensing of certain
copyrights, trademarks, servicemarks and service names of Dow Jones. Dow
Jones has no obligation to take the needs of American Skandia, First
Trust or variable annuity owners into consideration in determining,
composing or calculating the DJIA. Dow Jones is not responsible for and
has not participated in the determination of the terms and conditions of
the Funds, including the pricing of the Funds' interests or the amount
payable under variable annuity contracts. Dow Jones has no obligation or
liability in connection with the administration or marketing of the Fund
or any variable annuity contracts.

DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
DOW JONES INDUSTRIAL AVERAGE (SM) OR ANY DATA INCLUDED THEREIN AND DOW
JONES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSION, OR INTERRUPTIONS
THEREIN. DOW JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS
TO BE OBTAINED BY A FUND, AMERICAN SKANDIA, FIRST TRUST OR VARIABLE
ANNUITY OWNERS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW
JONES INDUSTRIAL AVERAGE (SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES
NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE DOW JONES INDUSTRIAL AVERAGE (SM) OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW
JONES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE,
SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

The Financial Times Industrial Ordinary Share Index

The FT Index began as the Financial News Industrial Ordinary Share Index
in London in 1935 and became the Financial Times Industrial Ordinary
Share Index in 1947. The Financial Times Ordinary Index is calculated by
FTSE International Ltd. ("FTSE"). All copyright in the Index constituent
list vests in FTSE. The FT Index is comprised of 30 common stocks chosen
by the editors of The Financial Times as representative of the British
industry and commerce. This index is an unweighted average of the share
prices of selected companies, which are highly capitalized, major
factors in their industries and their stocks are widely held by
individuals and institutional investors. Changes in the components of
the FT Index are made entirely by the editors of The Financial Times
without consultation with the companies, the stock exchange or any
official agency. For the sake of continuity, changes are made rarely.
However, on December 16, 1997, Diageo PLC and Scottish Power PLC
replaced Guinness PLC and Grand Metropolitan PLC. Most substitutions
have been the result of mergers or because of poor share performance,
but from time to time, changes may be made to achieve a better
representation. The components of the FT Index may be changed at any
time for any reason.

The Hang Seng Index

The Hang Seng Index was first published in 1969 and presently consists
of 33 of the stocks currently listed on the Stock Exchange of Hong Kong
Ltd. (the "Hong Kong Stock Exchange"), and it includes companies
intended to represent four major market sectors: commerce and industry,
finance, properties and utilities. The Hang Seng Index is a recognized
indicator of stock market performance in Hong Kong. It is computed on an
arithmetic basis, weighted by market capitalization, and is therefore
strongly influenced by stocks with large market capitalizations.

Except as described herein or in the Prospectus, neither the publishers
of the S&P 500 Index, DJIA, FT Index nor the Hang Seng Index have
granted the Funds, American Skandia, or First Trust a license to use
their respective Index. The Funds are not designed so that prices will
parallel or correlate with the movements in any particular index or a
combination thereof and it is expected that their prices will not
parallel or correlate with such movements. The publishers of the S&P 500
Index, DJIA, FT Index and the Hang Seng Index have not participated in
any way in the creation of the Funds or in the selection of stocks in
the Funds and have not approved any information related thereto.

The Nasdaq - 100 Index

The Nasdaq - 100 Index represents the largest and most active non-
financial domestic and international issues listed on the Nasdaq Stock

Page 16

Market(registered trademark). The index is calculated based on a
modified capitalization weighted methodology. The Nasdaq Stock Market
lists nearly 5,400 companies and trades more shares per day than any
other major U.S. market.

The Nasdaq Target 15 Portfolio is not sponsored, endorsed, sold or
promoted by The Nasdaq Stock Market, Inc. (including its affiliates)
(Nasdaq, with its affiliates are referred to as the "Corporations"). The
Corporations have not passed on the legality or suitability of, or the
accuracy or adequacy of descriptions and disclosures relating to, the
Nasdaq Target 15 Portfolio. The Corporations make no representation or
warranty, express or implied to the owners of the Nasdaq Target 15
Portfolio or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly, or the
ability of the Nasdaq 100 Index(registered trademark) to track general
stock market performance. The Corporations' only relationship to First
Trust (the "Licensee") is in the licensing of the Nasdaq 100(registered
trademark), Nasdaq 100 Index(registered trademark) and Nasdaq(registered
trademark) trademarks or service marks, and certain trade names of the
corporations and the use of the Nasdaq 100 Index(registered trademark)
which is determined, composed and calculated by Nasdaq without regard to
Licensee or the Fund. Nasdaq has no obligation to take the needs of the
Licensee or the owners of the Nasdaq Target 15 Portfolio into
consideration in determining, composing or calculating the Nasdaq 100
Index(registered trademark). The Corporations are not responsible for
and have not participated in the determination of the timing of, prices
at, or quantities of the Fund to be issued or in the determination or
calculation of the equation by which the Fund is to be converted into
cash. The corporations have not liability in connection with the
administration, marketing or trading of the Fund.

THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED
CALCULATION OF THE NASDAQ 100 INDEX(registered trademark) OR ANY DATA
INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT(S) OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ 100
INDEX(registered trademark) OR ANY DATA INCLUDED THEREIN. THE
CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY
DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE WITH RESPECT TO THE NASDAQ 100 INDEX(registered
trademark) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY
LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

The Standard & Poor's 500 Index

The S&P Target 10 Portfolio is not sponsored, endorsed, sold or promoted
by Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
("S&P"). S&P makes no representation or warranty, express or implied, to
the owners of the S&P Target 10 Portfolio or any member of the public
regarding the advisability or investing in securities generally or in
the S&P Target 10 Portfolio particularly or the ability of the S&P 500
Index to track general stock market performance. S&P's only relationship
to First Trust is the licensing of certain trademarks and trade names of
S&P and of the S&P 500 Index which is determined, composed and
calculated by S&P without regard to First Trust or the S&P Target 10
Portfolio. S&P has no obligation to take the needs of First Trust or the
owners of the S&P Target 10 Portfolio into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for
and has not participated in the determination for the prices and amount
of the S&P Target 10 Portfolio or the timing of the issuance or sale of
the Fund or in the determination or calculation of the equation by which
the Fund is to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of
the Fund.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSION OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE,

Page 17

OWNERS OF THE PRODUCT OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR
IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY
OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Investment Risks

Generally

An investment in a Fund should be made with an understanding of the
risks which an investment in common stocks entails, including the risk
that the financial condition of the issuers of the equity securities or
the general condition of the common stock market may worsen and the
value of the equity securities and therefore the value of a Fund may
decline. A Fund may not be an appropriate investment for those who are
unable or unwilling to assume the risks involved generally with an
equity investment. The past market and earnings performance of any of
the equity securities included in a Fund is not predictive of their
future performance. Common stocks are especially susceptible to general
stock market movements and to volatile increases and decreases of value
as market confidence in and perceptions of the issuers change. These
perceptions are based on unpredictable factors including expectations
regarding government, economic, monetary and fiscal policies, inflation
and interest rates, economic expansion or contraction, and global or
regional political economic or banking crises. First Trust cannot
predict the direction or scope of any of these factors. Shareholders of
common stocks have rights to receive payments from the issuers of those
common stocks that are generally subordinate to those of creditors of,
or holders of debt obligations or preferred stocks of, such issuers.
Shareholders of common stocks of the type held by a Fund have a right to
receive dividends only when and if, and in the amounts, declared by the
issuer's board of directors and have a right to participate in amounts
available for distribution by the issuer only after all other claims on
the issuer have been paid or provided for. Common stocks do not
represent an obligation of the issuer and, therefore, do not offer any
assurance of income or provide the same degree of protection of capital
as do debt securities. The issuance of additional debt securities or
preferred stock will create prior claims for payment of principal,
interest and dividends which could adversely affect the ability and
inclination of the issuer to declare or pay dividends on its common
stock or the rights of holders of common stock with respect to assets of
the issuer upon liquidation or bankruptcy. The value of common stocks is
subject to market fluctuations for as long as the common stocks remain
outstanding, and thus the value of the equity securities in a Fund will
fluctuate over the life of the Fund and may be more or less than the
price at which they were purchased by such Fund. The equity securities
held in a Fund may appreciate or depreciate in value (or pay dividends)
depending on the full range of economic and market influences affecting
these securities, including the impact of the Fund's purchase and sale
of the equity securities and other factors.

Holders of common stocks incur more risk than holders of preferred
stocks and debt obligations because common stockholders, as owners of
the entity, have generally inferior rights to receive payments from the
issuer in comparison with the rights of creditors of, or holders of debt
obligations or preferred stocks issued by, the issuer. Cumulative
preferred stock dividends must be paid before common stock dividends and
any cumulative preferred stock dividend omitted is added to future
dividends payable to the holders of cumulative preferred stock.
Preferred stockholders are also generally entitled to rights on
liquidation which are senior to those of common stockholders.

First Trust shall not be liable in any way for any default, failure or
defect in any equity security held in a Fund's portfolio.

Legislation

At any time after the date of the Prospectus, legislation may be enacted
that could negatively affect the equity securities in a Fund or the
issuers of the equity securities. Changing approaches to regulation,
particularly with respect to the environment or with respect to the
petroleum industry, may have a negative impact on certain companies
represented in a Fund. There can be no assurance that future
legislation, regulation or deregulation will not have a material adverse
effect on a Fund or will not impair the ability of the issuers of the
equity securities held in a Fund to achieve their business goals.

Page 18

Liquidity

Whether or not the equity securities in a Fund are listed on a
securities exchange, the principal trading market for the equity
securities may be in the over-the-counter market. As a result, the
existence of a liquid trading market for the equity securities may
depend on whether dealers will make a market in the equity securities.
There can be no assurance that a market will be made for any of the
equity securities, that any market for the equity securities will be
maintained or that there will be sufficient liquidity of the equity
securities in any markets made. The price at which the equity securities
held in a Fund may be sold to meet transfers, partial withdrawals or
surrenders and the value of a Fund will be adversely affected if trading
markets for the equity securities are limited or absent.

Lack of Diversification

Each Fund is classified as "non-diversified" and therefore a Fund is
only limited as to the percentage of its assets which may be invested in
securities of any one issuer by its own investment restrictions and by
diversification requirements imposed by the Internal Revenue Code of
1986, as amended. A Fund may therefore invest a relatively high
percentage of its assets in a limited number of issuers. This can expose
each Fund to potentially greater market fluctuations than might be
experienced by a diversified fund. Each Fund may be more susceptible to
any single economic, political or regulatory occurrence and to the
financial conditions of the issuer in which it invests. For example, an
investment in the Dow Target 5 Portfolio may subject an investor to
additional risk due to the relative lack of diversity in its portfolio
since the portfolio contains only five stocks. Therefore, the Dow Target
5 Portfolio may be subject to greater market risk than other Funds which
may contain a more diversified portfolio of securities. A Fund is not
designed to be a complete investment program for an investor. Variable
annuity Policy owners, in light of their own financial situations and
goals, should consider other additional funding options in order to
diversify the allocations of their Policy assets.

Small Capitalization Companies

Certain or all of the equity securities in the First Trust 10 Uncommon
Values Portfolio and certain securities in the Sector Funds, may be
small cap company stocks. While, historically, small cap company stocks
have outperformed the stocks of large companies, the former have
customarily involved more investment risk as well. Small cap companies
may have limited product lines, markets or financial resources; may lack
management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. Some of
these companies may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel.

The prices of small company securities are often more volatile than
prices associated with large company issues, and can display abrupt or
erratic movements at times, due to limited trading volumes and less
publicly available information. Also, because small cap companies
normally have fewer shares outstanding and these shares trade less
frequently than large companies, it may be more difficult for a Fund
which contain these equity securities to buy and sell significant
amounts of such shares without an unfavorable impact on prevailing
market prices. The securities of small companies are often traded over-
the-counter and may not be traded in the volumes typical of a national
securities exchange.

Litigation

Certain of the issuers of equity securities in certain Funds may be
involved in the manufacture, distribution and sale of tobacco products.
Pending litigation proceedings against such issuers in the United States
and abroad cover a wide range of matters including product liability and
consumer protection. Damages claimed in such litigation alleging
personal injury (both individual and class actions), and in health cost
recovery cases brought by governments, labor unions and similar entities
seeking reimbursement for health care expenditures, aggregate many
billions of dollars.

In November 1998, certain companies in the U.S. tobacco industry,
including Philip Morris, entered into a negotiated settlement with
several states which would result in the resolution of significant
litigation and regulatory issues affecting the tobacco industry
generally. The proposed settlement, while extremely costly to the

Page 19

tobacco industry, would significantly reduce uncertainties facing the
industry and increase stability in business and capital markets. Future
litigation and/or legislation could adversely affect the value,
operating revenues and financial position of tobacco companies and
could adversely affect the Funds.

Certain of the Funds may include the common stock of Microsoft Corporation
in their portfolios. Microsoft Corporation is currently engaged in liti-
gation with Sun Microsystems, Inc., the U.S. Department of Justice and
several state Attorneys General. The complaints against Microsoft include
copyright infringement, unfair competition and anti-trust violations. The
claims seek injunctive relief and monetary damages. In the action brought
against Microsoft by the U.S. Department of Justice, the United States
District Court for the District of Columbia issued findings of fact that
included a finding that Microsoft possesses and exercised monopoly
power. The court also recently entered an order finding that Microsoft
exercised this power in violation of the Sherman Antitrust Act and
various state antitrust laws. The next step in the litigation will be
for the court to determine the penalties against Microsoft. The
possible remedies that could potentially be considered by the court,
according to industry experts, range from a possible breakup of Microsoft
to remedies such as ordering the company to surrender its blueprint or
"source code" for it Windows operating software. Microsoft has stated
that it will appeal this ruling following the penalties phase and final
decree. It is possible that any remedy could have a material adverse impact on
Microsoft; however, it is impossible to predict the impact that any penalty
may have on Microsoft's business in the future or the Funds.

At any time litigation may be instituted on a variety of grounds with respect
to the common stock held by the Funds. A Fund is unable to predict whether
litigation, including the litigation described above, that has been or will
be instituted might have a material adverse effect on the Funds.

Additional Strategy Fund Risks

The equity securities selected for The Dow (sm) Target 5 Portfolio, The
Dow (sm) DART 10 Portfolio and Global Target 15 Portfolio generally share
attributes that have caused them to have lower prices or higher yields
relative to other stocks in their respective index or Exchange. The
equity securities may, for example, be experiencing financial
difficulty, or be out of favor in the market because of weak
performance, poor earnings forecasts or negative publicity; or they may
be reacting to general market cycles. There can be no assurance that the
market factors that caused the relatively low prices and high dividend
yields of the equity securities will change, that any negative
conditions adversely affecting the stock prices will not deteriorate,
that the dividend rates on the equity securities will be maintained or
that share prices will not decline further during the life of the Funds,
or that the equity securities will continue to be included in the
respective indices or Exchanges. Investing in stocks with the highest
dividend yields amounts to a contrarian strategy because these shares
are often out of favor. Such strategy may be effective in achieving the
respective Strategy Fund's investment objective because regular
dividends are common for established companies and dividends have often
accounted for a substantial portion of the total return on stocks of the
index as a group. However, there is no guarantee that either a Fund's
objective will be achieved or that a Fund will provide for capital
appreciation in excess of such Fund's expenses. Because of the
contrarian nature of such Funds and the attributes of the common stocks
which caused inclusion in the portfolio, such Funds may not be
appropriate for investors seeking either preservation of capital or high
current income. In addition, each of the strategies have underperformed
their respective index or indices in certain years.

Equity securities in a Strategy Fund from time to time may be sold under
certain circumstances described in the Prospectus or herein. Each
Strategy Fund, however, is not actively managed and equity securities in
a Fund will not be sold to take advantage of market fluctuations or
changes in anticipated rates of appreciation or depreciation or if the
equity securities no longer meet the criteria by which they were
selected for a Fund. However, equity securities will be sold on or about
each annual Stock Selection Date in accordance with its stock selection
strategy.

Additional Fund Industry Risks

The following is a discussion of additional risks affecting particular
industry sectors represented in the Funds.

Energy Sector. An investment in the energy sector should be made with an
understanding of the problems and risks such an investment may entail.

The business activities of companies in the energy sector may include:
production, generation, transmission, marketing, control, or measurement
of energy or energy fuels; providing component parts or services to
companies engaged in the above activities; energy research or
experimentation; and environmental activities related to the solution of
energy problems, such as energy conservation and pollution control.
Companies participating in new activities resulting from technological
advances or research discoveries in the energy field are also considered
for the First Trust Energy Portfolio.

The securities of companies in the energy field are subject to changes
in value and dividend yield which depend, to a large extent, on the

Page 20

price and supply of energy fuels. Swift price and supply fluctuations
may be caused by events relating to international politics, energy
conservation, the success of exploration projects, and tax and other
regulatory policies of various governments. As a result of the
foregoing, the equity securities held in the First Trust Energy
Portfolio Fund may be subject to rapid price volatility. First Trust is
unable to predict what impact the foregoing factors will have during the
life of the First Trust Energy Portfolio Fund on the equity securities
held in its portfolio.

According to the U.S. Department of Commerce, the factors which will
most likely shape the energy industry include the price and availability
of oil from the Middle East, changes in United States environmental
policies and the continued decline in U.S. production of crude oil.
Possible effects of these factors may be increased U.S. and world
dependence on oil from the Organization of Petroleum Exporting Countries
("OPEC") and highly uncertain and potentially more volatile oil prices.
Factors which First Trust believes may increase the profitability of oil
and petroleum operations include increasing demand for oil and petroleum
products as a result of the continued increases in annual miles driven
and the improvement in refinery operating margins caused by increases in
average domestic refinery utilization rates. The existence of surplus
crude oil production capacity and the willingness to adjust production
levels are the two principal requirements for stable crude oil markets.
Without excess capacity, supply disruptions in some countries cannot be
compensated for by others. Surplus capacity in Saudi Arabia and a few
other countries and the utilization of that capacity prevented, during
the Persian Gulf crisis, and continues to prevent, severe market
disruption. Although unused capacity contributed to market stability in
1990 and 1991, it ordinarily creates pressure to overproduce and
contributes to market uncertainty. The restoration of a large portion of
Kuwait and Iraq's production and export capacity could lead to such a
development in the absence of substantial growth in world oil demand.
Formerly, OPEC members attempted to exercise control over production
levels in each country through a system of mandatory production quotas.
Because of the 1990-1991 crisis in the Middle East, the mandatory system
has since been replaced with a voluntary system. Production under the
new system has had to be curtailed on at least one occasion as a result
of weak prices, even in the absence of supplies from Kuwait and Iraq.
The pressure to deviate from mandatory quotas, if they are reimposed, is
likely to be substantial and could lead to a weakening of prices. In the
longer term, additional capacity and production will be required to
accommodate the expected large increases in world oil demand and to
compensate for expected sharp drops in U.S. crude oil production and
exports from the Soviet Union. Only a few OPEC countries, particularly
Saudi Arabia, have the petroleum reserves that will allow the required
increase in production capacity to be attained. Given the large-scale
financing that is required, the prospect that such expansion will occur
soon enough to meet the increased demand is uncertain.

Declining U.S. crude oil production will likely lead to increased
dependence on OPEC oil, putting refiners at risk of continued and
unpredictable supply disruptions. Increasing sensitivity to
environmental concerns will also pose serious challenges to the industry
over the coming decade. Refiners are likely to be required to make heavy
capital investments and make major production adjustments in order to
comply with increasingly stringent environmental legislation, such as
the 1990 amendments to the Clean Air Act. If the cost of these changes
is substantial enough to cut deeply into profits, smaller refiners may
be forced out of the industry entirely. Moreover, lower consumer demand
due to increases in energy efficiency and conservation, gasoline
reformulations that call for less crude oil, warmer winters or a general
slowdown in economic growth in this country and abroad could negatively
affect the price of oil and the profitability of oil companies. No
assurance can be given that the demand for or prices of oil will
increase or that any increases will not be marked by great volatility.
Some oil companies may incur large cleanup and litigation costs relating
to oil spills and other environmental damage. Oil production and
refining operations are subject to extensive federal, state and local
environmental laws and regulations governing air emissions and the
disposal of hazardous materials. Increasingly stringent environmental
laws and regulations are expected to require companies with oil
production and refining operations to devote significant financial and
managerial resources to pollution control. General problems of the oil
and petroleum products industry include the ability of a few influential
producers to significantly affect production, the concomitant volatility
of crude oil prices, increasing public and governmental concern over air
emissions, waste product disposal, fuel quality and the environmental
effects of fossil-fuel use in general. In addition, any future
scientific advances concerning new sources of energy and fuels or
legislative changes relating to the energy industry or the environment
could have a negative impact on the petroleum products industry. While
legislation has been enacted to deregulate certain aspects of the oil
industry, no assurances can be given that new or additional regulations
will not be adopted. Each of the problems referred to could adversely
affect the financial stability of the issuers of any petroleum industry
stocks in this Fund.

Page 21

Financial Sector. An investment in the financial services sector should
be made with an understanding of the problems and risks inherent in the
bank and financial services sector in general.

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. Banks and thrifts are highly dependent on net
interest margin. Recently, bank profits have come under pressure as net
interest margins have contracted, but volume gains have been strong in
both commercial and consumer products. There is no certainty that such
conditions will continue. Bank and thrift institutions had received
significant consumer mortgage fee income as a result of activity in
mortgage and refinance markets. As initial home purchasing and
refinancing activity subsided, this income diminished. Economic
conditions in the real estate markets, which have been weak in the past,
can have a substantial effect upon banks and thrifts because they
generally have a portion of their assets invested in loans secured by
real estate. Banks, thrifts and their holding companies are subject to
extensive federal regulation and, when such institutions are state-
chartered, to state regulation as well. Such regulations impose strict
capital requirements and limitations on the nature and extent of
business activities that banks and thrifts may pursue. Furthermore, bank
regulators have a wide range of discretion in connection with their
supervisory and enforcement authority and may substantially restrict the
permissible activities of a particular institution if deemed to pose
significant risks to the soundness of such institution or the safety of
the federal deposit insurance fund. Regulatory actions, such as
increases in the minimum capital requirements applicable to banks and
thrifts and increases in deposit insurance premiums required to be paid
by banks and thrifts to the Federal Deposit Insurance Corporation
("FDIC"), can negatively impact earnings and the ability of a company to
pay dividends. Neither federal insurance of deposits nor governmental
regulations, however, insures the solvency or profitability of banks or
their holding companies, or insures against any risk of investment in
the securities issued by such institutions.

The statutory requirements applicable to and regulatory supervision of
banks, thrifts and their holding companies have increased significantly
and have undergone substantial change in recent years. To a great extent,
these changes are embodied in the Financial Institutions Reform, Recovery
and Enforcement Act enacted in August 1989, the Federal Deposit Insurance
Corporation Improvement Act of 1991, the Resolution Trust Corporation
Refinancing, Restructuring, and Improvement Act of 1991 and the regulations
promulgated under these laws. Their impact on the business, financial
condition and prospectus of the equity securities in the First Trust
Financial Services Portfolio cannot be predicted with certainty.

The recently enacted Gramm-Leach-Bliley Act repealed most of the barriers set
up by the 1933 Glass-Steagall Act which separated the banking, insurance and
securities industries. Now banks, insurance companies and securities firms
can merge to form one-stop financial conglomerates marketing a wide range of
financial service products to investors. This legislation will likely result in
increased merger activity and heightened competition among existing and new
participants in the field.

Efforts to expand the ability of federal thrifts to branch on an interstate
basis have been initially successful through promulgation of regulations, and
legislation to liberalize interstate banking has recently been signed into
law. Under the legislation, banks will be able to purchase or establish
subsidiary banks in any state, one year after the legislation's enactment.

Since mid-1997, banks have been allowed to turn existing banks into branches.
Consolidation is likely to continue. The Securities and Exchange
Commission and the Financial Accounting Standards Board require the
expanded use of market value accounting by banks and have imposed rules
requiring market accounting for investment securities held in trading
accounts or available for sale. Adoption of additional such rules may
result in increased volatility in the reported health of the industry,
and mandated regulatory intervention to correct such problems.
Additional legislative and regulatory changes may be forthcoming. For
example, the bank regulatory authorities have proposed substantial
changes to the Community Reinvestment Act and fair lending laws, rules
and regulations, and there can be no certainty as to the effect, if any,
that such changes would have on the equity securities in the First Trust
Financial Services Portfolio. In addition, from time to time the deposit
insurance system is reviewed by Congress and federal regulators, and
proposed reforms of that system could, among other things, further
restrict the ways in which deposited moneys can be used by banks or
reduce the dollar amount or number of deposits insured for any
depositor. Such reforms could reduce profitability such as investment
opportunities available to bank institutions become more limited and as
consumers look for savings vehicles other than bank deposits. Banks and
thrifts face significant competition from other financial institutions
such as mutual funds, credit unions, mortgage banking companies and
insurance companies, and increased competition may result from
legislative broadening of regional and national interstate banking
powers as has been recently enacted. Among other benefits, the
legislation allows banks and bank holding companies to acquire across
previously prohibited state lines and to consolidate their various bank
subsidiaries into one unit. First Trust makes no prediction as to what,
if any, manner of bank and thrift regulatory actions might ultimately be
adopted or what ultimate effect such actions might have on the First
Trust Financial Services Portfolio.

The Federal Bank Holding Company Act of 1956 generally prohibits a bank
holding company from (1) acquiring, directly or indirectly, more than
25% of the outstanding shares of any class of voting securities of a
bank or bank holding company, (2) acquiring control of a bank or another
bank holding company, (3) acquiring all or substantially all the assets
of a bank, or (4) merging or consolidating with another bank holding
company, without first obtaining Federal Reserve Board ("FRB") approval.
In considering an application with respect to any such transaction, the
FRB is required to consider a variety of factors, including the
potential anti-competitive effects of the transaction, the financial
condition and future prospects of the combining and resulting
institutions, the managerial resources of the resulting institution, the
convenience and needs of the communities the combined organization would
serve, the record of performance of each combining organization under
the Community Reinvestment Act and the Equal Credit Opportunity Act, and

Page 22

the prospective availability to the FRB of information appropriate to
determine ongoing regulatory compliance with applicable banking laws. In
addition, the federal Change In Bank Control Act and various state laws
impose limitations on the ability of one or more individuals or other
entities to acquire control of banks or bank holding companies.

The FRB has issued a policy statement on the payment of cash dividends
by bank holding companies. In the policy statement, the FRB expressed
its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends which exceed its net income or which could
only be funded in ways that would weaken its financial health, such as
by borrowing. The FRB also may impose limitations on the payment of
dividends as a condition to its approval of certain applications,
including applications for approval of mergers and acquisitions. First
Trust makes no prediction as to the effect, if any, such laws will have
on the equity securities in this sector or whether such approvals, if
necessary, will be obtained.

Companies involved in the insurance industry are engaged in
underwriting, reinsuring, selling, distributing or placing of property
and casualty, life or health insurance. Other growth areas within the
insurance industry include brokerage, reciprocals, claims processors and
multiline insurance companies. Insurance company profits are affected by
interest rate levels, general economic conditions, and price and
marketing competition. Property and casualty insurance profits may also
be affected by weather catastrophes and other disasters. Life and health
insurance profits may be affected by mortality and morbidity rates.
Individual companies may be exposed to material risks including reserve
inadequacy and the inability to collect from reinsurance carriers.
Insurance companies are subject to extensive governmental regulation,
including the imposition of maximum rate levels, which may not be
adequate for some lines of business. Proposed or potential tax law
changes may also adversely affect insurance companies' policy sales, tax
obligations, and profitability. In addition to the foregoing, profit
margins of these companies continue to shrink due to the commoditization
of traditional businesses, new competitors, capital expenditures on new
technology and the pressures to compete globally.

In addition to the normal risks of business, companies involved in the
insurance industry are subject to significant risk factors, including
those applicable to regulated insurance companies, such as: (i) the
inherent uncertainty in the process of establishing property-liability
loss reserves, particularly reserves for the cost of environmental,
asbestos and mass tort claims, and the fact that ultimate losses could
materially exceed established loss reserves which could have a material
adverse effect on results of operations and financial condition; (ii)
the fact that insurance companies have experienced, and can be expected
in the future to experience, catastrophe losses which could have a
material adverse impact on their financial condition, results of
operations and cash flow; (iii) the inherent uncertainty in the process
of establishing property-liability loss reserves due to changes in loss
payment patterns caused by new claims settlement practices; (iv) the
need for insurance companies and their subsidiaries to maintain
appropriate levels of statutory capital and surplus, particularly in
light of continuing scrutiny by rating organizations and state insurance
regulatory authorities, and in order to maintain acceptable financial
strength or claims-paying ability rating; (v) the extensive regulation
and supervision to which insurance companies' subsidiaries are subject,
various regulatory initiatives that may affect insurance companies, and
regulatory and other legal actions; (vi) the adverse impact that
increases in interest rates could have on the value of an insurance
company's investment portfolio and on the attractiveness of certain of
its products; (vii) the need to adjust the effective duration of the
assets and liabilities of life insurance operations in order to meet the
anticipated cash flow requirements of its policyholder obligations, and
(vii) the uncertainty involved in estimating the availability of
reinsurance and the collectibility of reinsurance recoverables.

The state insurance regulatory framework has, during recent years, come
under increased federal scrutiny, and certain state legislatures have
considered or enacted laws that alter and, in many cases, increase state
authority to regulate insurance companies and insurance holding company
systems. Further, the National Association of Insurance Commissioners
("NAIC") and state insurance regulators are re-examining existing laws
and regulations, specifically focusing on insurance companies,
interpretations of existing laws and the development of new laws. In
addition, Congress and certain federal agencies have investigated the
condition of the insurance industry in the United States to determine
whether to promulgate additional federal regulations. First Trust is
unable to predict whether any state or federal legislation will be
enacted to change the nature or scope of regulation of the insurance
industry, or what effect, if any, such legislation would have on the
industry.

All insurance companies are subject to state laws and regulations that
require diversification of their investment portfolios and limit the
amount of investments in certain investment categories. Failure to

Page 23

comply with these laws and regulations could cause non-conforming
investments to be treated as non-admitted assets for purposes of
measuring statutory surplus and, in some instances, would require
divestiture.

Environmental pollution clean-up is the subject of both federal and
state regulation. By some estimates, there are thousands of potential
waste sites subject to clean up. The insurance industry is involved in
extensive litigation regarding coverage issues. The Comprehensive
Environmental Response Compensation and Liability Act of 1980
("Superfund") and comparable state statutes ("mini-Superfund") govern
the clean-up and restoration by "Potentially Responsible Parties"
("PRP's"). Superfund and the mini-Superfunds ("Environmental Clean-up
Laws" or "ECLs") establish a mechanism to pay for clean-up of waste
sites if PRPs fail to do so, and to assign liability to PRPs. The extent
of liability to be allocated to a PRP is dependent on a variety of
factors. Further, the number of waste sites subject to clean-up is
unknown. Very few sites have been subject to clean-up to date. The
extent of clean-up necessary and the assignment of liability has not
been established. The insurance industry is disputing many such claims.
Key coverage issues include whether Superfund response costs are
considered damages under the policies, when and how coverage is
triggered, applicability of pollution exclusions, the potential for
joint and several liability and definition of an occurrence. Similar
coverage issues exist for clean up and waste sites not covered under
Superfund. To date, courts have been inconsistent in their rulings on
these issues. An insurer's exposure to liability with regard to its
insureds which have been, or may be, named as PRPs is uncertain.
Superfund reform proposals have been introduced in Congress, but none
have been enacted. There can be no assurance that any Superfund reform
legislation will be enacted or that any such legislation will provide
for a fair, effective and cost-efficient system for settlement of
Superfund related claims.

While current federal income tax law permits the tax-deferred
accumulation of earnings on the premiums paid by an annuity owner and
holders of certain savings-oriented life insurance products, no
assurance can be given that future tax law will continue to allow such
tax deferrals. If such deferrals were not allowed, consumer demand for
the affected products would be substantially reduced. In addition,
proposals to lower the federal income tax rates through a form of flat
tax or otherwise could have, if enacted, a negative impact on the demand
for such products.

Companies engaged in investment banking/brokerage and investment
management include brokerage firms, broker/dealers, investment banks,
finance companies and mutual fund companies. Earnings and share prices
of companies in this industry are quite volatile, and often exceed the
volatility levels of the market as a whole. Recently, ongoing
consolidation in the industry and the strong stock market has benefited
stocks which investors believe will benefit from greater investor and
issuer activity. Major determinants of future earnings of these
companies are the direction of the stock market, investor confidence,
equity transaction volume, the level and direction of long-term and
short-term interest rates, and the outlook for emerging markets.
Negative trends in any of these earnings determinants could have a
serious adverse effect on the financial stability, as well as on the
stock prices, of these companies. Furthermore, there can be no assurance
that the issuers of the equity securities included in the First Trust
Financial Services Portfolio will be able to respond in a timely manner
to compete in the rapidly developing marketplace. In addition to the
foregoing, profit margins of these companies continue to shrink due to
the commoditization of traditional businesses, new competitors, capital
expenditures on new technology and the pressures to compete globally.

Pharmaceutical Sector. An investment in the pharmaceutical sector should
be made with an understanding of the characteristics of the
pharmaceutical industry and the risks which such investment may entail.

Pharmaceutical companies are companies involved in drug development and
production services, biotech, and advanced medical devices and instruments.
In addition, they are well known for the vast amounts of money they spend
on world-class research and development. In short, such companies work to
improve the quality of life for millions of people and are vital to the
nation's health and well-being. Such companies have potential risks unique to
their sector of the healthcare field. Such companies are subject to govern-
mental regulation of their products and services, a factor which could have
a significant and possibly unfavorable effect on the price and availability of
such products or services. Furthermore, such companies face the risk of
increasing competition from generic drug sales, the termination of their
patent protection for drug products and the risk that technological
advances will render their products or services obsolete. The research
and development costs of bringing a drug to market are substantial and
include lengthy government review processes, with no guarantee that the
product will ever come to market. Many of these companies may have
losses and not offer certain products for several years. Such companies
may also have persistent losses during a new product's transition from
development to production, and revenue patterns may be erratic.

Page 24

As the population of the United States ages, the companies involved in
the pharmaceutical field will continue to search for and develop new
drugs through advanced technologies and diagnostics. On a worldwide
basis, such companies are involved in the development and distribution
of drugs and vaccines. These activities may make the pharmaceutical
sector very attractive for investors seeking the potential for growth in
their investment portfolio. However, there are no assurances that the
Fund's objectives will be met.

Legislative proposals concerning healthcare are considered from time to
time. These proposals span a wide range of topics, including cost and
price controls (which might include a freeze on the prices of
prescription drugs), national health insurance, incentives for
competition in the provisions of healthcare services, tax incentives and
penalties related to healthcare insurance premiums and promotion of
prepaid healthcare plans. First Trust is unable to predict the effect of
any of these proposals, if enacted, on the issuers of equity securities
in the First Trust Pharmaceutical Portfolio.

Technology/Internet Sectors. An investment in the Nasdaq Target 15 Portfolio
which may be concentrated in the technology industry and the First Trust
Internet and Technology Portfolios, which will be concentrated in the
Internet and technology industries, respectively, should be made with an
understanding of the characteristics of the technology industry and the risks
which such an investment may entail.

Technology companies generally include companies involved in the
development, design, manufacture and sale of computers, computer-related
equipment, computer networks, communications systems, telecommunications
products, electronic products and other related products, systems and
services. The market for these products, especially those specifically
related to the Internet, is characterized by rapidly changing
technology, rapid product obsolescence, cyclical market patterns,
evolving industry standards and frequent new product introductions. The
success of the issuers of the equity securities included in this sector
depends in substantial part on the timely and successful introduction of
new products. An unexpected change in one or more of the technologies
affecting an issuer's products or in the market for products based on a
particular technology could have a material adverse affect on an
issuer's operating results. Furthermore, there can be no assurance that
the issuers of the equity securities included in this sector will be
able to respond in a timely manner to compete in the rapidly developing
marketplace.

Based on trading history of common stock, factors such as announcements
of new products or development of new technologies and general
conditions of the industry have caused and are likely to cause the
market price of high- technology common stocks to fluctuate
substantially. In addition, technology company stocks have experienced
extreme price and volume fluctuations that often have been unrelated to
the operating performance of such companies. This market volatility may
adversely affect the market price of the equity securities held in the
First Trust Internet and Technology Portfolios.

Some key components of certain products of technology issuers are
currently available only from single sources. There can be no assurance
that in the future suppliers will be able to meet the demand for
components in a timely and cost effective manner. Accordingly, an
issuer's operating results and customer relationships could be adversely
affected by either an increase in price for, or an interruption or
reduction in supply of, any key components. Additionally, many
technology issuers are characterized by a highly concentrated customer
base consisting of a limited number of large customers who may require
product vendors to comply with rigorous industry standards. Any failure
to comply with such standards may result in a significant loss or
reduction of sales. Because many products and technologies of technology
companies are incorporated into other related products, such companies
are often highly dependent on the performance of the personal computer,
electronics and telecommunications industries. There can be no assurance
that these customers will place additional orders, or that an issuer of
equity securities held by the First Trust Internet and Technology
Portfolios will obtain orders of similar magnitude such as past orders
from other customers. Similarly, the success of certain technology
companies is tied to a relatively small concentration of products or
technologies. Accordingly, a decline in demand of such products,
technologies or from such customers could have a material adverse impact
on issuers of equity securities held in the First Trust Internet and
Technology Portfolios.

Many technology companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their
proprietary rights in their products and technologies. There can be no
assurance that the steps taken by the issuers of the equity securities
held by the First Trust Internet and Technology Portfolios to protect
their proprietary rights will be adequate to prevent misappropriation of

Page 25

their technology or that competitors will not independently develop
technologies that are substantially equivalent or superior to such
issuers' technology. In addition, due to the increasing public use of
the Internet, it is possible that other laws and regulations may be
adopted to address issues such as privacy, pricing, characteristics, and
quality of Internet products and services. For example, recent proposals
would prohibit the distribution of obscene, lascivious or indecent
communications on the Internet. The adoption of any such laws could have
a material adverse impact on the equity securities in the First Trust
Internet and Technology Portfolios.

Additional Foreign Issuer Risks

Since certain of the portfolio securities included in the Global Target
15 Portfolio, NASDAQ Target 15 Portfolio, First Trust 10 Uncommon Values
Portfolio and the Sector Funds may consist of common stocks of foreign
issuers, an investment in such Funds involves certain investment risks
that are different in some respects from an investment in a fund which
invests entirely in common stocks of domestic issuers. These investment
risks include the possible imposition of future political or
governmental restrictions which might adversely affect the payment or
receipt of dividends on the relevant portfolio securities, the
possibility that the financial condition of the issuers of the portfolio
securities may become impaired or that the general condition of the
relevant stock market may deteriorate, the limited liquidity and
relatively small market capitalization of the relevant securities
market, the imposition of expropriation or confiscatory taxation,
economic uncertainties, the lack of the quantity and quality of publicly
available information concerning the foreign issuers as such issuers are
generally not subject to the same reporting and accounting requirements
as domestic issuers, and the effect of foreign currency devaluations,
and fluctuations on the value of the common stocks and dividends of foreign
issuers in terms of U.S. dollars. In addition, fixed brokerage commissions
and other transaction costs on foreign securities exchanges are generally
higher than in the United States and there is generally less government
supervision and regulation of exchanges, brokers and issuers in foreign
countries than there is in the United States.

On the basis of the best information available to First Trust at the
present time, none of the portfolio securities in such Funds are
currently subject to exchange control restrictions under existing law
which would materially interfere with payment to such Funds of dividends
due on, or proceeds from the sale of, the foreign portfolio securities.
The adoption of such restrictions or other legal restrictions could
adversely impact the marketability of the foreign portfolio securities
and may impair the ability of such Funds to satisfy its obligation to
redeem shares or could cause delays or increase the costs associated
with the purchase and sale of the foreign portfolio securities and
correspondingly affect the price of its shares.

The purchase and sale of the foreign portfolio securities will generally
be made in foreign securities markets. Although First Trust does not
believe that the Funds will encounter obstacles in acquiring or
disposing of the foreign portfolio securities, investors should be aware
that in certain situations it may not be possible to purchase or sell a
foreign portfolio security in a timely manner for any number of reasons,
including lack of liquidity in the relevant market, the unavailability
of a seller or purchaser of the foreign portfolio securities, and
restrictions on such purchases or sales by reason of federal securities
laws or otherwise. An investment in such Funds will also be subject to
the risks of currency fluctuations associated with investments in
foreign equity securities trading in non-U.S. currencies.

Certain of the equity securities in Global Target 15 Portfolio, NASDAQ
Target 15 Portfolio, First Trust 10 Uncommon Values Portfolio and the
Sector Funds may be in ADR or GDR form. ADRs, which evidence American
Depositary Receipts and GDRs, which evidence Global Depositary Receipts,
represent common stock deposited with a custodian in a depositary.
American Depositary Shares and Global Depositary Shares (collectively,
the "Depositary Receipts") are issued by a bank or trust company to
evidence ownership of underlying securities issued by a foreign
corporation. These instruments may not necessarily be denominated in the
same currency as the securities into which they may be converted. For
purposes of the discussion herein, the terms ADR and GDR generally
include American Depositary Shares and Global Depositary Shares,
respectively.

Depositary Receipts may be sponsored or unsponsored. In an unsponsored
facility, the depositary initiates and arranges the facility at the
request of market makers and acts as agent for the Depositary Receipts
holder, while the company itself is not involved in the transaction. In
a sponsored facility, the issuing company initiates the facility and
agrees to pay certain administrative and shareholder-related expenses.

Page 26

Sponsored facilities use a single depositary and entail a contractual
relationship between the issuer, the shareholder and the depositary;
unsponsored facilities involve several depositaries with no contractual
relationship to the company. The depositary bank that issues Depositary
Receipts generally charges a fee, based on the price of the Depositary
Receipts, upon issuance and cancellation of the Depositary Receipts.
This fee would be in addition to the brokerage commissions paid upon the
acquisition or surrender of the security. In addition, the depositary
bank incurs expenses in connection with the conversion of dividends or
other cash distributions paid in local currency into U.S. dollars and
such expenses are deducted from the amount of the dividend or
distribution paid to holders, resulting in a lower payout per underlying
share represented by the Depositary Receipts than would be the case if
the underlying share were held directly. Certain tax considerations,
including tax rate differentials and withholding requirements, arising
from the application of the tax laws of one nation to nationals of
another and from certain practices in the Depositary Receipts market may
also exist with respect to certain Depositary Receipts. In varying
degrees, any or all of these factors may affect the value of the
Depositary Receipts compared with the value of the underlying shares in
the local market. In addition, the rights of holders of Depositary
Receipts may be different than those of holders of the underlying
shares, and the market for Depositary Receipts may be less liquid than
that for the underlying shares. Depositary Receipts are registered
securities pursuant to the Securities Act of 1933 and may be subject to
the reporting requirements of the Securities Exchange Act of 1934.

For the equity securities that are Depositary Receipts, currency
fluctuations will affect the U.S. dollar equivalent of the local
currency price of the underlying domestic shares and, as a result, are
likely to affect the value of the Depositary Receipts and consequently
the value of the equity securities. The foreign issuers of securities
that are Depositary Receipts may pay dividends in foreign currencies
which must be converted into dollars. Most foreign currencies have
fluctuated widely in value against the United States dollar for many
reasons, including supply and demand of the respective currency, the
soundness of the world economy and the strength of the respective
economy as compared to the economies of the United States and other
countries. Therefore, for any securities of issuers (whether or not they
are in Depositary Receipt form) whose earnings are stated in foreign
currencies, or which pay dividends in foreign currencies or which are
traded in foreign currencies, there is a risk that their United States
dollar value will vary with fluctuations in the United States dollar
foreign exchange rates for the relevant currencies.

The information provided below details certain important factors which
impact the economies of both the United Kingdom and Hong Kong. This
information has been extracted from various governmental and private
publications, but no representation can be made as to its accuracy.
Furthermore, no representation is made that any correlation exists
between the economies of the United Kingdom and Hong Kong and the value
of the equity securities held by the Global Target 15 Portfolio.

United Kingdom. The emphasis of the United Kingdom's economy is in the
private services sector, which includes the wholesale and retail sector,
banking, finance, insurance and tourism. Services as a whole account for
a majority of the United Kingdom's gross national product and make a
significant contribution to the country's balance of payments. The
portfolio of the Global Target 15 Portfolio may contain common stocks of
British companies engaged in such industries as banking, chemicals,
building and construction, transportation, telecommunications and
insurance. Many of these industries may be subject to government
regulation, which may have a materially adverse effect on the
performance of their stock. The United Kingdom is a
member of the European Union (the "EU"), which was created through the
formation of the Maastricht Treaty on European Union in late 1993. It is
expected that the Treaty will have the effect of eliminating most
remaining trade barriers between the 15 member nations and make Europe
one of the largest common markets in the world. However, the effective
implementation of the treaty provisions and the rate at which trade
barriers are eliminated is uncertain at this time. Furthermore, the
recent rapid political and social change throughout Europe make the
extent and nature of future economic development in the United Kingdom
and Europe and the impact of such development upon the value of the
portfolio securities issued by United Kingdom companies held in the
Global Target 15 Portfolio impossible to predict.

A majority of the EU members converted their existing sovereign
currencies to a common currency (the "euro") on January 1, 1999. The
United Kingdom did not participate in the conversion on January 1, 1999
and First Trust is unable to predict if or when the United Kingdom will
convert to the euro. Moreover, it is not possible to accurately predict
the effect of the current political and economic situation upon long-
term inflation and balance of trade cycles and how these changes, as
well as the implementation of a common currency throughout a majority of
EU countries, would affect the currency exchange rate between the U.S.

Page 27

dollar and the British pound sterling. In addition, United Kingdom
companies with significant markets or operations in other European
countries (whether or not such countries are participating) face
strategic challenges as these entities adapt to a single trans-national
currency. The euro conversion may have a material impact on revenues,
expenses or income from operations; increase competition due to the
increased price transparency of EU markets; affect issuers' currency
exchange rate risk and derivatives exposure; disrupt currency contracts;
cause issuers to increase spending on information technology updates
required for the conversion; and result in potential adverse tax
consequences. First Trust is unable to predict what impact, if any, the
euro conversion will have on any of the portfolio securities issued by
United Kingdom companies in the Global Target 15 Portfolio.

Hong Kong. Hong Kong, established as a British colony in the 1840's,
reverted to Chinese sovereignty effective July 1, 1997. On such date,
Hong Kong became a Special Administrative Region ("SAR") of China. Hong
Kong's new constitution is the Basic Law (promulgated by China in 1990).
Prior to July 1, 1997, the Hong Kong government followed a laissez-faire
policy toward industry. However, Hong Kong's recent economic data has
not been encouraging. The full impact of the Asian financial crisis, as
well as current international economic instability, is likely to
continue to have a negative impact on the Hong Kong economy in the near
future.

Although China has committed by treaty to preserve for 50 years the
economic and social freedoms enjoyed in Hong Kong prior to the
reversion, the continuation of the economic system in Hong Kong after
the reversion will be dependent on the Chinese government, and there can
be no assurances that the commitment made by China regarding Hong Kong
will be maintained. Prior to the reversion, legislation was enacted in
Hong Kong designed to extend democratic voting procedures for Hong
Kong's legislature. China has expressed disagreement with this
legislation, which it states is in contravention of the principles
evidenced in the Basic Law of the Hong Kong SAR. The National Peoples'
Congress of China has passed a resolution to the effect that the
Legislative Council and certain other councils and boards of the Hong
Kong Government were to be terminated on June 30, 1997. Such bodies have
subsequently been reconstituted in accordance with China's
interpretation of the Basic Law. Any increase in uncertainty as to the
future economic and political status of Hong Kong could have a
materially adverse effect on the value of the Global Target 15
Portfolio. First Trust is unable to predict the level of market
liquidity or volatility which may occur as a result of the reversion to
sovereignty, both of which may negatively impact such Fund and the value
of its shares.

China currently enjoys a most favored nation status ("MFN Status") with
the United States. MFN Status is subject to annual review by the
President of the United States and approval by Congress. As a result of
Hong Kong's reversion to Chinese control, U.S. lawmakers have suggested
that they may review China's MFN status on a more frequent basis.
Revocation of the MFN status would have a severe effect on China's trade
and thus could have a materially adverse effect on the value of the
Global Target 15 Portfolio. The performance of certain companies listed
on the Hong Kong Stock Exchange is linked to the economic climate of
China. The renewal of China's MFN Status in May of 1996 has helped to
reduce the uncertainty for Hong Kong in conducting Sino-U.S. trade, and
the signing of the agreement on copyright protection between the U.S.
and Chinese governments in June of 1996 averted a trade war that would
have affected Hong Kong's re-export trade. In 1997, China and the United
States reached a four-year bilateral agreement on textiles, again
avoiding a Sino-U.S. trade war. More recently, the currency crisis which
has affected a majority of Asian markets since mid-1997 has forced Hong
Kong leaders to address whether to devalue the Hong Kong dollar or
maintain its peg to the U.S. dollar. During the volatile markets of
1998, the Hong Kong Monetary Authority (the "HKMA") acquired the common
stock of certain Hong Kong issuers listed on the Hong Kong Stock
Exchange in a an effort to stabilize the Hong King dollar and thwart
currency speculators. Government intervention may hurt Hong Kong's
reputation as a free market and increases concerns that authorities are
not willing to let Hong Kong's currency system function autonomously.
This may undermine confidence in the Hong Kong dollar's peg to the U.S.
Dollar. Any downturn in economic growth or increase in the rate of
inflation in China or Hong Kong could have a materially adverse effect
on the value of the Global Target 15 Portfolio.

Securities prices on the Hong Kong Stock Exchange, and specifically the
Hang Seng Index, can be highly volatile and are sensitive to
developments in Hong Kong and China, as well as other world markets. For
example, the Hang Seng Index declined by approximately 31% in October,
1997 as a result of speculation that the Hong Kong dollar would become
the next victim of the Asian currency crisis, and in 1989, the Hang Seng
Index dropped 1,216 points (approximately 58%) in early June following
the events at Tiananmen Square. The Hang Seng Index gradually climbed
subsequent to the events at Tiananmen Square but fell by 181 points on
October 13, 1989 (approximately 6.5%) following a substantial fall in
the U.S. stock markets. During 1994, the Hang Seng Index lost
approximately 31% of its value. From January through August of 1998,

Page 28

during a period marked by international economic instability and a
global currency crisis, the Hang Seng Index declined by nearly 27%. The
Hang Seng Index is subject to change, and delisting of any issuers may
have an adverse impact on the performance of the Global Target 15
Portfolio, although delisting would not necessarily result in the
disposal of the stock of these companies, nor would it prevent such Fund
from purchasing additional equity securities of these companies. In
recent years, a number of companies, comprising approximately 10% of the
total capitalization of the Hang Seng Index, have delisted. In addition,
as a result of Hong Kong's reversion to Chinese sovereignty, an
increased number of Chinese companies could become listed on the Hong
Kong Stock Exchange, thereby changing the composition of the stock
market and, potentially, the composition of the Hang Seng Index.

Exchange Rate. The Global Target 15 Portfolio, NASDAQ Target 15
Portfolio, First Trust 10 Uncommon Values Portfolio and the Sector Funds
may be comprised substantially of equity securities that are principally
traded in foreign currencies and as such, involve investment risks that
are substantially different from an investment in a fund which invests
in securities that are principally traded in United States dollars. The
United States dollar value of each Fund's portfolios and of the
distributions from the portfolios will vary with fluctuations in the
United States dollar foreign exchange rates for the relevant currencies.
Most foreign currencies have fluctuated widely in value against the
United States dollar for many reasons, including supply and demand of
the respective currency, the rate of inflation in the respective
economies compared to the United States, the impact of interest rate
differentials between different currencies on the movement of foreign
currency rates, the balance of imports and exports of goods and
services, the soundness of the world economy and the strength of the
respective economy as compared to the economies of the United States and
other countries.

Exchange rate fluctuations are partly dependent on a number of economic
factors including economic conditions within countries, the impact of
actual and proposed government policies on the value of currencies,
interest rate differentials between the currencies and the balance of
imports and exports of goods and services and transfers of income and
capital from one country to another. These economic factors are
influenced primarily by a particular country's monetary and fiscal
policies (although the perceived political situation in a particular
country may have an influence as well--particularly with respect to
transfers of capital). Investor psychology may also be an important
determinant of currency fluctuations in the short run. Moreover,
institutional investors trying to anticipate the future relative
strength or weakness of a particular currency may sometimes exercise
considerable speculative influence on currency exchange rates by
purchasing or selling large amounts of the same currency or currencies.
However, over the long term, the currency of a country with a low rate
of inflation and a favorable balance of trade should increase in value
relative to the currency of a country with a high rate of inflation and
deficits in the balance of trade.

The following table sets forth, for the periods indicated, the range of
fluctuation concerning the equivalent U.S. dollar rates of exchange and
end of month equivalent U.S. dollar rates of exchange for the United
Kingdom pound sterling and the Hong Kong dollar:

<TABLE>
<CAPTION>
Foreign Exchange Rates
Range of Fluctuations in Foreign Currencies

United Kingdom Pound
Annual Period Sterling/U.S. Dollar Hong Kong/U.S. Dollar
_____________ ____________________ _____________________
<S> <C> <C>
1983 0.616-0.707 6.480-8.700
1984 0.671-0.864 7.774-8.050
1985 0.672-0.951 7.729-7.990
1986 0.643-0.726 7.768-7.819
1987 0.530-0.680 7.751-7.822
1988 0.525-0.601 7.764-7.912
1989 0.548-0.661 7.775-7.817
1990 0.504-0.627 7.740-7.817
1991 0.499-0.624 7.716-7.803
1992 0.498-0.667 7.697-7.781
1993 0.630-0.705 7.722-7.766
1994 0.610-0.684 7.723-7.750
1995 0.610-0.653 7.726-7.763
1996 0.583-0.670 7.732-7.742
1997 0.584-0.633 7.708-7.751

Page 29

1998 0.584-0.620 7.735-7.749
1999 0.597-0.646 7.746-7.775

<FN>
Source: Bloomberg L.P.
</FN>
</TABLE>

First Trust will estimate current exchange rates for the relevant
currencies based on activity in the various currency exchange markets.
However, since these markets are volatile and are constantly changing,
depending on the activity at any particular time of the large
international commercial banks, various central banks, large multi-
national corporations, speculators and other buyers and sellers of
foreign currencies, and since actual foreign currency transactions may
not be instantly reported, the exchange rates estimated by First Trust
may not be indicative of the amount in United States dollars a Fund
would receive had the Fund sold any particular currency in the market.
The foreign exchange transactions of a Fund will be conducted by the
Fund with foreign exchange dealers acting as principals on a spot (i.e.,
cash) buying basis. Although foreign exchange dealers trade on a net
basis, they do realize a profit based upon the difference between the
price at which they are willing to buy a particular currency (bid price)
and the price at which they are willing to sell the currency (offer
price).

Fund Management

The officers of the Registrant manage its day to day operations and are
responsible to the Registrant's Board of Trustees. The management of the
Fund, including general supervision of the duties performed for the Fund
under the Investment Advisory and Management Agreement, is the
responsibility of its Board of Trustees. The Trustees set broad policies
for each Fund and choose the Registrant's officers. The following is a
list of the Trustees and officers of the Registrant and a statement of
their present positions and principal occupations during the past five
years, with the Trustee who is an "interested person" (as such term is
defined in the Investment Company Act of 1940) of the Registrant
indicated by an asterisk. The mailing address of the officers and
Trustees, unless otherwise noted, is 1001 Warrenville Road, Suite 300,
Lisle, Illinois 60532.

<TABLE>
<CAPTION>
Principal Occupations
Name, Age and Address Position and Offices with Registrant During Past 5 Years
_____________________ ____________________________________ _____________________________
<S> <C> <C>
(1) Robert J. Bartel Trustee Board Member (1996 to Present), First
730 Windmill Circle American Federal Savings Bank of Virginia;
Bristol, VA 24201 Tri-City Advisory Board (1999 to Present),
D.O.B: 11/31 First American Bank; Senior Financial
Advisor (1997 to Present), United
Management Company, LLC; Trustee (1997 to
Present), United Investment Trust; Chairman
of the Board (1989 to 1996), Charter
Federal Savings Bank.

*James A. Bowen President, Chairman of the Board, President, Nike Securities and First Trust
D.O.B: 09/55 Chief Executive Officer and Trustee Advisors.

Mark R. Bradley Treasurer, Controller, Chief Financial Chief Financial Officer, Senior Vice
D.O.B: 11/57 Officer and Chief Accounting Officer President, Managing Director, Nike
Securities and First Trust Advisors.

Susan M. Brix Assistant Vice President Representative, Nike Securities; Assistant
D.O.B: 01/60 Portfolio Manager, First Trust Advisors.

Page 30

Robert F. Carey Vice President Senior Vice President, Nike Securities and
D.O.B: 07/63 First Trust Advisors.

Richard E. Erickson Trustee Physician, Sportsmed/Wheaton Orthopedics
327 Gundersen Drive
Carol Stream, IL 60188
D.O.B: 04/51

David B. Field Vice President Senior Vice President, Nike Securities;
D.O.B: 02/49 Senior Vice President, Chief Investment
Officer, First Trust Advisors; Of Counsel
(1998 to Present), Johnson Westra,
Attorneys; Adjunct
Professor of Finance (1999 to Present),
Kellstadt Graduate School of Business,
DePaul University.

Patrick M. Fitzgerald Trustee President, Available Business Group Inc.
4141 S. Peoria Street (Printing products and distribution).
Chicago, IL 60609
D.O.B: 03/53

W. Scott Jardine Secretary Senior Vice President and General Counsel,
D.O.B: 05/60 Nike Securities and First Trust Advisors.

Niel B. Nielson Trustee Pastor (1997 to Present), College Church in
D.O.B: 3/54 330 East Union Wheaton; Partner (1996 to
1997), Ritchie Capital Wheaton, IL 60187
Markets (Options Trading); Vice President
(1995 to 1996), The Service-Master Company;
Senior Vice President (1984 to 1995),
Chicago Research and Trading-NationsBank.

<FN>
(1) Mr. Bartel is Mr. Bradley's father-in-law.
</FN>
</TABLE>

The following table sets forth compensation paid by the Registrant to
each of the Trustees who are not designated "interested persons" during
the period since inception, October 6, 1999, to December 31, 1999 and
the compensation estimated to be paid to the Trustees for the fiscal
year ending December 31, 2000. The Registrant has no retirement or
pension plans. The officers and Trustees who are "interested persons" as
designated above serve without any compensation from the Registrant.

<TABLE>
<CAPTION>
Actual Aggregate Compensation
Name of Trustee From Registrant and Fund Complex* Estimated Compensation*
_______________ ________________________________ _______________________
<S> <C> <C>
Robert J. Bartel $14,750 $21,500
Richard E. Erickson $14,250 $20,500
Patrick M. Fitzgerald $14,750 $21,500
Niel B. Nielson $14,750 $21,500
_______ _______
Total $58,500 $85,000

Page 31

<FN>
*Based on the estimated compensation to be paid to the independent
Trustees for the fiscal year ending December 31, 2000 for services to
the Registrant.
</FN>
</TABLE>

As of April 25, 2000, Account B owned all shares of the Registrant. Nike
Securities L.P. ("Nike Securities") has indirect beneficial interest in at
least 25% of the outstanding voting securities of the Target 5 Portfolio,
Global Target 15 Portfolio, First Trust 10 Uncommon Values Portfolio, First
Trust Energy Portfolio, First Trust Internet Portfolio, and First Trust
Pharmaceutical Portfolio. As a result, Nike Securities is considered to
control those Funds. Due to such control Nike Securities may have the ability
to effect the outcome of any item voted on by such Funds. To the extent
required by applicable law, American Skandia will solicit voting instructions
from owners of variable annuity Policies. All interests in each Fund will be
voted by American Skandia in accordance with voting instructions received
from such variable Policy owners. American Skandia will vote all of the
interests which it is entitled to vote in the same proportion as the voting
instructions given by variable Policy owners, on the issues presented.

As of April 25, 2000, the Trustees and officers of the Funds, owned, in
the aggregate, less than 1% of the interests of any individual Fund.

As of April 25, 2000 the following persons owned of record or
beneficially more than 5% of the outstanding voting shares of the
Portfolios:

PORTFOLIO NAME INTEREST HOLDER ADDRESS PERCENTAGE
______________ _______________ _______ __________
<S> <C> <C> <C>

The Dow Target 5 Nike Securities L.P. 1001 Warrenville Road 87.8%
Lisle, IL 60532-4310

DLJ as Custodian FBO Darrell Murray 1 Pershing Plaza 7.4%
Pershing, NJ 07399

The Dow DART 10 Nike Securities L.P. Same 21.3%

Mr. James Leckie 314 Lilac Drive 9.9%
El Cajon, CA 92021

Mr. Richard Lancrain 9032 N. Maple Street 13.72%
Hayden, ID 83835

Mr. Philip Dreisbach 1219 Mountain Avenue 8.5%
Coeur D Alene, ID 83814

Ms. Norma Jean Beckman 1525 Chatsworth Blvd 7.5%
San Diego, CA 92107

Svirsky Family Trust 10611 Noakes Road 7.4%
La Mesa, CA 91941

Global Target 15 Nike Securities L.P. Same 55.2%
Mr. Philip Dreisbach Same 9.5%
Mr. William Applebee 2809 Klamath Drive 7.1%
Anchorage, AK 99517

Mr. Richard Lancrain Same 6.9%
S&P Target 10 Nike Securities L.P. Same 14.4%
Mr. Philip Dreisbach Same 8.7%
Mr. Richard Lancrain Same 7.2%
Mr. James Leckie Same 6.3%
Ruth P. Dingwall POA Trust U/A 10-6-92 4784 Mt. Helix Drive 10.2%
La Mesa, CA 91941

NASDAQ Target 15 Nike Securities L.P. Same 9.0%
Ruth P. Dingwall POA Trust U/A 10-6-92 Same 8.6%
Svirsky Family Trust Same 6.3%
Ms. Marie Duncan 1085 Tasman Drive No. 413 6.0%
Sunnyvale, CA 94089

First Trust 10 Uncommon Values Nike Securities L.P. Same 65.7%
Mr. Richards Mowles 1862 Sweetwater Road 5.1%
Gypsum, CO 81637

First Trust Energy Nike Securities L.P. Same 98.3%

First Trust Financial Services Nike Securities L.P. Same 24.9%
Ms. Sue Hecker 1221 Cresendo Drive 10.1%
Roseville, CA 95678
Ruth P. Dingwall POA Trust U/A 10-6-92 Same 5.9%
Mr. James Leckie Same 9.4%
Svirsky Family Trust Same 8.2%

First Trust Internet Nike Securities L.P. Same 29.0%
Mr. M. Robert Burman 10001 Apple Hill Court 15.5%
Potomac, MD 20854
Ms. Sue Hecker Same 10.3%
Ms. Charlotte Chavin 4740 Laurel Grove 10.0%
Valley Village, CA 91607
</TABLE>

Performance

A Fund may quote its total return and yield in reports to shareholders,
sales literature, and advertisements. These performance measures are
described below. Performance advertised for a Fund may or may not
reflect the effect of any charges that are imposed under a variable
annuity Policy that is funded by the Registrant. Such charges, described
in the variable annuity prospectus, will have the effect of reducing a
Fund's performance.

Standardized average annual total return and non-standardized total
return measure both the net investment income generated by, and the
effect of any realized and unrealized appreciation or depreciation of,
the underlying investments of a Fund. Yield is a measure of the net
investment income per interest earned over a specific one month or 30-
day period expressed as a percentage of the net asset value.

A Fund's standardized average annual total return quotation is computed
in accordance with a standardized method prescribed by rules of the
Securities and Exchange Commission. The standardized average annual
total return for a Fund for a specific period is found by first taking a
hypothetical $1,000 investment ("initial investment") in the Fund's
interests on the first day of the period, adjusting to deduct the
applicable charges, if any, and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then
divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is
subtracted from the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains dividends paid by
a Fund have been reinvested at net asset value on the reinvestment dates
during the period. The total returns for the period from October 6,
1999 (commencement of operations) to December 31, 1999 (not annualized)
for the following Portfolios were: The Dow (sm) Target 5 Portfolio
(19.60%), The Dow sm DART 10 Portfolio (7.80%), Global Target 15
Portfolio (2..90%), S&P Target 10 Portfolio 18.30% , NASDAQ Target 15
Portfolio 46.00%, First Trust 10 Uncommon Values Portfolio 14.00%, First
Trust Energy Portfolio 12.30%, First Trust Financial Services Portfolio
4.90%, First Trust Internet Portfolio 63.30%, First Trust Pharmaceutical
Portfolio 3.70% and First Trust Technology Portfolio 34.10%.

The standardized average annual total return quotations will be current
to the last day of the calendar quarter preceding the date on which an
advertisement is submitted for publication. The standardized average
annual total return will be based on rolling calendar quarters and will
cover at least periods of one, five and ten years, or a period covering
the time the Fund has been in existence, if it has not been in existence
for one of the prescribed periods.

Non-standardized total return may also be advertised. The non-
standardized total return is not subject to a prescribed formula. Non-
standardized total return may be for periods other than those required
to be presented or may otherwise differ from standardized average annual
total return. Non-standardized total return for a specific period is
calculated by first taking an investment ("initial investment") in the
Fund's interests on the first day of the period and computing the "end
value" of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from
the ending value and dividing the remainder by the initial investment
and expressing the result as a percentage. The calculation assumes that
all income and capital gains dividends paid by a Fund have been
reinvested at net asset value on the reinvestment dates during the
period. Non-standardized total return may also be shown as the increased
dollar value of the hypothetical investment over the period.

Page 32

Quotations of standardized average annual total return and non-
standardized total return are based upon historical earnings and is not
intended to indicate future performance.

The yield for a Fund is computed in accordance with a standardized
method prescribed by the rules of the SEC. Under that method, yield is
computed by dividing the net investment income per interest earned
during the specified one month or 30-day period by the offering price
per interest on the last day of the period, according to the following
formula:

Yield = 2[((a - b/cd) + 1) 6 - 1]

Where:

a = dividends and interest earned during the period;

b = expenses accrued for the period (net of reimbursements);

c = the average daily number of interests outstanding during the period
that were entitled to receive dividends; and

d = the offering price (net asset value) per interest on the last day of
the period.

In computing the yield, a Fund follows certain standardized accounting
practices specified by SEC rules. These practices are not necessarily
consistent with those that a Fund uses to prepare annual and interim
financial statements in accordance with generally accepted accounting
principles.

A Fund's performance quotations are based upon historical results and
are not necessarily representative of future performance. A Fund's
interests are sold at net asset value. Returns and net asset value will
fluctuate. Factors affecting a Fund's performance include general market
conditions, operating expenses and investment management. Interests of a
Fund are redeemable at the then current net asset value, which may be
more or less than original cost.

The performance of the Funds may be compared to the performance of other
mutual funds, mutual fund indices or annuity indices with similar
objectives and policies as reported by various sources, including Lipper
Analytical Services, Inc. ("Lipper") and CDA Investment Technologies,
Inc. ("CDA"). Lipper and CDA performance calculations are based upon
changes in net asset value with all dividends reinvested and do not
include the effect of any sales charges. The Fund's performance may also
be compared to that of the Consumer Price Index or various unmanaged
stock and bond indices including, but not limited to, Salomon Brothers
Broad Investment Grade Index, Lehman Brothers High Yield Index, Lehman
Brothers Aggregate Bond Index, Lehman Brothers Intermediate
Government/Corporate Bond Index, Salomon Brothers Treasury Index, S&P
MidCap 400 Index, Morgan Stanley Capital International World Index,
Morgan Stanley Capital International Europe and Australia, Far East
Equity Index, Russell 2000 Index, Russell MidCap Index, Dow Jones
Industrial Average, Hang Seng Index, Ibbotson Small Cap Index, Financial
Times and S&P 500 Index. There are differences and similarities between
the investments which a Fund may purchase and the investments by the
market indicators.

From time to time, a Fund also may quote information from publications
including, but not limited to, the following: Morningstar, Inc., The
Wall Street Journal, Money Magazine, Forbes, Barron's, The New York
Times, USA Today, Institutional Investor and Registered Representative.
Also, investors may want to compare the historical returns of various
investments, performance indices of those investments or economic
indicators, including but not limited to stocks, bonds, certificates of
deposit and other bank products, money market funds and U.S. Treasury
obligations. Certain of these alternative investments may offer fixed
rates of return and guaranteed principal, and may be insured. Economic
indicators may include, without limitation, indicators of market rate
trends and cost of funds, such as Federal Home Loan Bank Board 11th
District Cost of Funds Index (COFI). A Fund may also advertise its
portfolio or its significant holdings at any given time. A Fund may also
periodically advertise tax-deferred compounding charts and other
hypothetical illustrations.

Page 33

Performance Data of Investment Strategies

The following table shows hypothetical performance and information for
the strategies employed by the Funds noted below, but not any actual
Fund, and the actual performance of the S&P 500 Index, the FT Index, the
Hang Seng Index, the DJIA, the Ibbotson Small Cap Index and a
combination of the FT Index, Hang Seng Index and the DJIA (the
"Cumulative Index Returns"). The information for each investment
strategy assumed that the strategy was fully invested as of the
beginning of each year and that each Stock Selection Date was the last
day of the preceding year. In addition, the performance information does
not take into consideration any sales charges, commissions, insurance
fees or charges imposed on the sale of the variable annuity policies,
expenses or taxes. Any of such charges will lower the returns shown. All
of the figures set forth below have been adjusted to take into account
the effect of currency exchange rate fluctuations of the U.S. dollar,
where applicable (i.e., returns are stated in U.S. dollar terms). The
Cumulative Index Returns are calculated by adding one-third of the total
returns of each of the FT Index, the Hang Seng Index and the DJIA. The
returns shown in the following tables and graphs are not guarantees of
future performance and should not be used as a predictor of returns to
be expected in connection with a Fund's portfolio. Both stock prices
(which may appreciate or depreciate) and dividends (which may be
increased, reduced or eliminated) will affect the returns. Each
investment strategy has under performed its respective index or indices
in certain years. Accordingly, there can be no assurance that a Fund's
portfolio will outperform its respective index (or combination thereof,
where applicable).

The following table compares the hypothetical performance of the
investment strategy of the DART 10 Portfolio (the "DART 10 Strategy");
the Five Lowest Priced Stocks of the Ten Highest Dividend Yielding
Stocks of the DJIA (the "Dow Target 5 Strategy"); a combination of the
Five Lowest Priced Stocks of the Ten Highest Dividend Yielding Stocks
Strategies in the FT Index, Hang Seng Index and the DJIA (the "Global
Target 15 Strategy"); the investment strategy of the S&P Target 10
Portfolio (the "S&P Target 10 Strategy") and the investment strategy of
the NASDAQ Target 15 Portfolio (the "NASDAQ Target 15 Strategy"); and
the performance of the S&P 500 Index, the FT Index, the Hang Seng Index,
the DJIA, the Ibbotson Small-Cap Index and the Cumulative Index Returns
in each of the 20 years listed below, as of December 31 in each of those
years (and as of the most recent quarter).

An investor in a Fund would not necessarily realize as high a total
return on an investment in the stocks upon which the hypothetical
returns are based for the following reasons: the total return figures
shown do not reflect brokerage commissions, expenses or taxes; the Funds
are established at different times of the year; and the Funds may not be
fully invested at all times or equally weighted in all stocks comprising
a strategy. Further, the returns also do not reflect the deduction of
any insurance fees or charges which are imposed by American Skandia in
connection with the sale of variable annuity policies. Investors should
refer to the prospectus for Account B for a description of those fees
and charges which have a detrimental effect on the performance of the
Funds. If the above-mentioned charges were reflected in the hypothetical
returns, the returns would be lower than those presented here.

The returns shown below for the strategies do not represent the results
of actual trading using client assets but were achieved by means of the
retroactive application of a strategy that was designed with the benefit
of hindsight. These returns should not be considered indicative of the
skill of First Trust. The returns may not reflect the impact that any
material market or economic factors might have had if the strategies had
been used during the periods shown to actually manage client assets.
During most of the period shown in the table below, First Trust did not
manage or supervise accounts which employed strategies similar to the
hypothetical strategies shown below. The returns shown below for the
strategies are not a guarantee of future performance and should not be
used to predict the expected returns of a Fund. Each strategy has the
potential for loss.

These figures are for calendar years; the Funds may use different 12-
month periods.

Page 34

<TABLE>
<CAPTION>
COMPARISON OF TOTAL RETURN (2)

Strategy Total Returns Index Total Returns

S&P NASDAQ Ibbotson
DART Dow Combined Target Target 15 Small Cumulative
10 Target 5 15 10 Large Cap S&P 500 FT Hang Cap Index
YEAR Strategy Strategy Strategy Strategy Strategy Index Index Seng DJIA Index Returns(3)
____ ________ ________ ________ _______ ___________ ________ ________ _________ _________ ________ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1979 13.01% 9.84% 44.70% 43.17% - 18.22% 3.59% 77.99% 10.60% 43.46% 30.73%
1980 24.80% 41.69% 52.51% 54.15% - 32.11% 31.77% 65.48% 21.90% 38.88% 39.72%
1981 2.02% 3.19% 0.03% -10.59% - -4.92% -5.30% -12.34% -3.61% 13.88% -7.08%
1982 27.46% 43.37% -2.77% 38.21% - 21.14% 0.42% -48.01% 26.85% 28.01% -6.91%
1983 40.44% 36.38% 15.61% 20.01% - 22.28% 21.94% -2.04% 25.82% 39.67% 15.24%
1984 6.22% 11.12% 29.88% 16.34% - 6.22% 2.15% 42.61% 1.29% -6.67% 15.35%
1985 39.31% 38.34% 54.06% 43.49% - 31.77% 54.74% 50.95% 33.28% 24.66% 46.32%
1986 41.95% 30.89% 38.11% 21.81% 22.94% 18.31% 24.36% 51.16% 27.00% 6.85% 34.18%
1987 5.24% 10.69% 17.52% 9.16% 14.10% 5.33% 37.13% -6.84% 5.66% -9.30% 11.99%
1988 19.02% 21.47% 24.26% 20.35% -0.59% 16.64% 9.00% 21.04% 16.03% 22.87% 15.36%
1989 28.49% 10.55% 15.98% 39.62% 37.33% 31.35% 20.07% 10.59% 32.09% 10.18% 20.92%
1990 1.27% -15.74% 3.19% -5.64% -5.39% -3.30% 11.03% 11.71% -0.73% -21.56% 7.34%
1991 43.84% 62.03% 40.40% 24.64% 109.27% 30.40% 8.77% 50.68% 24.19% 44.63% 27.88%
1992 8.53% 22.90% 26.64% 24.66% -0.15% 7.62% -3.13% 34.73% 7.39% 23.35% 12.99%
1993 21.15% 34.01% 65.65% 42.16% 28.55% 9.95% 19.22% 124.95% 16.87% 20.98% 53.68%
1994 0.17% 8.27% -7.26% 8.17% 10.50% 1.34% 1.97% -29.34% 5.03% 3.11% -7.45%
1995 38.14% 30.50% 13.45% 25.26% 53.80% 37.22% 16.21% 27.52% 36.67% 34.66% 26.80%
1996 34.93% 26.20% 21.00% 26.61% 60.03% 22.82% 18.35% 37.86% 28.71% 17.62% 28.31%
1997 25.64% 19.97% -6.38% 61.46% 35.15% 33.21% 14.78% -17.69% 24.82% 22.78% 7.30%
1998 19.96% 12.36% 13.50% 53.85% 123.10% 28.57% 12.32% -2.60% 18.03% -7.38% 9.25%
1999 18.47% -7.28% 8.88% 3.49% 100.35% 20.94% 15.25% 71.34% 27.06% 28.96% 37.88%

<FN>
(1) The Strategy Stocks for each Strategy for a given year consist of
stock selected by applying the respective strategy as of the beginning
of the period. The Global Target 15 Strategy merely averages the Total
Return of the stocks which comprise the Five Lowest Priced Stocks of the
Ten Highest Dividend Yielding Stocks in the FT Index, Hang Seng Index
and the DJIA, respectively.

(2) Total Return represents the sum of the change in market value of
each group of stocks between the first and last trading day of a period
plus the total dividends paid on each group of stocks during the period
divided by the opening market value of each group of stocks as of the
first trading day of a period. Total Return does not take into
consideration any sales charges, commissions, expenses or taxes. Total
Return assumes that all dividends are reinvested semi-annually (with the
exception of the FT Index and the Hang Seng Index from 12/31/78 through
12/31/86, during which time annual reinvestment was assumed), and all
returns are stated in terms of the United States dollar. Based on the
year-by-year returns contained in the table, over the 14 years listed
for the NASDAQ Target 15 Strategy the average annual total return is
36.76%; in addition, over the 20 full years listed above, the DART 10
Strategy achieved an average annual total return of 21.51%, the S&P
Target 10 Strategy achieved an average annual total return of 24.37%,
and the Five Lowest Priced Stocks of the Ten Highest Dividend Yielding
Stocks in the DJIA and Global Target 15 Strategy achieved an average
annual total return of 20.67% and 19.61%, respectively. In addition,
over this period, each individual strategy achieved a greater average
annual total return than that of its corresponding index, the S&P 500
Index, Ibbotson Small-Cap Index, the DJIA or a combination of the FT
Index, Hang Seng Index and DJIA, which were 17.75%, 15.39%, 18.10% and
18.25%, respectively. For the seven year period between January 1, 1972
and December 31, 1978, the DART 10 Strategy achieved an annual total
return of 23.76% in 1972, -2.26% in 1973, -7.11% in 1974, 57.78% in
1975, 35.18% in 1976, -1.95% in 1977 and -1.95% in 1978; the Five Lowest
Priced Stocks of the Ten Highest Dividend Yielding Stocks in the DJIA
achieved an annual total return of 22.92% in 1972, 20.01% in 1973, -
5.40% in 1974, 65.77% in 1975, 40.96% in 1976, 5.49% in 1977 and 1.23%
in 1978; the DJIA achieved an annual total return of 18.38% in 1972, -
13.20% in 1973, -23.64% in 1974, 44.46% in 1975, 22.80% in 1976, -12.91%
in 1977 and 2.66% in 1978; the S&P 500 Index achieved an annual total
return of 18.89% in 1972, -14.57% in 1973, -26.33% in 1974, 36.84% in
1975, 23.64% in 1976 and -7.25% in 1977 and 6.49% in 1978; and the
Ibbotson Small-Cap Index achieved an annual total return of 4.43% in
1972, -30.90% in 1973, -19.95% in 1974, 52.82% in 1975, 57.38% in 1976,
25.38% in 1977 and 23.46% in 1978. Although each Fund seeks to achieve a
better performance than its respective index as a whole, there can be no
assurance that a Fund will achieve a better performance.

(3) Cumulative Index Returns represent the average of the annual returns
of the stocks contained in the FT Index, Hang Seng Index and DJIA.
Cumulative Index Returns do not represent an actual index.
</FN>
</TABLE>

Page 35

There can be no assurance that any Fund will outperform the DJIA or any
other index shown. Investors should not rely on the preceding financial
information as an indication of the past or future performance of a
Fund. This information may be used in advertisements.

Investment Advisory and Other Services

Investment Adviser

First Trust Advisors L.P., 1001 Warrenville Road, Suite 300, Lisle,
Illinois 60532, is the investment adviser to the Funds. As investment
adviser, First Trust provides the Funds with professional investment
supervision and management and permits any of its officers or employees
to serve without compensation as Trustees or officers of the Registrant
if elected to such positions. First Trust provides each Fund with
discretionary investment services and certain administrative services
necessary with the management of the portfolios. Specifically, First
Trust is responsible for supervising and directing the investments of
each Fund in accordance with each Fund's investment objective, program,
and restrictions as provided in the Prospectus and this Statement of
Additional Information. First Trust is responsible for effecting all
security transactions on behalf of each Fund. First Trust is also
responsible for compliance with the provisions of Section 817(h) of the
Internal Revenue Code of 1986, as amended ("Code"), applicable to each
Fund (relating to the diversification requirements applicable to
investments in underlying variable annuity contracts).

First Trust Advisors L.P. ("First Trust") is an Illinois limited partnership
formed in 1991 and an investment adviser registered with the SEC under the
Investment Advisers Act of 1940. First Trust is a limited partnership with one
limited partner, Grace Partners of DuPage L.P. ("Grace Partners"), and one
general partner, Nike Securities Corporation. Grace Partners is a limited
partnership with one general partner, Nike Securities Corporation, and a
number of limited partners. Grace Partners' and Nike Securities Corporation's
primary business is investment advisory and broker/dealer services through
their interests. Nike Securities Corporation is an Illinois corporation
controlled by Robert Donald Van Kampen. First Trust is controlled by Grace
Partners and Nike Securities Corporation.

First Trust is also adviser or subadviser to over 50 mutual funds and is the
portfolio supervisor of certain unit investment trusts sponsored by Nike
Securities L.P. ("Nike Securities") which are substantially similar to the
Funds in that they have the same investment objectives and strategies as the
various Funds but have a finite life. Nike Securities specializes in the
underwriting, trading and distribution of unit investment trusts and other
securities. Nike Securities, an Illinois limited partnership formed in 1991,
acts as sponsor for successive series of The First Trust Combined Series,
FT (formerly known as The First Trust Special Situations Trust), The First
Trust Insured Corporate Trust, The First Trust of Insured Municipal Bonds and
The First Trust GNMA. First Trust introduced the first insured unit investment
trust in 1974 and, to date, more than $27 billion in First Trust unit invest-
ment trusts have been deposited.

First Trust acts as investment adviser to the Funds pursuant to an
Investment Advisory and Management Agreement. The Investment Advisory
and Management Agreement continues in effect for each Fund from year to
year after its initial two-year term so long as its continuation is
approved at least annually by the Trustees including a majority of the
Trustees who are not parties to such agreement or interested persons of
any such party except in their capacity as Trustees of the Registrant,
or the interest holders of each Fund. It may be terminated at any time
upon 60 days notice by either party, or by a majority vote of the
outstanding interests of a Fund with respect to that Fund, and will
terminate automatically upon assignment. Additional Funds may be subject
to a different agreement. The Investment Advisory and Management
Agreement provides that First Trust, its partners, directors, officers,
employees, and certain other persons performing specific functions for a
Fund will only be liable to a Fund for losses resulting from willful
misfeasance, bad faith, gross negligence, or reckless disregard of their
obligations and duties under the agreement. As compensation for its
services, each Fund pays First Trust a fee as described in the
Prospectus. Provisions regarding expense limitations are described in
the Prospectus. For the period October 6, 1999 (commencement of
operations) to December 31, 1999 each Portfolio accrued the following
advisory fees:

<TABLE>
<CAPTION>
Amount of
Expenses Reimbursed Advisory Fee
Portfolio of Advisory Fee Paid Accrued
_________ _________________ _____________
<S> <C> <C>
The Dow (sm) Target 5 $123 $43,828
The Dow (sm) DART 10 $146 $44,284
Global Target 15 $344 $28,662
S&P Target 10 $240 $38,374
NASDAQ Target 15 $248 $37,086
First Trust 10 Uncommon Value $159 $38,288
First Trust Energy $150 $27,648
First Trust Financial Services $157 $30,037
First Trust Internet $185 $41,997
First Trust Pharmaceutical $157 $38,421
First Trust Technology $170 $32,426
</TABLE>

Page 36

Nike Securities, 1001 Warrenville Road, Lisle, Illinois 60532, serves as
the principal underwriter of the interests of the Fund pursuant to a
"best efforts" arrangement as provided by a distribution agreement with
the Funds (the "Distribution Agreement"). The officers of the Registrant
described as being associated with Nike Securities are affiliated
persons of both the Registrant and Nike Securities. Pursuant to the
Distribution Agreement, the Fund appointed Nike Securities to be its
agent for the distribution of the Funds' shares on a continuous offering
basis. Nike Securities sells shares to Account B. Pursuant to the
Distribution Agreement, Nike Securities, at its own expense, finances
certain activities incident to the sale and distribution of the
interests of the Funds, including printing and distribution of
prospectuses and statements of additional information to other than
existing shareholders and the printing and distributing of sales
literature and advertising. Nike Securities does not receive
underwriting commissions for its sale of interests of the Funds. Nike
Securities also receives compensation pursuant to a Rule 12b-1 plan
adopted by the Fund and described herein under "12b-1 Plan."

Custodian and Transfer Agent

The custodian has custody of all securities and cash of the Registrant
maintained in the United States and attends to the collection of
principal and income and payment for and collection of proceeds of
securities bought and sold by the Funds. The Chase Manhattan Bank, 4 New
York Plaza, New York, NY 10004-2413, acts as custodian for each Fund.
PFPC Inc, 4400 Computer Drive, Westborough, Massachusetts 01581, is the
transfer, shareholder services, accounting and dividend-paying agent for
each Fund and also provides certain clerical, bookkeeping, accounting
and administrative services necessary for the operation of the
Registrant and maintenance of shareholder accounts.

Administrator

Each Fund pays an administration fee of 0.325% of average daily net
assets to cover expenses incurred by American Skandia in connection with
the administrator of the Funds, Account B and the Policies. The services
provided by American Skandia shall include, among others, the following:
(i) coordinating matters relating to the operation of Account B with the
Funds, including any necessary coordination with the custodian, transfer
agent, dividend disbursing agent, recordkeeping agent, accountants,
attorneys, and other parties performing services or operational
functions for the Funds; (ii) coordinating the preparation of the
necessary documents with the SEC and other federal and state regulatory
authorities as may be required; (iii) taking such other action as may be
required by applicable law, with respect to the foregoing, including
without limitation the rules and regulations of the SEC and of state
insurance authorities and other regulatory agencies; and (iv)
coordinating with First Trust regarding investment limitations and
parameters imposed on funding vehicles for variable annuities by the
insurance laws of the various states and by the Internal Revenue Code.
For the period October 6, 1999 (commencement of operations) to December
31, 1999 each Portfolio paid the following amount: The Dow (sm) Target 5
Portfolio $66, The Dow (sm) DART 10 Portfolio $79, Global Target 15
Portfolio $187, S&P Target 10 Portfolio $132, NASDAQ Target 15 Portfolio
$136, First Trust 10 Uncommon Values Portfolio $87, First Trust Energy
Portfolio $82, First Trust Financial Services Portfolio $86, First Trust
Internet Portfolio $101, First Trust Pharmaceutical Portfolio $85 and
First Trust Technology Portfolio $93.

American Skandia also makes its officers and employees available to the
Trustees and officers of the Fund for consultation and discussions
regarding the operations of Account B and the Policies in connection
with the administration of the Funds and services provided to the Funds.

Independent Auditor

The Funds' independent auditors, Ernst & Young LLP, 200 Clarendon Street,
Boston, MA 02116, audit and report on the Funds' annual financial
statements, and perform other professional accounting, auditing and
advisory services when engaged to do so by the Funds.

Fund Transactions and Brokerage

First Trust is responsible for decisions to buy and sell securities for
each Fund and for the placement of a Fund's securities business, the
negotiation of the commissions to be paid on brokered transactions, the
prices for principal trades in securities, and the allocation of

Page 37

portfolio brokerage and principal business. It is the policy of First
Trust to seek the best execution at the best security price available
with respect to each transaction, and with respect to brokered
transactions in light of the overall quality of brokerage and research
services provided to First Trust and its advisees. The best price to the
Fund means the best net price without regard to the mix between purchase
or sale price and commission, if any. Purchases may be made from
underwriters, dealers, and, on occasion, the issuers. Commissions will
be paid on a Fund's futures and options transactions, if any. The
purchase price of portfolio securities purchased from an underwriter or
dealer may include underwriting commissions and dealer spreads. A Fund
may pay mark-ups on principal transactions. In selecting broker/dealers
and in negotiating commissions, First Trust considers, among other
things, the firm's reliability, the quality of its execution services on
a continuing basis and its financial condition. Fund portfolio
transactions may be effected with broker/dealers who have assisted
investors in the purchase of policies. The selection of a broker-dealer
may take into account the sale of products sponsored or advised by First
Trust and/or its affiliates.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment adviser, under certain circumstances, to cause an
account to pay a broker or dealer who supplies brokerage and research
services a commission for effecting a transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting the transaction. Brokerage and research services include (a)
furnishing advice as to the value of securities, the advisability of
investing, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, (b) furnishing
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing
functions incidental thereto (such as clearance, settlement, and custody).

In light of the above, in selecting brokers, First Trust considers
investment and market information and other research, such as economic,
securities and performance measurement research, provided by such
brokers, and the quality and reliability of brokerage services,
including execution capability, performance, and financial
responsibility. Accordingly, the commissions charged by any such broker
may be greater than the amount another firm might charge if First Trust
determines in good faith that the amount of such commissions is
reasonable in relation to the value of the research information and
brokerage services provided by such broker to First Trust or the
Registrant. First Trust believes that the research information received
in this manner provides the Funds with benefits by supplementing the
research otherwise available to the Funds. The Investment Advisory and
Management Agreement provides that such higher commissions will not be
paid by the Funds unless the adviser determines in good faith that the
amount is reasonable in relation to the services provided. The
investment advisory fees paid by the Funds to First Trust under the
Investment Advisory and Management Agreement are not reduced as a result
of receipt by First Trust of research services.

First Trust places portfolio transactions for other advisory accounts
advised by it, and research services furnished by firms through which
the Funds effects their securities transactions may be used by First
Trust in servicing all of its accounts; not all of such services may be
used by First Trust in connection with a Fund. First Trust believes it
is not possible to measure separately the benefits from research
services to each of the accounts (including the Funds) advised by it.
Because the volume and nature of the trading activities of the accounts
are not uniform, the amount of commissions in excess of those charged by
another broker paid by each account for brokerage and research services
will vary. However, First Trust believes such costs to the Funds will
not be disproportionate to the benefits received by the Funds on a
continuing basis. First Trust seeks to allocate portfolio transactions
equitably whenever concurrent decisions are made to purchase or sell
securities by the Funds and another advisory account. In some cases,
this procedure could have an adverse effect on the price or the amount
of securities available to the Funds. In making such allocations between
the Funds and other advisory accounts, the main factors considered by
First Trust are the respective investment objectives, the relative size
of portfolio holding of the same or comparable securities, the
availability of cash for investment and the size of investment
commitments generally held.

Brokerage Commissions

For the fiscal year ended December 31, 1999, the Fund paid the following
amounts in aggregate brokerage commissions: The Dow (sm) Target 5
Portfolio, $68.73, The Dow (sm) DART 10 Portfolio $53.52, Global Target 15
Portfolio U.S. $58.83, H.K. $1,892.90, L 113.93, S&P Target 10 Portfolio
$86.34, NASDAQ Target 15 Portfolio $107.85, First Trust 10 Uncommon
Values Portfolio $50.10, First Trust Energy Portfolio $103.08,
First Trust Financial Services Portfolio $70.89, First Trust Internet
Portfolio $49.65, First Trust Pharmaceutical Portfolio $63.36 and
First Trust Technology Portfolio $51.75.

Page 38

Code of Ethics

To mitigate the possibility that a Fund will be adversely affected by
personal trading of employees, the Registrant, First Trust (the
"Adviser"), and Nike Securities (the "Distributor") have adopted Codes
of Ethics under Rule 17j-1 of the Investment Company Act of 1940. These
Codes contain policies restricting securities trading in personal
accounts of the portfolio Trustees and others who normally come into
possession of information on portfolio transactions.

Purchases, Redemptions and Pricing of Interests

Account B will purchase interests of the Funds at their net asset value.
Interests are purchased using premiums received on Policies issued by
Account B. Account B is funded by interests of the Registrant.

All investments in the Registrant are credited to the interest holder's
account in the form of full and fractional interests of the designated
Fund (rounded to the nearest 1/1000 of an interest). The Registrant does
not issue interest certificates.

As stated in the Prospectus, the net asset value ("NAV") of Fund's
interests is determined once each day on which the New York Stock
Exchange (the "NYSE") is open ("Business Day") at the close of the
regular trading session of the Exchange (normally 4:00 p.m., Eastern
Time, Monday through Friday). The NAV of a Fund's interests is not
determined on the days the NYSE is closed, which days generally are New
Year's Day, Martin Luther King Jr. holiday, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.

The per interest NAV of a Fund is determined by dividing the total value
of the securities and other assets, less liabilities, by the total
number of interests outstanding. A Fund's net assets value may not be
calculated on days during which the Fund receives no orders to purchase
shares and no shares are tendered for redemption. In determining NAV,
portfolio securities for each Fund for which accurate market quotations
are readily available will be valued by the fund accounting agent as
follows:

(1) Common stocks and other equity securities listed on any national or
foreign exchange or on the Nasdaq will be valued at the closing sale
price on the exchange or system in which they are principally traded on
the valuation date. If there are no transactions on the valuation day,
securities traded principally on a national or foreign exchange or on
Nasdaq will be valued at the mean between the most recent bid and ask
prices.

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

(3) Exchange traded options and futures contracts will be valued at the
closing price in the market where such contracts are principally traded.

(4) Forward foreign currency exchange contracts which are traded in the
United States on regulated exchanges, will be valued by calculating the
mean between the last bid and asked quotations supplied to a pricing
service by certain independent dealers in such contracts.

In addition, the following types of securities will be valued as follows:

(1) Fixed income securities with a remaining maturity of 60 days or more
will be valued by the fund accounting agent using a pricing service.
When price quotes are not available, fair market value is based on
prices of comparable securities.

(2) Fixed income securities maturing within 60 days are valued by the
fund accounting agent on an amortized cost basis.

(3) Repurchase agreements will be valued as follows. Overnight
repurchase agreements will be valued at cost. Term purchase agreements
(i.e., those whose maturity exceeds seven days) will be valued by First
Trust at the average of the bid quotations obtained daily from at least
two recognized dealers.

Page 39

The value of any portfolio security held by a Fund for which market
quotations are not readily available will be determined by the Adviser
in a manner that most fairly reflects fair market value of the security
on the valuation date, based on a consideration of all available
information.

Foreign securities, currencies and other assets denominated in foreign
currencies are translated into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar as provided by a pricing service. All
assets denominated in foreign currencies will be converted into U.S.
dollars at the exchange rates in effect at the time of valuation.

All foreign equity securities are valued at their closing sale price on
the exchange on which the security is primarily traded. Where a foreign
securities market remains open at the time that a Fund values its
portfolio securities, or closing prices of securities from that market
may not be retrieved because of local time differences or other
difficulties in obtaining such prices at that time, the most recent
prices in such market at a point in time most practicable to timely
valuation of the Fund may be used.

Foreign securities not traded on a particular day or on an exchange are
valued at one of the following prices: (a) at the most recent bid price
or (b) a valuation within the range considered best to represent value
in the circumstances. Otherwise, the fund accounting agent will contact
a pricing service and/or broker/dealers to provide a price for the
securities at "fair value."

Foreign debt securities are valued by the fund accounting agent on the
basis of prices provided by a pricing service, or at the mean between
the bid and asked price, as long as such prices, in the opinion of the
fund accounting agent continue to reflect the value of the security. If
no quotations are available, the fund accounting agent will contact a
pricing service and/or broker/dealers to provide a price for the
securities at "fair value."

Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close
of business on each Business Day. In addition, European and Far Eastern
securities trading generally or in a particular country or countries may
not take place on all Business Days. Furthermore, trading takes place in
Japanese markets on certain Saturdays and in various foreign markets on
days which are not Business Days and on which a Fund's net asset value
is not calculated. A Fund calculates net asset value per interest, and
therefore effects sales, redemptions and repurchases of its interests,
as of the close of the NYSE once on each day on which the NYSE is open.
Such calculation does not take place contemporaneously with the
determination of the prices of the majority of the foreign portfolio
securities used in such calculation.

The Registrant may suspend the right of redemption for any Fund only
under the following unusual circumstances: (a) when the New York Stock
Exchange is closed (other than weekends and holidays) or trading is
restricted; (b) when trading in the markets normally utilized is
restricted, or when an emergency exists as determined by the Securities
and Exchange Commission so that disposal of the Company's investments or
determination of its net assets is not reasonably practicable; or (c)
during any period when the Securities and Exchange Commission may permit.

12b-1 Plan

The Registrant has adopted a plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, which provides that interests
of the Funds will be subject to an annual service fee.

Nike Securities serves as selling agent and distributor of the interests
of the Funds. In this capacity, Nike Securities manages the offering of
the Funds' interests and is responsible for all sales and promotional
activities. In order to reimburse Nike Securities for its costs in
connection with these activities, each Fund has adopted a service plan
under Rule 12b-1 under the Investment Company Act of 1940. Nike
Securities uses the service fee to compensate American Skandia for
providing account services to Policy owners. These services include
establishing and maintaining Policy owners' accounts, supplying
information to Policy owners, delivering fund materials to Policy
owners, answering inquiries, and providing other personal services to
Policy owners. Each Fund may spend up to .25 of 1% per year of the
average daily net assets of its interests as a service fee under the
Plan. In addition, the Plan permits First Trust to use a portion of its

Page 40

advisory fee to compensate Nike Securities for expenses incurred in
connection with the sale and distribution of a Fund's interests
including, without limitation, compensation of its sales force, expenses
of printing and distributing prospectuses to persons other than interest
holders or policy owners, expenses of preparing, printing and
distributing advertising and sales literature and reports to interests
holders and Policy owners used in connection with the sale of a Fund's
interests, certain other expenses associated with the distribution of
interests of the Funds, and any distribution-related expenses that may
be authorized from time to time by the Board of Trustees. For the period
October 6, 1999 (commencement of operations) to December 31, 1999 each
Portfolio paid the following amount: The Dow (sm) Target 5 Portfolio $51,
The Dow sm DART 10 Portfolio $61, Global Target 15 Portfolio $143, S&P
Target 10 Portfolio $100, NASDAQ Target 15 Portfolio $103, First Trust
10 Uncommon Values Portfolio $66, First Trust Energy Portfolio $63,
First Trust Financial Services Portfolio $65, First Trust Internet
Portfolio $ 77, First Trust Pharmaceutical Portfolio $65, and First
Trust Technology Portfolio $71.

Under the Registrant's Plan, the Registrant will report quarterly to the
Board of Trustees for its review all amounts expended under the Plan.
The Plan may be terminated at any time with respect to any Fund, without
the payment of any penalty, by a vote of a majority of the Trustees who
are not "interested persons" and who have no direct or indirect
financial interest in the Plan or by vote of a majority of the
outstanding voting securities of such Fund. The Plan may be renewed from
year to year if approved by a vote of the Board of Trustees and a vote
of the non-interested Trustees who have no direct or indirect financial
interest in the Plan cast in person at a meeting called for the purpose
of voting on the Plan. The Plan may be continued only if the Trustees
who vote to approve such continuance conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties
under the applicable law, that there is a reasonable likelihood that the
Plan will benefit a Fund and its shareholders. The Plan may not be
amended to increase materially the cost which a Fund may bear under the
Plan without the approval of the interest holders of the affected Fund,
and any other material amendments of the Plan must be approved by the
non-interested Trustees by a vote cast in person at a meeting called for
the purpose of considering such amendments. During the continuance of
the Plan, the selection and nomination of the non-interested Trustees of
the Registrant will be committed to the discretion of the non-interested
Trustees then in office.

Additional Information

Voting Rights

Interest holders are entitled to one vote for each interest held.
Interest holders may vote on the election of Trustees and on other
matters submitted to meetings of interest holders. In regard to certain
matters including termination, merger, or a change of investment
restrictions, the right to vote is limited to the holders of interests
of the particular Fund affected by the proposal. When a majority is
required, it means the lesser of 67% or more of the interests present at
a meeting when the holders of more than 50% of the outstanding interests
are present or represented by proxy, or more than 50% of the outstanding
interests.

To the extent required by applicable law, American Skandia will solicit
voting instructions from owners of variable annuity Policies. All
interests in each Fund will be voted by American Skandia in accordance
with voting instructions received from such variable annuity Policy
owners. American Skandia will vote all of the interests which it is
entitled to vote in the same proportion as the voting instructions given
by variable annuity Policy owners, on the issues presented.

Each issued and outstanding interest in a Fund is entitled to
participate equally in dividends and distributions, if any, declared by
its corresponding Fund, and in the net assets of the Fund remaining upon
liquidation or dissolution after outstanding liabilities are satisfied.
The interests of each Fund, when issued, are fully paid and non-
assessable. They have no preemptive, conversion, cumulative dividend or
similar rights. They are not freely transferable. A Fund can only be
owned by Account B. Interests in a Fund do not have cumulative rights.
This means that owners of more than half of the Registrant's interests
voting for election of Trustees can elect all the Trustees if they so
choose. Then, the remaining interest owners would not be able to elect
any Trustees.

Shareholder Inquiries

All inquiries regarding the Registrant should be directed to the
Registrant at 1-(800) 621-1675 or by writing the Registrant at 1001
Warrenville Road, Suite 300, Lisle, Illinois 60532.

Page 41

Tax Status

The Registrant is not a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). The
Registrant nonetheless does not pay federal income tax on its interest,
dividend income or capital gains. As a limited liability company whose
interests are sold only to Account B, the Registrant is disregarded as
an entity for purposes of federal income taxation. American Skandia,
through Account B, is treated as owning the assets of the Registrant,
which are the collective assets of the Funds, directly and its tax
obligations thereon are computed pursuant to Subchapter L of the Code
(which governs the taxation of insurance companies). Under current tax
law, interest, dividend income and capital gains of the Registrant are
not taxable to the Registrant, and are not currently taxable to American
Skandia or to Policy owners, when left to accumulate within a variable
annuity Policy. Tax disclosure relating to the variable annuity Policies
that offer the Registrant as an investment alternative is contained in
the prospectuses for those Policies.

Section 817(h) of the Code imposes certain diversification standards on
the underlying assets of segregated asset accounts that hold assets
purchased under contracts such as the variable annuity Policies (that
is, the assets of the Funds). Failure to satisfy those standards would
result in imposition of Federal income tax on a variable annuity Policy
owner with respect to the increase in the value of the variable annuity
Policy. Section 817(h)(2) provides that a segregated asset account that
funds contracts such as the variable annuity Policies is treated as
meeting the diversification standards if, as of the close of each
calendar quarter, the assets in the account meet the diversification
requirements for a regulated investment company and no more than 55% of
those assets consist of cash, cash items, U.S. Government securities and
securities of other regulated investment companies.

The Treasury Regulations amplify the diversification standards set forth
in Section 817(h) and provide an alternative to the provision described
above. Under the regulations, an investment portfolio will be deemed
adequately diversified if (i) no more than 55% of the value of the total
assets of the portfolio is represented by any one investment; (ii) no
more than 70% of such value is represented by any two investments; (iii)
no more than 80% of such value is represented by any three investments;
and (iv) no more than 90% of such value is represented by any four
investments. For purposes of these Regulations, all securities of the
same issuer are treated as a single investment, but each United States
government agency or instrumentality shall be treated as a separate
issuer.

Each Fund will be managed with the intention of complying with these
diversification requirements. It is possible that, in order to comply
with these requirements, less desirable investment decisions may be made
which could affect the investment performance of a Fund.

Financial Statements

The audited financial statements and notes thereto for the First Defined
Fund, contained in the Annual Report to Shareholders dated February 29,
2000, are incorporated by reference into this Statement of Additional
Information and have been audited by Ernst & Young LLP, whose report
also appears in the Annual Report and is also incorporated by reference
herein. No other parts of the Annual Report are incorporated by
reference herein.

Page 42