UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22652
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First Trust Variable Insurance Trust
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2014
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JUNE 30, 2014
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2014
Shareholder Letter.......................................................... 1
Portfolio Management........................................................ 2
Performance Summary and Portfolio Components
First Trust/Dow Jones Dividend & Income Allocation Portfolio............. 4
First Trust Multi Income Allocation Portfolio............................ 6
Understanding Your Fund Expenses............................................ 8
Portfolio of Investments
First Trust/Dow Jones Dividend & Income Allocation Portfolio............. 10
First Trust Multi Income Allocation Portfolio............................ 23
Statements of Assets and Liabilities........................................ 29
Statements of Operations.................................................... 30
Statements of Changes in Net Assets......................................... 31
Financial Highlights........................................................ 32
Notes to Financial Statements............................................... 34
Additional Information...................................................... 43
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of the First Trust Variable Insurance Trust (the "Trust") to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. When evaluating the
information included in this report, you are cautioned not to place undue
reliance on these forward-looking statements, which reflect the judgment of the
Advisor and its representatives only as of the date hereof. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any series (individually called a "Fund" and
collectively the "Funds") of the Trust will achieve its investment objective.
Each Fund is subject to market risk, which is the possibility that the market
values of securities owned by the Fund will decline and that the value of the
Fund shares may therefore be less than what you paid for them. Accordingly, you
can lose money by investing in a Fund. See "Risk Considerations" in the
Additional Information section of this report for a discussion of certain other
risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns and net asset value will fluctuate and Fund shares, when sold, may be
worth more or less than their original cost.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund's portfolio and presents data and analysis that
provide insight into each Fund's performance. The statistical information that
follows may help you understand each Fund's performance compared to that of
relevant market benchmarks. The risks of investing in each Fund is spelled out
in its prospectus, its statement of additional information, this report and
other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2014
Dear Shareholders:
I am pleased to present you with the semi-annual report for your investment in
First Trust Variable Insurance Trust (the "Trust").
As a shareholder, twice a year you receive a detailed report about your
investment. Additionally, First Trust Advisors L.P. ("First Trust") compiles the
Trust's financial statements for you to review. These reports are intended to
keep you up-to-date on your investment, and I encourage you to read this
document and discuss it with your financial advisor.
As you are probably aware, the six months covered by this report saw both
challenging economic and political issues in the U.S. However, the period was
still positive for the markets. In fact, the S&P 500(R) Index, as measured on a
total return basis, rose 7.14% during the twelve months ended June 30, 2014. Of
course, past performance can never be an indicator of future performance, but
First Trust believes that staying invested in quality products through up and
down markets and having a long-term horizon can help investors as they work
toward their financial goals.
First Trust continues to offer a variety of products that we believe could fit
the financial plans for many investors seeking long-term investment success.
Your financial advisor can tell you about the other investments First Trust
offers that might fit your financial goals. We encourage you to discuss those
goals with your financial advisor regularly so that he or she can help keep you
on track and help you choose investments that match your goals.
First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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PORTFOLIO MANAGEMENT
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to First
Trust/Dow Jones Dividend & Income Allocation Portfolio (the "Fund"). In this
capacity, First Trust is responsible for the selection and ongoing monitoring of
the securities in the Fund's portfolio and certain other services necessary for
the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director,
First Trust
David G. McGarel, Chief Investment Officer and Managing Director, First Trust
Jon C. Erickson, Senior Vice President, First Trust
Roger F. Testin, Senior Vice President, First Trust
Todd Larson, Vice President, First Trust
Page 2
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014
INVESTMENT ADVISOR
First Trust is the investment advisor to First Trust Multi Income Allocation
Portfolio (the "Fund"). First Trust manages the Fund's fixed income investments,
as well as a portion of the Fund's equity investments.
SUB-ADVISORS
Stonebridge Advisors LLC ("Stonebridge" or a "Sub-Advisor") is a sub-advisor to
the Fund and is a registered investment advisor based in Wilton, CT. Stonebridge
specializes in the management of preferred securities and North American equity
income securities.
Energy Income Partners, LLC ("EIP" or a "Sub-Advisor") is a sub-advisor to the
Fund and is a registered investment advisor based in Westport, CT. EIP was
founded in 2003 to provide professional asset management services in the area of
energy-related master limited partnerships and other high-payout securities such
as pipeline companies, power utilities and Canadian income equities.
PORTFOLIO MANAGEMENT TEAMS
FIRST TRUST
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director,
First Trust
David G. McGarel, Chief Investment Officer and Managing Director, First Trust
Jon C. Erickson, Senior Vice President, First Trust
Roger F. Testin, Senior Vice President, First Trust
William Housey, Senior Vice President, First Trust
Todd Larson, Vice President, First Trust
James Snyder, Vice President, First Trust
Jeremiah Charles, Vice President, First Trust
STONEBRIDGE
Scott Fleming, Portfolio Manager, President and Chief Investment Officer of
Stonebridge
Robert Wolf, Portfolio Manager, Vice President and Senior Credit Analyst of
Stonebridge
EIP
James J. Murchie, Portfolio Manager, Founder and CEO of EIP
Eva Pao, Co-Portfolio Manager, Principal of EIP
Page 3
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2014
1 YEAR
INCEPTION SIX MONTH ANNUAL SINCE INCEPTION AVERAGE
DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 4.66% 12.97% 10.11%
Blended Benchmark (a) 6.42% 16.36% 12.27%
Barclays U.S. Corporate Investment-Grade Index (b) 5.68% 7.73% 4.80%
Russell 3000(R) Index (c) 6.94% 25.22% 19.69%
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INCEPTION SINCE INCEPTION CUMULATIVE
DATE TOTAL RETURN
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 2.41%
Blended Benchmark (a) 2.91%
Barclays U.S. Corporate Investment-Grade Index (b) 1.11%
Russell 3000(R) Index (c) 4.70%
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(a) The Blended Benchmark returns are a 50/50 split between the Russell
3000(R) Index and the Barclays U.S. Corporate Investment-Grade Index
returns.
(b) Barclays U.S. Corporate Investment-Grade Index measures the performance of
investment grade U.S. corporate bonds. The index includes all publicly
issued, dollar-denominated corporate bonds with a minimum of $250 million
par outstanding that are investment grade-rated (Baa3/BBB- or higher). The
index excludes bonds having less than one year to final maturity as well
as floating rate bonds, non-registered private placements, structured
notes, hybrids, and convertible securities. (Bloomberg). (The index
reflects no deduction for fees, expenses or taxes).
(c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. This index represents approximately
98% of the investable U.S. equity market. (Bloomberg). (The index reflects
no deduction for fees, expenses or taxes).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
May 1, 2012 - June 30, 2014
First Trust/Dow Jones Dividend & Blended Barclays U.S. Corporate Russell 3000(R)
Income Allocation Portfolio - Class I Benchmark Investment-Grade Index Index
5/1/2012 $10,000 $10,000 $10,000 $10,000
6/30/2012 10,020 9,925 10,135 9,701
12/31/2012 10,438 10,505 10,636 10,333
6/30/2013 10,904 11,039 10,273 11,786
12/31/13 11,770 12,070 10,472 13,800
6/30/14 12,318 12,839 11,067 14,758
Page 4
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
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Covidien PLC 0.5%
ConocoPhillips 0.4
CH Robinson Worldwide, Inc. 0.4
Intel Corp. 0.4
Aaron's, Inc. 0.4
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Total 2.1%
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% OF TOTAL
TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS
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U.S. Government 3.5%
Bank of America Corp. 1.8
Citigroup, Inc. 1.6
Morgan Stanley 1.6
Goldman Sachs Group (The), Inc. 1.5
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Total 10.0%
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
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Common Stocks:
Financials 12.7%
Industrials 10.3
Consumer Discretionary 8.9
Information Technology 7.9
Consumer Staples 6.4
Health Care 5.8
Materials 2.6
Energy 1.2
Telecommunication Services 0.4
Utilities 0.4
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Total Common Stocks 56.6
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Corporate Bonds & Notes:
Financials 16.3
Energy 4.3
Consumer Discretionary 3.4
Information Technology 3.3
Consumer Staples 3.0
Utilities 2.5
Telecommunication Services 2.1
Industrials 1.9
Health Care 1.8
Materials 1.3
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Total Corporate Bonds & Notes 39.9
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U.S. Government Bonds & Notes 3.5
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Total 100.0%
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 8.7%
AA+ 4.0
AA 3.1
AA- 5.2
A+ 10.3
A 26.7
A- 16.2
BBB+ 9.6
BBB 10.9
BBB- 5.3
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Total 100.0%
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(1) The credit quality information presented reflects the ratings assigned by
one or more nationally recognized statistical rating organizations
(NRSROs), including Standard & Poor's Ratings Group, a division of the
McGraw Hill Companies, Inc., Moody's Investors Service, Inc., Fitch
Ratings or a comparably rated NRSRO. For situations in which a security is
rated by more than one NRSRO and ratings are not equivalent, the highest
ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or
lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The
credit ratings shown relate to the creditworthiness of the issuers of the
underlying securities in the Fund, and not to the Fund or its shares.
Credit ratings are subject to change.
Page 5
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2014
SINCE INCEPTION
INCEPTION DATE CUMULATIVE TOTAL RETURN
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 3.20%
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 3.20%
Blended Benchmark (a) 2.46%
Barclays U.S. Aggregate Index (b) 0.96%
Russell 3000(R) Index (c) 4.70%
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(a) The Blended Benchmark return is split between the Russell 3000(R) Index
(40%) and the Barclays U.S. Aggregate Index (60%).
(b) The Barclays U.S. Aggregate Index represents the U.S. investment grade
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
Bonds included in the index are U.S. dollar denominated; have a fixed rate
coupon; carry an investment-grade rating; have at least one year to final
maturity; and meet certain criterion for minimum amount of outstanding par
value. (The index reflects no deduction for fees, expenses or taxes).
(c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. This index represents approximately
98% of the investable U.S. equity market. (Bloomberg). (The index reflects
no deduction for fees, expenses or taxes).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
May 1, 2014 - June 30, 2014
First Trust Multi Income Allocation Blended Barclays U.S. Russell 3000(R)
Portfolio - Class I Benchmark Aggergate Index Index
5/1/2014 $10,000 $10,000 $10,000 $10,000
6/30/2014 10,320 10,246 10,096 10,470
Page 6
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2014 (UNAUDITED)
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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First Trust Senior Loan Fund 15.8%
First Trust Preferred Securities and Income ETF 9.0
First Trust High Yield Long/Short ETF 8.9
iShares iBoxx $ Investment Grade Corporate Bond ETF 8.4
iShares MBS ETF 5.0
U.S. Treasury Inflation Indexed Note 1.13%, 01/15/21 1.7
U.S. Treasury Inflation Indexed Note 0.13%, 04/15/17 1.4
U.S. Treasury Inflation Indexed Note 0.13%, 01/15/23 0.9
U.S. Treasury Inflation Indexed Note 0.13%, 01/15/22 0.9
ONEOK Partners, L.P. 0.9
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Total 52.9%
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
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Exchange-Traded Funds 47.8%
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Common Stocks:
Energy 4.8
Financials 3.6
Utilities 3.2
Consumer Discretionary 2.6
Industrials 2.5
Health Care 2.3
Consumer Staples 1.8
Information Technology 1.8
Telecommunication Services 0.7
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Total Common Stocks 23.3
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Real Estate Investment Trusts:
Financials 13.7
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Total Real Estate Investment Trusts 13.7
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Master Limited Partnerships:
Energy 8.2
Utilities 0.5
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Total Master Limited Partnerships 8.7
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U.S. Government Bond & Notes 6.5
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Total 100.0%
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Page 7
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2014 (UNAUDITED)
As a shareholder of First Trust/Dow Jones Dividend & Income Allocation Portfolio
or First Trust Multi Income Allocation Portfolio (each a "Fund" and
collectively, the "Funds"), you incur two types of costs: (1) transaction costs;
and (2) ongoing costs, including management fees; distribution and/or service
(12b-1) fees; and other Fund expenses. This Example is intended to help you
understand your ongoing costs (in U.S. dollars) of investing in the Funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended June 30, 2014.
ACTUAL EXPENSES
The first three columns of the table below provide information about actual
account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the third column under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during the
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The next three columns of the table below provide information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the
hypothetical section of the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have
been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
------------------------------------------ ------------------------------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL-
ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED
VALUE VALUE 1/1/2014- VALUE VALUE 1/1/2014- EXPENSE
1/1/2014 6/30/2014 6/30/2014 (a) 1/1/2014 6/30/2014 6/30/2014 (a) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ---------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I................... $ 1,000.00 $ 1,046.60 $ 6.09 $ 1,000.00 $ 1,018.84 $ 6.01 1.20%
(a) Expenses are equal to the annualized expense ratio as indicated in the
table, multiplied by the average account value over the period (January 1,
2014, through June 30, 2014), multiplied by 181/365 (to reflect the
one-half year period).
(b) The expense ratio reflects an expense cap.
Page 8
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
------------------------------------------ ------------------------------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL-
ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED
VALUE VALUE 5/1/2014- VALUE VALUE 5/1/2014- EXPENSE
5/1/2014 6/30/2014 6/30/2014 (c) 5/1/2014 6/30/2014 6/30/2014 (c) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ---------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class II.................. $ 1,000.00 $ 1,024.10 $ 1.61 $ 1,000.00 $ 1,020.08 $ 4.76 0.95%
First Trust Multi Income
Allocation Portfolio
Class I................... $ 1,000.00 $ 1,032.00 $ 2.00 $ 1,000.00 $ 1,018.84 $ 6.01 1.20%
Class II.................. $ 1,000.00 $ 1,032.00 $ 1.59 $ 1,000.00 $ 1,020.08 $ 4.76 0.95%
(c) Actual expenses are equal to the annualized expense ratio as indicated in
the table, multiplied by the average account value over the period (May 1,
2014, through June 30, 2014), multiplied by 61/365. Hypothetical expenses
are assumed for the most recent half-year period.
Page 9
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS - 55.4%
AEROSPACE & DEFENSE - 2.9%
3,715 Boeing (The) Co............................................................... $ 472,659
4,280 General Dynamics Corp......................................................... 498,834
5,026 Honeywell International, Inc.................................................. 467,167
3,947 L-3 Communications Holdings, Inc.............................................. 476,600
2,856 Lockheed Martin Corp.......................................................... 459,045
3,778 Northrop Grumman Corp......................................................... 451,962
4,720 Raytheon Co................................................................... 435,420
3,991 United Technologies Corp...................................................... 460,761
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3,722,448
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AIR FREIGHT & LOGISTICS - 0.8%
8,899 CH Robinson Worldwide, Inc.................................................... 567,667
11,764 Expeditors International of Washington, Inc................................... 519,499
-------------
1,087,166
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BANKS - 1.8%
6,753 BOK Financial Corp............................................................ 449,750
11,948 Community Bank System, Inc.................................................... 432,517
6,013 Cullen/Frost Bankers, Inc..................................................... 477,552
10,877 U.S. Bancorp.................................................................. 471,192
9,373 Wells Fargo & Co.............................................................. 492,645
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2,323,656
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BEVERAGES - 1.5%
12,058 Coca-Cola (The) Co............................................................ 510,777
9,761 Coca-Cola Enterprises, Inc.................................................... 466,381
8,561 Dr. Pepper Snapple Group, Inc................................................. 501,503
5,584 PepsiCo, Inc.................................................................. 498,874
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1,977,535
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BIOTECHNOLOGY - 0.4%
56,100 PDL BioPharma, Inc............................................................ 543,048
-------------
BUILDING PRODUCTS - 0.4%
10,129 A.O. Smith Corp............................................................... 502,196
-------------
CAPITAL MARKETS - 1.4%
11,700 Cohen & Steers, Inc........................................................... 507,546
13,872 SEI Investments Co............................................................ 454,586
5,662 T. Rowe Price Group, Inc...................................................... 477,929
13,732 TD Ameritrade Holding Corp.................................................... 430,498
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1,870,559
-------------
CHEMICALS - 1.9%
4,376 Airgas, Inc................................................................... 476,590
6,089 FMC Corp...................................................................... 433,476
4,873 International Flavors & Fragrances, Inc....................................... 508,157
2,364 Sherwin-Williams (The) Co..................................................... 489,135
4,992 Sigma-Aldrich Corp............................................................ 506,588
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2,413,946
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Page 10 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 0.7%
7,819 Cintas Corp................................................................... $ 496,819
15,417 Rollins, Inc.................................................................. 462,510
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959,329
-------------
COMMUNICATIONS EQUIPMENT - 1.1%
20,798 Cisco Systems, Inc............................................................ 516,830
10,489 Plantronics, Inc.............................................................. 503,996
5,913 QUALCOMM, Inc................................................................. 468,310
-------------
1,489,136
-------------
CONTAINERS & PACKAGING - 0.4%
7,053 Aptargroup, Inc............................................................... 472,622
-------------
DISTRIBUTORS - 0.4%
5,369 Genuine Parts Co.............................................................. 471,398
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.3%
8,238 CBOE Holdings, Inc............................................................ 405,392
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4%
13,295 AT&T, Inc..................................................................... 470,111
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 0.4%
5,087 Amphenol Corp., Class A....................................................... 490,082
-------------
FOOD & STAPLES RETAILING - 0.7%
6,229 CVS Caremark Corp............................................................. 469,480
6,099 Wal-Mart Stores, Inc.......................................................... 457,852
-------------
927,332
-------------
FOOD PRODUCTS - 2.5%
8,996 General Mills, Inc............................................................ 472,650
4,466 Hershey (The) Co.............................................................. 434,855
9,461 Hormel Foods Corp............................................................. 466,900
4,858 J&J Snack Foods Corp.......................................................... 457,235
4,795 JM Smucker (The) Co........................................................... 511,003
4,688 Lancaster Colony Corp......................................................... 446,110
6,499 McCormick & Co., Inc.......................................................... 465,263
-------------
3,254,016
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.5%
6,335 Baxter International, Inc..................................................... 458,021
6,329 Covidien PLC.................................................................. 570,749
7,576 Medtronic, Inc................................................................ 483,046
5,722 Stryker Corp.................................................................. 482,479
-------------
1,994,295
-------------
HEALTH CARE PROVIDERS & SERVICES - 2.6%
6,220 Aetna, Inc.................................................................... 504,318
7,108 AmerisourceBergen Corp........................................................ 516,467
5,211 Chemed Corp................................................................... 488,375
13,310 Owens & Minor, Inc............................................................ 452,274
11,164 Patterson Cos., Inc........................................................... 441,090
See Notes to Financial Statements Page 11
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
8,048 Quest Diagnostics, Inc........................................................ $ 472,337
5,687 UnitedHealth Group, Inc....................................................... 464,912
-------------
3,339,773
-------------
HOTELS, RESTAURANTS & LEISURE - 1.5%
9,319 Bob Evans Farms, Inc.......................................................... 466,416
4,795 Cracker Barrel Old Country Store, Inc......................................... 477,438
4,757 McDonald's Corp............................................................... 479,220
17,877 Texas Roadhouse, Inc.......................................................... 464,802
-------------
1,887,876
-------------
HOUSEHOLD DURABLES - 0.4%
8,438 Garmin, Ltd................................................................... 513,874
-------------
HOUSEHOLD PRODUCTS - 0.7%
6,751 Church & Dwight Co., Inc...................................................... 472,233
5,783 Procter & Gamble (The) Co..................................................... 454,486
-------------
926,719
-------------
INDUSTRIAL CONGLOMERATES - 0.8%
3,437 3M Co......................................................................... 492,316
6,217 Danaher Corp.................................................................. 489,464
-------------
981,780
-------------
INSURANCE - 7.5%
4,705 ACE, Ltd...................................................................... 487,909
13,553 Allied World Assurance Co. Holdings, AG....................................... 515,285
8,241 Allstate Corp................................................................. 483,912
8,077 American Financial Group, Inc................................................. 481,066
7,176 Assurant, Inc................................................................. 470,387
10,168 Axis Capital Holdings, Ltd.................................................... 450,239
5,219 Chubb Corp.................................................................... 481,035
10,912 CNA Financial Corp............................................................ 441,063
3,047 Everest Re Group, Ltd......................................................... 489,013
10,249 HCC Insurance Holdings, Inc................................................... 501,586
9,456 Marsh & McLennan Cos., Inc.................................................... 490,010
15,665 Montpelier Re Holdings, Ltd................................................... 500,497
9,897 Primerica, Inc................................................................ 473,571
19,248 Progressive (The) Corp........................................................ 488,129
4,778 RenaissanceRe Holdings, Ltd................................................... 511,246
10,539 RLI Corp...................................................................... 482,475
5,925 Torchmark Corp................................................................ 485,376
5,478 Travelers (The) Cos., Inc..................................................... 515,316
12,361 Validus Holdings, Ltd......................................................... 472,685
14,918 XL Group PLC.................................................................. 488,266
-------------
9,709,066
-------------
Page 12 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
IT SERVICES - 2.9%
5,847 Accenture PLC, Class A........................................................ $ 472,671
6,034 Automatic Data Processing, Inc................................................ 478,375
12,553 Broadridge Financial Solutions, Inc........................................... 522,707
4,918 DST Systems, Inc.............................................................. 453,292
2,421 International Business Machines Corp.......................................... 438,855
8,360 Jack Henry & Associates, Inc.................................................. 496,835
10,942 Paychex, Inc.................................................................. 454,750
2,160 Visa, Inc., Class A........................................................... 455,134
-------------
3,772,619
-------------
LEISURE PRODUCTS - 0.3%
11,623 Mattel, Inc................................................................... 452,948
-------------
MACHINERY - 2.2%
8,128 CLARCOR, Inc.................................................................. 502,717
10,995 Donaldson Co., Inc............................................................ 465,308
5,287 Lindsay Corp.................................................................. 446,593
7,378 Toro (The) Co................................................................. 469,241
3,132 Valmont Industries, Inc....................................................... 475,907
6,015 Wabtec Corp................................................................... 496,779
-------------
2,856,545
-------------
MEDIA - 1.1%
5,900 Morningstar, Inc.............................................................. 423,679
14,583 Twenty-First Century Fox, Inc., Class A....................................... 512,592
5,821 Walt Disney (The) Co.......................................................... 499,093
-------------
1,435,364
-------------
METALS & MINING - 0.4%
6,528 Kaiser Aluminum Corp.......................................................... 475,695
-------------
MULTI-UTILITIES - 0.4%
10,015 Wisconsin Energy Corp......................................................... 469,904
-------------
MULTILINE RETAIL - 0.4%
8,036 Family Dollar Stores, Inc..................................................... 531,501
-------------
OIL, GAS & CONSUMABLE FUELS - 1.2%
3,922 Chevron Corp.................................................................. 512,017
6,626 ConocoPhillips................................................................ 568,047
4,774 Exxon Mobil Corp.............................................................. 480,646
-------------
1,560,710
-------------
PERSONAL PRODUCTS - 0.4%
6,969 Estee Lauder (The) Cos., Inc.................................................. 517,518
-------------
PHARMACEUTICALS - 1.1%
7,921 Eli Lilly & Co................................................................ 492,449
4,747 Johnson & Johnson............................................................. 496,631
14,514 Pfizer, Inc................................................................... 430,775
-------------
1,419,855
-------------
See Notes to Financial Statements Page 13
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS - 1.1%
42,497 Annaly Capital Management, Inc................................................ $ 485,741
19,506 PennyMac Mortgage Investment Trust............................................ 427,961
2,768 Public Storage................................................................ 474,297
-------------
1,387,999
-------------
ROAD & RAIL - 1.1%
6,482 JB Hunt Transport Services, Inc............................................... 478,242
7,873 Landstar System, Inc.......................................................... 503,872
4,968 Union Pacific Corp............................................................ 495,558
-------------
1,477,672
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.9%
8,773 Analog Devices, Inc........................................................... 474,356
18,059 Intel Corp.................................................................... 558,023
6,744 KLA-Tencor Corp............................................................... 489,884
9,886 Texas Instruments, Inc........................................................ 472,452
8,590 Xilinx, Inc................................................................... 406,393
-------------
2,401,108
-------------
SOFTWARE - 1.5%
15,049 CA, Inc....................................................................... 432,508
4,324 FactSet Research Systems, Inc................................................. 520,091
11,373 Microsoft Corp................................................................ 474,254
11,396 Oracle Corp................................................................... 461,880
-------------
1,888,733
-------------
SPECIALTY RETAIL - 3.2%
15,417 Aaron's, Inc.................................................................. 549,462
17,208 Finish Line (The), Inc., Class A.............................................. 511,766
9,924 Foot Locker, Inc.............................................................. 503,345
5,892 Home Depot (The), Inc......................................................... 477,016
6,766 PetSmart, Inc................................................................. 404,607
6,515 Ross Stores, Inc.............................................................. 430,837
7,687 TJX (The) Cos., Inc........................................................... 408,564
6,600 Tractor Supply Co............................................................. 398,640
6,995 Williams-Sonoma, Inc.......................................................... 502,101
-------------
4,186,338
-------------
TEXTILES, APPAREL & LUXURY GOODS - 1.4%
9,388 Coach, Inc.................................................................... 320,976
6,312 NIKE, Inc., Class B........................................................... 489,496
2,896 Ralph Lauren Corp............................................................. 465,358
7,533 VF Corp....................................................................... 474,579
-------------
1,750,409
-------------
THRIFTS & MORTGAGE FINANCE - 0.3%
37,117 Capitol Federal Financial, Inc................................................ 451,343
-------------
TOBACCO - 0.4%
8,728 Reynolds American, Inc........................................................ 526,735
-------------
Page 14 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
TRADING COMPANIES & DISTRIBUTORS - 1.1%
9,665 Applied Industrial Technologies, Inc.......................................... $ 490,305
5,389 MSC Industrial Direct Co., Inc................................................ 515,404
1,844 W.W. Grainger, Inc............................................................ 468,874
-------------
1,474,583
-------------
TOTAL COMMON STOCKS........................................................... 71,770,934
(Cost $64,125,953) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES - 38.5%
AEROSPACE & DEFENSE - 1.0%
$ 300,000 Boeing Capital Corp................................. 4.70% 10/27/19 339,708
125,000 Northrop Grumman Corp............................... 5.05% 11/15/40 136,264
250,000 United Technologies Corp............................ 1.80% 06/01/17 255,531
425,000 United Technologies Corp............................ 3.10% 06/01/22 431,234
100,000 United Technologies Corp............................ 6.05% 06/01/36 127,423
-------------
1,290,160
-------------
AUTOMOBILES - 0.8%
450,000 Ford Motor Credit Co., LLC.......................... 2.88% 10/01/18 466,234
500,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 534,970
-------------
1,001,204
-------------
BANKS - 6.5%
1,025,000 Bank of America Corp................................ 2.60% 01/15/19 1,038,162
725,000 Bank of America Corp................................ 5.70% 01/24/22 842,594
225,000 Bank of America Corp................................ 5.88% 02/07/42 268,194
100,000 Bank of America Corp................................ 4.88% 04/01/44 103,603
525,000 Citigroup, Inc...................................... 4.45% 01/10/17 565,770
200,000 Citigroup, Inc...................................... 2.50% 09/26/18 203,463
625,000 Citigroup, Inc...................................... 4.50% 01/14/22 680,468
200,000 Citigroup, Inc...................................... 6.13% 08/25/36 229,771
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 240,151
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 124,940
600,000 HSBC USA, Inc....................................... 1.63% 01/16/18 601,858
425,000 HSBC USA, Inc....................................... 4.88% 08/24/20 474,317
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 607,138
225,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 223,812
300,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 309,550
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 509,456
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 106,459
125,000 PNC Financial Services Group (The), Inc............. 3.90% 04/29/24 127,632
125,000 Wells Fargo & Co.................................... 2.13% 04/22/19 125,570
750,000 Wells Fargo & Co.................................... 3.00% 01/22/21 766,321
200,000 Wells Fargo & Co.................................... 5.95% 08/26/36 251,647
-------------
8,400,876
-------------
See Notes to Financial Statements Page 15
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BEVERAGES - 0.8%
$ 325,000 Anheuser-Busch Inbev Finance, Inc................... 4.63% 02/01/44 $ 339,520
650,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 623,975
100,000 PepsiCo, Inc........................................ 2.25% 01/07/19 102,103
-------------
1,065,598
-------------
BIOTECHNOLOGY - 0.3%
100,000 Amgen, Inc.......................................... 3.63% 05/22/24 101,088
150,000 Amgen, Inc.......................................... 5.38% 05/15/43 166,151
50,000 Gilead Sciences, Inc................................ 3.70% 04/01/24 51,408
50,000 Gilead Sciences, Inc................................ 4.80% 04/01/44 52,971
-------------
371,618
-------------
CAPITAL MARKETS - 3.0%
525,000 Goldman Sachs Group (The), Inc...................... 6.15% 04/01/18 602,592
450,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 452,762
300,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 305,998
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 489,694
200,000 Morgan Stanley...................................... 2.13% 04/25/18 202,382
300,000 Morgan Stanley...................................... 2.50% 01/24/19 303,685
550,000 Morgan Stanley...................................... 5.50% 07/28/21 632,795
300,000 Morgan Stanley...................................... 3.75% 02/25/23 305,745
100,000 Morgan Stanley...................................... 3.88% 04/29/24 101,418
350,000 Morgan Stanley...................................... 6.38% 07/24/42 445,724
-------------
3,842,795
-------------
CHEMICALS - 0.3%
300,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 385,980
50,000 Eastman Chemical Co................................. 4.65% 10/15/44 49,680
-------------
435,660
-------------
COMMERCIAL SERVICES & SUPPLIES - 0.1%
150,000 Waste Management, Inc............................... 3.50% 05/15/24 151,208
-------------
COMMUNICATIONS EQUIPMENT - 0.2%
125,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 128,743
100,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 122,499
-------------
251,242
-------------
CONSUMER FINANCE - 1.5%
425,000 American Express Credit Corp........................ 2.80% 09/19/16 442,759
500,000 American Express Credit Corp........................ 2.13% 07/27/18 508,522
75,000 Capital One Financial Corp.......................... 2.45% 04/24/19 75,788
125,000 Capital One Financial Corp.......................... 3.75% 04/24/24 127,131
800,000 Caterpillar Financial Services Corp................. 1.63% 06/01/17 813,231
-------------
1,967,431
-------------
DIVERSIFIED FINANCIAL SERVICES - 1.3%
500,000 General Electric Capital Corp....................... 5.63% 09/15/17 566,434
250,000 General Electric Capital Corp....................... 4.63% 01/07/21 278,779
100,000 General Electric Capital Corp....................... 3.45% 05/15/24 100,562
575,000 General Electric Capital Corp....................... 6.75% 03/15/32 760,667
-------------
1,706,442
-------------
Page 16 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.0%
$ 500,000 AT&T, Inc........................................... 1.70% 06/01/17 $ 506,173
225,000 AT&T, Inc........................................... 3.88% 08/15/21 239,740
275,000 AT&T, Inc........................................... 4.80% 06/15/44 281,859
200,000 Verizon Communications, Inc. (a).................... 1.76% 09/15/16 205,620
200,000 Verizon Communications, Inc......................... 2.50% 09/15/16 206,259
375,000 Verizon Communications, Inc......................... 5.15% 09/15/23 420,440
625,000 Verizon Communications, Inc......................... 6.55% 09/15/43 789,408
-------------
2,649,499
-------------
ELECTRIC UTILITIES - 2.2%
500,000 American Electric Power Co., Inc.................... 1.65% 12/15/17 490,372
300,000 Constellation Energy Group, Inc..................... 4.55% 06/15/15 315,030
550,000 American Electric Power Co., Inc.................... 1.65% 12/15/17 553,380
100,000 Appalachian Power Co................................ 4.40% 05/15/44 100,914
275,000 Constellation Energy Group, Inc..................... 5.15% 12/01/20 310,375
225,000 Duke Energy Carolinas, LLC.......................... 6.00% 01/15/38 288,154
100,000 Duke Energy Corp.................................... 3.55% 09/15/21 104,717
50,000 Duke Energy Corp.................................... 3.75% 04/15/24 51,460
100,000 Florida Power & Light Co............................ 3.25% 06/01/24 101,004
50,000 Florida Power & Light Co............................ 4.05% 06/01/42 49,752
100,000 MidAmerican Energy Co............................... 3.50% 10/15/24 102,377
200,000 MidAmerican Energy Co............................... 4.80% 09/15/43 219,545
100,000 MidAmerican Energy Co............................... 4.40% 10/15/44 102,799
625,000 NV Energy, Inc...................................... 6.25% 11/15/20 738,583
100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 125,648
-------------
2,848,708
-------------
FOOD & STAPLES RETAILING - 1.2%
645,000 CVS Caremark Corp................................... 4.00% 12/05/23 676,267
100,000 Kroger (The) Co..................................... 3.30% 01/15/21 102,518
125,000 Kroger (The) Co..................................... 5.15% 08/01/43 135,558
100,000 Wal-Mart Stores, Inc................................ 3.30% 04/22/24 101,261
425,000 Wal-Mart Stores, Inc................................ 5.63% 04/15/41 515,201
-------------
1,530,805
-------------
FOOD PRODUCTS - 0.2%
300,000 Kraft Foods Group, Inc.............................. 5.00% 06/04/42 321,968
-------------
HEALTH CARE PROVIDERS & SERVICES - 0.7%
50,000 Cigna Corp.......................................... 5.13% 06/15/20 56,612
50,000 Express Scripts Holding Co.......................... 3.50% 06/15/24 49,579
550,000 UnitedHealth Group, Inc............................. 1.63% 03/15/19 542,129
50,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 55,761
50,000 UnitedHealth Group, Inc............................. 2.88% 03/15/23 49,143
100,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 135,852
-------------
889,076
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.1%
100,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 100,661
-------------
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES (CONTINUED)
INDUSTRIAL CONGLOMERATES - 0.1%
$ 75,000 General Electric Co................................. 4.50% 03/11/44 $ 78,470
-------------
INSURANCE - 2.9%
600,000 American International Group, Inc................... 5.85% 01/16/18 685,505
300,000 American International Group, Inc................... 3.38% 08/15/20 312,170
200,000 American International Group, Inc................... 4.13% 02/15/24 210,946
200,000 American International Group, Inc................... 6.25% 05/01/36 253,048
175,000 CNA Financial Corp.................................. 3.95% 05/15/24 180,935
150,000 Hartford Financial Services Group (The), Inc........ 5.95% 10/15/36 182,152
850,000 MetLife, Inc........................................ 6.75% 06/01/16 945,006
100,000 MetLife, Inc........................................ 3.60% 04/10/24 102,056
300,000 MetLife, Inc........................................ 4.88% 11/13/43 325,710
300,000 Travelers (The) Cos., Inc........................... 5.75% 12/15/17 343,288
125,000 Travelers (The) Cos., Inc........................... 6.75% 06/20/36 171,212
-------------
3,712,028
-------------
IT SERVICES - 0.4%
600,000 International Business Machines Corp................ 1.63% 05/15/20 579,011
-------------
MEDIA - 2.2%
50,000 21st Century Fox America, Inc....................... 3.00% 09/15/22 49,314
200,000 21st Century Fox America, Inc....................... 5.40% 10/01/43 224,015
150,000 Comcast Corp........................................ 2.85% 01/15/23 149,144
525,000 Comcast Corp........................................ 4.25% 01/15/33 541,032
225,000 DIRECTV Holdings, LLC/DIRECTV
Financing Co., Inc.................................. 5.20% 03/15/20 253,780
175,000 NBCUniversal Media, LLC............................. 2.88% 01/15/23 174,133
50,000 Time Warner Cable, Inc.............................. 6.75% 07/01/18 59,218
200,000 Time Warner Cable, Inc.............................. 4.50% 09/15/42 195,463
100,000 Time Warner, Inc.................................... 2.10% 06/01/19 99,607
300,000 Time Warner, Inc.................................... 4.88% 03/15/20 336,543
100,000 Time Warner, Inc.................................... 3.55% 06/01/24 99,493
200,000 Time Warner, Inc.................................... 6.50% 11/15/36 245,522
75,000 Viacom, Inc......................................... 3.88% 04/01/24 76,366
50,000 Viacom, Inc......................................... 6.88% 04/30/36 63,420
100,000 Walt Disney (The) Co................................ 5.50% 03/15/19 115,950
50,000 Walt Disney (The) Co................................ 2.35% 12/01/22 48,283
100,000 Walt Disney (The) Co................................ 4.13% 06/01/44 98,815
-------------
2,830,098
-------------
METALS & MINING - 0.7%
500,000 Freeport-McMoRan Copper & Gold, Inc................. 2.38% 03/15/18 507,902
250,000 Newmont Mining Corp................................. 5.13% 10/01/19 276,119
100,000 Plains Exploration & Production Co.................. 6.75% 02/01/22 114,125
-------------
898,146
-------------
MULTI-UTILITIES - 0.1%
50,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 51,378
123,000 San Diego Gas & Electric Co......................... 3.60% 09/01/23 128,960
-------------
180,338
-------------
MULTILINE RETAIL - 0.1%
75,000 Macy's Retail Holdings, Inc......................... 3.63% 06/01/24 74,774
-------------
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS - 4.0%
$ 350,000 ConocoPhillips Co................................... 2.40% 12/15/22 $ 337,195
200,000 ConocoPhillips Co................................... 6.50% 02/01/39 269,154
125,000 Continental Resources, Inc.......................... 4.50% 04/15/23 133,761
100,000 Continental Resources, Inc. (b)..................... 4.90% 06/01/44 103,737
150,000 DCP Midstream Operating L.P......................... 4.95% 04/01/22 164,945
225,000 Devon Energy Corp................................... 2.25% 12/15/18 227,865
325,000 Devon Energy Corp................................... 3.25% 05/15/22 327,932
100,000 Devon Energy Corp................................... 5.60% 07/15/41 116,171
50,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 54,672
500,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 496,306
225,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 269,654
200,000 Kinder Morgan Energy Partners L.P................... 3.95% 09/01/22 204,906
150,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 185,519
700,000 ONEOK Partners L.P.................................. 2.00% 10/01/17 710,111
175,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 174,171
200,000 Phillips 66......................................... 4.30% 04/01/22 216,819
75,000 Phillips 66......................................... 5.88% 05/01/42 90,190
275,000 Pioneer Natural Resources Co........................ 3.95% 07/15/22 289,291
200,000 Plains All American Pipeline L.P./PAA Finance Corp.. 3.85% 10/15/23 205,832
350,000 Spectra Energy Capital, LLC......................... 3.30% 03/15/23 335,594
250,000 Spectra Energy Partners L.P......................... 4.75% 03/15/24 271,372
50,000 Valero Energy Corp.................................. 6.63% 06/15/37 62,328
-------------
5,247,525
-------------
PHARMACEUTICALS - 0.8%
425,000 AbbVie, Inc......................................... 1.75% 11/06/17 427,664
525,000 Novartis Capital Corp............................... 3.40% 05/06/24 532,857
100,000 Pfizer, Inc......................................... 3.40% 05/15/24 101,754
-------------
1,062,275
-------------
REAL ESTATE INVESTMENT TRUSTS - 0.6%
300,000 Boston Properties L.P............................... 3.85% 02/01/23 309,921
400,000 Weyerhaeuser Co..................................... 4.63% 09/15/23 433,773
-------------
743,694
-------------
ROAD & RAIL - 0.7%
450,000 Burlington Northern Santa Fe, LLC................... 3.00% 03/15/23 443,503
325,000 Burlington Northern Santa Fe, LLC................... 5.15% 09/01/43 359,668
75,000 Ryder System, Inc................................... 2.45% 09/03/19 75,376
-------------
878,547
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.2%
250,000 Intel Corp.......................................... 2.70% 12/15/22 243,505
75,000 Intel Corp.......................................... 4.80% 10/01/41 79,733
-------------
323,238
-------------
SOFTWARE - 1.0%
150,000 Microsoft Corp...................................... 3.63% 12/15/23 157,109
200,000 Microsoft Corp...................................... 4.88% 12/15/43 220,712
100,000 Oracle Corp......................................... 2.38% 01/15/19 101,791
50,000 Oracle Corp......................................... 2.25% 10/08/19 49,944
200,000 Oracle Corp......................................... 2.50% 10/15/22 191,699
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE (CONTINUED)
$ 200,000 Oracle Corp......................................... 3.63% 07/15/23 $ 206,446
300,000 Oracle Corp......................................... 5.38% 07/15/40 342,287
-------------
1,269,988
-------------
SPECIALTY RETAIL - 0.4%
350,000 Home Depot (The), Inc............................... 5.40% 09/15/40 407,419
50,000 Home Depot (The), Inc............................... 4.40% 03/15/45 50,973
-------------
458,392
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 1.4%
100,000 Apple, Inc.......................................... 2.85% 05/06/21 101,018
150,000 Apple, Inc.......................................... 2.40% 05/03/23 141,982
50,000 Apple, Inc.......................................... 3.85% 05/04/43 46,185
125,000 Apple, Inc.......................................... 4.45% 05/06/44 127,183
300,000 EMC Corp............................................ 1.88% 06/01/18 302,266
300,000 Hewlett-Packard Co.................................. 2.60% 09/15/17 310,302
725,000 Hewlett-Packard Co.................................. 3.75% 12/01/20 758,884
-------------
1,787,820
-------------
TOBACCO - 0.7%
575,000 Altria Group, Inc................................... 2.85% 08/09/22 554,305
200,000 Altria Group, Inc................................... 10.20% 02/06/39 340,567
-------------
894,872
-------------
TOTAL CORPORATE BONDS AND NOTES............................................... 49,844,167
(Cost $48,717,738) -------------
FOREIGN CORPORATE BONDS AND NOTES - 0.5%
CAPITAL MARKETS - 0.2%
200,000 Credit Suisse....................................... 5.40% 01/14/20 225,012
-------------
CHEMICALS - 0.2%
100,000 LYB International Finance, B.V...................... 4.00% 07/15/23 105,181
175,000 LYB International Finance, B.V...................... 4.88% 03/15/44 183,182
-------------
288,363
-------------
OIL, GAS & CONSUMABLE FUELS - 0.1%
100,000 Encana Corp......................................... 6.63% 08/15/37 126,054
50,000 Encana Corp......................................... 5.15% 11/15/41 54,709
-------------
180,763
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES....................................... 694,138
(Cost $663,600) -------------
U.S. GOVERNMENT BONDS AND NOTES - 3.4%
250,000 U.S. Treasury Bond.................................. 5.38% 02/15/31 328,340
300,000 U.S. Treasury Bond.................................. 3.63% 02/15/44 316,641
150,000 U.S. Treasury Note (c).............................. 0.25% 05/15/16 149,590
1,900,000 U.S. Treasury Note.................................. 1.38% 09/30/18 1,897,847
1,350,000 U.S. Treasury Note.................................. 1.50% 05/31/19 1,343,303
350,000 U.S. Treasury Note.................................. 2.50% 05/15/24 349,535
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES......................................... 4,385,256
(Cost $4,365,531) -------------
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
DESCRIPTION VALUE
----------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS - 97.8%.................................................... $ 126,694,495
(Cost $117,872,822) (d)
NET OTHER ASSETS AND LIABILITIES - 2.2%...................................... 2,857,741
-------------
NET ASSETS - 100.0%.......................................................... $ 129,552,236
=============
-----------------------------
(a) Floating rate security. The interest rate shown reflects the rate in
effect at June 30, 2014.
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Variable Insurance Trust's Board of Trustees,
this security has been determined to be liquid by First Trust Advisors
L.P., the Fund's advisor. Although market instability can result in
periods of increased overall market illiquidity, liquidity for each
security is determined based on security specific factors and assumptions,
which require subjective judgement. At June 30, 2014, securities noted as
such amounted to $103,737 or 0.08% of net assets.
(c) All or a portion of this security is segregated as collateral for open
futures contracts.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2014, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $9,507,435 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $685,762.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2014
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2014 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*....................................... $ 71,770,934 $ 71,770,934 $ -- $ --
Corporate Bonds and Notes*........................... 49,844,167 -- 49,844,167 --
Foreign Corporate Bonds and Notes*................... 694,138 -- 694,138 --
U.S. Government Bonds and Notes...................... 4,385,256 -- 4,385,256 --
------------ ------------ ------------ ------------
Total................................................ $126,694,495 $ 71,770,934 $ 54,923,561 $ --
============ ============ ============ ============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2014 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Futures Contracts**.................................. $ (42,137) $ ( 42,137) $ -- $ --
============ ============ ============ ============
* See the Portfolio of Investments for industry breakout.
** Includes cumulative appreciation/depreciation on futures contracts as
presented on the Statements of Operations. Only the current day's
variation margin is presented on the Statements of Assets and Liabilities.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2014.
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
OPEN FUTURES CONTRACTS AT JUNE 30, 2014 (see Note 2D - Futures Contracts in the
Notes to Financial Statements):
UNREALIZED
NUMBER OF EXPIRATION NOTIONAL APPRECIATION/
SHORT FUTURES CONTRACTS CONTRACTS MONTH VALUE (DEPRECIATION)
------------------------------------------------ ------------ ------------ ------------ --------------
U.S. Treasury 5-Year Notes 4 Sept-2014 $ 477,844 $ 553
U.S. Treasury 10-Year Notes 60 Sept-2014 7,510,313 (10,455)
Ultra Long Term U.S. Treasury Bond Futures 17 Sept-2014 2,548,937 (32,235)
------------ ----------
Total Futures Contracts $ 10,537,094 $ (42,137)
============ ==========
Page 22 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
EXCHANGE-TRADED FUNDS -- 47.2%
2,070 First Trust High Yield Long/Short ETF......................................... $ 108,903
5,680 First Trust Preferred Securities and Income ETF............................... 109,397
3,875 First Trust Senior Loan Fund.................................................. 192,859
58 iShares 1-3 Year Credit Bond ETF.............................................. 6,129
855 iShares iBoxx $ Investment Grade Corporate Bond ETF........................... 101,967
567 iShares MBS ETF............................................................... 61,361
105 ProShares UltraShort Lehman 7-10 Year Treasury (a)............................ 2,834
-------------
TOTAL EXCHANGE-TRADED FUNDS................................................... 583,450
(Cost $579,051) -------------
COMMON STOCKS -- 23.0%
AEROSPACE & DEFENSE -- 0.7%
32 Boeing (The) Co............................................................... 4,071
45 Honeywell International, Inc.................................................. 4,183
-------------
8,254
-------------
AUTO COMPONENTS -- 0.7%
93 Johnson Controls, Inc......................................................... 4,644
43 Magna International, Inc...................................................... 4,633
-------------
9,277
-------------
BANKS -- 0.7%
75 JPMorgan Chase & Co........................................................... 4,322
84 Wells Fargo & Co.............................................................. 4,415
-------------
8,737
-------------
BEVERAGES -- 0.4%
40 Anheuser-Busch InBev N.V., ADR................................................ 4,598
-------------
CAPITAL MARKETS -- 1.4%
38 Ameriprise Financial, Inc..................................................... 4,560
15 BlackRock, Inc................................................................ 4,794
115 Invesco Ltd................................................................... 4,341
62 Waddell & Reed Financial, Inc., Class A....................................... 3,881
-------------
17,576
-------------
COMMUNICATIONS EQUIPMENT -- 0.3%
52 QUALCOMM, Inc................................................................. 4,118
-------------
CONSUMER FINANCE -- 0.4%
57 Capital One Financial Corp.................................................... 4,708
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
88 Verizon Communications, Inc................................................... 4,306
-------------
ELECTRIC UTILITIES -- 1.2%
60 American Electric Power Co., Inc.............................................. 3,346
46 ITC Holdings Corp............................................................. 1,678
33 NextEra Energy, Inc........................................................... 3,382
71 Northeast Utilities........................................................... 3,356
74 Southern (The) Co............................................................. 3,358
-------------
15,120
-------------
See Notes to Financial Statements Page 23
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT -- 0.4%
58 Eaton Corp. PLC............................................................... $ 4,476
-------------
ENERGY EQUIPMENT & SERVICES -- 0.8%
40 Helmerich & Payne, Inc........................................................ 4,644
42 Schlumberger Ltd.............................................................. 4,954
-------------
9,598
-------------
FOOD & STAPLES RETAILING -- 1.1%
36 Costco Wholesale Corp......................................................... 4,146
58 CVS Caremark Corp............................................................. 4,371
61 Walgreen Co................................................................... 4,522
-------------
13,039
-------------
GAS UTILITIES -- 0.8%
32 Atmos Energy Corp............................................................. 1,709
88 ONE Gas, Inc.................................................................. 3,322
135 Questar Corp.................................................................. 3,348
33 UGI Corp...................................................................... 1,666
-------------
10,045
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.8%
108 Abbott Laboratories........................................................... 4,417
59 Covidien PLC.................................................................. 5,321
-------------
9,738
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.8%
59 Aetna, Inc.................................................................... 4,784
64 AmerisourceBergen Corp........................................................ 4,650
-------------
9,434
-------------
INDUSTRIAL CONGLOMERATES -- 0.3%
31 Siemens AG, ADR............................................................... 4,098
-------------
INSURANCE -- 1.1%
115 Hartford Financial Services Group (The), Inc.................................. 4,118
140 Horace Mann Educators Corp.................................................... 4,378
81 MetLife, Inc.................................................................. 4,500
-------------
12,996
-------------
IT SERVICES -- 0.3%
51 Accenture PLC, Class A........................................................ 4,123
-------------
MACHINERY -- 0.7%
36 Snap-on, Inc.................................................................. 4,267
67 Timken (The) Co............................................................... 4,545
-------------
8,812
-------------
MEDIA -- 0.4%
51 Walt Disney (The) Co.......................................................... 4,373
-------------
MULTILINE RETAIL -- 0.4%
68 Nordstrom, Inc................................................................ 4,619
-------------
Page 24 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES -- 1.2%
71 Alliant Energy Corp........................................................... $ 4,321
108 CMS Energy Corp............................................................... 3,364
45 National Grid PLC, ADR........................................................ 3,347
16 Sempra Energy................................................................. 1,676
36 Wisconsin Energy Corp......................................................... 1,689
-------------
14,397
-------------
OIL, GAS & CONSUMABLE FUELS -- 4.0%
83 BP PLC, ADR................................................................... 4,378
34 Chevron Corp.................................................................. 4,439
46 China Petroleum & Chemical Corp., ADR......................................... 4,371
57 ConocoPhillips................................................................ 4,887
128 Enbridge Income Fund Holdings, Inc............................................ 3,349
70 Enbridge, Inc................................................................. 3,323
107 Inter Pipeline Ltd............................................................ 3,321
64 Kinder Morgan Management LLC (b).............................................. 5,052
92 Kinder Morgan, Inc............................................................ 3,336
70 TransCanada Corp.............................................................. 3,340
72 Valero Energy Corp............................................................ 3,607
100 Williams (The) Cos., Inc...................................................... 5,821
-------------
49,224
-------------
PHARMACEUTICALS -- 0.7%
42 Johnson & Johnson............................................................. 4,394
82 Teva Pharmaceutical Industries Ltd., ADR...................................... 4,298
-------------
8,692
-------------
ROAD & RAIL -- 0.4%
45 Union Pacific Corp............................................................ 4,489
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.4%
157 Intel Corp.................................................................... 4,851
-------------
SOFTWARE -- 0.7%
105 Microsoft Corp................................................................ 4,379
51 SAP AG, ADR................................................................... 3,927
-------------
8,306
-------------
SPECIALTY RETAIL -- 0.7%
89 Foot Locker, Inc.............................................................. 4,514
52 Home Depot (The), Inc......................................................... 4,210
-------------
8,724
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.3%
69 VF Corp....................................................................... 4,347
-------------
TOBACCO -- 0.3%
36 British American Tobacco PLC, ADR............................................. 4,287
-------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
88 China Mobile Ltd., ADR........................................................ 4,278
-------------
TOTAL COMMON STOCKS........................................................... 283,640
(Cost $269,477) -------------
See Notes to Financial Statements Page 25
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
REAL ESTATE INVESTMENT TRUSTS -- 13.5%
DIVERSIFIED REITS -- 1.6%
580 Lexington Realty Trust........................................................ $ 6,386
231 Select Income REIT............................................................ 6,847
61 Vornado Realty Trust.......................................................... 6,510
-------------
19,743
-------------
HEALTH CARE REITS -- 2.1%
105 National Health Investors, Inc................................................ 6,569
180 OMEGA Healthcare Investors, Inc............................................... 6,635
230 Sabra Health Care REIT, Inc................................................... 6,603
96 Ventas, Inc................................................................... 6,153
-------------
25,960
-------------
HOTEL & RESORT REITS -- 1.7%
234 Chesapeake Lodging Trust...................................................... 7,074
225 Hospitality Properties Trust.................................................. 6,840
242 RLJ Lodging Trust............................................................. 6,991
-------------
20,905
-------------
INDUSTRIAL REITS -- 1.1%
160 Prologis, Inc................................................................. 6,574
275 STAG Industrial, Inc.......................................................... 6,603
-------------
13,177
-------------
OFFICE REITS -- 1.6%
307 BioMed Realty Trust, Inc...................................................... 6,702
422 Brandywine Realty Trust....................................................... 6,583
161 Highwoods Properties, Inc..................................................... 6,754
-------------
20,039
-------------
RESIDENTIAL REITS -- 1.6%
92 Camden Property Trust......................................................... 6,546
629 Education Realty Trust, Inc................................................... 6,755
91 Mid-America Apartment Communities, Inc........................................ 6,648
-------------
19,949
-------------
RETAIL REITS -- 2.2%
287 Kimco Realty Corp............................................................. 6,595
187 National Retail Properties, Inc............................................... 6,955
442 Retail Properties of America, Inc., Class A................................... 6,798
37 Simon Property Group, Inc..................................................... 6,152
17 Washington Prime Group, Inc. (a).............................................. 319
-------------
26,819
-------------
SPECIALIZED REITS -- 1.6%
202 Corrections Corp. of America.................................................. 6,636
122 EPR Properties................................................................ 6,816
127 Extra Space Storage, Inc...................................................... 6,763
-------------
20,215
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS........................................... 166,807
(Cost $161,663) -------------
Page 26 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
UNITS DESCRIPTION VALUE
----------- ------------------------------------------------------------------------------ -------------
MASTER LIMITED PARTNERSHIPS -- 8.6%
GAS UTILITIES -- 0.5%
147 AmeriGas Partners, L.P........................................................ $ 6,672
-------------
OIL, GAS & CONSUMABLE FUELS -- 8.1%
52 Alliance Holdings GP, L.P..................................................... 3,369
106 Alliance Resource Partners, L.P............................................... 4,945
140 El Paso Pipeline Partners, L.P................................................ 5,072
249 Enbridge Energy Partners, L.P................................................. 9,196
87 Energy Transfer Partners, L.P................................................. 5,043
107 Enterprise Products Partners, L.P............................................. 8,377
39 EQT Midstream Partners, L.P................................................... 3,773
141 Holly Energy Partners, L.P.................................................... 4,849
82 Kinder Morgan Energy Partners, L.P............................................ 6,741
60 Magellan Midstream Partners, L.P.............................................. 5,043
79 NGL Energy Partners, L.P...................................................... 3,424
174 ONEOK Partners, L.P........................................................... 10,197
168 Plains All American Pipeline, L.P............................................. 10,088
95 Spectra Energy Partners, L.P.................................................. 5,068
64 TC Pipelines, L.P............................................................. 3,306
108 Teekay LNG Partners, L.P...................................................... 4,983
38 TransMontaigne Partners, L.P.................................................. 1,663
93 Williams Partners, L.P........................................................ 5,049
-------------
100,186
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................. 106,858
(Cost $100,537) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------- -------------
U.S. GOVERNMENT BOND AND NOTES -- 6.4%
$ 4,331 U.S. Treasury Inflation Indexed Bond................ 0.63% 02/15/43 $ 3,939
16,908 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/17 17,500
3,000 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/19 3,125
10,893 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/22 10,974
11,195 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/23 11,165
19,399 U.S. Treasury Inflation Indexed Note................ 1.13% 01/15/21 21,029
7,674 U.S. Treasury Inflation Indexed Note................ 1.38% 01/15/20 8,423
3,000 U.S. Treasury Note.................................. 0.38% 04/30/16 2,999
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES......................................... 79,154
(Cost $78,364) -------------
TOTAL INVESTMENTS - 98.7%..................................................... 1,219,909
(Cost $1,189,092) (c)
NET OTHER ASSETS AND LIABILITIES - 1.3%....................................... 15,582
-------------
NET ASSETS - 100.0%........................................................... $ 1,235,491
=============
See Notes to Financial Statements Page 27
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2014 (UNAUDITED)
(a) Non-income producing security.
(b) Non-income producing security which pays in-kind distributions in the form
of additional shares. No in-kind payments were made during the period
ended June 30, 2014.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2014, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $32,755 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $1,938.
ADR American Depositary Receipt
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2014
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2014 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds................................ $ 583,450 $ 583,450 $ -- $ --
Common Stocks*....................................... 283,640 283,640 -- --
Real Estate Investment Trusts*....................... 166,807 166,807 -- --
Master Limited Partnerships*......................... 106,858 106,858 -- --
U.S. Government Bond and Notes....................... 79,154 -- 79,154 --
------------ ------------ ------------ ------------
Total................................................ $ 1,219,909 $ 1,140,755 $ 79,154 $ --
============ ============ ============ ============
* See the Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at June 30, 2014.
Page 28 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2014 (UNAUDITED)
FIRST TRUST/DOW FIRST TRUST
JONES DIVIDEND & MULTI INCOME
INCOME ALLOCATION ALLOCATION
PORTFOLIO PORTFOLIO
----------------- -------------
ASSETS:
Investments, at value..................................................... $ 126,694,495 $ 1,219,909
Cash and cash equivalents................................................. 2,454,375 95,044
Foreign currency, at value................................................ -- 17
Receivables:
Interest............................................................... 563,575 178
Fund shares sold....................................................... 450,338 7
Dividends.............................................................. 82,872 864
From investment advisor................................................ -- 26,292
Prepaid expenses.......................................................... 5,325 --
----------------- -------------
Total Assets........................................................... 130,250,980 1,342,311
----------------- -------------
LIABILITIES:
Payables:
Investment securities purchased........................................ 453,637 52,219
Fund shares redeemed................................................... 79,787 27
Investment advisory fees............................................... 47,615 --
12b-1 service fees (Class I)........................................... 26,045 216
Administrative service fees............................................ 20,840 360
Audit and tax fees..................................................... 17,447 12,541
Variation margin....................................................... 16,125 --
Custodian fees......................................................... 11,488 18,100
Accounting and administration fees..................................... 8,649 3,542
Licensing fees......................................................... 7,306 --
Legal fees............................................................. 4,603 4,274
Transfer agent fees.................................................... 3,169 5,741
Commitment fees........................................................ 1,262 --
Financial reporting fees............................................... 771 --
Printing fees.......................................................... -- 6,148
Trustees' fees......................................................... -- 2,967
Other liabilities......................................................... -- 685
----------------- -------------
Total Liabilities...................................................... 698,744 106,820
----------------- -------------
NET ASSETS................................................................ $ 129,552,236 $ 1,235,491
================= =============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 117,497,932 $ 1,200,650
Accumulated net investment income (loss).................................. 778,901 4,003
Accumulated net realized gain (loss) on investments, futures and foreign
currency transactions................................................... 2,495,867 21
Net unrealized appreciation (depreciation) on investments and futures..... 8,779,536 30,817
----------------- -------------
NET ASSETS................................................................ $ 129,552,236 $ 1,235,491
================= =============
CLASS I SHARES:
NET ASSETS................................................................ $ 129,541,999 $ 1,132,278
================= =============
NET ASSET VALUE, PER SHARE................................................ $ 11.90 $ 10.32
================= =============
Number of Shares outstanding.............................................. 10,886,796 109,744
================= =============
CLASS II SHARES:
NET ASSETS................................................................ $ 10,237 $ 103,213
================= =============
NET ASSET VALUE, PER SHARE................................................ $ 11.91 $ 10.32
================= =============
Number of Shares outstanding.............................................. 860 10,000
================= =============
Investments, at cost...................................................... $ 117,872,822 $ 1,189,092
================= =============
Foreign currency, at cost................................................. $ -- $ 17
================= =============
See Notes to Financial Statements Page 29
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2014 (UNAUDITED)
FIRST TRUST/
DOW JONES FIRST TRUST
DIVIDEND & INCOME MULTI INCOME
ALLOCATION ALLOCATION
PORTFOLIO (a) PORTFOLIO (b)
----------------- -------------
INVESTMENT INCOME:
Interest.................................................................. $ 754,428 $ 604
Dividends................................................................. 714,956 5,570
Foreign withholding tax on dividend income................................ 139 (50)
----------------- -------------
Total investment income................................................ 1,469,523 6,124
----------------- -------------
EXPENSES:
Investment advisory fees.................................................. 345,313 1,081
12b-1 service fees (Class I).............................................. 143,876 409
Administrative service fees............................................... 115,104 360
Accounting and administration fees........................................ 51,955 3,542
Custodian fees............................................................ 35,241 18,100
Transfer agent fees....................................................... 17,221 5,741
Legal fees................................................................ 16,795 4,274
Audit and tax fees........................................................ 14,380 12,541
Printing fees............................................................. 12,780 6,148
Trustees' fees and expenses............................................... 8,959 2,967
Commitment fees........................................................... 5,845 --
Financial reporting fees.................................................. 4,625 --
Licensing fees............................................................ 2,309 --
Other..................................................................... 1,709 685
----------------- -------------
Total expenses......................................................... 776,112 55,848
Fees waived or expenses reimbursed by the investment advisor........... (85,490) (53,727)
----------------- -------------
Net expenses........................................................... 690,622 2,121
----------------- -------------
NET INVESTMENT INCOME (LOSS).............................................. 778,901 4,003
----------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................................ 2,783,815 20
Futures................................................................ (234,383) --
Foreign currency transactions.......................................... -- 1
----------------- -------------
Net realized gain (loss).................................................. 2,549,432 21
----------------- -------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................ 2,212,341 30,817
Futures................................................................ (91,451) --
----------------- -------------
Net change in unrealized appreciation (depreciation)...................... 2,120,890 30,817
----------------- -------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 4,670,322 30,838
----------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 5,449,223 $ 34,841
================= =============
-----------------------
(a) The Fund's Class II Shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
(b) The Fund's Class I and Class II shares were seeded on April 30, 2014, and
commenced operations on May 1, 2014.
Page 30 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/ FIRST TRUST
DOW JONES MULTI INCOME
DIVIDEND & INCOME ALLOCATION
ALLOCATION PORTFOLIO PORTFOLIO
------------------------------- ---------------
SIX MONTHS PERIOD
ENDED YEAR ENDED
6/30/2014 ENDED 6/30/2014
(UNAUDITED) (a) 12/31/2013 (UNAUDITED) (b)
--------------- ------------ ---------------
OPERATIONS:
Net investment income (loss)..................................... $ 778,901 $ 948,398 $ 4,003
Net realized gain (loss)......................................... 2,549,432 1,281,625 21
Net change in unrealized appreciation (depreciation)............. 2,120,890 6,481,905 30,817
------------- ------------ -------------
Net increase (decrease) in net assets resulting from operations.. 5,449,223 8,711,928 34,841
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME:
Class I.......................................................... -- (809,141) --
Class II......................................................... -- -- --
------------- ------------ -------------
-- (809,141) --
------------- ------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
NET REALIZED GAIN:
Class I.......................................................... -- (1,474,214) --
Class II......................................................... -- -- --
------------- ------------ -------------
-- (1,474,214) --
------------- ------------ -------------
Total distributions to shareholders.............................. -- (2,283,355) --
------------- ------------ -------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold........................................ 28,884,521 79,882,059 1,217,346
Proceeds from shares reinvested.................................. -- 2,283,355 --
Cost of shares redeemed.......................................... (10,860,390) (14,691,475) (16,696)
------------- ------------ -------------
Net increase (decrease) in net assets resulting from capital
transactions.................................................. 18,024,131 67,473,939 1,200,650
------------- ------------ -------------
Total increase (decrease) in net assets.......................... 23,473,354 73,902,512 1,235,491
NET ASSETS:
Beginning of period.............................................. 106,078,882 32,176,370 --
------------- ------------ -------------
End of period.................................................... $ 129,552,236 $106,078,882 $ 1,235,491
============= ============ =============
Accumulated net investment income (loss) at end of period........ $ 778,901 $ -- $ 4,003
============= ============ =============
-----------------------
(a) The Fund's Class II Shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
(b) The Fund's Class I and Class II shares were seeded on April 30, 2014, and
commenced operations on May 1, 2014.
See Notes to Financial Statements Page 31
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
SIX MONTHS
ENDED YEAR PERIOD
6/30/2014 ENDED ENDED
(UNAUDITED) 12/31/2013 12/31/2012 (a)
--------------- -------------- --------------
Net asset value, beginning of period....... $ 11.37 $ 10.31 $ 10.00
----------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.08 0.14 0.15
Net realized and unrealized gain (loss).... 0.45 1.17 0.29
----------- ---------- ----------
Total from investment operations........... 0.53 1.31 0.44
----------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... -- (0.09) (0.07)
Net realized gain.......................... -- (0.16) (0.04)
Return of capital.......................... -- -- (0.02)
----------- ---------- ----------
Total from distributions................... -- (0.25) (0.13)
----------- ---------- ----------
Net asset value, end of period............. $ 11.90 $ 11.37 $ 10.31
=========== ========== ==========
Total return (b) (c)....................... 4.66% 12.75% 4.38%
=========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 129,542 $ 106,079 $ 32,176
Ratio of total expenses to average net assets 1.35% (d) 1.65% 2.69% (d)
Ratio of net expenses to average net assets. 1.20% (d) 1.20% 1.20% (d)
Ratio of net investment income (loss)
to average net assets.................... 1.35% (d) 1.27% 2.25% (d)
Portfolio turnover rate.................... 44% 73% 34%
CLASS II SHARES
PERIOD
ENDED
6/30/2014
(UNAUDITED) (e)
---------------
Net asset value, beginning of period....... $ 11.63
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.04
Net realized and unrealized gain (loss).... 0.24
-----------
Total from investment operations........... 0.28
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... --
Net realized gain.......................... --
Return of capital.......................... --
-----------
Total from distributions................... --
-----------
Net asset value, end of period............. $ 11.91
===========
Total return (b) (c)....................... 2.41%
===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 10
Ratio of total expenses to average net
assets.................................. 1.06% (d)
Ratio of net expenses to average net
assets.................................. 0.95% (d)
Ratio of net investment income (loss)
to average net assets................... 1.83% (d)
Portfolio turnover rate.................... 44%
-------------------------
(a) The Fund's Class I shares were seeded on April 12, 2012, and commenced
operations on May 1, 2012.
(b) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions, if any. Total return is not
annualized for periods of less than one year. The returns for the Fund do
not reflect the deduction of expenses associated with variable products,
such as mortality and expense risk charges, separate account charges, and
sales charges or the effect of taxes. These expenses would reduce the
overall return above.
(c) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) Annualized.
(e) The Fund's Class II shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
Page 32 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
CLASS I SHARES
PERIOD
ENDED
6/30/2014
(UNAUDITED) (a)
---------------
Net asset value, beginning of period....... $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.03
Net realized and unrealized gain (loss).... 0.29
-----------
Total from investment operations........... 0.32
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... --
Net realized gain.......................... --
Return of capital.......................... --
-----------
Total from distributions................... --
-----------
Net asset value, end of period............. $ 10.32
===========
Total return (b) (c)....................... 3.20%
===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 1,132
Ratio of total expenses to average net
assets.................................. 31.02% (d)
Ratio of net expenses to average net
assets.................................. 1.20% (d)
Ratio of net investment income (loss)
to average net assets................... 2.20% (d)
Portfolio turnover rate.................... 1%
CLASS II SHARES
PERIOD
ENDED
6/30/2014
(UNAUDITED) (a)
---------------
Net asset value, beginning of period....... $ 10.00
-----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.04
Net realized and unrealized gain (loss).... 0.28
-----------
Total from investment operations........... 0.32
-----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... --
Net realized gain.......................... --
Return of capital.......................... --
-----------
Total from distributions................... --
-----------
Net asset value, end of period............. $ 10.32
===========
Total return (b) (c)....................... 3.20%
===========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 103
Ratio of total expenses to average net
assets.................................. 30.70% (d)
Ratio of net expenses to average net
assets.................................. 0.95% (d)
Ratio of net investment income (loss)
to average net assets................... 2.40% (d)
Portfolio turnover rate.................... 1%
-------------------------
(a) The Fund's Class I and Class II shares were seeded on April 30, 2014, and
commenced operations on May 1, 2014.
(b) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions, if any. Total return is not
annualized for periods of less than one year. The returns for the Fund do
not reflect the deduction of expenses associated with variable products,
such as mortality and expense risk charges, separate account charges, and
sales charges or the effect of taxes. These expenses would reduce the
overall return above.
(c) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) Annualized.
See Notes to Financial Statements Page 33
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
1. ORGANIZATION
First Trust Variable Insurance Trust (the "Trust") is a diversified open-end
management investment company organized as a Massachusetts business trust on
December 14, 2011 and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust
currently offers shares of two series (each a "Fund" and collectively, the
"Funds"), First Trust/Dow Jones Dividend & Income Allocation Portfolio ("First
Trust Dow Jones"), which commenced investment operations on May 1, 2012, and
First Trust Multi Income Allocation Portfolio ("First Trust Multi Income"),
which commenced investment operations on May 1, 2014. Each Fund's shares are
sold only to variable insurance accounts (each an "Account") to fund the
benefits of the variable annuity and variable life insurance contracts (each a
"Contract" and collectively the "Contracts") issued by life insurance companies
writing variable annuity contracts and variable life insurance contracts (each a
"Participating Insurance Company").
First Trust Dow Jones' investment objective is to seek to provide total return
by allocating among dividend-paying stocks and investment grade bonds. First
Trust Dow Jones seeks to achieve its investment objective by investing, under
normal market conditions, approximately 40-60% of its net assets in equity
securities and approximately 40-60% of its net assets in fixed-income securities
at the time of purchase. The equity portion of the portfolio will be derived
from a quantitative process that seeks to provide total return through investing
generally in dividend paying stocks included in the Dow Jones U.S. Total Stock
Market Index(SM). First Trust Advisors L.P. ("First Trust" or the "Advisor")
reserves the right to over-weight, under-weight or exclude certain securities
from the Fund that would otherwise be selected pursuant to the quantitative
process in certain instances.
First Trust Dow Jones' fixed-income component seeks to provide income and
preserve capital through investing in a diversified investment grade bond
portfolio. Investment grade bonds are those bonds rated "BBB-" or higher by
Standard & Poor's Ratings Group or Fitch Ratings, Inc. or "Baa3" or higher by
Moody's Investors Service, Inc. at the time of purchase. Under normal market
conditions, at the time of purchase approximately 80% of the net assets of the
Fund allocated to corporate bonds will be invested in: investment grade bonds
included in the Dow Jones Equal Weighted U.S. Issued Corporate Bond Index(SM)
(the "Bond Index"(1)) and other investment grade bonds of issuers whose
securities are included in the Bond Index; and investment grade bonds of issuers
included in the Dow Jones Industrial Index (the "Dow 30"). The Fund may also
invest in U.S. government and agency securities, including mortgage-backed
securities. The Fund may, at certain times, also hold exchange-traded funds
("ETFs") that invest in investment grade corporate bonds and U.S. government
bonds in lieu of investing directly in bonds.
First Trust Multi Income's investment objective is to maximize current income,
with a secondary objective of capital appreciation. First Trust Multi Income
seeks to achieve its objectives through diversified exposure to nine income
generating asset classes: dividend paying stocks, preferred stocks, energy
infrastructure companies and master limited partnerships ("MLPs"), real estate
investment trusts ("REITs"), high yield or "junk" bonds, floating rate loans,
corporate bonds, mortgage-backed securities and Treasury Inflation Protected
Securities ("TIPS"). The Fund will be actively managed by First Trust and
implementing the strategy involves multiple portfolio managers.
The Advisor will tactically adjust allocation weights in a manner deemed to
offer attractive levels of total return relative to the level of expected risk.
The Advisor intends to adjust asset allocation weights quarterly but may do so
more or less frequently depending upon market conditions. The maximum weight of
any asset class, at the time of adjustment, will be 20%. The minimum weight of
any asset class, at the time of adjustment, will be 5%.
First Trust Multi Income may, at certain times, invest in ETFs that generally
provide exposure to the nine asset classes in lieu of investing directly in such
asset classes. Certain of the ETFs may be advised by First Trust, as a result,
First Trust will also earn advisory fees on the underlying ETFs.
In general, the U.S. dollar-denominated fixed-income securities in which First
Trust Multi Income invests may be issued by U.S. and non-U.S. issuers, of any
credit quality, including high yield securities. The high yield securities in
which the Fund invests are rated below investment grade at the time of purchase
or unrated and deemed by the Advisor to be of comparable quality, commonly
referred to as "junk" bonds. The Fund also invests in the equity securities of
domestic and foreign issuers listed on a U.S. or foreign securities exchange and
non-U.S. securities that are listed on a U.S. securities exchange in the form of
American Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs").
The Fund may invest in equity securities issued by small, mid or large
capitalization companies.
Each Fund offers two classes of shares: Class I and Class II. Each class
represents an interest in the same portfolio of investments but with a different
combination of service (12b-1) fees, eligibility requirements and other
features.
-----------------------------
(1) Prior to April 30, 2013, the Dow Jones Equal Weighted U.S. Issued
Corporate Bond Index(SM) was known as the Dow Jones Corporate Bond
Index(SM).
Page 34
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of the financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
A. PORTFOLIO VALUATION:
The net asset value ("NAV") for each class of shares in each Fund is determined
daily as of the close of regular trading on The New York Stock Exchange
("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for
trading. If the NYSE closes early on a valuation day, the NAV is determined as
of that time. Domestic debt securities and foreign securities are priced using
data reflecting the earlier closing of the principal markets for those
securities. The NAV for each class is calculated by dividing the value of each
Fund's total assets attributable to such class (including accrued interest and
dividends), less all liabilities attributable to such class (including accrued
expenses, dividends declared but unpaid, and any borrowings of each Fund) by the
total number of shares of the class outstanding. Differences in the NAV of each
class of each Fund's shares are generally expected to be due to the daily
expense accruals of the specified service (12b-1) fees, if any, and transfer
agency costs applicable to such class of shares and the resulting differential
in the dividends that may be paid on each class of shares.
Each Fund's investments are valued daily at market value or, in absence of
market value with respect to any portfolio securities, at fair value in
accordance with valuation procedures adopted by the Trust's Board of Trustees,
and in accordance with provisions of the 1940 Act. Market quotations and prices
used to value each Fund's investments are primarily obtained from third party
pricing services. Each Fund's investments are valued as follows:
Common stocks, preferred stocks, MLPs and other equity securities listed
on any national or foreign exchange (excluding The NASDAQ(R) Stock Market
LLC ("NASDAQ") and the London Stock Exchange Alternative Investment
Market ("AIM")) are valued at the last sale price on the exchange on
which they are principally traded or, for NASDAQ and AIM securities, the
official closing price. Securities traded on more than one securities
exchange are valued at the last sale price or official closing price, as
applicable, at the close of the securities exchange representing the
principal market for such securities.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Corporate bonds, notes, U.S. government securities and other debt
securities are valued on the basis of valuations provided by dealers who
make markets in such securities or by an independent pricing service
approved by the Trust's Board of Trustees, which may use the following
valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price
is available, exchange-traded futures contracts are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Short-term investments that mature in less than 60 days when purchased
are valued at amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate at fair value. These securities generally include, but are not limited
to, restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a pricing
service is unable to provide a market price; securities whose trading has been
formally suspended; a security whose market price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the
market has closed but before the calculation of a Fund's NAV or make it
difficult or impossible to obtain a reliable market quotation; and a security
whose price, as provided by the pricing service, does not reflect the security's
"fair value." As a general principle, the current "fair value" of a security
would appear to be the amount which the owner might reasonably expect to receive
for the security upon its
Page 35
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
current sale. The use of fair value prices by a Fund generally results in prices
used by the Fund that may differ from current market quotations or official
closing prices on the applicable exchange. A variety of factors may be
considered in determining the fair value of such securities.
Fair valuation of a debt security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in
which these securities are purchased and sold;
3) the type, size and cost of security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on First
Trust's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities
(or equity securities) of the issuer/borrower, or comparable
companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any,
securing the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt
only);
11) the prospects for the issuer's industry, and multiples (of
earnings and/or cash flows) being paid for similar businesses
in that industry (for corporate debt only); and
12) other relevant factors.
Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or
the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might
affect the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other
foreign markets;
2) ADR trading of similar securities;
3) foreign currency exchange activity;
4) the trading prices of financial products that are tied to
baskets of foreign securities;
5) factors relating to the event that precipitated the pricing
problem;
6) whether the event is likely to recur; and
7) whether the effects of the event are isolated or whether they
affect entire markets, countries or regions.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in
markets that are non-active. A non-active market is a
market where there are few transactions for the
investment, the prices are not current, or price
quotations vary substantially either over time or among
market makers, or in which little information is
released publicly.
Page 36
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
o Inputs other than quoted prices that are observable for
the investment (for example, interest rates and yield
curves observable at commonly quoted intervals,
volatilities, prepayment speeds, loss severities, credit
risks, and default rates).
o Inputs that are derived principally from or corroborated
by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodology used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of June 30, 2014, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
on the accrual basis. Amortization of premiums and accretion of discounts are
recorded using the effective interest method.
Distributions received from a Fund's investments in REITs and MLPs may be
comprised of return of capital, capital gains and income. The actual character
of the amounts received during the year is not known until after the REIT's and
MLP's fiscal year end. A Fund records the character of distributions received
from the REITs and MLPs during the year based on estimates and historical
information available. The characterization of distributions received by a Fund
may be subsequently revised based on information received from the REITs and
MLPs after their tax reporting periods conclude.
C. CASH AND CASH EQUIVALENTS:
Normally, the Funds invest substantially all of their assets to meet their
investment objectives. The Funds may invest the remainder of their assets in
securities with maturities of less than one year or cash equivalents, or they
may hold cash. The investment in such instruments is not a principal investment
strategy of the Funds. The percentage of each Fund's net assets invested in such
holdings varies and depends on several factors, including market conditions. For
temporary defensive purposes and during periods of high cash inflows or
outflows, the Funds may depart from their principal investment strategies and
invest part or all of their assets in these securities, or they may hold cash.
At June 30, 2014, the percentage of net assets held in cash by First Trust Dow
Jones and First Trust Multi Income were approximately 1.9% and 7.7%,
respectively.
D. FUTURES CONTRACTS:
First Trust Dow Jones purchases or sells (i.e., is long or short) futures
contracts to hedge against changes in interest rates (interest rate risk).
Futures contracts are agreements between the Fund and a counterparty to buy or
sell a specific quantity of an underlying instrument at a specified price and at
a specified date. Depending on the terms of the contract, futures contracts are
settled either through physical delivery of the underlying instrument on the
settlement date or by payment of a cash settlement amount on the settlement
date. Open futures contracts can also be closed out prior to settlement by
entering into an offsetting transaction in a matching futures contract. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain margin deposits on the futures contract. When the
contract is closed or expires, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed or expired. This gain or loss is included in
"Net realized gain (loss) on Futures" on the Statements of Operations.
Upon entering into a futures contract, the Fund must deposit funds, called
margin, with its custodian in the name of the clearing broker equal to a
specified percentage of the current value of the contract. Open futures contacts
are marked-to-market daily with the change in value recognized as a component
of, "Net change in unrealized appreciation (depreciation) on Futures" on the
Statements of Operations. Pursuant to the contract, the Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin
and are included in "Variation margin payable or receivable" on the Statements
of Assets and Liabilities. If market conditions change unexpectedly, the Fund
may not achieve the anticipated benefits of the futures contract and may realize
a loss. The use of futures contracts involves the risk of imperfect correlation
in movements in the price of the futures contracts, interest rates and the
underlying instruments.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income of each Fund, if any, are declared and
paid annually. Each Fund distributes its net realized capital gains, if any, to
shareholders at least annually. All dividends payable by each Fund will be
reinvested in the Fund.
Page 37
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Funds and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some point in the future.
The tax character of distributions paid by First Trust Dow Jones during the
fiscal year ended December 31, 2013 was as follows:
DISTRIBUTIONS PAID FROM:
Ordinary income................................... $ 2,021,177
Long-term capital gain............................ 262,178
Return of capital................................. --
As of December 31, 2013, First Trust Dow Jones' distributable earnings and net
assets on a tax basis were as follows:
Undistributed ordinary income..................... $ --
Undistributed capital gains....................... 4,022
--------------
Total undistributed earnings...................... 4,022
Accumulated capital and other losses.............. --
Net unrealized appreciation (depreciation)........ 6,601,059
--------------
Total accumulated earnings (losses)............... 6,605,081
Other............................................. --
Paid-in capital................................... 99,473,801
--------------
Net assets........................................ $ 106,078,882
==============
F. INCOME TAXES:
First Trust Dow Jones intends to continue to qualify, and First Trust Multi
Income intends to qualify, as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Each Fund intends to comply with
the provisions of Section 817(h) of the Internal Revenue Code, which impose
certain diversification requirements upon variable contracts that are based on
segregated asset accounts. Accordingly, no provision has been made for federal
or state income taxes.
Each Fund intends to utilize provisions of the federal income tax laws which
allow it to carry realized capital losses forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At December 31, 2013, First
Trust Dow Jones had no capital loss carryforward for federal income tax
purposes.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. First Trust Dow Jones' taxable
years ended 2012 and 2013 remain open to federal and state audit. As of June 30,
2014, management has evaluated the application of these standards to the Funds
and has determined that no provision for income tax is required in the Funds'
financial statements for uncertain tax positions.
G. EXPENSES:
Each Fund will pay all expenses directly related to its operations.
Each Participating Insurance Company performs certain administrative services
for the Funds, their Accounts and the variable annuity and variable life
insurance Contracts. Each Fund pays an administrative services fee of 0.20% of
average daily net assets to cover expenses incurred by Participating Insurance
Companies in connection with these services.
First Trust has entered into various licensing agreements, which allow First
Trust to use certain trademarks and trade names of the applicable licensors (see
Licensing Information in the Additional Information section of this report). The
Trust, on behalf of the Funds, is a sub-licensee to these license agreements and
is required to pay licensing fees, which are shown on the Statements of
Operations.
Page 38
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust provides each Fund with discretionary investment services and certain
administrative services necessary for the management of the Funds. For its
investment advisory and management services, First Trust is entitled to a
monthly fee calculated at an annual rate of 0.60% of each Fund's average daily
net assets. First Trust also provides fund reporting services to the Funds for a
flat annual fee in the amount of $9,250 per Fund.
First Trust Multi Income and First Trust have retained EIP and Stonebridge (the
"Sub-Advisors"), affiliates of First Trust, to serve as investment Sub-Advisors.
In this capacity, the Sub-Advisors provide recommendations to the Advisor
regarding the selection and on-going monitoring of the securities in First Trust
Multi Income's investment portfolio. EIP acts as Sub-Advisor for, and manages on
a discretionary basis the investment and reinvestment of only the assets of
First Trust Multi Income allocated to EIP by the Advisor and furnish an
investment program in respect of and make investment decisions only with respect
to the portion of First Trust Multi Income's investment portfolio allocated to
it by the Advisor. EIP, an affiliate of the Advisor, has been retained by First
Trust Multi Income to provide recommendations regarding the selection and
ongoing monitoring of the MLP, MLP affiliate and energy infrastructure
securities in First Trust Multi Income's investment portfolio and to exercise
discretion only with respect to assets of First Trust Multi Income allocated to
EIP. Stonebridge serves as a non-discretionary sub-adviser. Stonebridge has been
retained by First Trust Multi Income to provide recommendations regarding the
selection and ongoing monitoring of the preferred and hybrid securities in First
Trust Multi Income's investment portfolio.
For the services provided and the expenses assumed pursuant to the investment
management agreement, First Trust will pay EIP a sub-advisory fee equal to 40%
monthly in arrears of any remaining monthly investment management fee paid to
the Advisor for the average daily net assets allocated to the EIP after First
Trust's waiver of any of its investment management fee to comply with the
then-current expense cap, as defined below. For the services provided and the
expenses assumed pursuant to the investment management agreement, First Trust
will pay Stonebridge a portfolio management fee equal to an annual rate of 0.20%
of the Fund's average daily net assets allocated to Stonebridge.
First Trust has agreed to waive fees and/or pay each Fund's expenses to the
extent necessary to prevent the operating expenses of Class I shares and Class
II shares (excluding interest expense, brokerage commissions and other trading
expenses, taxes and extraordinary expenses) from exceeding 1.20% and 0.95% (the
"Expense Cap"), respectively, of each Fund's average daily net assets per year
at least until May 1, 2015, for First Trust Dow Jones and until May 1, 2016, for
First Trust Multi Income. Expenses borne and fees waived by First Trust are
subject to reimbursement by the Fund for up to three years from the date the fee
or expense was incurred by the Fund, but no reimbursement payment will be made
by the Fund at any time if it would result in the Fund's expenses exceeding the
Expense Cap. These amounts would be included in "Expenses previously waived or
reimbursed" on the Statements of Operations. The advisory fee waivers and
expense reimbursements for the period ended June 30, 2014, and the expenses
borne by First Trust subject to recovery from the Funds at June 30, 2014, are
included in the table below.
First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns,
through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and
EIP Partners, LLC, an affiliate of EIP. In addition, as of March 27, 2014, FTCP,
through a wholly-owned subsidiary, purchased a preferred interest in EIP. The
preferred interest is non-voting and does not share in the profits or losses of
EIP. EIP may buy back any or all of FTCP's preferred interest at any time and
FTCP may sell back to EIP up to 50% of its preferred interest on or after
September 25, 2015, and any or all of its preferred interest after March 27,
2017. Stonebridge is a majority-owned affiliate of First Trust.
EXPENSES SUBJECT TO RECOVERY
--------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD
FEES EXPENSES DECEMBER DECEMBER ENDED
WAIVED REIMBURSED 31, 2012 31, 2013 JUNE 30, 2014 TOTAL
------------ -------------- ------------- ------------ --------------- -------------
First Trust Dow Jones $ 85,490 $ -- $ 125,220 $ 333,872 $ 85,490 $ 544,582
First Trust Multi Income 1,081 52,646 -- -- 53,727 53,727
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as the Funds'
administrator, fund accountant and transfer agent in accordance with certain fee
arrangements. As administrator and fund accountant, BNYM IS is responsible for
providing certain administrative and accounting services to the Trust, including
maintaining the Trust's books of account, records of the Trust's securities
transactions, and certain other books and records. As transfer agent, BNYM IS is
responsible for maintaining shareholder records for the Trust. The Bank of New
York Mellon ("BNYM") serves as the Trust's custodian in accordance with certain
fee arrangements. As custodian, BNYM is responsible for custody of the Trust's
assets.
Page 39
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
Each Trustee who is not an officer or employee of First Trust, any Sub-Advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated pro rata among each fund in the First Trust Fund
Complex based on net assets. Each Independent Trustee is also paid an annual per
fund fee that varies based on whether the fund is a closed-end or other actively
managed fund, or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Trustees are reimbursed for travel and out-of-pocket expenses in connection with
all meetings. The Lead Independent Trustee and Committee Chairmen rotate every
three years. The officers and "Interested" Trustee receive no compensation from
the Trust for acting in such capacities.
4. CAPITAL SHARE TRANSACTIONS
Capital transactions for First Trust Dow Jones were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2014 DECEMBER 31, 2013
-------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
------------ -------------- ------------ --------------
Sales:
Class I 2,502,588 $ 28,874,521 7,328,851 $ 79,882,059
Class II 860 10,000 -- --
------------ -------------- ------------ --------------
Total Sales: 2,503,448 $ 28,884,521 7,328,851 $ 79,882,059
============ ============== ============ ==============
Dividend Reinvestment:
Class I -- $ -- 202,965 $ 2,283,355
Class II -- -- -- --
------------ -------------- ------------ --------------
Total Dividend Reinvestment: -- $ -- 202,965 $ 2,283,355
============ ============== ============ ==============
Redemptions
Class I (944,231) $ (10,860,390) (1,323,631) $ (14,691,475)
Class II -- -- -- --
------------ -------------- ------------ --------------
Total Redemptions: (944,231) $ (10,860,390) (1,323,631) $ (14,691,475)
============ ============== ============ ==============
Capital transactions for First Trust Multi Income were as follows:
PERIOD ENDED
JUNE 30, 2014
--------------------------------
SHARES VALUE
------------ --------------
Sales:
Class I 111,386 $ 1,117,346
Class II 10,000 100,000
------------ --------------
Total Sales: 121,386 $ 1,217,346
============ ==============
Dividend Reinvestment:
Class I -- $ --
Class II -- --
------------ --------------
Total Dividend Reinvestment: -- $ --
============ ==============
Redemptions
Class I (1,642) $ (16,696)
Class II -- --
------------ --------------
Total Redemptions: (1,642) $ ( 16,696)
============ ==============
Page 40
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
5. DERIVATIVES TRANSACTIONS
The following table presents the types of derivatives held by First Trust Dow
Jones at June 30, 2014, the primary underlying risk exposure and the location of
these instruments as presented on the Statements of Assets and Liabilities.
First Trust Multi Income did not hold any derivative instruments as of June 30,
2014.
ASSET DERIVATIVES LIABILITY DERIVATIVES
----------------------------------------- -----------------------------------------
DERIVATIVE RISK STATEMENTS OF ASSETS STATEMENTS OF ASSETS
INSTRUMENT EXPOSURE AND LIABILITIES LOCATION FAIR VALUE AND LIABILITIES LOCATION FAIR VALUE
------------------------------------------------------------------------------------------------------------------------
Futures Interest Rate Risk Variation Margin Receivable $ -- Variation Margin Payable $ 16,125
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended June 30, 2014, on derivatives instruments, as well as the primary
underlying risk exposure associated with each instrument.
STATEMENTS OF OPERATIONS LOCATION INTEREST RATE RISK
----------------------------------------------------------------------------
Net realized gain (loss) on futures $ (234,383)
Net change in unrealized gain (loss) on futures (91,451)
During the six months ended June 30, 2014, the amount of notional values of
futures contracts opened and closed were $25,385,297 and $18,884,148,
respectively.
6. 12B-1 SERVICE PLAN
The Trust has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act, which provides that Class I shares of each of the Funds will be subject to
an annual service fee.
First Trust Portfolios L.P. ("FTP"), an affiliate of First Trust, serves as the
selling agent and distributor of shares of the Funds. In this capacity, FTP
manages the offering of the Funds' shares and is responsible for all sales and
promotional activities. The Plan reimburses FTP for its costs in connection with
these activities. FTP also uses the service fee to compensate each Participating
Insurance Company for providing account services to policy owners. These
services include establishing and maintaining Contract owners' accounts,
supplying information to Contract owners, delivering Fund materials to Contract
owners, answering inquiries, and providing other personal services to Contract
owners. Each Fund may spend up to 0.25% per year of the average daily net assets
of its Class I shares as a service fee under the Plan. In addition, the Plan
permits First Trust to use a portion of its advisory fee to compensate FTP for
expenses incurred in connection with the sale of a Fund's Class I shares
including, without limitation, compensation of its sales force, expenses of
printing and distributing the Prospectus to persons other than Contract owners,
expenses of preparing, printing and distributing advertising and sales
literature and reports to Contract owners used in connection with the sale of a
Fund's Class I Shares, certain other expenses associated with the servicing of
Class I shares of a Fund, and any service-related expenses that may be
authorized from time to time by the Board of Trustees.
During the six months ended June 30, 2014, all service fees received by FTP were
paid to the Participating Insurance Companies, with no portion of such fees
retained by FTP. The Plan may be renewed from year to year if approved by a vote
of the Trust's Board of Trustees and a vote of the Independent 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.
7. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the six month (or shorter) period ended June 30,
2014, were as follows:
PURCHASES SALES
------------------------------------------------------------
First Trust Dow Jones $69,664,624 $50,459,770
First Trust Multi Income 1,200,461 11,534
Page 41
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
8. BORROWINGS
Effective March 28, 2013, the Trust and First Trust Series Fund entered into a
$20 million Committed Line of Credit ("Line of Credit") with The Bank of Nova
Scotia ("Scotia") to be a liquidity backstop during periods of high redemption
volume. On July 30, 2013, the Line of Credit was increased to $50 million and
First Trust Exchange-Traded Fund III and First Trust Exchange-Traded Fund IV
were added to the Credit Agreement. A commitment fee of 0.125% of the daily
amount of the excess of the commitment amount over the outstanding principal
balance of the loans was charged by Scotia, which First Trust allocated amongst
the funds that had access to the Line of Credit. To the extent that the Fund
accessed the Line of Credit, there would also be an interest fee charged.
The Line of Credit terminated on March 27, 2014. Effective March 27, 2014, the
Trust, on behalf of First Trust Dow Jones, along with First Trust Series Fund
and First Trust Exchange-Traded Fund IV, entered into a $30 million Credit
Agreement (the "BNYM Line of Credit") with BNYM to be a liquidity backstop
during periods of high redemption volume. A commitment fee of 0.15% of the daily
amount of the excess of the commitment amount over the outstanding principal
balance of the loans will be charged by BNYM, which First Trust will allocate
amongst the funds that have access to the BNYM Line of Credit. To the extent
that First Trust Dow Jones accesses the BNYM Line of Credit, there would also be
an interest fee charged.
9. INDEMNIFICATION
The Trust has a variety of indemnification obligations under contracts with its
service providers. The Trust's maximum exposure under these arrangements is
unknown. However, the Trust has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
10. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
Page 42
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Trust voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Trust's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Trust files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Trust's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Trust's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
LICENSING INFORMATION
Standard & Poor's and S&P are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P") and Dow Jones is a registered trademark of Dow
Jones Trademark Holdings LLC ("Dow Jones"). The trademarks have been licensed to
S&P Dow Jones Indices LLC and have been sublicensed for use for certain purposes
by First Trust Advisors L.P. ("First Trust"). The DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM),
AND DOW JONES COMPOSITE AVERAGE are products of S&P Dow Jones Indices LLC and
has been licensed for use by First Trust. The First Trust/Dow Jones Dividend &
Income Allocation Portfolio is not sponsored, endorsed, sold or promoted by S&P
Dow Jones Indices LLC, Dow Jones, S&P, or any of their respective affiliates
(collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor its
affiliates make any representation or warranty, express or implied, to the
owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or
any member of the public regarding the advisability of investing in securities
generally or in the First Trust/Dow Jones Dividend & Income Allocation Portfolio
particularly or the ability of the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE
BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM), AND DOW JONES
COMPOSITE AVERAGE to track general market performance. S&P Dow Jones Indices
only relationship to First Trust with respect to the DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM),
AND DOW JONES COMPOSITE AVERAGE is the licensing of the Index and certain
trademarks, service marks and/or trade names of S&P Dow Jones Indices. The DOW
JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL
STOCK MARKET INDEX(SM), AND DOW JONES COMPOSITE AVERAGE is determined, composed
and calculated by S&P Dow Jones Indices without regard to First Trust or the
First Trust/Dow Jones Dividend & Income Allocation Portfolio. S&P Dow Jones
Indices has no obligation to take the needs of First Trust or the owners of the
First Trust/Dow Jones Dividend & Income Allocation Portfolio into consideration
in determining, composing or calculating the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM), AND DOW
JONES COMPOSITE AVERAGE. Neither S&P Dow Jones Indices nor its affiliates are
responsible for and have not participated in the determination of the prices,
and amount of the First Trust/Dow Jones Dividend & Income Allocation Portfolio
or the timing of the issuance or sale of the First Trust/Dow Jones Dividend &
Income Allocation Portfolio or in the determination or calculation of the
equation by which the First Trust/Dow Jones Dividend & Income Allocation
Portfolio is to be managed. S&P Dow Jones Indices has no obligation or liability
in connection with the administration, marketing or trading of the First
Trust/Dow Jones Dividend & Income Allocation Portfolio. There is no assurance
that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM), AND DOW
JONES COMPOSITE AVERAGE will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
advisor. Inclusion of a security within an index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it considered to
be investment advice.
NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM),
AND DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION
(INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES
INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS,
OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST
TRUST, OWNERS OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL
WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET
INDEX(SM), AND DOW JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED
THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P
DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE
Page 43
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR
OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR
ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND FIRST TRUST, OTHER THAN THE
LICENSORS OF S&P DOW JONES INDICES.
Board Considerations Regarding Approval of Investment Management
Agreement for First Trust/Dow Jones Dividend & Income Allocation
Portfolio
The Board of Trustees of the First Trust Variable Insurance Trust (the "Trust"),
including the Independent Trustees, unanimously approved the continuation of the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
("First Trust" or the "Advisor") on behalf of the First Trust/Dow Jones Dividend
& Income Allocation Fund (the "Fund") for a one-year period ending March 31,
2015 at a meeting held on March 16-17, 2014. The Board of Trustees determined
that continuation of the Agreement is in the best interests of the Fund in light
of the extent and quality of services provided and such other matters as the
Board considered to be relevant in the exercise of its reasonable business
judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreement, the
Independent Trustees received a report from First Trust in advance of the Board
meeting responding to a request for information from counsel to the Independent
Trustees. The report, among other things, outlined the services provided by
First Trust to the Fund (including the relevant personnel responsible for these
services and their experience); the advisory fee for the Fund as compared to
fees charged to a peer group of funds compiled by Lipper Inc. ("Lipper"), an
independent source (the "Lipper Peer Group"), and as compared to fees charged to
other clients of First Trust; expenses of the Fund as compared to expense ratios
of funds in the Lipper Peer Group; the nature of expenses incurred in providing
services to the Fund and the potential for economies of scale, if any; financial
data on First Trust; fall out benefits to First Trust and its affiliate, First
Trust Portfolios L.P. ("FTP"); and a summary of First Trust's compliance
program. Following receipt of this information, counsel to the Independent
Trustees posed follow-up questions to the Advisor, and the Independent Trustees
and their counsel then met separately to discuss the information provided by the
Advisor, including the supplemental responses. The Board applied its business
judgment to determine whether the arrangement between the Trust and First Trust
is a reasonable business arrangement from the Fund's perspective as well as from
the perspective of shareholders. The Board considered that shareholders chose to
invest or remain invested in the Fund knowing that the Advisor manages the Fund
and knowing the Fund's investment advisory fee.
In reviewing the Agreement for the Fund, the Board considered the nature, extent
and quality of services provided by First Trust under the Agreement. The Board
considered that the Advisor is responsible for the overall management and
administration of the Trust and the Fund and reviewed all the services provided
by the Advisor to the Fund. The Board also considered the background and
experience of the persons responsible for the day-to-day management of the Fund.
The Board considered the compliance program that had been developed by First
Trust and the procedures in place to monitor the Fund's investment program. In
light of the information presented and the considerations made, the Board
concluded that the nature, extent and quality of services provided to the Fund
by First Trust under the Agreement have been and are expected to remain
satisfactory and that First Trust has managed the Fund consistent with its
investment objective and policies.
The Board considered the advisory fees payable to First Trust under the
Agreement, noting that First Trust is compensated at an annual rate of 0.60% of
the Fund's average daily net assets. The Board considered that First Trust
agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent
the annual operating expenses of the Fund (excluding interest expense, brokerage
commissions and other trading expenses, taxes and extraordinary expenses) from
exceeding 1.20% of average daily net assets for Class I and 0.95% of average
daily net assets for Class II through May 1, 2015. The Board noted that expenses
borne by First Trust are subject to reimbursement by the Fund for up to three
years from the date the fee or expense was incurred, but no reimbursement
payment would be made by the Fund if it would result in the Fund exceeding an
expense ratio equal to the expense cap in place at the time the expenses were
borne by First Trust. The Board considered the advisory fees charged by First
Trust to other funds and non-fund clients, noting that the Advisor does not
provide advisory services to other funds with investment objectives and policies
similar to the Fund's, but does provide services to certain separately managed
accounts with investment objectives and policies similar to the Fund's. The
Board noted that the Advisor charges a lower advisory fee rate to the separately
managed accounts, as well as the Advisor's statement that the nature of the
services provided to the separately managed accounts is not comparable to those
provided to the Fund. The Board also reviewed data comparing the Fund's advisory
fee and expense ratio to the Lipper Peer Group, and noted that the Lipper data
combined advisory fees and administration fees as "management fees," and showed
that the Fund's actual management fees (reflecting fee waivers) were the lowest
of the Lipper Peer Group, while the Fund's total expense ratio was above the
median of the Lipper Peer Group. The Board also noted that the Fund is the
smallest in the Lipper Peer Group, which the Advisor stated may favor the larger
peers. The Board also considered the Advisor's comments regarding other
limitations of the Lipper data.
Page 44
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
The Board also considered and discussed with the Advisor performance information
for the Fund, noting that the performance information included the Fund's
quarterly performance report, which is part of the process that the Board has
established for monitoring the Fund's performance on an ongoing basis. The Board
determined that this process continues to be effective for reviewing the Fund's
performance. In addition to the Board's ongoing review of performance, the Board
also reviewed data prepared by Lipper comparing the Fund's performance to a
broader peer universe and to a benchmark index. The Board reviewed the Lipper
materials, but based on the Advisor's comments regarding the limitations of the
data, such as the inclusion of funds with a different mix of asset classes, and
the impact of the Fund's value bias on its performance during the last year and
since its inception, the Board determined that the performance data provided by
Lipper was of limited value. The Board also noted the differences between the
Fund and the benchmark index. Based on the information provided and the Board's
ongoing review of the Fund's performance, the Board concluded that the Fund's
performance was consistent with its investment strategies.
On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory fee for the Fund
was reasonable and appropriate in light of the nature, extent and quality of
services provided by the Advisor to the Fund under the Agreement.
The Board noted that First Trust has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board considered the Advisor's statement
that no material economies of scale exist at current Fund asset levels. The
Board considered the costs borne by First Trust in connection with its services
performed under the Agreement and noted that First Trust estimated that it
incurred a loss in providing services to the Fund for the twelve months ended
December 31, 2013. The Board considered that First Trust had identified as a
fall out benefit to First Trust and FTP their exposure to investors and brokers
who, in the absence of the Fund, may have had no dealings with First Trust or
FTP. The Board noted that FTP is compensated for services provided to the Fund
through Rule 12b-1 service fees payable by Class I shares, and that First Trust
receives compensation from the Fund for providing fund reporting services
pursuant to a separate Fund Reporting Services Agreement. The Board also noted
that First Trust does not utilize soft dollars in connection with its management
of the Fund's portfolio.
Based upon all of the information considered and the conclusions reached, the
Board of Trustees, including the Independent Trustees, unanimously determined
that the terms of the Agreement continue to be fair and reasonable and that the
continuation of the Agreement is in the best interests of the Fund. No single
factor was determinative in the Board's analysis.
Board Considerations Regarding Approval of Investment Management and
Sub-Advisory Agreements for First Trust Multi Income Allocation Portfolio
The Board of Trustees of the First Trust Variable Insurance Trust (the "Trust"),
including the Independent Trustees, unanimously approved the Investment
Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P.
("First Trust" or the "Advisor") for the First Trust Multi Income Allocation
Portfolio (the "Fund"); the Investment Sub-Advisory Agreement (the "Stonebridge
Sub-Advisory Agreement") among the Trust, on behalf of the Fund, the Advisor and
Stonebridge Advisors LLC ("Stonebridge"); and the Investment Sub- Advisory
Agreement (the "Energy Income Partners Sub-Advisory Agreement") among the Trust,
on behalf of the Fund, the Advisor and Energy Income Partners, LLC ("Energy
Income Partners"), for initial two-year terms at a meeting held on March 16-17,
2014. The Stonebridge Sub-Advisory Agreement and the Energy Income Partners
Sub-Advisory Agreement are collectively referred to as the "Sub-Advisory
Agreements." Stonebridge and Energy Income Partners are collectively referred to
as the "Sub-Advisors." The Sub-Advisory Agreements together with the Advisory
Agreement are referred to as the "Agreements." The Board of Trustees determined
that the Agreements are in the best interests of the Fund in light of the extent
and quality of services expected to be provided, and such other matters as the
Board considered to be relevant in the exercise of its reasonable business
judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements, the
Independent Trustees received a separate report from First Trust and each
Sub-Advisor in advance of the Board meeting responding to a request for
information from counsel to the Independent Trustees. The reports, among other
things, outlined the services to be provided by First Trust and the applicable
Sub-Advisor to the Fund (including the relevant personnel responsible for these
services and their experience); the proposed advisory fee for the Fund as
compared to fees charged by investment advisors to comparable funds and as
compared to fees charged to other clients of First Trust; the proposed
sub-advisory fees to be paid by First Trust to each Sub-Advisor; estimated
expenses of the Fund as compared to expense ratios of comparable funds; the
nature of expenses to be incurred in providing services to the Fund and the
potential for economies of scale, if any; financial data on First Trust and each
Sub-Advisor; any fall-out benefits to First Trust and its affiliate, First Trust
Portfolios L.P. ("FTP"), and each Sub-Advisor; and a summary of First Trust's
and each Sub-Advisor's compliance programs. The Independent Trustees also met
separately with their
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
independent legal counsel to discuss the information provided by First Trust and
each Sub-Advisor. The Board applied its business judgment to determine whether
the arrangements between the Trust and First Trust and among the Trust, the
Advisor and each Sub- Advisor are reasonable business arrangements from the
Fund's perspective as well as from the perspective of shareholders.
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of services to be provided by First
Trust and the Sub-Advisors under the Agreements. The Board noted that the Fund
is the second series of the Trust and considered the efforts expended by First
Trust in making arrangements for other services to be provided to the Fund. The
Board considered that First Trust employees provide management services to the
initial series of the Trust as well as other funds in the First Trust fund
complex with diligence and care. With respect to the Advisory Agreement, the
Board considered that First Trust will be responsible for the overall management
and administration of the Fund and reviewed the services to be provided by First
Trust to the Fund, including the strategic and tactical asset allocations to be
made among internal management teams and the Sub-Advisors. At the meeting, the
Board received a presentation from one of the members of the Advisor's
Investment Committee that would be responsible for managing the Fund regarding
the process for allocating and reallocating assets to the internal management
teams and the Sub-Advisors, as well as a member of the internal team that will
manage tactical asset allocations. The Board considered that Stonebridge would
only act as a non-discretionary manager providing model portfolio
recommendations to the Advisor, and that while Energy Income Partners would act
as a discretionary investment advisor, First Trust would execute its portfolio
trades. The Board noted that members of First Trust's Equity Research Team,
Leveraged Finance Team, Investment Grade Fixed Income Team and Mortgage
Securities Team would participate in the management of the Fund and considered
the experience of each team and the resources available to them. The Board noted
the compliance program that had been developed by First Trust and considered
that it includes a robust program for monitoring the Sub-Advisors and each
internal management team's compliance with the 1940 Act and the Fund's
investment objectives and policies. With respect to the Sub-Advisory Agreements,
the Board reviewed the materials provided by the Sub- Advisors and considered
the nature, extent and quality of the services that each Sub-Advisor is expected
to provide to the Fund, including Stonebridge's non-discretionary management of
the portion of the Fund's assets allocated to it, and Energy Income Partners'
discretionary management of the portion of the Fund's assets allocated to it.
The Board noted its familiarity with the Sub-Advisors due to its oversight of
other funds in the First Trust fund complex for which Energy Income Partners or
Stonebridge serves as Sub-Advisor. Since the Fund had yet to commence investment
operations, the Board could not consider the historical investment performance
of the Fund. In light of the information presented and the considerations made,
the Board concluded that the nature, extent and quality of services to be
provided to the Fund by First Trust and each Sub-Advisor under the applicable
Agreements are expected to be satisfactory.
The Board considered the advisory fees to be paid to First Trust under the
Advisory Agreement, noting that First Trust would be compensated at an annual
rate of 0.60% of the Fund's average daily net assets. The Board noted that, from
the advisory fees, First Trust would pay Stonebridge an annual sub-advisory fee
equal to 0.20% of the average daily net assets of its allocated portion of the
Fund's portfolio and would pay Energy Income Partners a sub-advisory fee equal
to 40.0% of the advisory fee after any advisory fee waivers for its allocated
portion of the Fund's portfolio in a given month. The Board considered that
First Trust agreed to waive fees and/or pay Fund expenses to the extent
necessary to prevent the annual operating expenses of the Fund (excluding
interest expense, brokerage commissions and other trading expenses, taxes and
extraordinary expenses) from exceeding 1.20% of average daily net assets of
Class I and 0.95% of average daily net assets for Class II for the initial term
of the Advisory Agreement.
The Board noted that expenses borne by First Trust are proposed to be subject to
reimbursement by the Fund for up to three years from the date the fee or expense
was incurred, but no reimbursement payment would be made by the Fund if it would
result in the Fund exceeding an expense ratio equal to the expense cap in place
at the time the expenses were borne by First Trust. The Board noted that First
Trust does not provide advisory services to registered investment companies that
have investment objectives and policies similar to the Fund's. The Board
considered the fees charged by First Trust for providing advisory services to
the initial series of the Trust, noting that First Trust also charges an annual
advisory fee of 0.60% of average daily net assets to the initial series. The
Board also noted that First Trust provides retail separate managed account
investment advisory services to a variety of accounts that may have investment
objectives and policies similar to the Fund's and noted First Trust's standard
fee for such services, as well as differences in the services to be provided to
the Fund. The Board also reviewed fee data prepared by Lipper Inc. ("Lipper"),
an independent source, comparing the Fund to a peer group selected by Lipper,
and data for two peer groups selected by First Trust, one of which included only
funds serving as funding vehicles for variable annuities. The Board also
considered data provided by the Sub-Advisors on fees they charge to other
clients, noting that the Sub-Advisors would be paid by the Advisor and not by
the Fund, and that their compensation would depend on the amount of assets the
Advisor allocates to them. In light of the information considered and the
nature, extent and quality of services expected to be provided under the
Agreements, the Board determined that the proposed advisory fee for the Fund was
fair and reasonable.
The Board considered that the proposed advisory fee was not structured to pass
the benefits of any economies of scale on to shareholders as the Fund's assets
grow. The Board noted that First Trust has continued to invest in personnel and
infrastructure for the First Trust fund complex. The Board noted that neither
Sub-Advisor identified any significant expected economies of scale in connection
with their services to the Fund, and that the Advisor would control the amount
of assets allocated to each Sub-Advisor. The Board took the costs to be borne by
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
First Trust in connection with its services to be performed under the Advisory
Agreement into consideration and noted that First Trust was unable to estimate
the profitability of the Advisory Agreement to First Trust. The Board noted that
First Trust's profitability would depend to a degree on the extent to which the
Sub-Advisors, rather than First Trust's internal management teams, managed the
Fund's portfolio. The Board also considered that each Sub- Advisor was unable to
estimate the profitability of the Sub-Advisory Agreement to the Sub- Advisor and
that each Sub-Advisory Agreement was negotiated at arm's length between the
Advisor and the respective Sub-Advisor, and that each Sub-Advisor would be paid
by the Advisor. The Board noted the inherent limitations in analyzing
profitability and concluded that the profitability analysis for the Advisor
would be more relevant after the Fund commences operations. The Board considered
that First Trust had identified as a fall-out benefit to First Trust and FTP
their exposure to investors and brokers who, in the absence of the Fund, may
have had no dealings with First Trust or FTP. The Board noted that FTP would be
compensated for services provided to the Class I shares of the Fund through Rule
12b-1 service fees and that First Trust will receive compensation from the Trust
for providing fund reporting services for the Fund pursuant to a separate Fund
Reporting Services Agreement. The Board also considered the ownership interests
of affiliates of the Advisor in Stonebridge and Energy Income Partners. The
Board also noted that First Trust would not utilize soft dollars in connection
with its management of the Fund's portfolio, and that neither Stonebridge nor
Energy Income Partners identified any fall-out benefits.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements are fair and reasonable and that the approval of the
Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some of the risks
that should be considered for the Funds. For additional information about the
risks associated with investing in the Funds, please see the Funds' prospectus
and statement of additional information, as well as other regulatory filings.
AFFILIATED FUND RISK. The First Trust Multi Income Allocation Portfolio invests
in securities of affiliated ETFs, which involves additional expenses that would
not be present in a direct investment in such affiliated ETFs. Furthermore, the
Fund's investment performance and risks are directly related to the investment
performance and risks of the affiliated ETFs.
CREDIT RISK. The Funds are subject to credit risk. Credit risk is the risk that
an issuer of a security will be unable or unwilling to make dividend, interest
and/or principal payments when due and the related risk that the value of a
security may decline because of concerns about the issuer's ability to make such
payments.
DEPOSITARY RECEIPTS RISK. The First Trust Multi Income Allocation Portfolio
invests in equity securities in the form of Depositary Receipts, which may be
less liquid than the underlying securities in their primary trading market. Any
distributions paid to the holders of Depositary Receipts are usually subject to
a fee charged by the depositary. Holders of Depositary Receipts may have limited
voting rights, and investment restrictions in certain countries may adversely
impact the value of Depositary Receipts because such restrictions may limit the
ability to convert the securities into Depositary Receipts and vice versa. Such
restrictions may cause the securities of the underlying issuer to trade at a
discount or premium to the market price of the Depositary Receipts.
DIVIDEND RISK. The Funds are subject to dividend risk. There is no guarantee
that the issuers of the Funds' equity securities will declare dividends in the
future or that, if declared, they will either remain at current levels or
increase over time.
ENERGY INFRASTRUCTURE COMPANIES RISK. The First Trust Multi Income Allocation
Portfolio invests in energy infrastructure companies. These companies
principally include publicly-traded MLPs and limited liability companies taxed
as partnerships, MLP affiliates, Canadian income trusts and their successor
companies, pipeline companies, utilities, and other companies that derive at
least 50% of their revenues from operating or providing services in support of
infrastructure assets such as pipeline, power transmission and petroleum and
natural gas storage in the petroleum, natural gas and power generation
industries. The Fund invests in energy infrastructure companies and is subject
to certain risks inherent in investing in these types of securities. Energy
infrastructure companies may be directly affected by energy commodity prices,
especially those companies that own the underlying energy commodity. A decrease
in the production or availability of natural gas, natural gas liquids, crude
oil, coal or other energy commodities or a decrease in the volume of such
commodities available for transportation, processing, storage or distribution
may adversely impact the financial performance of energy infrastructure
companies. Energy infrastructure companies are subject to significant federal,
state and local government regulation in virtually every aspect of their
operations, including how facilities are constructed, maintained and operated,
environmental and safety controls, and the prices they may charge for products
and services. Various governmental authorities have the power to enforce
compliance with these regulations and the permits issued under them and
violators are subject to administrative, civil and criminal penalties, including
civil fines, injunctions or both. Stricter laws, regulations or enforcement
policies could be enacted in the future which would likely increase compliance
costs and may adversely affect the financial performance of energy
infrastructure companies. Natural disasters, such as hurricanes in the Gulf of
Mexico, also may impact energy infrastructure companies.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
Certain energy infrastructure companies in the utilities industry are subject to
imposition of rate caps, increased competition due to deregulation, difficulty
in obtaining an adequate return on invested capital or in financing large
construction projects, limitations on operations and increased costs and delays
attributable to environmental considerations, and the capital market's ability
to absorb utility debt. In addition, taxes, government regulation, international
politics, price and supply fluctuations, volatile interest rates and energy
conservation may cause difficulties for these companies. Such issuers have been
experiencing certain of these problems to varying degrees.
EQUITY SECURITIES RISK. The Funds invest in equity securities. The value of the
shares will fluctuate with changes in the value of these equity securities.
Equity securities prices fluctuate for several reasons, including changes in
investors' perceptions of the financial condition of an issuer or the general
condition of the relevant stock market, such as the current market volatility,
or when political or economic events affecting the issuers occur. In addition,
common stock prices may be particularly sensitive to rising interest rates, as
the cost of the capital rises and borrowing costs increase.
ETF RISK. An ETF trades like common stock and represents a portfolio of
securities. The risks of owning an ETF generally reflect the risks of owning the
underlying securities, although lack of liquidity in an ETF could result in it
being more volatile. ETFs have management fees and other operating expenses that
increase their costs. In general, as a shareholder in other investment
companies, the Fund bears its ratable share of the underlying fund's expenses,
and is subject to duplicative expenses to the extent a Fund invests in other
ETFs.
FINANCIAL COMPANIES RISK. Financial companies are especially subject to the
adverse effects of economic recession, currency exchange rates, government
regulation, decreases in the availability of capital, 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.
FLOATING RATE LOAN RISK. The Funds may invest in floating rate loans. An
investment in floating rate loans subjects the Funds to credit risk, which is
heightened for loans in which the Funds may invest because companies that issue
such loans tend to be highly leveraged and thus are more susceptible to the
risks of interest deferral, default and/or bankruptcy. The loans are usually
rated below investment grade but may also be unrated. An economic downturn would
generally lead to a higher non-payment rate, and a loan may lose significant
market value before a default occurs. Moreover, any specific collateral used to
secure a loan may decline in value or become illiquid, which would adversely
affect the loan's value. Unlike the securities markets, there is no central
clearinghouse for loan trades, and the loan market has not established
enforceable settlement standards or remedies for failure to settle. Therefore,
portfolio transactions in loans may have uncertain settlement time periods.
Loans are subject to a number of risks described elsewhere in this prospectus,
including liquidity risk and the risk of investing in below investment grade
debt instruments.
HIGH YIELD SECURITIES RISK. The First Trust Multi Income Allocation Portfolio
invests in high yield securities, or "junk" bonds, which are subject to greater
market fluctuations and risk of loss than securities with higher ratings, and
therefore, may be highly speculative. These securities are issued by companies
that may have limited operating history, narrowly focused operations, and/or
other impediments to the timely payment of periodic interest and principal at
maturity. If the economy slows down or dips into recession, the issuers of high
yield securities may not have sufficient resources to continue making timely
payment of periodic interest and principal at maturity. The market for high
yield securities is generally smaller and less liquid than that for investment
grade securities. High yield securities are generally not listed on a national
securities exchange but trade in the over-the-counter markets. Due to the
smaller, less liquid market for high yield securities, the bid-offer spread on
such securities is generally greater than it is for investment grade securities
and the purchase or sale of such securities may take longer to complete.
ILLIQUID SECURITIES RISK. Some of the securities held by the First Trust Multi
Income Allocation Portfolio may be illiquid. Illiquid securities involve the
risk that the securities will not be able to be sold at the time desired by the
Fund or at prices approximately the value at which the Fund is carrying the
securities on its books.
INCOME RISK. Income from the Funds' fixed income investments could decline
during periods of falling interest rates.
INTEREST RATE RISK. Interest rate risk is the risk that the value of the
fixed-income securities in the Funds will decline because of rising market
interest rates. Interest rate risk is generally lower for shorter term
investments and higher for longer term investments.
PREPAYMENT RISK. The loans that the Funds may invest in are subject to
prepayment risk. The degree to which borrowers prepay loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the borrower and competitive
conditions among loan investors, among others. As such, prepayments cannot be
predicted with accuracy. Upon a prepayment, either in part or in full, the
actual outstanding debt on which a Fund derives interest income will be reduced.
The Funds may not be able to reinvest the proceeds received on terms as
favorable as the prepaid loan.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
MARKET RISK. Market risk is the risk that a particular security owned by a Fund
or shares of the Funds in general may fall in value. Shares are subject to
market fluctuations caused by such factors as economic, political, regulatory or
market developments, changes in interest rates and perceived trends in
securities prices. Overall Fund share values could decline generally or could
underperform other investments.
MLP RISK. The First Trust Multi Income Allocation Portfolio's investment in MLP
units involves risks which differ from an investment in common stock of a
corporation. Holders of MLP units have limited control and voting rights on
matters affecting the partnership. In addition, there are certain tax risks
associated with an investment in MLP units and conflicts of interest may exist
between common unit holders and the general partner, including those arising
from incentive distribution payments. In addition, there is the risk that an MLP
could be, contrary to its intention, taxed as a corporation, resulting in
decreased returns from such MLP.
MORTGAGE SECURITIES RISK. The First Trust Multi Income Allocation Portfolio
invests in mortgage-related securities, including mortgage-backed securities,
which may make the Fund more susceptible to adverse economic, political or
regulatory events that affect the value of real estate. The First Trust/Dow
Jones Dividend & Income Allocation Portfolio may invest in such securities.
Changes in local, state and federal policies could negatively impact the
mortgage-related securities market, which include various government initiated
and sponsored homeowner assistance programs and eminent domain issues. Mortgage
related securities may also face liquidity issues when a Fund seeks to sell such
securities, but is unable to find buyers at a bid-ask spread to make the
transaction feasible. These securities are also subject to the risk that the
underlying borrowers may default on their mortgages, resulting in a non-payment
of principal and interest. Finally, the mortgage-related securities market may
be negatively impacted by regulatory changes including those that are related to
the mandate or existence of the government-sponsored enterprises, Fannie Mae,
Freddie Mac and Ginnie Mae. Mortgage-related securities are subject to
prepayment risk. The degree to which borrowers prepay loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the borrower and competitive
conditions among loan investors, among others. As such, prepayments cannot be
predicted with accuracy. Upon a prepayment, either in part or in full, the
actual outstanding debt on which a Fund derives interest income will be reduced.
In declining interest rate environments, the extent to which borrowers prepay a
mortgage generally increases, which increase reinvestment risk, or the risk that
the proceeds received are not reinvested on terms as favorable as the prepaid
loan. Conversely, mortgage-related securities are subject to the risk that the
rate of mortgage prepayments decreases, which extends the average life of a
security and increases the interest rate risk exposure.
NEW FUND RISK. The First Trust Multi Income Allocation Portfolio currently has
fewer assets than larger funds, and like other relatively new funds, large
inflows and outflows may impact the Fund's market exposure for limited periods
of time. This impact may be positive or negative, depending on the direction of
market movement during the period affected.
NON-U.S. SECURITIES RISK. The First Trust Multi Income Allocation Portfolio
invests in securities of non-U.S. issuers. Non-U.S. securities are subject to
higher volatility than securities of domestic issuers due to possible adverse
political, social or economic developments; restrictions on foreign investment
or exchange of securities; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; different legal or accounting standards
and less government supervision and regulation of exchanges in foreign
countries. These risks may be heightened for securities of companies located in,
or with significant operations in, emerging market countries.
PREFERRED SECURITIES RISK. The First Trust Multi Income Allocation Portfolio
invests in preferred securities. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt instruments in a company's
capital structure in terms of priority to corporate income, and therefore will
be subject to greater credit risk than those debt instruments. Preferred
securities are also subject to credit risk, interest rate risk and income risk.
REIT RISK. The First Trust Multi Income Allocation Portfolio invests in REITs,
and as a result, the Fund is subject to the risks associated with investing in
real estate, which may include, but are not limited to, fluctuations in the
value of underlying properties; defaults by borrowers or tenants; market
saturation; changes in general and local operating expenses; and other economic,
political or regulatory occurrences affecting companies in the real estate
industry. In addition to risks related to investments in real estate generally,
investing in REITs involves certain other risks related to their structure and
focus, which include, but are not limited to, dependency upon management skills,
limited diversification, the risks of locating and managing financing for
projects, heavy cash flow dependency, possible default by borrowers, the costs
and potential losses of self-liquidation of one or more holdings, the risk of a
possible lack of mortgage funds and associated interest rate risks,
overbuilding, property vacancies, increases in property taxes and operating
expenses, changes in zoning laws, losses due to environmental damages, changes
in neighborhood values and appeal to purchases, the possibility of failing to
maintain exemptions from registration under the 1940 Act and, in many cases,
relatively small market capitalization, which may result in less market
liquidity and greater price volatility. REITs are also subject to the risk that
the real estate market may experience an economic downturn generally, which may
have a material effect on the real estate in which the REITs invest and their
underlying portfolio securities.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2014 (UNAUDITED)
SMALLER COMPANY RISK. The Funds invest in small- and mid-capitalization
companies. Such companies may be more vulnerable to adverse general market or
economic developments, and their securities may be less liquid and may
experience greater price volatility than larger, more established 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, more established companies.
TIPS RISK. The First Trust Multi Income Allocation Portfolio invests in TIPs.
TIPS are inflation-indexed fixed-income securities issued by the U.S. Department
of Treasury and are subject to the same risks as other fixed income investments.
In a falling inflationary environment, both interest payments and the value of
the TIPS will decline.
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FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
Energy Income Partners, LLC
49 Riverside Avenue
Westport, CT 06880
Stonebridge Advisors, LLC
187 Danbury Road
Wilton, CT 06897
ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
FIRST TRUST/DOW JONES DIVIDEND &
INCOME ALLOCATION PORTFOLIO
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Variable Insurance Trust
----------------------------------------------------
By (Signature and Title)* /s/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 21, 2014
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 21, 2014
---------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 21, 2014
---------------------
* Print the name and title of each signing officer under his or her signature.