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, 2016
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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, 2016
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2016
Shareholder Letter.......................................................... 1
Portfolio Management........................................................ 2
Performance Summary and Portfolio Components
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 5
First Trust Multi Income Allocation Portfolio.......................... 7
First Trust Dorsey Wright Tactical Core Portfolio...................... 9
Understanding Your Fund Expenses............................................ 11
Portfolio of Investments
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 12
First Trust Multi Income Allocation Portfolio.......................... 32
First Trust Dorsey Wright Tactical Core Portfolio...................... 42
Statements of Assets and Liabilities........................................ 43
Statements of Operations.................................................... 44
Statements of Changes in Net Assets......................................... 45
Financial Highlights........................................................ 48
Notes to Financial Statements............................................... 51
Additional Information...................................................... 63
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"), Energy Income Partners, LLC ("EIP" or a "Sub-Advisor")
and Stonebridge Advisors, LLC ("Stonebridge" or a "Sub-Advisor") and their
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/or Sub-Advisors and their 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.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund 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.
It is important to keep in mind that the opinions expressed by personnel of
First Trust and the Sub-Advisors are just that: informed opinions. They should
not be considered to be promises or advice. The opinions, like the statistics,
cover the period through the date on the cover of this report. The material
risks of investing in each Fund are spelled out in the prospectus, the statement
of additional information, this report and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2016
Dear Shareholders:
Thank you for your investment in First Trust Variable Insurance Trust (the
"Trust").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment for
the six months ended June 30, 2016. Additionally, First Trust has compiled each
Fund's financial statements for you to review. We encourage you to read this
report and discuss it with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the
"Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated
rate hike by the Fed in December had little effect on the money supply, and the
stock market was not shocked by the hike. Early in 2016, many investors were
concerned that the volatility we saw in the market in 2015 would continue, and
it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index
declined by 10.27%. Since then, the market has made a steady comeback, and as of
June 30, 2016, the S&P 500(R) Index was up 15.73%.
First Trust believes that having a long-term investment horizon and investing in
quality products can help you reach your goals, regardless of how the market
behaves. We have always maintained perspective about the markets and believe
investors should as well. We will continue to strive to provide quality
investment opportunities each and every day, which has been one of the hallmarks
of our firm since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach 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, 2016
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust") is a registered investment advisor
based in Wheaton, IL and 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
Chris A. Peterson, Senior 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, 2016
INVESTMENT ADVISOR
First Trust is a registered investment advisor based in Wheaton, IL and 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 ("MLPs") 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
Chris A. Peterson, 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, Senior Portfolio Manager and Senior Vice President of Stonebridge
EIP
James J. Murchie, Portfolio Manager, Founder, Principal and CEO of EIP
Eva Pao, Co-Portfolio Manager, Principal of EIP
John Tysseland, Co-Portfolio Manager, Principal of EIP
Page 3
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2016
INVESTMENT ADVISOR
First Trust is a registered investment advisor based in Wheaton, IL and is the
investment advisor to First Trust Dorsey Wright Tactical Core 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
Chris A. Peterson, Senior Vice President, First Trust
Page 4
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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, 2016 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2016
1 YEAR
SIX MONTH ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 6.51% 6.29% 8.04%
Blended Benchmark (a) 5.72% 5.21% 8.50%
Barclays U.S. Corporate Investment-Grade Index (b) 7.68% 7.94% 4.55%
Russell 3000(R) Index (c) 3.62% 2.14% 12.23%
Secondary Blended Benchmark (d) 6.06% 6.00% 8.80%
Dow Jones Equal Weight U.S. Issued Corporate Bond
Index(SM) (e) 8.17% 9.13% 4.97%
Dow Jones U.S. Total Stock Market Index(SM) (f) 3.54% 2.03% 12.12%
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1 YEAR
SIX MONTH ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 6.71% 6.53% 6.81%
Blended Benchmark (a) 5.72% 5.21% 5.68%
Barclays U.S. Corporate Investment-Grade Index (b) 7.68% 7.94% 4.48%
Russell 3000(R) Index (c) 3.62% 2.14% 6.56%
Secondary Blended Benchmark (d) 6.06% 6.00% 6.17%
Dow Jones Equal Weight U.S. Issued Corporate Bond
Index(SM) (e) 8.17% 9.13% 5.19%
Dow Jones U.S. Total Stock Market Index(SM) (f) 3.54% 2.03% 6.46%
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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).
(d) The Secondary Blended Benchmark return is a 50/50 split between the Dow
Jones U.S. Total Stock Market Index(SM) and the Dow Jones Equal Weight
U.S. Issued Corporate Bond Index(SM) returns.
(e) The Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) measures
the return of readily tradable, high-grade U.S. corporate bonds. The index
includes an equally weighted basket of 96 recently issued investment-grade
corporate bonds with laddered maturities. (The index reflects no deduction
for fees, expenses or taxes).
(f) The Dow Jones U.S. Total Stock Market Index(SM) measures all U.S. equity
securities that have readily available prices. (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, 2016
Dow Jones
First Trust/Dow Barclays U.S. Equal Weight Dow Jones
Jones Dividend & Corporate Russell Secondary U.S. Issued U.S. Total
Income Allocation Blended Investment-Grade 3000(R) Blended Corporate Bond Stock Market
Portfolio - Class I Benchmark Index Index Benchmark Index(SM) Index(SM)
5/1/2012 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
6/30/2012 10,020 9,925 10,135 9,701 9,933 10,152 9,702
12/31/2012 10,438 10,495 10,636 10,331 10,519 10,677 10,322
6/30/2013 10,904 11,026 10,273 11,784 11,047 10,290 11,786
12/31/2013 11,770 12,055 10,472 13,798 12,088 10,523 13,777
6/30/2014 12,318 12,823 11,067 14,756 12,844 11,083 14,733
12/31/2014 12,951 13,269 11,254 15,531 13,336 11,336 15,493
6/30/2015 12,989 13,350 11,150 15,832 13,409 11,215 15,790
12/31/2015 12,962 13,286 11,177 15,606 13,402 11,315 15,559
6/30/2016 13,806 14,046 12,035 16,171 14,214 12,239 16,110
Page 5
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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, 2016 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
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Primerica, Inc. 0.5%
Hershey (The) Co. 0.5
Pfizer, Inc. 0.4
MarketAxess Holdings, Inc. 0.4
A.O. Smith Corp. 0.4
Cincinnati Financial Corp. 0.4
Exponent, Inc. 0.4
AFLAC, Inc. 0.4
Torchmark Corp. 0.4
SunTrust Banks, Inc. 0.4
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Total 4.2%
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
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Common Stocks:
Financials 17.9%
Industrials 14.2
Information Technology 7.1
Consumer Discretionary 6.3
Consumer Staples 5.8
Health Care 3.1
Materials 1.2
Energy 0.8
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Total Common Stocks 56.4
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Corporate Bonds & Notes:
Financials 12.0
Utilities 4.3
Consumer Staples 3.7
Energy 3.5
Information Technology 3.1
Industrials 2.9
Consumer Discretionary 2.8
Health Care 2.7
Telecommunication Services 2.4
Materials 0.3
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Total Corporate Bonds & Notes 37.7
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U.S. Government Bonds & Notes 4.8
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Foreign Corporate Bonds & Notes:
Financials 0.6
Health Care 0.3
Materials 0.2
Energy 0.0*
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Total Foreign Corporate Bonds & Notes 1.1
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Total 100.0%
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* Amount is less than 0.1%.
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% OF TOTAL
TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS
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U.S. Government 4.8%
Bank of America Corp. 1.6
Goldman Sachs Group (The), Inc. 1.4
Wells Fargo & Co. 1.4
Citigroup, Inc. 1.3
Morgan Stanley 1.3
JPMorgan Chase & Co. 1.3
AT&T, Inc. 1.3
Verizon Communications, Inc. 1.1
Anheuser-Busch Inbev Worldwide, Inc. 0.8
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Total 16.3%
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 12.8%
AA+ 1.4
AA 4.3
AA- 8.1
A+ 8.0
A 23.4
A- 19.1
BBB+ 9.4
BBB 8.2
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 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, 2016 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2016
1 YEAR
SIX MONTH ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST MULTI INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/14 7.72% 4.98% 4.06%
FIRST TRUST MULTI INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 7.74% 5.13% 4.26%
Broad Blended Benchmark (a) 4.75% 4.70% 5.23%
Barclays U.S. Aggregate Index (b) 5.31% 6.03% 4.08%
Russell 3000(R) Index (c) 3.62% 2.14% 6.56%
Multi Asset Class Blended Benchmark (d) 8.16% 4.52% 3.37%
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(a) The Broad Blended Benchmark return is split between the Barclays U.S.
Aggregate Index (60%) and the Russell 3000(R) Index (40%).
(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 criteria 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).
(d) The Multi Asset Class Blended Benchmark is weighted to include nine
indexes: Russell 3000(R) Index (15%)BofA Merrill Lynch Fixed Rate
Preferred Securities Index (8%), Alerian MLP Index (15%), S&P U.S. REIT
Index (15%), BofA Merrill Lynch U.S. High Yield Index (8%), S&P/LSTA
Leveraged Loan Index (15%), Barclays U.S. Corporate Investment-Grade Index
(8%), BofA Merrill Lynch U.S. MBS Index (8%), and BofA Merrill Lynch U.S.
Inflation-Linked Treasury Index (8%).
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, 2016
First Trust Multi Barclays Multi Asset Class
Income Allocation Broad Blended U.S. Aggregate Russell 3000(R) Blended
Portfolio - Class I Benchmark Index Index Benchmark
5/1/2014 $10,000 $10,000 $10,000 $10,000 $10,000
6/30/2014 10,320 10,245 10,096 10,470 10,334
12/31/2014 10,457 10,582 10,295 11,020 10,428
6/30/2015 10,383 10,667 10,284 11,234 10,278
12/31/2015 10,119 10,662 10,354 11,073 9,933
6/30/2016 10,900 11,168 10,904 11,474 10,744
Page 7
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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, 2016 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Senior Loan Fund 15.6%
iShares iBoxx $ Investment Grade Corporate
Bond ETF 9.0
First Trust Preferred Securities and
Income ETF 5.9
First Trust Tactical High Yield ETF 5.9
Enterprise Products Partners, L.P. 1.6
iShares MBS ETF 1.6
Enbridge Energy Partners, L.P. 1.0
Magellan Midstream Partners, L.P. 1.0
Spectra Energy Partners, L.P. 1.0
TransCanada Corp. 0.9
------------------------------------------------------
Total 43.5%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
------------------------------------------------------
Exchange-Traded Funds 38.2%
------------------------------------------------------
Common Stocks:
Utilities 3.8
Energy 3.8
Financials 3.8
Information Technology 3.1
Industrials 2.6
Consumer Discretionary 1.9
Health Care 1.9
Consumer Staples 1.6
Telecommunication Services 0.7
Materials 0.7
------------------------------------------------------
Total Common Stocks 23.9
------------------------------------------------------
Real Estate Investment Trusts:
Financials 13.5
------------------------------------------------------
Total Real Estate Investment Trusts 13.5
------------------------------------------------------
Master Limited Partnerships:
Energy 9.4
Utilities 1.1
Materials 0.3
------------------------------------------------------
Total Master Limited Partnerships 10.8
------------------------------------------------------
U.S. Government Bonds & Notes 8.8
------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 4.2
------------------------------------------------------
Mortgage-Backed Securities 0.5
------------------------------------------------------
Asset-Backed Securities 0.1
------------------------------------------------------
Total 100.0%
======
Page 8
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2016 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED JUNE 30, 2016
SIX MONTH SINCE INCEPTION
INCEPTION DATE TOTAL RETURN CUMULATIVE TOTAL RETURN
FIRST TRUST DORSEY WRIGHT TACTICAL CORE
PORTFOLIO - CLASS I 10/30/15 -1.34% -1.93%
FIRST TRUST DORSEY WRIGHT TACTICAL CORE
PORTFOLIO - CLASS II 10/30/15 -1.23% -1.72%
Broad Blended Benchmark (a) 4.52% 3.48%
Barclays U.S. Aggregate Index (b) 5.31% 4.69%
S&P 500(R) Index (c) 3.84% 2.50%
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(a) The Broad Blended Benchmark return is split between Barclays U.S.
Aggregate Index (40%) and the S&P 500(R) 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 criteria for minimum amount of outstanding par
value. (The index reflects no deduction for fees, expenses or taxes).
(c) The S&P 500(R) Index is an unmanaged index of 500 stocks used to measure
large-cap U.S. stock market performance. (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
October 30, 2015 - June 30, 2016
First Trust Dorsey Wright
Tactical Core Portfolio - Broad Blended Barclays U.S.
Class I Benchmark Aggregate Index S&P 500(R) Index
10/30/15 $10,000 $10,000 $10,000 $10,000
12/31/15 9,940 9,900 9,941 9,872
6/30/16 9,807 10,347 10,469 10,251
Page 9
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2016 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
iShares Core U.S. Aggregate Bond ETF 17.8%
SPDR Barclays International Treasury
Bond ETF 10.6
SPDR Wells Fargo Preferred Stock ETF 10.5
SPDR Nuveen Barclays Municipal Bond ETF 10.4
SPDR Barclays Emerging Markets Local
Bond ETF 10.2
First Trust Mid Cap Growth AlphaDEX(R) Fund 4.8
First Trust Large Cap Growth
AlphaDEX(R) Fund 4.7
First Trust Mid Cap Core AlphaDEX(R) Fund 4.7
First Trust Energy AlphaDEX(R) Fund 4.5
First Trust Utilities AlphaDEX(R) Fund 4.3
------------------------------------------------------
Total 82.5%
======
Page 10
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2016 (UNAUDITED)
As a shareholder of First Trust/Dow Jones Dividend & Income Allocation
Portfolio, First Trust Multi Income Allocation Portfolio or First Trust Dorsey
Wright Tactical Core 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 (including 12b-1) fees,
if any; 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 and held through the six-month period ended June 30, 2016.
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 1/1/2016- VALUE VALUE 1/1/2016- EXPENSE
1/1/2016 6/30/2016 6/30/2016 (a) 1/1/2016 6/30/2016 6/30/2016 (a) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ---------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I ................. $ 1,000.00 $ 1,065.10 $ 6.16 $ 1,000.00 $ 1,018.90 $ 6.02 1.20%
Class II ................ $ 1,000.00 $ 1,067.10 $ 4.88 $ 1,000.00 $ 1,020.14 $ 4.77 0.95%
First Trust Multi Income Allocation
Portfolio
Class I ................. $ 1,000.00 $ 1,077.20 $ 4.29 $ 1,000.00 $ 1,020.74 $ 4.17 0.83%
Class II ................ $ 1,000.00 $ 1,077.40 $ 3.00 $ 1,000.00 $ 1,021.98 $ 2.92 0.58%
First Trust Dorsey Wright Tactical
Core Portfolio
Class I ................. $ 1,000.00 $ 986.60 $ 4.25 $ 1,000.00 $ 1,020.59 $ 4.32 0.86%
Class II ................ $ 1,000.00 $ 987.70 $ 2.97 $ 1,000.00 $ 1,021.88 $ 3.02 0.60%
(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,
2016 through June 30, 2016), multiplied by 182/366 (to reflect the
one-half year period).
(b) The expense ratios reflect an expense cap. First Trust Multi Income
Allocation Portfolio expense ratios reflect an additional waiver. See Note
3 in the Notes to Financial Statements.
Page 11
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS -- 55.1%
AEROSPACE & DEFENSE -- 2.0%
10,007 General Dynamics Corp........................................................ $ 1,393,375
11,733 Honeywell International, Inc................................................. 1,364,782
5,935 Lockheed Martin Corp......................................................... 1,472,889
6,643 Northrop Grumman Corp........................................................ 1,476,606
10,721 Raytheon Co.................................................................. 1,457,520
-------------
7,165,172
-------------
AIR FREIGHT & LOGISTICS -- 0.4%
26,934 Expeditors International of Washington, Inc.................................. 1,320,843
-------------
BANKS -- 2.9%
43,939 Columbia Banking System, Inc................................................. 1,232,928
29,247 Commerce Bancshares, Inc..................................................... 1,400,931
72,956 First Midwest Bancorp, Inc................................................... 1,281,107
20,468 South State Corp............................................................. 1,392,848
36,438 SunTrust Banks, Inc.......................................................... 1,496,873
107,232 TCF Financial Corp........................................................... 1,356,485
32,389 U.S. Bancorp................................................................. 1,306,249
27,185 Wells Fargo & Co............................................................. 1,286,666
-------------
10,754,087
-------------
BEVERAGES -- 0.7%
28,340 Coca-Cola (The) Co........................................................... 1,284,652
14,702 Dr. Pepper Snapple Group, Inc................................................ 1,420,654
-------------
2,705,306
-------------
BUILDING PRODUCTS -- 0.4%
17,228 A.O. Smith Corp.............................................................. 1,517,959
-------------
CAPITAL MARKETS -- 0.8%
30,538 SEI Investments Co........................................................... 1,469,183
17,896 T. Rowe Price Group, Inc..................................................... 1,305,871
-------------
2,775,054
-------------
CHEMICALS -- 1.2%
11,789 Ecolab, Inc.................................................................. 1,398,175
11,556 International Flavors & Fragrances, Inc...................................... 1,456,865
3,318 NewMarket Corp............................................................... 1,374,913
-------------
4,229,953
-------------
COMMERCIAL SERVICES & SUPPLIES -- 0.8%
14,638 Cintas Corp.................................................................. 1,436,427
48,476 Rollins, Inc................................................................. 1,418,892
-------------
2,855,319
-------------
COMMUNICATIONS EQUIPMENT -- 0.4%
46,177 Cisco Systems, Inc........................................................... 1,324,818
-------------
DISTRIBUTORS -- 0.8%
13,231 Genuine Parts Co............................................................. 1,339,639
14,984 Pool Corp.................................................................... 1,408,945
-------------
2,748,584
-------------
Page 12 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES -- 1.8%
13,687 CME Group, Inc............................................................... $ 1,333,114
8,676 FactSet Research Systems, Inc................................................ 1,400,480
10,532 MarketAxess Holdings, Inc.................................................... 1,531,353
14,894 Morningstar, Inc............................................................. 1,218,031
19,805 Nasdaq, Inc.................................................................. 1,280,789
-------------
6,763,767
-------------
ELECTRICAL EQUIPMENT -- 1.4%
26,304 AMETEK, Inc.................................................................. 1,216,034
24,176 Emerson Electric Co.......................................................... 1,261,020
12,411 Hubbell, Inc................................................................. 1,308,988
11,558 Rockwell Automation, Inc..................................................... 1,327,090
-------------
5,113,132
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0%
22,737 Amphenol Corp., Class A...................................................... 1,303,512
10,679 Littelfuse, Inc.............................................................. 1,262,151
21,232 TE Connectivity, Ltd......................................................... 1,212,560
-------------
3,778,223
-------------
FOOD & STAPLES RETAILING -- 0.7%
12,674 CVS Health Corp.............................................................. 1,213,409
19,195 Wal-Mart Stores, Inc......................................................... 1,401,619
-------------
2,615,028
-------------
FOOD PRODUCTS -- 2.7%
20,752 General Mills, Inc........................................................... 1,480,033
14,276 Hershey (The) Co............................................................. 1,620,183
30,404 Hormel Foods Corp............................................................ 1,112,786
12,141 J&J Snack Foods Corp......................................................... 1,448,057
13,215 McCormick & Co., Inc......................................................... 1,409,644
32,768 Mondelez International, Inc., Class A........................................ 1,491,272
14,578 Sanderson Farms, Inc......................................................... 1,263,038
-------------
9,825,013
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.1%
31,429 Abbott Laboratories.......................................................... 1,235,474
22,737 ResMed, Inc.................................................................. 1,437,661
12,253 Stryker Corp................................................................. 1,468,277
-------------
4,141,412
-------------
HEALTH CARE PROVIDERS & SERVICES -- 1.1%
9,459 Anthem, Inc.................................................................. 1,242,345
28,254 Patterson Cos., Inc.......................................................... 1,353,084
10,199 UnitedHealth Group, Inc...................................................... 1,440,099
-------------
4,035,528
-------------
HOTELS, RESTAURANTS & LEISURE -- 1.1%
24,763 Cheesecake Factory (The), Inc................................................ 1,192,091
8,611 Cracker Barrel Old Country Store, Inc........................................ 1,476,528
22,021 Starbucks Corp............................................................... 1,257,840
-------------
3,926,459
-------------
See Notes to Financial Statements Page 13
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
HOUSEHOLD PRODUCTS -- 0.8%
14,262 Church & Dwight Co., Inc..................................................... $ 1,467,417
15,972 Procter & Gamble (The) Co.................................................... 1,352,349
-------------
2,819,766
-------------
INDUSTRIAL CONGLOMERATES -- 1.5%
7,890 3M Co........................................................................ 1,381,697
13,213 Carlisle Cos., Inc........................................................... 1,396,350
13,859 Danaher Corp................................................................. 1,399,759
7,193 Roper Industries, Inc........................................................ 1,226,838
-------------
5,404,644
-------------
INSURANCE -- 11.6%
20,822 AFLAC, Inc................................................................... 1,502,516
37,626 Allied World Assurance Co. Holdings AG....................................... 1,322,178
19,514 Allstate (The) Corp.......................................................... 1,365,004
18,682 American Financial Group, Inc................................................ 1,381,160
12,587 Aon PLC...................................................................... 1,374,878
25,198 Argo Group International Holdings, Ltd....................................... 1,307,776
27,561 Aspen Insurance Holdings, Ltd................................................ 1,278,279
17,040 Assurant, Inc................................................................ 1,470,722
23,705 Axis Capital Holdings, Ltd................................................... 1,303,775
36,723 Brown & Brown, Inc........................................................... 1,376,011
11,034 Chubb, Ltd................................................................... 1,442,254
20,114 Cincinnati Financial Corp.................................................... 1,506,337
40,854 CNA Financial Corp........................................................... 1,283,633
20,120 Endurance Specialty Holdings, Ltd............................................ 1,351,259
14,138 Erie Indemnity Co., Class A.................................................. 1,404,469
6,659 Everest Re Group, Ltd........................................................ 1,216,400
34,497 First American Financial Corp................................................ 1,387,469
14,572 Hanover Insurance Group (The), Inc........................................... 1,233,083
28,530 Hartford Financial Services Group, Inc....................................... 1,266,161
21,626 Marsh & McLennan Cos., Inc................................................... 1,480,516
29,523 Primerica, Inc............................................................... 1,689,896
25,982 ProAssurance Corp............................................................ 1,391,336
37,412 Progressive (The) Corp....................................................... 1,253,302
13,659 Reinsurance Group of America, Inc............................................ 1,324,786
10,971 RenaissanceRe Holdings, Ltd.................................................. 1,288,434
24,274 Torchmark Corp............................................................... 1,500,619
11,264 Travelers (The) Cos., Inc.................................................... 1,340,867
42,518 Unum Group................................................................... 1,351,647
27,859 Validus Holdings, Ltd........................................................ 1,353,669
23,393 W.R. Berkley Corp............................................................ 1,401,709
35,725 XL Group PLC................................................................. 1,190,000
-------------
42,340,145
-------------
IT SERVICES -- 3.3%
11,392 Accenture PLC, Class A....................................................... 1,290,600
21,759 Amdocs Ltd................................................................... 1,255,929
14,655 Automatic Data Processing, Inc............................................... 1,346,355
22,166 Broadridge Financial Solutions, Inc.......................................... 1,445,223
8,681 International Business Machines Corp......................................... 1,317,602
15,545 Jack Henry & Associates, Inc................................................. 1,356,612
Page 14 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
IT SERVICES (CONTINUED)
13,912 MasterCard, Inc., Class A.................................................... $ 1,225,091
24,341 Paychex, Inc................................................................. 1,448,290
17,190 Visa, Inc., Class A.......................................................... 1,274,982
-------------
11,960,684
-------------
MACHINERY -- 3.9%
22,749 CLARCOR, Inc................................................................. 1,383,822
11,958 Cummins, Inc................................................................. 1,344,557
41,199 Donaldson Co., Inc........................................................... 1,415,598
15,658 Graco, Inc................................................................... 1,236,825
15,862 IDEX Corp.................................................................... 1,302,270
12,834 Illinois Tool Works, Inc..................................................... 1,336,789
22,446 Lincoln Electric Holdings, Inc............................................... 1,326,110
24,039 PACCAR, Inc.................................................................. 1,246,903
8,374 Snap-On, Inc................................................................. 1,321,585
15,266 Toro (The) Co................................................................ 1,346,461
16,581 Wabtec Corp.................................................................. 1,164,484
-------------
14,425,404
-------------
MEDIA -- 0.7%
21,524 Comcast Corp., Class A....................................................... 1,403,150
13,238 Walt Disney (The) Co......................................................... 1,294,941
-------------
2,698,091
-------------
MULTILINE RETAIL -- 0.3%
15,978 Target Corp.................................................................. 1,115,584
-------------
OIL, GAS & CONSUMABLE FUELS -- 0.7%
15,728 Exxon Mobil Corp............................................................. 1,474,343
15,183 Phillips 66.................................................................. 1,204,619
-------------
2,678,962
-------------
PERSONAL PRODUCTS -- 0.3%
13,940 Estee Lauder (The) Cos., Inc., Class A....................................... 1,268,819
-------------
PHARMACEUTICALS -- 0.8%
12,150 Johnson & Johnson............................................................ 1,473,795
44,355 Pfizer, Inc.................................................................. 1,561,740
-------------
3,035,535
-------------
PROFESSIONAL SERVICES -- 1.4%
11,503 Equifax, Inc................................................................. 1,476,985
25,773 Exponent, Inc................................................................ 1,505,401
16,147 ManpowerGroup, Inc........................................................... 1,038,898
28,224 Robert Half International, Inc............................................... 1,077,028
-------------
5,098,312
-------------
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
13,080 PS Business Parks, Inc....................................................... 1,387,526
4,766 Public Storage............................................................... 1,218,142
-------------
2,605,668
-------------
See Notes to Financial Statements Page 15
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ROAD & RAIL -- 1.1%
15,606 JB Hunt Transport Services, Inc.............................................. $ 1,262,994
20,348 Landstar System, Inc......................................................... 1,397,094
16,526 Union Pacific Corp........................................................... 1,441,893
-------------
4,101,981
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.1%
29,503 Linear Technology Corp....................................................... 1,372,775
42,409 Tessera Technologies, Inc.................................................... 1,299,412
22,896 Texas Instruments, Inc....................................................... 1,434,434
-------------
4,106,621
-------------
SOFTWARE -- 0.7%
42,698 CA, Inc...................................................................... 1,401,775
32,136 Oracle Corp.................................................................. 1,315,327
-------------
2,717,102
-------------
SPECIALTY RETAIL -- 2.3%
20,382 Foot Locker, Inc............................................................. 1,118,156
44,717 Gap (The), Inc............................................................... 948,895
9,853 Home Depot (The), Inc........................................................ 1,258,130
22,706 Ross Stores, Inc............................................................. 1,287,203
16,779 TJX (The) Cos., Inc.......................................................... 1,295,842
14,533 Tractor Supply Co............................................................ 1,325,119
24,017 Williams-Sonoma, Inc......................................................... 1,252,006
-------------
8,485,351
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.7%
21,387 NIKE, Inc., Class B.......................................................... 1,180,562
20,301 VF Corp...................................................................... 1,248,309
-------------
2,428,871
-------------
THRIFTS & MORTGAGE FINANCE -- 0.4%
97,311 Northwest Bancshares, Inc.................................................... 1,443,122
-------------
TOBACCO -- 0.4%
26,131 Reynolds American, Inc....................................................... 1,409,245
-------------
TRADING COMPANIES & DISTRIBUTORS -- 1.1%
26,830 Fastenal Co.................................................................. 1,190,984
5,632 W.W. Grainger, Inc........................................................... 1,279,872
9,757 Watsco, Inc.................................................................. 1,372,712
-------------
3,843,568
-------------
TOTAL COMMON STOCKS.......................................................... 201,583,132
(Cost $186,722,997) -------------
Page 16 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES -- 36.8%
AEROSPACE & DEFENSE -- 1.1%
$ 50,000 BAE Systems Holdings, Inc. (a)...................... 4.75% 10/07/44 $ 54,769
100,000 Boeing (The) Co..................................... 1.65% 10/30/20 101,275
250,000 Boeing (The) Co..................................... 2.35% 10/30/21 259,218
100,000 Boeing (The) Co..................................... 2.20% 10/30/22 102,753
175,000 Boeing (The) Co..................................... 1.88% 06/15/23 175,150
150,000 Boeing (The) Co..................................... 2.50% 03/01/25 155,582
100,000 Boeing (The) Co..................................... 2.60% 10/30/25 104,256
175,000 Boeing (The) Co..................................... 2.25% 06/15/26 176,033
25,000 Boeing (The) Co..................................... 6.63% 02/15/38 36,417
150,000 Boeing (The) Co..................................... 3.50% 03/01/45 153,496
150,000 Boeing (The) Co..................................... 3.38% 06/15/46 150,977
300,000 Boeing Capital Corp................................. 4.70% 10/27/19 334,589
200,000 Lockheed Martin Corp................................ 2.50% 11/23/20 206,584
250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 272,103
220,000 Lockheed Martin Corp................................ 4.70% 05/15/46 260,432
200,000 Northrop Grumman Corp............................... 5.05% 11/15/40 240,850
250,000 United Technologies Corp............................ 1.80% 06/01/17 251,947
650,000 United Technologies Corp............................ 3.10% 06/01/22 693,421
100,000 United Technologies Corp............................ 6.05% 06/01/36 133,730
150,000 United Technologies Corp............................ 4.50% 06/01/42 172,209
-------------
4,035,791
-------------
AIR FREIGHT & LOGISTICS -- 0.3%
150,000 FedEx Corp.......................................... 2.30% 02/01/20 153,702
300,000 FedEx Corp.......................................... 3.20% 02/01/25 312,933
50,000 FedEx Corp.......................................... 3.25% 04/01/26 52,409
50,000 FedEx Corp.......................................... 4.75% 11/15/45 55,949
350,000 FedEx Corp.......................................... 4.55% 04/01/46 381,368
-------------
956,361
-------------
AIRLINES -- 0.2%
385,000 Southwest Airlines Co............................... 2.75% 11/06/19 398,313
420,000 Southwest Airlines Co............................... 2.65% 11/05/20 433,942
-------------
832,255
-------------
BANKS -- 6.0%
1,400,000 Bank of America Corp................................ 2.60% 01/15/19 1,433,450
50,000 Bank of America Corp................................ 2.65% 04/01/19 51,257
100,000 Bank of America Corp................................ 2.63% 10/19/20 101,696
600,000 Bank of America Corp................................ 2.63% 04/19/21 609,885
725,000 Bank of America Corp................................ 5.70% 01/24/22 840,433
450,000 Bank of America Corp................................ 4.00% 04/01/24 481,084
100,000 Bank of America Corp................................ 4.00% 01/22/25 102,115
100,000 Bank of America Corp................................ 4.45% 03/03/26 104,799
700,000 Bank of America Corp................................ 3.50% 04/19/26 724,869
225,000 Bank of America Corp................................ 5.88% 02/07/42 285,046
225,000 Bank of America Corp................................ 4.88% 04/01/44 257,435
600,000 Bank of America N.A................................. 5.30% 03/15/17 616,286
800,000 Citigroup, Inc...................................... 2.15% 07/30/18 810,160
300,000 Citigroup, Inc...................................... 2.50% 09/26/18 306,111
300,000 Citigroup, Inc...................................... 2.05% 06/07/19 302,278
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 250,000 Citigroup, Inc...................................... 2.40% 02/18/20 $ 252,777
550,000 Citigroup, Inc...................................... 2.70% 03/30/21 560,406
775,000 Citigroup, Inc...................................... 4.50% 01/14/22 857,697
350,000 Citigroup, Inc...................................... 4.60% 03/09/26 371,791
300,000 Citigroup, Inc...................................... 3.40% 05/01/26 308,245
300,000 Citigroup, Inc...................................... 4.30% 11/20/26 309,723
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 254,084
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 128,839
50,000 Citigroup, Inc...................................... 4.65% 07/30/45 55,174
250,000 Citigroup, Inc...................................... 4.75% 05/18/46 251,876
600,000 HSBC Bank USA N.A................................... 4.88% 08/24/20 652,207
100,000 HSBC USA, Inc....................................... 1.50% 11/13/17 99,813
890,000 HSBC USA, Inc....................................... 1.63% 01/16/18 888,614
300,000 JPMorgan Chase & Co................................. 1.85% 03/22/19 303,225
300,000 JPMorgan Chase & Co................................. 2.20% 10/22/19 305,083
150,000 JPMorgan Chase & Co................................. 2.55% 03/01/21 152,556
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 612,456
200,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 202,934
325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 337,169
250,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 252,774
400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 432,556
650,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 673,456
100,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 106,177
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 548,904
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 120,265
150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 165,091
437,000 JPMorgan Chase Bank N.A............................. 6.00% 10/01/17 461,648
175,000 PNC Financial Services Group (The), Inc............. 3.90% 04/29/24 188,063
600,000 Wells Fargo & Co.................................... 6.00% 11/15/17 638,543
375,000 Wells Fargo & Co.................................... 2.13% 04/22/19 383,230
200,000 Wells Fargo & Co.................................... 2.15% 01/30/20 203,497
100,000 Wells Fargo & Co.................................... 2.55% 12/07/20 102,978
900,000 Wells Fargo & Co.................................... 3.00% 01/22/21 941,011
550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 564,362
425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 446,230
550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 561,355
200,000 Wells Fargo & Co.................................... 3.90% 05/01/45 210,477
100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 109,695
275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 280,877
250,000 Wells Fargo Bank N.A................................ 1.75% 05/24/19 253,489
200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 252,553
-------------
21,828,804
-------------
BEVERAGES -- 1.3%
63,000 Anheuser-Busch InBev Finance, Inc................... 1.90% 02/01/19 64,110
475,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.65% 02/01/21 493,103
200,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 203,755
375,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.30% 02/01/23 395,697
600,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.65% 02/01/26 644,023
325,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.70% 02/01/36 366,397
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BEVERAGES (CONTINUED)
$ 475,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 02/01/46 $ 558,927
250,000 Coca-Cola (The) Co.................................. 1.38% 05/30/19 252,798
150,000 Coca-Cola (The) Co.................................. 1.88% 10/27/20 153,401
875,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 943,366
100,000 Coca-Cola (The) Co.................................. 2.88% 10/27/25 106,046
100,000 Coca-Cola (The) Co.................................. 2.55% 06/01/26 103,071
100,000 Molson Coors Brewing Co............................. 1.45% 07/15/19 100,327
100,000 Molson Coors Brewing Co............................. 2.10% 07/15/21 100,421
200,000 Molson Coors Brewing Co............................. 3.00% 07/15/26 200,233
200,000 Molson Coors Brewing Co............................. 4.20% 07/15/46 201,704
-------------
4,887,379
-------------
BIOTECHNOLOGY -- 0.9%
750,000 AbbVie, Inc......................................... 1.75% 11/06/17 754,678
250,000 AbbVie, Inc......................................... 2.50% 05/14/20 255,810
375,000 AbbVie, Inc......................................... 2.90% 11/06/22 382,909
150,000 AbbVie, Inc......................................... 3.60% 05/14/25 157,466
175,000 AbbVie, Inc......................................... 4.40% 11/06/42 179,017
100,000 AbbVie, Inc......................................... 4.70% 05/14/45 106,178
450,000 Amgen, Inc.......................................... 2.70% 05/01/22 463,716
200,000 Amgen, Inc.......................................... 3.63% 05/22/24 214,948
50,000 Amgen, Inc.......................................... 3.13% 05/01/25 52,260
200,000 Amgen, Inc.......................................... 5.38% 05/15/43 235,085
175,000 Gilead Sciences, Inc................................ 2.35% 02/01/20 179,609
325,000 Gilead Sciences, Inc................................ 3.50% 02/01/25 346,852
125,000 Gilead Sciences, Inc................................ 4.50% 02/01/45 136,588
-------------
3,465,116
-------------
BUILDING PRODUCTS -- 0.0%
100,000 Masco Corp.......................................... 3.50% 04/01/21 102,530
-------------
CAPITAL MARKETS -- 2.7%
825,000 Goldman Sachs Group (The), Inc...................... 6.15% 04/01/18 889,304
300,000 Goldman Sachs Group (The), Inc...................... 2.00% 04/25/19 303,278
400,000 Goldman Sachs Group (The), Inc...................... 2.55% 10/23/19 409,585
350,000 Goldman Sachs Group (The), Inc...................... 2.60% 04/23/20 356,139
500,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 507,625
600,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 630,292
600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 642,504
150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 154,403
550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 580,023
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 519,454
50,000 Goldman Sachs Group (The), Inc...................... 4.75% 10/21/45 55,339
450,000 Morgan Stanley...................................... 2.13% 04/25/18 454,910
695,000 Morgan Stanley...................................... 2.50% 01/24/19 709,483
50,000 Morgan Stanley...................................... 2.45% 02/01/19 50,970
400,000 Morgan Stanley...................................... 2.65% 01/27/20 406,940
600,000 Morgan Stanley...................................... 2.50% 04/21/21 606,958
550,000 Morgan Stanley...................................... 5.50% 07/28/21 628,734
300,000 Morgan Stanley...................................... 3.75% 02/25/23 318,220
450,000 Morgan Stanley...................................... 3.88% 04/29/24 482,503
450,000 Morgan Stanley...................................... 3.88% 01/27/26 478,672
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 350,000 Morgan Stanley...................................... 6.38% 07/24/42 $ 475,703
100,000 Morgan Stanley...................................... 4.30% 01/27/45 105,695
-------------
9,766,734
-------------
CHEMICALS -- 0.3%
525,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 623,599
200,000 Dow Chemical (The) Co............................... 3.00% 11/15/22 205,767
25,000 Dow Chemical (The) Co............................... 4.25% 10/01/34 25,885
75,000 Dow Chemical (The) Co............................... 4.63% 10/01/44 79,739
228,000 Eastman Chemical Co................................. 4.65% 10/15/44 234,119
-------------
1,169,109
-------------
COMMERCIAL SERVICES & SUPPLIES -- 0.1%
250,000 Republic Services, Inc.............................. 2.90% 07/01/26 254,081
-------------
COMMUNICATIONS EQUIPMENT -- 0.4%
100,000 Cisco Systems, Inc.................................. 2.45% 06/15/20 104,184
100,000 Cisco Systems, Inc.................................. 2.20% 02/28/21 103,130
100,000 Cisco Systems, Inc.................................. 3.00% 06/15/22 107,572
100,000 Cisco Systems, Inc.................................. 2.60% 02/28/23 105,475
500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 561,026
100,000 Cisco Systems, Inc.................................. 2.95% 02/28/26 106,566
225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 306,070
75,000 QUALCOMM, Inc....................................... 3.45% 05/20/25 79,793
25,000 QUALCOMM, Inc....................................... 4.80% 05/20/45 26,286
-------------
1,500,102
-------------
CONSUMER FINANCE -- 1.5%
50,000 American Express Co................................. 8.13% 05/20/19 58,651
450,000 American Express Co................................. 3.63% 12/05/24 462,352
800,000 American Express Credit Corp........................ 2.13% 07/27/18 812,574
200,000 American Express Credit Corp........................ 1.88% 11/05/18 202,194
150,000 American Express Credit Corp........................ 2.60% 09/14/20 155,057
250,000 American Express Credit Corp........................ 2.25% 05/05/21 254,606
550,000 Capital One Financial Corp.......................... 3.75% 04/24/24 574,768
150,000 Caterpillar Financial Services Corp................. 3.25% 12/01/24 160,982
400,000 Ford Motor Credit Co., LLC.......................... 2.88% 10/01/18 410,594
250,000 Ford Motor Credit Co., LLC.......................... 2.02% 05/03/19 252,300
200,000 Ford Motor Credit Co., LLC.......................... 2.46% 03/27/20 201,829
100,000 Ford Motor Credit Co., LLC.......................... 3.22% 01/09/22 102,563
250,000 Ford Motor Credit Co., LLC.......................... 3.10% 05/04/23 253,881
725,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 789,167
200,000 Ford Motor Credit Co., LLC.......................... 4.13% 08/04/25 214,838
100,000 General Motors Financial Co., Inc................... 2.40% 05/09/19 100,347
250,000 General Motors Financial Co., Inc................... 4.20% 03/01/21 261,810
250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 250,681
150,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 163,368
-------------
5,682,562
-------------
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
175,000 Berkshire Hathaway, Inc............................. 2.20% 03/15/21 180,647
125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 129,269
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
$ 425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 $ 446,179
350,000 Diamond 1 Finance Corp./Diamond 2 Finance Corp.
(a).............................................. 3.48% 06/01/19 358,790
250,000 Diamond 1 Finance Corp./Diamond 2 Finance Corp.
(a).............................................. 4.42% 06/15/21 257,598
129,000 General Electric Capital Corp....................... 6.75% 03/15/32 181,336
300,000 Nasdaq, Inc......................................... 3.85% 06/30/26 305,422
-------------
1,859,241
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.3%
850,000 AT&T, Inc........................................... 1.70% 06/01/17 853,685
500,000 AT&T, Inc........................................... 2.30% 03/11/19 510,973
300,000 AT&T, Inc........................................... 2.45% 06/30/20 306,572
250,000 AT&T, Inc........................................... 2.80% 02/17/21 256,782
275,000 AT&T, Inc........................................... 3.88% 08/15/21 296,609
300,000 AT&T, Inc........................................... 3.00% 06/30/22 307,631
150,000 AT&T, Inc........................................... 3.60% 02/17/23 156,702
150,000 AT&T, Inc........................................... 3.90% 03/11/24 159,033
350,000 AT&T, Inc........................................... 3.40% 05/15/25 358,683
350,000 AT&T, Inc........................................... 4.13% 02/17/26 376,716
100,000 AT&T, Inc........................................... 4.50% 05/15/35 102,619
425,000 AT&T, Inc........................................... 4.80% 06/15/44 437,987
200,000 AT&T, Inc........................................... 4.75% 05/15/46 205,793
200,000 AT&T, Inc........................................... 5.65% 02/15/47 229,926
150,000 Verizon Communications, Inc......................... 1.35% 06/09/17 150,436
1,006,000 Verizon Communications, Inc......................... 2.63% 02/21/20 1,041,975
525,000 Verizon Communications, Inc......................... 5.15% 09/15/23 612,365
650,000 Verizon Communications, Inc......................... 3.50% 11/01/24 692,515
231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 237,193
300,000 Verizon Communications, Inc......................... 4.86% 08/21/46 329,272
249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 264,485
522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 530,347
-------------
8,418,299
-------------
ELECTRIC UTILITIES -- 3.5%
100,000 Alabama Power Co.................................... 3.75% 03/01/45 104,266
675,000 American Electric Power Co., Inc.................... 1.65% 12/15/17 677,172
300,000 Appalachian Power Co................................ 4.40% 05/15/44 323,400
240,000 CenterPoint Energy Houston Electric LLC............. 2.25% 08/01/22 242,188
295,000 CenterPoint Energy Houston Electric LLC............. 4.50% 04/01/44 348,900
200,000 Commonwealth Edison Co.............................. 2.55% 06/15/26 203,600
300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 323,702
300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 308,354
200,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 204,893
575,000 Constellation Energy Group, Inc..................... 5.15% 12/01/20 640,537
100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 103,605
350,000 Duke Energy Carolinas LLC........................... 6.00% 01/15/38 469,805
50,000 Duke Energy Carolinas LLC........................... 3.75% 06/01/45 52,933
100,000 Duke Energy Carolinas LLC........................... 3.88% 03/15/46 107,701
200,000 Duke Energy Corp.................................... 2.10% 06/15/18 201,865
300,000 Duke Energy Corp.................................... 3.55% 09/15/21 320,062
100,000 Duke Energy Indiana LLC............................. 3.75% 05/15/46 104,093
200,000 Exelon Corp......................................... 2.45% 04/15/21 203,038
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 50,000 Exelon Corp......................................... 3.95% 06/15/25 $ 53,552
50,000 Exelon Corp......................................... 5.10% 06/15/45 57,686
350,000 Florida Power & Light Co............................ 3.25% 06/01/24 376,548
210,000 Florida Power & Light Co............................ 4.05% 06/01/42 235,322
100,000 Indiana Michigan Power Co........................... 4.55% 03/15/46 111,604
410,000 Metropolitan Edison Co. (a)......................... 3.50% 03/15/23 422,618
200,000 MidAmerican Energy Co............................... 3.50% 10/15/24 219,163
250,000 MidAmerican Energy Co............................... 4.40% 10/15/44 290,831
125,000 Monongahela Power Co. (a)........................... 5.40% 12/15/43 157,504
625,000 NV Energy, Inc...................................... 6.25% 11/15/20 740,669
150,000 Ohio Edison Co...................................... 6.88% 07/15/36 185,166
250,000 Pacific Gas & Electric Co........................... 3.50% 06/15/25 273,036
100,000 Pacific Gas & Electric Co........................... 2.95% 03/01/26 104,351
350,000 Pacific Gas & Electric Co........................... 4.30% 03/15/45 394,115
100,000 Pacific Gas & Electric Co........................... 4.25% 03/15/46 111,599
100,000 Public Service Electric & Gas Co.................... 1.90% 03/15/21 101,778
195,000 Public Service Electric & Gas Co.................... 2.38% 05/15/23 199,453
275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 303,769
100,000 Public Service Electric & Gas Co.................... 3.80% 03/01/46 108,783
300,000 Sierra Pacific Power Co. (a)........................ 2.60% 05/01/26 306,971
550,000 Southern (The) Co................................... 1.85% 07/01/19 557,362
375,000 Southern (The) Co................................... 2.35% 07/01/21 382,887
250,000 Southern (The) Co................................... 3.25% 07/01/26 260,223
200,000 Southern (The) Co................................... 4.25% 07/01/36 212,812
325,000 Southern (The) Co................................... 4.40% 07/01/46 350,833
200,000 Southern California Edison Co....................... 3.50% 10/01/23 219,144
200,000 Southern California Edison Co....................... 3.60% 02/01/45 208,289
100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 124,942
200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 216,961
100,000 Virginia Electric & Power Co........................ 3.15% 01/15/26 105,790
475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 548,218
-------------
12,882,093
-------------
ENERGY EQUIPMENT & SERVICES -- 0.0%
100,000 Halliburton Co...................................... 5.00% 11/15/45 110,425
-------------
FOOD & STAPLES RETAILING -- 1.3%
600,000 CVS Health Corp..................................... 1.90% 07/20/18 609,382
150,000 CVS Health Corp..................................... 2.80% 07/20/20 156,337
300,000 CVS Health Corp..................................... 2.13% 06/01/21 304,036
700,000 CVS Health Corp..................................... 4.00% 12/05/23 775,313
178,000 CVS Health Corp..................................... 3.88% 07/20/25 196,164
50,000 CVS Health Corp..................................... 2.88% 06/01/26 51,204
300,000 CVS Health Corp..................................... 5.13% 07/20/45 373,698
250,000 Kroger (The) Co..................................... 3.30% 01/15/21 265,976
200,000 Kroger (The) Co..................................... 3.50% 02/01/26 215,946
300,000 Kroger (The) Co..................................... 5.15% 08/01/43 359,417
200,000 Sysco Corp.......................................... 1.90% 04/01/19 202,540
100,000 Sysco Corp.......................................... 2.50% 07/15/21 102,305
100,000 Sysco Corp.......................................... 3.30% 07/15/26 103,964
100,000 Sysco Corp.......................................... 4.50% 04/01/46 107,117
Page 22 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOOD & STAPLES RETAILING (CONTINUED)
$ 325,000 Wal-Mart Stores, Inc................................ 3.30% 04/22/24 $ 356,383
100,000 Wal-Mart Stores, Inc................................ 4.30% 04/22/44 116,987
100,000 Walgreens Boots Alliance, Inc....................... 3.10% 06/01/23 102,006
200,000 Walgreens Boots Alliance, Inc....................... 3.45% 06/01/26 205,728
-------------
4,604,503
-------------
FOOD PRODUCTS -- 0.4%
200,000 JM Smucker (The) Co................................. 3.50% 03/15/25 216,379
50,000 JM Smucker (The) Co................................. 4.38% 03/15/45 54,576
200,000 Kraft Foods Group, Inc.............................. 5.00% 06/04/42 230,822
200,000 Kraft Heinz Foods Co. (a)........................... 3.50% 07/15/22 212,694
200,000 Kraft Heinz Foods Co. (a)........................... 3.95% 07/15/25 217,862
150,000 Kraft Heinz Foods Co. (a)........................... 3.00% 06/01/26 151,542
150,000 Kraft Heinz Foods Co. (a)........................... 5.20% 07/15/45 178,333
150,000 Kraft Heinz Foods Co. (a)........................... 4.38% 06/01/46 159,298
-------------
1,421,506
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
225,000 Becton Dickinson and Co............................. 2.68% 12/15/19 231,610
250,000 Becton Dickinson and Co............................. 3.73% 12/15/24 269,763
100,000 Becton Dickinson and Co............................. 4.69% 12/15/44 113,117
50,000 Medtronic, Inc...................................... 1.50% 03/15/18 50,447
250,000 Medtronic, Inc...................................... 2.50% 03/15/20 259,416
450,000 Medtronic, Inc...................................... 3.15% 03/15/22 480,602
500,000 Medtronic, Inc...................................... 3.50% 03/15/25 545,679
450,000 Medtronic, Inc...................................... 4.63% 03/15/45 530,492
-------------
2,481,126
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.6%
650,000 UnitedHealth Group, Inc............................. 1.63% 03/15/19 656,909
275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 310,689
550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 579,729
100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 109,839
150,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 156,595
150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 219,318
250,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 301,942
-------------
2,335,021
-------------
HOTELS, RESTAURANTS & LEISURE -- 0.1%
150,000 McDonald's Corp..................................... 3.70% 01/30/26 162,388
100,000 McDonald's Corp..................................... 4.88% 12/09/45 117,411
-------------
279,799
-------------
HOUSEHOLD DURABLES -- 0.3%
250,000 Newell Rubbermaid, Inc.............................. 3.15% 04/01/21 260,727
250,000 Newell Rubbermaid, Inc.............................. 4.20% 04/01/26 271,333
375,000 Newell Rubbermaid, Inc.............................. 5.50% 04/01/46 447,200
-------------
979,260
-------------
See Notes to Financial Statements Page 23
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HOUSEHOLD PRODUCTS -- 0.1%
$ 100,000 Proctor & Gamble (The) Co........................... 1.85% 02/02/21 $ 102,576
100,000 Proctor & Gamble (The) Co........................... 2.70% 02/02/26 105,952
-------------
208,528
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY
PRODUCERS -- 0.3%
250,000 NextEra Energy Capital Holdings, Inc................ 2.30% 04/01/19 255,015
525,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 536,397
200,000 PSEG Power LLC...................................... 3.00% 06/15/21 202,992
-------------
994,404
-------------
INDUSTRIAL CONGLOMERATES -- 0.1%
425,000 General Electric Co................................. 4.50% 03/11/44 491,667
-------------
INSURANCE -- 1.0%
400,000 American International Group, Inc................... 3.38% 08/15/20 420,071
200,000 American International Group, Inc................... 4.13% 02/15/24 211,331
50,000 American International Group, Inc................... 3.88% 01/15/35 48,029
200,000 American International Group, Inc................... 6.25% 05/01/36 238,592
400,000 Chubb INA Holdings, Inc............................. 2.30% 11/03/20 411,504
150,000 Chubb INA Holdings, Inc............................. 2.88% 11/03/22 157,039
300,000 Chubb INA Holdings, Inc............................. 3.35% 05/03/26 320,164
250,000 Chubb INA Holdings, Inc............................. 4.35% 11/03/45 288,351
150,000 Hartford Financial Services Group (The), Inc........ 5.95% 10/15/36 184,603
100,000 MetLife, Inc........................................ 3.00% 03/01/25 101,362
150,000 MetLife, Inc........................................ 3.60% 11/13/25 157,582
300,000 MetLife, Inc........................................ 4.88% 11/13/43 332,394
20,000 MetLife, Inc........................................ 4.60% 05/13/46 21,555
100,000 Prudential Financial, Inc........................... 3.50% 05/15/24 104,089
275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 296,434
325,000 Travelers (The) Cos., Inc........................... 6.75% 06/20/36 471,527
80,000 Travelers (The) Cos., Inc........................... 3.75% 05/15/46 83,939
-------------
3,848,566
-------------
IT SERVICES -- 0.8%
500,000 International Business Machines Corp................ 1.63% 05/15/20 506,546
100,000 International Business Machines Corp................ 3.63% 02/12/24 109,160
400,000 Visa, Inc........................................... 2.20% 12/14/20 412,689
550,000 Visa, Inc........................................... 2.80% 12/14/22 580,745
550,000 Visa, Inc........................................... 3.15% 12/14/25 588,717
303,000 Visa, Inc........................................... 4.15% 12/14/35 343,376
300,000 Visa, Inc........................................... 4.30% 12/14/45 348,232
-------------
2,889,465
-------------
MACHINERY -- 0.2%
650,000 Caterpillar, Inc.................................... 3.90% 05/27/21 715,733
100,000 Fortive Corp. (a)................................... 1.80% 06/15/19 100,713
100,000 Fortive Corp. (a)................................... 2.35% 06/15/21 101,583
-------------
918,029
-------------
MEDIA -- 1.7%
150,000 21st Century Fox America, Inc....................... 3.00% 09/15/22 156,448
175,000 21st Century Fox America, Inc....................... 5.40% 10/01/43 204,041
50,000 21st Century Fox America, Inc....................... 4.95% 10/15/45 57,162
Page 24 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA (CONTINUED)
$ 275,000 CBS Corp............................................ 2.30% 08/15/19 $ 279,436
610,000 Charter Communications Operating LLC/Charter
Communications Operating Capital (a)............. 4.91% 07/23/25 668,115
300,000 Charter Communications Operating LLC/Charter
Communications Operating Capital (a)............. 6.48% 10/23/45 359,485
350,000 Comcast Corp........................................ 2.85% 01/15/23 368,285
200,000 Comcast Corp........................................ 2.75% 03/01/23 209,640
200,000 Comcast Corp........................................ 3.38% 08/15/25 216,357
200,000 Comcast Corp........................................ 3.15% 03/01/26 213,138
675,000 Comcast Corp........................................ 4.25% 01/15/33 746,122
100,000 Comcast Corp........................................ 4.60% 08/15/45 115,426
200,000 Discovery Communications LLC........................ 4.90% 03/11/26 212,497
329,000 Time Warner Cable, Inc.............................. 6.75% 07/01/18 360,931
100,000 Time Warner Cable, Inc.............................. 4.50% 09/15/42 93,492
350,000 Time Warner, Inc.................................... 4.88% 03/15/20 389,113
150,000 Time Warner, Inc.................................... 3.60% 07/15/25 159,021
100,000 Time Warner, Inc.................................... 2.95% 07/15/26 100,967
200,000 Time Warner, Inc.................................... 6.50% 11/15/36 254,411
50,000 Time Warner, Inc.................................... 4.85% 07/15/45 54,581
50,000 Viacom, Inc......................................... 2.75% 12/15/19 50,766
125,000 Viacom, Inc......................................... 3.88% 04/01/24 127,168
50,000 Viacom, Inc......................................... 4.85% 12/15/34 46,753
100,000 Walt Disney (The) Co................................ 2.15% 09/17/20 103,561
75,000 Walt Disney (The) Co................................ 2.30% 02/12/21 78,085
150,000 Walt Disney (The) Co................................ 3.00% 02/13/26 161,572
475,000 Walt Disney (The) Co................................ 4.13% 06/01/44 538,301
-------------
6,324,874
-------------
MULTI-UTILITIES -- 0.4%
320,000 CMS Energy Corp..................................... 3.00% 05/15/26 327,595
95,000 Consolidated Edison Co. of New York, Inc............ 4.50% 12/01/45 108,252
230,000 Consolidated Edison Co. of New York, Inc............ 3.30% 12/01/24 248,320
335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 378,341
100,000 Consolidated Edison Co. of New York, Inc............ 3.85% 06/15/46 103,896
100,000 Consolidated Edison, Inc............................ 2.00% 05/15/21 101,163
50,000 Dominion Gas Holdings LLC........................... 2.50% 12/15/19 51,183
200,000 Dominion Resources, Inc............................. 5.20% 08/15/19 221,692
100,000 San Diego Gas & Electric Co......................... 2.50% 05/15/26 101,752
-------------
1,642,194
-------------
OIL, GAS & CONSUMABLE FUELS -- 3.4%
150,000 Anadarko Petroleum Corp............................. 5.55% 03/15/26 165,950
100,000 Anadarko Petroleum Corp............................. 6.60% 03/15/46 121,182
200,000 Chevron Corp........................................ 1.56% 05/16/19 202,324
175,000 Chevron Corp........................................ 2.19% 11/15/19 179,997
200,000 Chevron Corp........................................ 1.96% 03/03/20 202,663
100,000 Chevron Corp........................................ 2.10% 05/16/21 101,978
100,000 Chevron Corp........................................ 2.57% 05/16/23 102,224
150,000 Chevron Corp........................................ 3.33% 11/17/25 160,504
300,000 Chevron Corp........................................ 2.95% 05/16/26 310,425
See Notes to Financial Statements Page 25
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 368,000 ConocoPhillips...................................... 5.75% 02/01/19 $ 405,104
225,000 ConocoPhillips...................................... 6.50% 02/01/39 291,271
100,000 ConocoPhillips Co................................... 1.50% 05/15/18 100,424
300,000 ConocoPhillips Co................................... 4.20% 03/15/21 325,164
350,000 ConocoPhillips Co................................... 2.40% 12/15/22 346,480
150,000 ConocoPhillips Co................................... 4.95% 03/15/26 170,414
50,000 ConocoPhillips Co................................... 4.15% 11/15/34 50,670
250,000 ConocoPhillips Co................................... 5.95% 03/15/46 312,256
325,000 Devon Energy Corp................................... 3.25% 05/15/22 315,599
100,000 Devon Energy Corp................................... 5.85% 12/15/25 110,507
50,000 Enbridge Energy Partners L.P........................ 4.38% 10/15/20 51,364
185,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 181,796
50,000 Enbridge Energy Partners L.P........................ 7.38% 10/15/45 61,144
50,000 Energy Transfer Partners L.P........................ 4.15% 10/01/20 50,795
300,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 287,887
50,000 Energy Transfer Partners L.P........................ 4.05% 03/15/25 49,156
50,000 Energy Transfer Partners L.P........................ 4.75% 01/15/26 51,516
175,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 184,341
50,000 Energy Transfer Partners L.P........................ 6.13% 12/15/45 52,025
200,000 Enterprise Products Operating LLC................... 1.65% 05/07/18 200,259
250,000 Enterprise Products Operating LLC................... 2.85% 04/15/21 258,584
400,000 Enterprise Products Operating LLC................... 3.70% 02/15/26 417,086
50,000 Enterprise Products Operating LLC................... 3.95% 02/15/27 53,145
250,000 Enterprise Products Operating LLC................... 4.90% 05/15/46 270,412
100,000 Exxon Mobil Corp.................................... 1.71% 03/01/19 101,664
250,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 257,929
150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 156,798
200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 212,564
200,000 Exxon Mobil Corp.................................... 3.57% 03/06/45 207,554
375,000 Exxon Mobil Corp.................................... 4.11% 03/01/46 424,056
200,000 Kinder Morgan Energy Partners L.P................... 6.00% 02/01/17 204,676
220,000 Kinder Morgan Energy Partners L.P................... 3.50% 03/01/21 220,945
175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 193,687
300,000 Kinder Morgan, Inc.................................. 3.05% 12/01/19 303,371
450,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 461,593
100,000 Kinder Morgan, Inc.................................. 5.55% 06/01/45 101,973
50,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 47,704
150,000 Occidental Petroleum Corp........................... 2.60% 04/15/22 153,825
200,000 Occidental Petroleum Corp........................... 3.40% 04/15/26 211,196
200,000 Occidental Petroleum Corp........................... 4.40% 04/15/46 221,564
750,000 ONEOK Partners L.P.................................. 2.00% 10/01/17 749,191
175,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 171,459
50,000 ONEOK Partners L.P.................................. 4.90% 03/15/25 52,524
75,000 Phillips 66......................................... 4.30% 04/01/22 82,019
75,000 Phillips 66......................................... 5.88% 05/01/42 90,384
50,000 Pioneer Natural Resources Co........................ 3.45% 01/15/21 51,682
400,000 Pioneer Natural Resources Co........................ 3.95% 07/15/22 419,047
50,000 Pioneer Natural Resources Co........................ 4.45% 01/15/26 54,579
250,000 Plains All American Pipeline L.P./PAA Finance Corp.. 6.13% 01/15/17 256,316
250,000 Plains All American Pipeline L.P./PAA Finance Corp.. 2.60% 12/15/19 243,753
Page 26 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 200,000 Plains All American Pipeline L.P./PAA Finance Corp.. 4.65% 10/15/25 $ 202,299
350,000 Spectra Energy Capital LLC.......................... 3.30% 03/15/23 336,869
125,000 Valero Energy Corp.................................. 6.63% 06/15/37 137,549
50,000 Valero Energy Corp.................................. 4.90% 03/15/45 46,484
-------------
12,519,900
-------------
PHARMACEUTICALS -- 0.4%
75,000 Merck & Co, Inc..................................... 1.85% 02/10/20 76,609
50,000 Merck & Co, Inc..................................... 3.70% 02/10/45 53,124
300,000 Pfizer, Inc......................................... 1.20% 06/01/18 301,475
100,000 Pfizer, Inc......................................... 1.45% 06/03/19 100,875
100,000 Pfizer, Inc......................................... 1.95% 06/03/21 101,426
250,000 Pfizer, Inc......................................... 3.40% 05/15/24 273,836
100,000 Pfizer, Inc......................................... 2.75% 06/03/26 103,255
250,000 Pfizer, Inc......................................... 4.40% 05/15/44 285,684
-------------
1,296,284
-------------
ROAD & RAIL -- 0.7%
200,000 CSX Corp............................................ 6.25% 03/15/18 216,568
425,000 CSX Corp............................................ 3.40% 08/01/24 457,552
200,000 CSX Corp............................................ 4.50% 08/01/54 215,188
250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 257,774
425,000 Ryder System, Inc................................... 2.45% 09/03/19 432,501
300,000 Ryder System, Inc................................... 2.65% 03/02/20 304,082
300,000 Union Pacific Corp.................................. 3.75% 03/15/24 334,018
100,000 Union Pacific Corp.................................. 2.75% 03/01/26 104,392
70,000 Union Pacific Corp.................................. 4.85% 06/15/44 83,812
150,000 Union Pacific Corp.................................. 4.15% 01/15/45 164,838
100,000 Union Pacific Corp.................................. 4.05% 03/01/46 110,154
-------------
2,680,879
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5%
100,000 Intel Corp.......................................... 1.70% 05/19/21 101,004
100,000 Intel Corp.......................................... 3.10% 07/29/22 107,162
375,000 Intel Corp.......................................... 2.70% 12/15/22 392,674
100,000 Intel Corp.......................................... 2.60% 05/19/26 102,056
160,000 Intel Corp.......................................... 4.80% 10/01/41 182,136
150,000 Intel Corp.......................................... 4.90% 07/29/45 175,159
100,000 Intel Corp.......................................... 4.10% 05/19/46 104,240
100,000 Lam Research Corp................................... 2.80% 06/15/21 102,490
100,000 Lam Research Corp................................... 3.45% 06/15/23 103,434
200,000 Lam Research Corp................................... 3.90% 06/15/26 210,982
193,000 QUALCOMM, Inc....................................... 2.25% 05/20/20 198,479
-------------
1,779,816
-------------
SOFTWARE -- 0.9%
150,000 Microsoft Corp...................................... 1.30% 11/03/18 151,414
75,000 Microsoft Corp...................................... 1.85% 02/12/20 76,692
150,000 Microsoft Corp...................................... 2.00% 11/03/20 153,922
200,000 Microsoft Corp...................................... 2.38% 02/12/22 206,567
150,000 Microsoft Corp...................................... 2.65% 11/03/22 156,905
See Notes to Financial Statements Page 27
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE (CONTINUED)
$ 150,000 Microsoft Corp...................................... 3.63% 12/15/23 $ 166,398
200,000 Microsoft Corp...................................... 3.13% 11/03/25 214,460
75,000 Microsoft Corp...................................... 4.88% 12/15/43 89,621
200,000 Microsoft Corp...................................... 4.45% 11/03/45 226,104
200,000 Oracle Corp......................................... 1.90% 09/15/21 200,881
100,000 Oracle Corp......................................... 2.50% 05/15/22 102,260
200,000 Oracle Corp......................................... 3.63% 07/15/23 219,297
250,000 Oracle Corp......................................... 3.40% 07/08/24 269,136
200,000 Oracle Corp......................................... 2.65% 07/15/26 200,760
400,000 Oracle Corp......................................... 5.38% 07/15/40 484,698
200,000 Oracle Corp......................................... 4.00% 07/15/46 202,164
-------------
3,121,279
-------------
SPECIALTY RETAIL -- 0.7%
400,000 Home Depot (The), Inc............................... 2.00% 04/01/21 411,104
600,000 Home Depot (The), Inc............................... 4.40% 04/01/21 676,914
100,000 Home Depot (The), Inc............................... 3.35% 09/15/25 109,107
400,000 Home Depot (The), Inc............................... 3.00% 04/01/26 425,637
200,000 Home Depot (The), Inc............................... 5.40% 09/15/40 260,720
150,000 Home Depot (The), Inc............................... 4.25% 04/01/46 172,420
200,000 Lowe's Cos., Inc.................................... 2.50% 04/15/26 203,959
150,000 Lowe's Cos., Inc.................................... 3.70% 04/15/46 154,644
-------------
2,414,505
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5%
100,000 Apple, Inc.......................................... 2.25% 02/23/21 102,955
250,000 Apple, Inc.......................................... 2.85% 05/06/21 264,216
375,000 Apple, Inc.......................................... 2.40% 05/03/23 382,241
50,000 Apple, Inc.......................................... 3.85% 05/04/43 50,327
100,000 Apple, Inc.......................................... 4.45% 05/06/44 109,514
50,000 Apple, Inc.......................................... 3.45% 02/09/45 47,108
100,000 Apple, Inc.......................................... 4.65% 02/23/46 113,241
150,000 Hewlett Packard Enterprise Co. (a).................. 2.45% 10/05/17 151,991
50,000 Hewlett Packard Enterprise Co. (a).................. 2.85% 10/05/18 51,231
100,000 Hewlett Packard Enterprise Co. (a).................. 3.60% 10/15/20 104,480
150,000 Hewlett Packard Enterprise Co. (a).................. 4.40% 10/15/22 160,740
125,000 Hewlett Packard Enterprise Co. (a).................. 4.90% 10/15/25 130,841
50,000 Hewlett Packard Enterprise Co. (a).................. 6.35% 10/15/45 49,946
-------------
1,718,831
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.0%
100,000 NIKE, Inc........................................... 3.88% 11/01/45 111,154
-------------
TOBACCO -- 0.6%
200,000 Altria Group, Inc................................... 10.20% 02/06/39 371,767
250,000 Philip Morris International, Inc.................... 4.25% 11/10/44 275,292
250,000 Reynolds American, Inc.............................. 3.50% 08/04/16 250,522
200,000 Reynolds American, Inc.............................. 2.30% 08/21/17 202,486
200,000 Reynolds American, Inc.............................. 4.00% 06/12/22 217,646
300,000 Reynolds American, Inc.............................. 4.45% 06/12/25 336,594
Page 28 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
TOBACCO (CONTINUED)
$ 375,000 Reynolds American, Inc.............................. 5.85% 08/15/45 $ 481,012
-------------
2,135,319
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................. 134,947,791
(Cost $129,817,739) -------------
U.S. GOVERNMENT BONDS AND NOTES -- 4.7%
275,000 U.S. Treasury Bond.................................. 5.38% 02/15/31 408,042
1,630,000 U.S. Treasury Bond.................................. 4.50% 02/15/36 2,348,506
2,076,000 U.S. Treasury Bond.................................. 2.50% 02/15/46 2,161,797
1,125,000 U.S. Treasury Note (b).............................. 0.88% 10/15/17 1,129,592
530,000 U.S. Treasury Note.................................. 0.88% 05/31/18 532,899
2,868,000 U.S. Treasury Note.................................. 0.88% 04/15/19 2,881,781
381,000 U.S. Treasury Note.................................. 0.88% 05/15/19 382,845
3,000,500 U.S. Treasury Note.................................. 1.13% 02/28/21 3,021,713
900,000 U.S. Treasury Note.................................. 1.25% 03/31/21 910,512
250,000 U.S. Treasury Note.................................. 1.38% 05/31/21 254,516
2,000,000 U.S. Treasury Note.................................. 1.50% 02/28/23 2,029,140
1,014,000 U.S. Treasury Note.................................. 1.63% 05/31/23 1,036,934
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 17,098,277
(Cost $16,630,548) -------------
FOREIGN CORPORATE BONDS AND NOTES -- 1.1%
BANKS -- 0.1%
225,000 HSBC Holdings PLC................................... 2.95% 05/25/21 227,485
225,000 HSBC Holdings PLC................................... 3.90% 05/25/26 231,768
-------------
459,253
-------------
CAPITAL MARKETS -- 0.1%
200,000 Credit Suisse....................................... 5.40% 01/14/20 217,291
250,000 Credit Suisse Group Funding Guernsey Ltd. (a)....... 3.80% 06/09/23 249,735
-------------
467,026
-------------
CHEMICALS -- 0.1%
175,000 LYB International Finance, B.V...................... 4.88% 03/15/44 185,748
100,000 LyondellBasell Industries N.V....................... 4.63% 02/26/55 98,029
-------------
283,777
-------------
CONSUMER FINANCE -- 0.2%
444,000 GE Capital International Funding Co. (a)............ 4.42% 11/15/35 498,983
-------------
DIVERSIFIED FINANCIAL SERVICES -- 0.2%
100,000 Shell International Finance, B.V.................... 1.38% 05/10/19 100,390
150,000 Shell International Finance, B.V.................... 1.88% 05/10/21 150,899
250,000 Shell International Finance, B.V.................... 2.88% 05/10/26 254,321
250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 255,646
-------------
761,256
-------------
METALS & MINING -- 0.1%
49,000 Rio Tinto Finance USA PLC........................... 2.88% 08/21/22 49,816
186,000 Rio Tinto Finance USA, Ltd.......................... 3.75% 06/15/25 194,940
-------------
244,756
-------------
See Notes to Financial Statements Page 29
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS -- 0.0%
$ 100,000 BP Capital Markets PLC.............................. 3.12% 05/04/26 $ 102,273
-------------
PHARMACEUTICALS -- 0.3%
375,000 Actavis Funding SCS................................. 3.00% 03/12/20 387,078
300,000 Actavis Funding SCS................................. 3.45% 03/15/22 311,959
300,000 Actavis Funding SCS................................. 3.80% 03/15/25 313,112
100,000 Actavis Funding SCS................................. 4.75% 03/15/45 105,423
-------------
1,117,572
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 3,934,896
(Cost $3,810,028) -------------
TOTAL INVESTMENTS -- 97.7%.................................................... 357,564,096
(Cost $336,981,312) (c)
NET OTHER ASSETS AND LIABILITIES -- 2.3%...................................... 8,528,525
-------------
NET ASSETS -- 100.0%.......................................................... $ 366,092,621
=============
-----------------------------
(a) 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 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, 2016, securities noted as such amounted
to $5,105,822 or 1.39% of net assets.
(b) All or a portion of this security is segregated as collateral for open
futures contracts.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $23,612,482 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,029,698.
Page 30 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as
of June 30, 2016 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
6/30/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*.................................... $201,583,132 $201,583,132 $ -- $ --
Corporate Bonds and Notes*........................ 134,947,791 -- 134,947,791 --
U.S. Government Bonds and Notes................... 17,098,277 -- 17,098,277 --
Foreign Corporate Bonds and Notes*................ 3,934,896 -- 3,934,896 --
------------ ------------ ------------ ------------
Total Investments................................. $357,564,096 $201,583,132 $155,980,964 $ --
============ ============ ============ ============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Futures Contracts**............................... $ (234,336) $ (234,336) $ -- $ --
============ ============ ============ ============
* See 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, 2016.
OPEN FUTURES CONTRACTS AT JUNE 30, 2016 (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 53 Sep-2016 $ 6,474,695 $ (103,133)
U.S. Treasury 10-Year Notes 24 Sep-2016 3,191,625 (73,906)
U.S. Treasury Ultra Long Term Bond Futures 13 Sep-2016 1,893,735 (57,297)
------------ ------------
Total Futures Contracts $ 11,560,055 $ (234,336)
============ ============
See Notes to Financial Statements Page 31
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 37.3%
CAPITAL MARKETS -- 37.3%
1 First Trust Low Duration Opportunities ETF (a)............................... $ 52
45,070 First Trust Preferred Securities and Income ETF (a).......................... 857,231
47,060 First Trust Senior Loan Fund (a)............................................. 2,250,409
17,780 First Trust Tactical High Yield ETF (a)...................................... 847,573
70 iShares 20+ Year Treasury Bond ETF........................................... 9,723
215 iShares 7-10 Year Treasury Bond ETF.......................................... 24,288
10,605 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 1,301,552
2,044 iShares MBS ETF.............................................................. 224,779
1 Vanguard Mortgage-Backed Securities ETF...................................... 54
-------------
TOTAL EXCHANGE-TRADED FUNDS.................................................. 5,515,661
(Cost $5,539,260) -------------
COMMON STOCKS -- 23.3%
AEROSPACE & DEFENSE -- 1.2%
368 General Dynamics Corp........................................................ 51,240
536 Honeywell International, Inc................................................. 62,348
415 Raytheon Co.................................................................. 56,419
-------------
170,007
-------------
BANKS -- 1.4%
966 JPMorgan Chase & Co.......................................................... 60,027
1,271 U.S. Bancorp................................................................. 51,259
1,396 Webster Financial Corp....................................................... 47,394
1,121 Wells Fargo & Co............................................................. 53,057
-------------
211,737
-------------
BEVERAGES -- 0.4%
441 Anheuser-Busch InBev N.V., ADR............................................... 58,071
-------------
CAPITAL MARKETS -- 0.3%
142 BlackRock, Inc............................................................... 48,639
-------------
CHEMICALS -- 0.6%
480 International Flavors & Fragrances, Inc...................................... 60,514
471 LyondellBasell Industries N.V., Class A...................................... 35,052
-------------
95,566
-------------
COMMUNICATIONS EQUIPMENT -- 0.8%
1,962 Cisco Systems, Inc........................................................... 56,290
697 Harris Corp.................................................................. 58,158
-------------
114,448
-------------
CONSUMER FINANCE -- 0.4
831 Capital One Financial Corp................................................... 52,777
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
998 Verizon Communications, Inc.................................................. 55,728
-------------
ELECTRIC UTILITIES -- 2.0%
490 Alliant Energy Corp.......................................................... 19,453
557 American Electric Power Co., Inc............................................. 39,040
72 Duke Energy Corp............................................................. 6,177
775 Edison International......................................................... 60,194
286 Emera, Inc. (CAD)............................................................ 10,763
Page 32 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
607 Eversource Energy............................................................ $ 36,359
460 NextEra Energy, Inc.......................................................... 59,984
853 Pinnacle West Capital Corp................................................... 69,144
-------------
301,114
-------------
ELECTRICAL EQUIPMENT -- 0.3%
776 Eaton Corp. PLC.............................................................. 46,351
-------------
ENERGY EQUIPMENT & SERVICES -- 0.3%
501 Schlumberger Ltd............................................................. 39,619
-------------
FOOD & STAPLES RETAILING -- 0.4%
605 CVS Health Corp.............................................................. 57,923
-------------
GAS UTILITIES -- 0.6%
150 Atmos Energy Corp............................................................ 12,198
517 Chesapeake Utilities Corp.................................................... 34,215
317 New Jersey Resources Corp.................................................... 12,220
522 UGI Corp..................................................................... 23,621
-------------
82,254
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
1,155 Abbott Laboratories.......................................................... 45,403
661 Medtronic PLC................................................................ 57,355
-------------
102,758
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.8%
496 Aetna, Inc................................................................... 60,577
691 Cardinal Health, Inc......................................................... 53,905
-------------
114,482
-------------
HOTELS, RESTAURANTS & LEISURE -- 0.3%
882 Starbucks Corp............................................................... 50,380
-------------
INDUSTRIAL CONGLOMERATES -- 0.4%
524 Siemens AG, ADR.............................................................. 53,757
-------------
INSURANCE -- 1.6%
1,705 FNF Group.................................................................... 63,938
1,351 Hartford Financial Services Group (The), Inc................................. 59,957
1,733 Horace Mann Educators Corp................................................... 58,558
1,245 MetLife, Inc................................................................. 49,588
-------------
232,041
-------------
IT SERVICES -- 0.5%
604 Accenture PLC, Class A....................................................... 68,427
-------------
MACHINERY -- 0.4%
411 Snap-on, Inc................................................................. 64,864
-------------
MEDIA -- 0.4%
550 Walt Disney (The) Co......................................................... 53,801
-------------
MULTI-UTILITIES -- 1.1%
510 National Grid PLC, ADR....................................................... 37,908
748 Public Service Enterprise Group, Inc......................................... 34,864
481 SCANA Corp................................................................... 36,393
See Notes to Financial Statements Page 33
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES (CONTINUED)
318 Sempra Energy................................................................ $ 36,258
365 WEC Energy Group, Inc........................................................ 23,835
-------------
169,258
-------------
OIL, GAS & CONSUMABLE FUELS -- 3.4%
1,406 Enbridge Income Fund Holdings, Inc. (CAD).................................... 34,890
264 Enbridge, Inc................................................................ 11,183
750 Exxon Mobil Corp............................................................. 70,305
1,046 Inter Pipeline Ltd. (CAD).................................................... 22,184
6,313 Kinder Morgan, Inc........................................................... 118,179
815 Targa Resources Corp......................................................... 34,344
2,900 TransCanada Corp............................................................. 131,138
946 Valero Energy Corp........................................................... 48,246
1,662 Williams (The) Cos., Inc..................................................... 35,949
-------------
506,418
-------------
PHARMACEUTICALS -- 0.4%
1,035 Teva Pharmaceutical Industries Ltd., ADR..................................... 51,988
-------------
ROAD & RAIL -- 0.3%
524 Union Pacific Corp........................................................... 45,719
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7%
1,421 Intel Corp................................................................... 46,609
939 Texas Instruments, Inc....................................................... 58,828
-------------
105,437
-------------
SOFTWARE -- 0.8%
1,219 Microsoft Corp............................................................... 62,376
1,241 Oracle Corp.................................................................. 50,794
-------------
113,170
-------------
SPECIALTY RETAIL -- 0.8%
520 Home Depot (The), Inc........................................................ 66,399
715 TJX (The) Cos., Inc.......................................................... 55,219
-------------
121,618
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.3%
482 Apple, Inc................................................................... 46,079
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.3%
736 VF Corp...................................................................... 45,257
-------------
TOBACCO -- 0.7%
803 Altria Group, Inc............................................................ 55,375
426 British American Tobacco PLC, ADR............................................ 55,159
-------------
110,534
-------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
1,643 Vodafone Group PLC, ADR...................................................... 50,752
-------------
TOTAL COMMON STOCKS.......................................................... 3,440,974
(Cost $3,295,367) -------------
Page 34 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS -- 13.2%
DIVERSIFIED REITS -- 1.7%
9,198 Lexington Realty Trust....................................................... $ 92,992
710 PS Business Parks, Inc....................................................... 75,317
2,521 Washington Real Estate Investment Trust...................................... 79,311
-------------
247,620
-------------
HEALTH CARE REITS -- 1.1%
1,115 National Health Investors, Inc............................................... 83,725
2,268 Omega Healthcare Investors, Inc.............................................. 76,999
-------------
160,724
-------------
HOTEL & RESORT REITS -- 1.5%
2,799 Hospitality Properties Trust................................................. 80,611
4,423 Host Hotels & Resorts, Inc................................................... 71,697
3,435 RLJ Lodging Trust............................................................ 73,681
-------------
225,989
-------------
INDUSTRIAL REITS -- 1.6%
1,784 DCT Industrial Trust, Inc.................................................... 85,703
1,670 Prologis, Inc................................................................ 81,897
2,880 Terreno Realty Corp.......................................................... 74,506
-------------
242,106
-------------
RESIDENTIAL REITS -- 2.0%
378 AvalonBay Communities, Inc................................................... 68,187
858 Camden Property Trust........................................................ 75,864
944 Equity LifeStyle Properties, Inc............................................. 75,567
722 Mid-America Apartment Communities, Inc....................................... 76,821
-------------
296,439
-------------
RETAIL REITS -- 2.0%
425 Federal Realty Investment Trust.............................................. 70,359
2,329 Kimco Realty Corp............................................................ 73,084
1,408 National Retail Properties, Inc.............................................. 72,822
343 Simon Property Group, Inc.................................................... 74,397
-------------
290,662
-------------
SPECIALIZED REITS -- 3.3%
1,811 CyrusOne, Inc................................................................ 100,800
798 Digital Realty Trust, Inc.................................................... 86,974
1,054 EPR Properties............................................................... 85,037
780 Extra Space Storage, Inc..................................................... 72,181
1,499 QTS Realty Trust, Inc., Class A.............................................. 83,914
609 Sovran Self Storage, Inc..................................................... 63,896
-------------
492,802
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 1,956,342
(Cost $1,613,769) -------------
See Notes to Financial Statements Page 35
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
UNITS DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS -- 10.5%
CHEMICALS -- 0.3%
2,015 Westlake Chemical Partners, L.P.............................................. $ 40,260
-------------
GAS UTILITIES -- 0.5%
1,528 AmeriGas Partners, L.P....................................................... 71,358
348 Suburban Propane Partners, L.P............................................... 11,623
-------------
82,981
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.5%
2,499 NextEra Energy Partners, L.P................................................. 75,920
-------------
OIL, GAS & CONSUMABLE FUELS -- 9.2%
1,228 Alliance Holdings GP, L.P.................................................... 25,837
3,432 Alliance Resource Partners, L.P.............................................. 54,088
317 Buckeye Partners, L.P........................................................ 22,295
4,527 Columbia Pipeline Partners, L.P.............................................. 67,905
6,458 Enbridge Energy Partners, L.P................................................ 149,826
8,002 Enterprise Products Partners, L.P............................................ 234,138
1,378 EQT Midstream Partners, L.P.................................................. 110,653
3,387 Holly Energy Partners, L.P................................................... 117,360
1,837 Magellan Midstream Partners, L.P............................................. 139,612
1,463 ONEOK Partners, L.P.......................................................... 58,608
4,278 Plains All American Pipeline, L.P............................................ 117,602
2,953 Spectra Energy Partners, L.P................................................. 139,322
777 Tallgrass Energy Partners, L.P............................................... 35,757
1,457 TC PipeLines, L.P............................................................ 83,428
-------------
1,356,431
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................ 1,555,592
(Cost $1,405,121) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES -- 8.6%
$ 18,387 U.S. Treasury Inflation Indexed Bond................ 2.38% 01/15/27 22,588
50,244 U.S. Treasury Inflation Indexed Bond................ 1.75% 01/15/28 58,821
26,741 U.S. Treasury Inflation Indexed Bond................ 2.50% 01/15/29 33,937
32,481 U.S. Treasury Inflation Indexed Bond................ 3.38% 04/15/32 47,649
14,388 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/40 18,851
20,537 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/41 27,151
18,845 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/42 18,932
43,285 U.S. Treasury Inflation Indexed Bond................ 0.63% 02/15/43 42,245
25,456 U.S. Treasury Inflation Indexed Bond................ 1.38% 02/15/44 29,492
25,702 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/45 25,876
10,096 U.S. Treasury Inflation Indexed Bond................ 1.00% 02/15/46 10,916
14,113 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/17 14,208
65,508 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/18 66,515
28,843 U.S. Treasury Inflation Indexed Note................ 1.38% 07/15/18 30,269
94,844 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/19 96,901
29,205 U.S. Treasury Inflation Indexed Note................ 1.38% 01/15/20 31,205
50,055 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/20 51,232
38,393 U.S. Treasury Inflation Indexed Note................ 1.25% 07/15/20 41,298
Page 36 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES (CONTINUED)
$ 42,868 U.S. Treasury Inflation Indexed Note................ 1.13% 01/15/21 $ 45,898
18,168 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/21 18,630
41,395 U.S. Treasury Inflation Indexed Note................ 0.63% 07/15/21 43,612
47,457 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/22 48,425
45,772 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/22 46,860
51,820 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/23 52,572
40,090 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/23 41,503
42,036 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/24 44,062
48,561 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/24 49,112
47,470 U.S. Treasury Inflation Indexed Note................ 0.25% 01/15/25 48,241
34,901 U.S. Treasury Inflation Indexed Note................ 2.38% 01/15/25 41,719
47,412 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/25 48,863
44,298 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/26 46,690
25,914 U.S. Treasury Inflation Indexed Note................ 2.00% 01/15/26 30,524
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 1,274,797
(Cost $1,237,207) -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.4%
Fannie Mae REMICS
136 Series 1988-16, Class B.......................... 9.50% 06/25/18 141
1,623 Series 1988-30, Class D.......................... 9.50% 12/25/18 1,718
406 Series 1989-69, Class G.......................... 7.60% 10/25/19 430
1,092 Series 1989-82, Class G.......................... 8.40% 11/25/19 1,187
3,515 Series 1990-109, Class J......................... 7.00% 09/25/20 3,710
1,638 Series 1992-24, Class Z.......................... 6.50% 04/25/22 1,783
195 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 201
3,480 Series 1993-1, Class KA.......................... 7.90% 01/25/23 3,938
2,424 Series 1993-62, Class E.......................... 7.00% 04/25/23 2,708
848 Series 1993-119, Class H......................... 6.50% 07/25/23 942
5,254 Series 1993-178, Class PK........................ 6.50% 09/25/23 5,865
5,158 Series 1995-24, Class G.......................... 6.50% 04/25/23 5,650
146 Series 2001-69, Class PG......................... 6.00% 12/25/16 146
138 Series 2001-71, Class QE......................... 6.00% 12/25/16 140
1,685 Series 2002-2, Class UC.......................... 6.00% 02/25/17 1,713
54,105 Series 2002-9, Class MS, IO (b).................. 7.65% 03/25/32 12,192
5,113 Series 2002-10, Class FB (b)..................... 0.95% 03/25/17 5,119
2,389 Series 2002-67, Class PE......................... 5.50% 11/25/32 2,680
245 Series 2003-9, Class EB.......................... 5.00% 02/25/18 251
6,739 Series 2003-14, Class AQ......................... 3.50% 03/25/33 7,032
9,089 Series 2003-41, Class OA......................... 4.00% 05/25/33 9,637
367 Series 2003-92, Class HP......................... 4.50% 09/25/18 378
10,198 Series 2004-10, Class ZB......................... 6.00% 02/25/34 13,031
11,044 Series 2004-76, Class CL......................... 4.00% 10/25/19 11,292
7,414 Series 2004-92, Class S, IO (b).................. 6.25% 08/25/34 563
2,702 Series 2005-46, Class LW......................... 5.00% 06/25/20 2,760
399 Series 2005-48, Class MD......................... 5.00% 04/25/34 408
14,346 Series 2005-68, Class BC......................... 5.25% 06/25/35 15,291
4,896 Series 2005-70, Class KJ......................... 5.50% 09/25/34 5,114
720 Series 2005-120, Class NF (b).................... 0.55% 01/25/21 720
See Notes to Financial Statements Page 37
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Fannie Mae REMICS (Continued)
$ 1,492 Series 2010-39, Class PG......................... 4.00% 06/25/38 $ 1,503
932 Series 2011-38, Class AH......................... 2.75% 05/25/20 946
4,632 Series 2012-35, Class PL......................... 2.00% 11/25/41 4,685
9,850 Series 2013-31, Class NT......................... 3.00% 04/25/43 10,099
Fannie Mae Trust
8,409 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 10,062
FHLMC - GNMA
678 Series 1993-5, Class HA.......................... 7.50% 02/25/23 743
1,456 Series 1994-27, Class D.......................... 7.00% 03/25/24 1,635
Freddie Mac REMICS
2,260 Series 1988-23, Class F.......................... 9.60% 04/15/20 2,404
1,666 Series 1989-84, Class F.......................... 9.20% 10/15/20 1,812
161 Series 1991-1074, Class I........................ 6.75% 05/15/21 170
3,754 Series 1991-1078, Class GZ....................... 6.50% 05/15/21 3,895
1,208 Series 1992-1250, Class J........................ 7.00% 05/15/22 1,335
9,023 Series 1994-1673, Class FB (b)................... 1.32% 02/15/24 9,079
1,885 Series 1996-1807, Class G........................ 9.00% 10/15/20 2,001
114 Series 1996-1847, Class LL....................... 7.50% 04/15/26 130
21,891 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 3,037
18,108 Series 1999-2174, Class PN....................... 6.00% 07/15/29 20,541
618 Series 2001-2353, Class TD....................... 6.00% 09/15/16 626
885 Series 2001-2354, Class TY....................... 5.75% 09/15/16 887
153 Series 2001-2366, Class MD....................... 6.00% 10/15/16 154
826 Series 2002-2399, Class PG....................... 6.00% 01/15/17 833
604 Series 2002-2447, Class LB....................... 5.50% 05/15/17 611
773 Series 2003-2559, Class PB....................... 5.50% 08/15/30 804
8,176 Series 2003-2590, Class NV....................... 5.00% 03/15/18 8,390
5,308 Series 2003-2649, Class KA....................... 4.50% 07/15/18 5,442
14,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 15,825
3,384 Series 2004-2780, Class JA....................... 4.50% 04/15/19 3,555
1,412 Series 2005-2922, Class QE....................... 5.00% 05/15/34 1,466
43,435 Series 2006-3114, Class GI, IO (b)............... 6.16% 02/15/36 10,709
65,577 Series 2006-3199, Class DS, IO (b)............... 6.71% 08/15/36 14,846
2,043 Series 2006-3237, Class CB....................... 5.50% 07/15/36 2,174
24,251 Series 2011-3824, Class FA (b)................... 0.59% 03/15/26 24,203
3,041 Series 2012-4097, Class DC....................... 1.50% 06/15/41 2,993
8,473 Series 2013-4253, Class TD....................... 2.00% 07/15/40 8,535
Freddie Mac Strips
34,417 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 7,186
Government National Mortgage Association
17,080 Series 1999-30, Class S, IO (b).................. 8.16% 08/16/29 4,390
6,506 Series 2004-42, Class LE......................... 5.50% 07/20/33 6,598
830 Series 2008-85, Class HP......................... 4.00% 04/20/38 839
14,154 Series 2009-29, Class TA......................... 4.50% 03/16/39 14,975
468 Series 2009-81, Class PA......................... 5.50% 02/16/38 492
1,019 Series 2010-117, Class MA........................ 2.50% 09/16/23 1,030
6,665 Series 2010-121, Class PQ........................ 3.00% 02/20/39 6,814
Page 38 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 5,754 Series 2011-136, Class GB........................ 2.50% 05/20/40 $ 5,863
48,726 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 6,841
-------------
347,898
-------------
PASS-THROUGH SECURITIES -- 1.7%
Federal Home Loan Mortgage Corporation
20,966 Pool A47829...................................... 4.00% 08/01/35 22,523
12,619 Pool C01252...................................... 6.50% 11/01/31 15,196
24,779 Pool G06358...................................... 4.00% 04/01/41 26,999
15,618 Pool G11418...................................... 6.50% 07/01/17 15,840
5,820 Pool O20138 (b).................................. 5.00% 11/01/30 6,466
31,001 Pool U90316...................................... 4.00% 10/01/42 33,599
Federal National Mortgage Association
16,550 Pool AH1568...................................... 4.50% 12/01/40 18,230
13,908 Pool AL0791...................................... 4.00% 02/01/41 15,179
59,438 Pool AU4289...................................... 4.00% 09/01/43 64,417
Government National Mortgage Association
18,682 Pool 3500........................................ 5.50% 01/20/34 21,075
13,304 Pool 3711........................................ 5.50% 05/20/35 15,012
-------------
254,536
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 602,434
(Cost $587,662) -------------
MORTGAGE-BACKED SECURITIES -- 0.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5%
Credit Suisse First Boston Mortgage Securities Corp.
4,277 Series 2004-1, Class 1A1......................... 5.75% 02/25/34 4,294
3,397 Series 2004-4, Class 1A3......................... 5.75% 08/25/34 3,462
Jefferies Resecuritization Trust
8,485 Series 2009-R7, Class 4A1 (b) (c)................ 2.73% 09/26/34 8,426
818 Series 2009-R7, Class 12A1 (b) (c)............... 2.89% 08/26/36 818
JPMorgan Resecuritization Trust
10,365 Series 2009-7, Class 5A1 (b) (c)................. 6.00% 02/27/37 10,431
164 Series 2010-4, Class 7A1 (b) (c)................. 1.99% 08/26/35 165
MASTR Alternative Loan Trust
6,655 Series 2004-10, Class 2A1........................ 5.50% 10/25/19 6,829
MASTR Asset Securitization Trust
6,587 Series 2003-5, Class 2A1......................... 5.00% 06/25/18 6,754
3,650 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 3,728
Prime Mortgage Trust
140 Series 2004-CL1, Class 2A1....................... 5.00% 02/25/19 141
RAAC Trust
3,953 Series 2005-SP1, Class 2A1....................... 5.25% 09/25/34 4,044
Structured Asset Mortgage Investments Trust
14,431 Series 1999-1, Class 2A (b)...................... 8.91% 06/25/29 14,825
Structured Asset Securities Corp. Mortgage
Pass-Through Certificates
4,709 Series 2004-21XS, Class 2A6A..................... 4.74% 12/25/34 4,797
See Notes to Financial Statements Page 39
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
WAMU Mortgage Pass-Through Certificates
$ 576 Series 2002-S8, Class 2A7........................ 5.25% 01/25/18 $ 581
Wells Fargo Alternative Loan Trust
2,448 Series 2007-PA5, Class 2A1....................... 6.00% 11/25/22 2,481
Wells Fargo Mortgage-Backed Securities Trust
3,720 Series 2006-17, Class A4......................... 5.50% 11/25/21 3,764
-------------
TOTAL MORTGAGE-BACKED SECURITIES............................................. 75,540
(Cost $74,371) -------------
ASSET-BACKED SECURITIES -- 0.1%
AFC Home Equity Loan Trust
1,146 Series 1997-4, Class 1A2 (b)..................... 1.16% 12/22/27 1,012
Bear Stearns Asset Backed Securities Trust
11,218 Series 2005-SD1, Class 1A3 (b)................... 0.85% 08/25/43 11,097
Conseco Financial Corp.
2,140 Series 1993-4, Class A5.......................... 7.05% 01/15/19 2,184
-------------
TOTAL ASSET-BACKED SECURITIES................................................ 14,293
(Cost $13,872) -------------
TOTAL INVESTMENTS -- 97.6%................................................... 14,435,633
(Cost $13,766,629) (d)
NET OTHER ASSETS AND LIABILITIES -- 2.4%..................................... 352,300
-------------
NET ASSETS -- 100.0%......................................................... $ 14,787,933
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Floating or variable rate security. The interest rate shown reflects the
rate in effect at June 30, 2016.
(c) 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 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 judgment. At June 30, 2016, securities noted as such amounted
to $19,840 or 0.13% of net assets.
(d) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $892,268 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $223,264.
ADR American Depositary Receipt
CAD Canadian Dollar - Security is denominated in Canadian Dollars and is
translated into U.S. Dollars based upon the current exchange rate.
IO Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
Page 40 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
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
6/30/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 5,515,661 $ 5,515,661 $ -- $ --
Common Stocks*.................................... 3,440,974 3,440,974 -- --
Real Estate Investment Trusts*.................... 1,956,342 1,956,342 -- --
Master Limited Partnerships*...................... 1,555,592 1,555,592 -- --
U.S. Government Bonds and Notes................... 1,274,797 -- 1,274,797 --
U.S. Government Agency Mortgage-Backed............
Securities.................................... 602,434 -- 602,434 --
Mortgage-Backed Securities........................ 75,540 -- 75,540 --
Asset-Backed Securities........................... 14,293 -- 14,293 --
------------ ------------ ------------ ------------
Total Investments................................. $ 14,435,633 $ 12,468,569 $ 1,967,064 $ --
============ ============ ============ ============
* See 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, 2016.
See Notes to Financial Statements Page 41
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 98.5%
CAPITAL MARKETS -- 98.5%
16,360 First Trust Consumer Discretionary AlphaDEX(R) Fund (a)...................... $ 551,659
12,264 First Trust Consumer Staples AlphaDEX(R) Fund (a)............................ 593,210
3,734 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 168,142
8,315 First Trust Dow Jones Internet Index Fund (a) (b)............................ 599,678
9,035 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 173,924
41,685 First Trust Energy AlphaDEX(R) Fund (a)...................................... 621,106
1,890 First Trust Germany AlphaDEX(R) Fund (a)..................................... 65,432
2,524 First Trust ISE Chindia Index Fund (a)....................................... 68,527
1,565 First Trust Japan AlphaDEX(R) Fund (a)....................................... 71,145
13,065 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 651,943
12,878 First Trust Mid Cap Core AlphaDEX(R) Fund (a)................................ 650,597
21,960 First Trust Mid Cap Growth AlphaDEX(R) Fund (a).............................. 659,020
1,694 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 65,371
1,841 First Trust United Kingdom AlphaDEX(R) Fund (a).............................. 61,213
22,236 First Trust Utilities AlphaDEX(R) Fund (a)................................... 601,039
21,870 iShares Core U.S. Aggregate Bond ETF......................................... 2,461,906
50,643 SPDR Barclays Emerging Markets Local Bond ETF (b)............................ 1,409,395
25,737 SPDR Barclays International Treasury Bond ETF (b)............................ 1,471,127
28,594 SPDR Nuveen Barclays Municipal Bond ETF...................................... 1,446,570
31,677 SPDR Wells Fargo Preferred Stock ETF......................................... 1,457,775
-------------
TOTAL INVESTMENTS -- 98.5%.................................................... 13,848,779
(Cost $13,467,785) (c) -------------
NET OTHER ASSETS AND LIABILITIES - 1.5%...................................... 210,343
-------------
NET ASSETS -- 100.0%.......................................................... $ 14,059,122
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $401,466 and the aggregate gross
unrealized depreciation for all securities in which there was an excess of
tax cost over value was $20,472.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2016
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
6/30/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 13,848,779 $ 13,848,779 $ -- $ --
============ ============ ============ ============
* See 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, 2016.
Page 42 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2016 (UNAUDITED)
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
ASSETS:
Investments, at value................................................... $ 357,564,096 $ 10,480,368 $ 8,246,773
Investments in affiliated funds, at value............................... -- 3,955,265 5,602,006
Cash and cash equivalents............................................... 10,174,909 422,845 259,256
Receivables:
Interest............................................................. 1,295,506 7,131 --
Investment securities sold........................................... 1,074,301 82,882 --
Fund shares sold..................................................... 520,800 8,938 6,188
Dividends............................................................ 182,392 15,684 --
Variation margin..................................................... 3,906 -- --
From investment advisor.............................................. -- 15,794 7,015
Reclaim.............................................................. -- 466 --
Prepaid expenses........................................................ 8,976 762 --
--------------- --------------- ---------------
Total Assets......................................................... 370,824,886 14,990,135 14,121,238
--------------- --------------- ---------------
LIABILITIES:
Payables:
Investment securities purchased...................................... 4,332,791 127,011 --
Investment advisory fees............................................. 133,503 -- --
12b-1 service fees (Class I)......................................... 71,260 2,926 2,688
Administrative service fees.......................................... 57,011 2,358 2,175
Printing fees........................................................ 30,858 8,476 7,446
Licensing fees....................................................... 26,357 -- 4,701
Accounting and administration fees................................... 18,555 6,263 11,883
Audit and tax fees................................................... 17,460 31,150 14,113
Transfer agent fees.................................................. 13,927 8,552 6,763
Custodian fees....................................................... 12,407 2,410 5,160
Fund shares redeemed................................................. 10,000 10,032 114
Variation margin..................................................... 4,141 -- --
Commitment fees...................................................... 2,677 1,502 --
Financial reporting fees............................................. 771 -- 2,683
Trustees' fees and expenses.......................................... 408 -- 1
Legal fees........................................................... -- 373 4,286
Other liabilities....................................................... 139 1,149 103
--------------- --------------- ---------------
Total Liabilities.................................................... 4,732,265 202,202 62,116
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 366,092,621 $ 14,787,933 $ 14,059,122
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... $ 346,725,927 $ 14,545,531 $ 14,002,711
Accumulated net investment income (loss)................................ 171,191 54,722 38,290
Accumulated net realized gain (loss) on investments, futures and
foreign currency transactions........................................ (1,152,945) (481,324) (362,873)
Net unrealized appreciation (depreciation) on investments and futures... 20,348,448 669,004 380,994
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 366,092,621 $ 14,787,933 $ 14,059,122
=============== =============== ===============
Investments, at cost.................................................... $ 336,981,312 $ 9,735,726 $ 8,054,102
=============== =============== ===============
Investments in affiliated funds, at cost................................ $ -- $ 4,030,903 $ 5,413,683
=============== =============== ===============
CLASS I SHARES:
NET ASSETS.............................................................. $ 366,076,070 $ 14,681,840 $ 14,009,980
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 12.40 $ 10.53 $ 9.80
=============== =============== ===============
Number of Shares outstanding............................................ 29,513,120 1,394,884 1,429,966
=============== =============== ===============
CLASS II SHARES:
NET ASSETS.............................................................. $ 16,551 $ 106,093 $ 49,142
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 12.42 $ 10.52 $ 9.81
=============== =============== ===============
Number of Shares outstanding............................................ 1,333 10,080 5,009
=============== =============== ===============
See Notes to Financial Statements Page 43
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
INVESTMENT INCOME:
Interest................................................................ $ 1,794,276 $ 18,208 $ 613
Dividends............................................................... 1,715,158 105,816 52,907
Dividends from affiliated funds......................................... -- 88,920 25,827
Foreign withholding tax on dividend income.............................. -- (1,310) --
Other................................................................... -- -- 25
--------------- --------------- ---------------
Total investment income.............................................. 3,509,434 211,634 79,372
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees................................................ 861,258 39,726 14,979
12b-1 distribution and service fees (Class I)........................... 358,840 16,427 10,641
Administrative service fees............................................. 287,054 13,142 8,482
Accounting and administration fees...................................... 90,646 8,897 10,151
Custodian fees.......................................................... 64,464 4,135 3,910
Licensing fees.......................................................... 46,873 -- 4,280
Transfer agent fees..................................................... 44,409 25,866 26,249
Printing fees........................................................... 30,062 4,815 6,623
Legal fees.............................................................. 28,287 1,353 1,106
Commitment fees......................................................... 15,513 9,101 --
Audit and tax fees...................................................... 14,421 25,361 11,399
Trustees' fees and expenses............................................. 9,357 8,057 8,748
Financial reporting fees................................................ 4,625 -- 3,579
Excise tax.............................................................. -- -- 248
Other................................................................... 4,752 4,062 1,243
--------------- --------------- ---------------
Total expenses....................................................... 1,860,561 160,942 111,638
Fees waived or expenses reimbursed by the investment advisor......... (137,978) (106,113) (74,204)
--------------- --------------- ---------------
Net expenses............................................................ 1,722,583 54,829 37,434
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)............................................ 1,786,851 156,805 41,938
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.......................................................... (548,322) (256,998) 23,323
Investments in affiliated funds...................................... -- (15,551) (386,196)
Foreign currency transactions........................................ -- 12 --
Futures.............................................................. (308,609) -- --
--------------- --------------- ---------------
Net realized gain (loss)................................................ (856,931) (272,537) (362,873)
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments.......................................................... 18,971,849 1,076,787 194,884
Investments in affiliated funds...................................... -- 67,001 237,961
Futures.............................................................. (257,141) -- --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation).................... 18,714,708 1,143,788 432,845
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 17,857,777 871,251 69,972
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS...................................................... $ 19,644,628 $ 1,028,056 $ 111,910
=============== =============== ===============
Page 44 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND
& INCOME ALLOCATION PORTFOLIO
--------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
6/30/2016 ENDED
(UNAUDITED) 12/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 1,786,851 $ 3,342,508
Net realized gain (loss)............................................................. (856,931) 8,084,683
Net change in unrealized appreciation (depreciation)................................. 18,714,708 (12,219,844)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 19,644,628 (792,653)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (1,615,565) (5,442,059)
Class II............................................................................. (95) (382)
------------ ------------
(1,615,660) (5,442,441)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (7,142,647) (4,388,357)
Class II............................................................................. (337) (185)
------------ ------------
(7,142,984) (4,388,542)
------------ ------------
Total distributions to shareholders.................................................. (8,758,644) (9,830,983)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 108,567,495 112,078,962
Proceeds from shares reinvested...................................................... 8,758,361 9,830,537
Cost of shares redeemed.............................................................. (5,379,355) (63,164,485)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 111,946,501 58,745,014
------------ ------------
Total increase (decrease) in net assets.............................................. 122,832,485 48,121,378
NET ASSETS:
Beginning of period.................................................................. 243,260,136 195,138,758
------------ ------------
End of period........................................................................ $366,092,621 $243,260,136
============ ============
Accumulated net investment income (loss) at end of period............................ $ 171,191 $ --
============ ============
See Notes to Financial Statements Page 45
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME
ALLOCATION PORTFOLIO
--------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
6/30/2016 ENDED
(UNAUDITED) 12/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 156,805 $ 236,497
Net realized gain (loss)............................................................. (272,537) (192,777)
Net increase from payment by the advisor............................................. -- 5,471
Net change in unrealized appreciation (depreciation)................................. 1,143,788 (564,737)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 1,028,056 (515,546)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (125,781) (234,799)
Class II............................................................................. (1,038) (2,203)
------------ ------------
Total distributions to shareholders.................................................. (126,819) (237,002)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 2,495,922 9,660,473
Proceeds from shares reinvested...................................................... 125,781 234,279
Cost of shares redeemed.............................................................. (1,091,690) (3,784,387)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 1,530,013 6,110,365
------------ ------------
Total increase (decrease) in net assets.............................................. 2,431,250 5,357,817
NET ASSETS:
Beginning of period.................................................................. 12,356,683 6,998,866
------------ ------------
End of period........................................................................ $ 14,787,933 $ 12,356,683
============ ============
Accumulated net investment income (loss) at end of period............................ $ 54,722 $ 24,736
============ ============
Page 46 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT
TACTICAL CORE PORTFOLIO
--------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED PERIOD
6/30/2016 ENDED
(UNAUDITED) 12/31/2015 (a)
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 41,938 $ 6,431
Net realized gain (loss)............................................................. (362,873) --
Net change in unrealized appreciation (depreciation)................................. 432,845 (51,851)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 111,910 (45,420)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (9,989) --
Class II............................................................................. (90) --
------------ ------------
Total distributions to shareholders.................................................. (10,079) --
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 9,450,807 5,538,309
Proceeds from shares reinvested...................................................... 10,079 --
Cost of shares redeemed.............................................................. (994,009) (2,475)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 8,466,877 5,535,834
------------ ------------
Total increase (decrease) in net assets.............................................. 8,568,708 5,490,414
NET ASSETS:
Beginning of period.................................................................. 5,490,414 --
------------ ------------
End of period........................................................................ $ 14,059,122 $ 5,490,414
============ ============
Accumulated net investment income (loss) at end of period............................ $ 38,290 $ 6,431
============ ============
-----------------------------
(a) The Fund's Class I and Class II Shares were seeded on October 29, 2015,
and commenced operations on October 30, 2015.
See Notes to Financial Statements Page 47
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
SIX MONTHS FOR THE
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2016 ------------------------------------- ENDED
(UNAUDITED) 2015 2014 2013 12/31/2012 (a)
------------ ---------- ---------- ---------- --------------
Net asset value, beginning of period........... $ 11.94 $ 12.41 $ 11.37 $ 10.31 $ 10.00
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.07 0.16 0.15 0.14 0.15
Net realized and unrealized gain (loss)........ 0.71 (0.15) 0.99 1.17 0.29
-------- -------- -------- -------- --------
Total from investment operations............... 0.78 0.01 1.14 1.31 0.44
-------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.06) (0.27) (0.10) (0.09) (0.07)
Net realized gain.............................. (0.26) (0.21) -- (0.16) (0.04)
Return of capital.............................. -- -- -- -- (0.02)
-------- -------- -------- -------- --------
Total from distributions....................... (0.32) (0.48) (0.10) (0.25) (0.13)
-------- -------- -------- -------- --------
Net asset value, end of period................. $ 12.40 $ 11.94 $ 12.41 $ 11.37 $ 10.31
======== ======== ======== ======== ========
TOTAL RETURN (b) (c)........................... 6.51% 0.09% 10.04% 12.75% 4.38%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $366,076 $243,244 $195,128 $106,079 $ 32,176
Ratio of total expenses to average net
assets...................................... 1.30% (d) 1.34% 1.43% 1.65% 2.69% (d)
Ratio of net expenses to average net
assets...................................... 1.20% (d) 1.20% 1.20% 1.20% 1.20% (d)
Ratio of net investment income (loss)
to average net assets....................... 1.24% (d) 1.35% 1.40% 1.27% 2.25% (d)
Portfolio turnover rate........................ 44% 81% 65% 73% 34%
CLASS II SHARES
SIX MONTHS FOR THE
ENDED YEAR PERIOD
6/30/2016 ENDED ENDED
(UNAUDITED) 12/31/2015 12/31/2014 (e)
------------ ---------- --------------
Net asset value, beginning of period........... $ 11.95 $ 12.43 $ 11.63
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.09 0.17 0.14
Net realized and unrealized gain (loss)........ 0.71 (0.14) 0.77
-------- -------- --------
Total from investment operations............... 0.80 0.03 0.91
-------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.07) (0.30) (0.11)
Net realized gain.............................. (0.26) (0.21) --
-------- -------- --------
Total from distributions....................... (0.33) (0.51) (0.11)
-------- -------- --------
Net asset value, end of period................. $ 12.42 $ 11.95 $ 12.43
======== ======== ========
TOTAL RETURN (b) (c)........................... 6.71% 0.25% 7.82%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 17 $ 16 $ 11
Ratio of total expenses to average net
assets...................................... 1.05% (d) 1.09% 1.21% (d)
Ratio of net expenses to average net
assets...................................... 0.95% (d) 0.95% 0.95% (d)
Ratio of net investment income (loss)
to average net assets........................ 1.50% (d) 1.64% 1.69% (d)
Portfolio turnover rate........................ 44% 81% 65%
-----------------------------
(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 returns 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 48 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
SIX MONTHS FOR THE
ENDED YEAR PERIOD
6/30/2016 ENDED ENDED
(UNAUDITED) 12/31/2015 12/31/2014 (a)
------------ ---------- --------------
Net asset value, beginning of period........... $ 9.86 $ 10.39 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.11 0.19 0.07
Net realized and unrealized gain (loss)........ 0.65 (0.53) (b) 0.39
-------- -------- --------
Total from investment operations............... 0.76 (0.34) 0.46
-------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.09) (0.19) (0.07)
-------- -------- --------
Total from distributions....................... (0.09) (0.19) (0.07)
-------- -------- --------
Net asset value, end of period................. $ 10.53 $ 9.86 $ 10.39
======== ======== ========
TOTAL RETURN (c) (d)........................... 7.72% (3.24)% (b) 4.57%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 14,682 $ 12,257 $ 6,894
Ratio of total expenses to average net
assets...................................... 2.43% (e) 2.60% 6.00% (e)
Ratio of net expenses to average net
assets...................................... 0.83% (e) 0.90% 1.20% (e)
Ratio of net investment income (loss)
to average net assets....................... 2.37% (e) 2.17% 2.35% (e)
Portfolio turnover rate........................ 29% 93% 15%
CLASS II SHARES
SIX MONTHS FOR THE
ENDED YEAR PERIOD
6/30/2016 ENDED ENDED
(UNAUDITED) 12/31/2015 12/31/2014 (a)
------------ ---------- --------------
Net asset value, beginning of period........... $ 9.86 $ 10.39 $ 10.00
-------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.12 0.24 0.04
Net realized and unrealized gain (loss)........ 0.64 (0.55) (b) 0.43
-------- -------- --------
Total from investment operations............... 0.76 (0.31) 0.47
-------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.10) (0.22) (0.08)
-------- -------- --------
Total from distributions....................... (0.10) (0.22) (0.08)
-------- -------- --------
Net asset value, end of period................. $ 10.52 $ 9.86 $ 10.39
======== ======== ========
TOTAL RETURN (c) (d)........................... 7.74% (3.01)% (b) 4.74%
======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 106 $ 100 $ 105
Ratio of total expenses to average net
assets...................................... 2.18% (e) 2.31% 14.44% (e)
Ratio of net expenses to average net
assets...................................... 0.58% (e) 0.67% 0.95% (e)
Ratio of net investment income (loss)
to average net assets....................... 2.59% (e) 2.32% 0.54% (e)
Portfolio turnover rate........................ 29% 93% 15%
-----------------------------
(a) The Fund's Class I and Class II shares were seeded on April 30, 2014, and
commenced operations on May 1, 2014.
(b) First Trust Multi Income Allocation Portfolio received a reimbursement
from the Advisor in the amount of $5,471, which represents less than $0.01
per share. Since the Advisor reimbursed the Fund, there was no effect on
the total return.
(c) 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 returns above.
(d) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(e) Annualized.
See Notes to Financial Statements Page 49
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
SIX MONTHS FOR THE
ENDED PERIOD
6/30/2016 ENDED
(UNAUDITED) 12/31/2015 (a)
------------ --------------
Net asset value, beginning of period........... $ 9.94 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.02 0.01
Net realized and unrealized gain (loss)........ (0.15) (0.07)
-------- --------
Total from investment operations............... (0.13) (0.06)
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.01) --
-------- --------
Total from distributions....................... (0.01) --
-------- --------
Net asset value, end of period................. $ 9.80 $ 9.94
======== ========
TOTAL RETURN (b) (c)........................... (1.34)% (0.60)%
======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 14,010 $ 5,440
Ratio of total expenses to average net
assets...................................... 2.28% (d) 11.71% (d)
Ratio of net expenses to average net
assets...................................... 0.86% (d) 0.79% (d)
Ratio of net investment income (loss)
to average net assets....................... 0.97% (d) 1.54% (d)
Portfolio turnover rate........................ 110% --%
CLASS II SHARES
SIX MONTHS FOR THE
ENDED PERIOD
6/30/2016 ENDED
(UNAUDITED) 12/31/2015 (a)
------------ --------------
Net asset value, beginning of period........... $ 9.95 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................... 0.04 0.01
Net realized and unrealized gain (loss)........ (0.16) (0.06)
-------- --------
Total from investment operations............... (0.12) (0.05)
-------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................... (0.02) --
-------- --------
Total from distributions....................... (0.02) --
-------- --------
Net asset value, end of period................. $ 9.81 $ 9.95
======== ========
TOTAL RETURN (b) (c)........................... (1.23)% (0.50)%
======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........... $ 49 $ 50
Ratio of total expenses to average net
assets...................................... 56.58% (d) 37.40% (d)
Ratio of net expenses to average net
assets...................................... 0.60% (d) 0.51% (d)
Ratio of net investment income (loss)
to average net assets....................... 0.94% (d) 0.86% (d)
Portfolio turnover rate........................ 110% --%
-----------------------------
(a) The Fund's Class I and Class II shares were seeded on October 29, 2015,
and commenced operations on October 30, 2015.
(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 returns above.
(c) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) Annualized.
Page 50 See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (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 three 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, First
Trust Multi Income Allocation Portfolio ("First Trust Multi Income"), which
commenced investment operations on May 1, 2014, and First Trust Dorsey Wright
Tactical Core Portfolio ("First Trust Dorsey Wright"), which commenced
investment operations on October 30, 2015. 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 with which the
Trust has a contract (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 are invested in: investment-grade bonds
included in the Dow Jones Equal Weight 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 Composite Average. 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 is actively managed by First Trust and
implementing the strategy involves multiple portfolio managers.
The Advisor tactically adjusts 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, is 20%. The minimum weight of any asset
class, at the time of adjustment, is 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.
-----------------------------
(1) Prior to April 30, 2013, the Dow Jones Equal Weight U.S. Issued Corporate
Bond Index(SM) was known as the Dow Jones Corporate Bond Index(SM).
Page 51
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
First Trust Dorsey Wright's investment objective is to provide total return.
First Trust Dorsey Wright seeks to achieve its investment objective by
investing, under normal market conditions, at least 80% of its net assets (plus
any investment borrowings) in ETFs and cash and cash equivalents that comprise
the Dorsey Wright Tactical Tilt Moderate Core Index. It is expected that a
majority of the ETFs in which the Fund invests will be advised by First Trust.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds, each of which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." 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 the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee, in
accordance with valuation procedures adopted by the Trust's Board of Trustees
(the "Board"), and in accordance with provisions of the 1940 Act. Investments
valued by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks, preferred stocks, MLPs, ETFs, REITs and other equity
securities listed on any national or foreign exchange (excluding The
Nasdaq 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 fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Corporate bonds, corporate notes, U.S. government securities and other
debt securities are fair valued on the basis of valuations provided by
dealers who make markets in such securities or by a third-party pricing
service approved by the Trust's Board, 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.
Page 52
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
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 fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of 60
days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using 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 or its delegate, the
Advisor's Pricing Committee, 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 or fair value price;
securities whose trading has been formally suspended; a security whose market or
fair value 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
current sale. When fair value prices are used, generally they will differ from
market quotations or official closing prices on the applicable exchanges. 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 the
Advisor'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;
Page 53
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
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) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
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.
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 methodologies 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, 2016, 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 MLPs generally are comprised
of return of capital and investment income. A Fund records estimated return of
capital and investment income based on historical information available from
each MLP. These estimates may subsequently be revised based on information
received from the MLPs after their tax reporting periods are concluded.
Distributions received from a Fund's investments in REITs may be comprised of
return of capital, capital gains and investment income. The actual character of
the amounts received during the year is not known until after the REITs' fiscal
year end. A Fund records the character of distributions received from REITs
during the year based on estimates available. The characterization of
distributions received by a Fund may subsequently be revised based on
information received from the REITs after their tax reporting periods are
concluded.
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 First Trust Dow Jones or First Trust Multi Income. The percentage of
Page 54
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
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.
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 semi-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.
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 each applicable Fund during the
period ended December 31, 2015 was as follows:
Distributions paid Distributions paid Distributions paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ 7,639,768 $ 2,191,215 $ --
First Trust Multi Income 237,002 -- --
First Trust Dorsey Wright -- -- --
As of December 31, 2015, the components of distributable earnings on a tax basis
for each Fund were as follows:
Accumulated Net
Undistributed Capital and Unrealized
Ordinary Other Appreciation
Income Gains (Loss) (Depreciation)
------------------ ------------------ ------------------
First Trust Dow Jones $ -- $ 7,108,070 $ 1,372,640
First Trust Multi Income 24,736 (108,013) (575,558)
First Trust Dorsey Wright 6,330 -- (51,750)
Page 55
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
F. INCOME TAXES
First Trust Dow Jones and First Trust Multi Income intend to continue to
qualify, and First Trust Dorsey Wright 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 (the "Internal Revenue Code"), which
includes distributing substantially all of their 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
and state income taxes. However, due to the timing and amount of distributions,
each Fund may be subject to an excise tax of 4% of the amount by which
approximately 98% of the Fund's taxable income exceeds the distributions from
such taxable income for the calendar year.
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. Taxable years ended 2012, 2013,
2014 and 2015 remain open to federal and state audit for First Trust Dow Jones.
Taxable years ended 2014 and 2015 remain open to federal and state audit for
First Trust Multi Income. Also, the taxable year ended 2015 remains open for
First Trust Dorsey Wright. As of June 30, 2016, 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.
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, 2015, for
federal income tax purposes, the Funds had capital loss carryforward available,
to the extent provided by regulations, to offset capital gains as follows:
Non-Expiring
Capital Loss
Carryforwards
---------------
First Trust Dow Jones $ --
First Trust Multi Income 108,013
First Trust Dorsey Wright --
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 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 First Trust Dow Jones and First Trust Dorsey Wright, is a
sub-licensee to these license agreements and is required to pay licensing fees,
which are shown on the Statements of Operations.
H. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are shown in "Net realized
gain (loss) on foreign currency transactions" on the Statements of Operations.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial purchase settlement date and subsequent sale
trade date is included in "Net realized gain (loss) on investments" on the
Statements of Operations.
Page 56
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
I. INTEREST-ONLY SECURITIES
An interest-only security "(IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.
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 the average daily net
assets for both First Trust Dow Jones and First Trust Multi Income, and 0.35% of
the average daily net assets for First Trust Dorsey Wright. First Trust also
provides fund reporting services to First Trust Dow Jones and First Trust Dorsey
Wright for a flat annual fee in the amount of $9,250 per Fund.
First Trust Multi Income and First Trust have retained Energy Income Partners,
LLC ("EIP") and Stonebridge Advisors LLC ("Stonebridge") (collectively 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 certain 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 furnishes
an investment program in respect of and makes 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 and the Advisor 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-advisor. Stonebridge has been retained by First Trust Multi Income and the
Advisor 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
sub-advisory 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 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 sub-advisory 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.
During the year ended December 31, 2015, First Trust Multi Income received a
reimbursement from the Advisor of $5,471 in connection with a trade error.
First Trust has agreed to waive fees and/or pay First Trust Dow Jones' and First
Trust Multi Income'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, acquired fund fees and
expenses, and 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, 2017. First Trust has agreed to waive fees and/or pay
First Trust Dorsey Wright'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 1.30% and 1.05%, respectively, of the
Fund's average daily net assets per year at least until October 31, 2017. In
First Trust Dorsey Wright, because acquired fund fees and expenses are
estimated, First Trust will periodically adjust the amount of the fee waiver and
expense reimbursement in order to attempt to meet the Expense Cap. However,
total net annual fund expense may be higher or lower than the Expense Cap.
Expenses borne and fees waived by First Trust are subject to reimbursement by
each 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,
if any, are included in "Expenses previously waived or reimbursed" on the
Statements of Operations.
Page 57
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
The advisory fee waivers and expense reimbursements for the six-month period
ended June 30, 2016, and the expenses borne by First Trust subject to recovery
from the applicable Fund at June 30, 2016, are included in the table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY
--------------------------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR SIX MONTHS
ENDED ENDED ENDED ENDED
FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
WAIVED REIMBURSED 2013 2014 2015 2016 TOTAL
------------ ------------ ------------ ------------ ------------ ---------- ----------
First Trust Dow Jones $ 137,978 $ -- $ 123,752 $ 308,178 $ 347,277 $ 137,978 $ 917,185
First Trust Multi Income 39,726 41,889 -- 101,172 151,967 81,615 334,754
First Trust Dorsey Wright 14,979 59,225 -- -- 48,180 74,204 122,384
During the six months ended June 30, 2016, First Trust did not recover any fees
that were previously waived or reimbursed.
First Trust agreed to waive and/or reimburse the acquired fund fees and expenses
of the shares of investment companies held by First Trust Multi Income up to
0.37% of the Fund's average daily net assets through May 1, 2017. During the
six-month period ended June 30, 2016, First Trust reimbursed First Trust Multi
Income $24,498 of fees that are not subject to recovery.
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. Stonebridge is a majority-owned
affiliate of FTCP.
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as First Trust Dow
Jones' and First Trust Multi Income's 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 Funds, including maintaining the Funds' books of
account, records of the Funds' securities transactions, and certain other books
and records. As transfer agent, BNYM IS is responsible for maintaining
shareholder records for the Funds. BNYM IS is a subsidiary of The Bank of New
York Mellon Corporation, a financial holding company.
The Bank of New York Mellon ("BNYM") serves as First Trust Dow Jones' and First
Trust Multi Income's custodian in accordance with certain fee arrangements. As
custodian, BNYM is responsible for custody of each Fund's assets. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Brown Brothers Harriman & Co. ("BBH") serves as First Trust Dorsey Wright's
administrator, fund accountant and custodian. As custodian, BBH is responsible
for custody of the Fund's assets. As administrator and fund accountant, BBH is
responsible for providing certain administrative and accounting services to the
Fund, including maintaining the Fund's books of account, records of the Fund's
securities transactions, and certain other books and records. BNYM IS serves as
the Fund's transfer agent in accordance with certain fee arrangements. As
transfer agent, BNYM IS is responsible for maintaining shareholder records for
the Fund.
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 equally among each fund in the First Trust Fund
Complex. 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.
Page 58
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
Capital transactions for First Trust Dow Jones were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 8,866,710 $108,567,495 9,010,497 $112,072,958
Class II -- -- 485 6,004
------------ ------------ ------------ ------------
Total Sales: 8,866,710 $108,567,495 9,010,982 $112,078,962
============ ============ ============ ============
Dividend Reinvestment:
Class I 715,540 $ 8,758,213 810,396 $ 9,830,416
Class II 12 148 11 121
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 715,552 $ 8,758,361 810,407 $ 9,830,537
============ ============ ============ ============
Redemptions:
Class I (448,685) $ (5,378,871) (5,160,259) $(63,164,485)
Class II (42) (484) -- --
------------ ------------ ------------ ------------
Total Redemptions: (448,727) $ (5,379,355) (5,160,259) $(63,164,485)
============ ============ ============ ============
Capital transactions for First Trust Multi Income were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 248,278 $ 2,495,922 929,411 $ 9,657,422
Class II -- -- 290 3,051
------------ ------------ ------------ ------------
Total Sales: 248,278 $ 2,495,922 929,701 $ 9,660,473
============ ============ ============ ============
Dividend Reinvestment:
Class I 12,094 $ 125,781 23,869 $ 234,274
Class II -- -- -- 5
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 12,094 $ 125,781 23,869 $ 234,279
============ ============ ============ ============
Redemptions:
Class I (108,094) $ (1,091,690) (374,076) $ (3,781,375)
Class II -- -- (290) (3,012)
------------ ------------ ------------ ------------
Total Redemptions: (108,094) $ (1,091,690) (374,366) $ (3,784,387)
============ ============ ============ ============
Page 59
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
Capital transactions for First Trust Dorsey Wright were as follows:
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 985,435 $ 9,450,807 547,381 $ 5,488,309
Class II -- -- 5,000 50,000
------------ ------------ ------------ ------------
Total Sales: 985,435 $ 9,450,807 552,381 $ 5,538,309
============ ============ ============ ============
Dividend Reinvestment:
Class I 1,027 $ 9,989 -- $ --
Class II 9 90 -- --
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 1,036 $ 10,079 -- $ --
============ ============ ============ ============
Redemptions:
Class I (103,630) $ (994,009) (247) $ (2,475)
Class II -- -- -- --
------------ ------------ ------------ ------------
Total Redemptions: (103,630) $ (994,009) (247) $ (2,475)
============ ============ ============ ============
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by First Trust Dow
Jones at June 30, 2016, the primary underlying risk exposure and the location of
these instruments as presented on the Statements of Assets and Liabilities.
First Trust Multi Income and First Trust Dorsey Wright did not hold any
derivative instruments as of June 30, 2016.
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------- ----------------------------------------
DERIVATIVE STATEMENTS OF ASSETS STATEMENTS OF ASSETS
INSTRUMENT RISK EXPOSURE AND LIABILITIES LOCATION VALUE AND LIABILITIES LOCATION VALUE
---------- ------------------ --------------------------- ---------- --------------------------- ----------
Futures Interest Rate Risk Variation Margin Receivable $ 3,906 Variation Margin Payable $ 4,141
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, 2016, on derivative 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 $ (308,609)
Net change in unrealized gain (loss) on futures (257,141)
During the six months ended June 30, 2016, the amount of notional values of
futures contracts opened and closed were $33,374,047 and $33,219,696,
respectively.
First Trust Dow Jones does not have the right to offset financial assets and
financial liabilities related to futures contracts on the Statements of Assets
and Liabilities.
6. AFFILIATED TRANSACTIONS
First Trust Multi Income and First Trust Dorsey Wright invest in securities of
affiliated funds. Dividend income and realized gains and losses from affiliated
funds are presented on the Statements of Operations. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Page 60
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
Amounts relating to these investments in First Trust Multi Income at June 30,
2016, and for the period then ended are as follows:
SHARE ACTIVITY
--------------------------------------------
BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED
SECURITY NAME 12/31/2015 PURCHASES SALES 6/30/2016 6/30/2016 INCOME GAIN (LOSS)
------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- -----------
First Trust Low Duration
Opportunities ETF -- 3,297 (3,296) 1 $ 52 $ -- $ 687
First Trust Preferred Securities and
Income ETF 45,430 5,760 (6,120) 45,070 857,231 26,434 (2,496)
First Trust Senior Loan Fund 37,730 11,480 (2,150) 47,060 2,250,409 37,915 (4,086)
First Trust Tactical High Yield ETF 17,680 2,990 (2,890) 17,780 847,573 24,571 (9,656)
-----------------------------------
$3,955,265 $ 88,920 $ (15,551)
===================================
Amounts relating to these investments in First Trust Dorsey Wright at June 30,
2016, and for the period then ended are as follows:
SHARE ACTIVITY
--------------------------------------------
BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED
SECURITY NAME 12/31/2015 PURCHASES SALES 6/30/2016 6/30/2016 INCOME GAIN (LOSS)
------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- -----------
First Trust Consumer Discretionary
AlphaDEX(R) Fund 11,835 18,545 (14,020) 16,360 $ 551,659 $ 2,033 $ (6,136)
First Trust Consumer Staples
AlphaDEX(R) Fund 10,272 12,160 (10,168) 12,264 593,210 5,030 13,895
First Trust Developed Markets
Ex-US AlphaDEX(R) Fund 1,405 2,464 (135) 3,734 168,142 1,676 (326)
First Trust Dow Jones Internet Index Fund 7,025 8,294 (7,004) 8,315 599,678 -- (57,067)
First Trust Emerging Markets
AlphaDEX(R) Fund 3,196 6,325 (486) 9,035 173,924 1,686 (394)
First Trust Energy AlphaDEX(R) Fund -- 42,142 (457) 41,685 621,106 2,389 477
First Trust Germany AlphaDEX(R) Fund 760 1,210 (80) 1,890 65,432 890 (31)
First Trust Health Care AlphaDEX(R) Fund 7,993 3,663 (11,656) -- -- -- (46,498)
First Trust Hong Kong AlphaDEX(R) Fund 707 249 (956) -- -- -- (4,252)
First Trust ISE Chindia Index Fund 870 1,775 (121) 2,524 68,527 266 (215)
First Trust Japan AlphaDEX(R) Fund -- 1,592 (27) 1,565 71,145 335 (7)
First Trust Large Cap Growth
AlphaDEX(R) Fund -- 23,989 (10,924) 13,065 651,943 1,661 33,965
First Trust Mid Cap Core AlphaDEX(R) Fund 10,218 16,621 (13,961) 12,878 650,597 2,345 (67,428)
First Trust Mid Cap Growth AlphaDEX(R) Fund 18,758 21,795 (18,593) 21,960 659,020 738 (26,071)
First Trust NYSE Arca Biotechnology
Index Fund 5,574 1,965 (7,539) -- -- -- (204,063)
First Trust Small Cap Growth
AlphaDEX(R) Fund 18,576 6,550 (25,126) -- -- -- (39,815)
First Trust Switzerland AlphaDEX(R) Fund 692 1,100 (98) 1,694 65,371 1,336 (12)
First Trust United Kingdom AlphaDEX(R) Fund 698 1,215 (72) 1,841 61,213 732 (364)
First Trust Utilities AlphaDEX(R) Fund -- 41,201 (18,965) 22,236 601,039 4,710 18,146
-----------------------------------
$5,602,006 $ 25,827 $ (386,196)
===================================
7. 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
distributor of shares of the Funds. FTP 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
Page 61
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
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.
During the six months ended June 30, 2016, 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 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.
8. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
U.S. Government securities and short-term investments, for the six months ended
June 30, 2016, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 176,330,581 $ 76,199,354
First Trust Multi Income 4,440,883 3,578,926
First Trust Dorsey Wright 17,263,706 9,289,795
Cost of purchases and proceeds from sales of U.S. Government investment
securities, excluding short-term investments, for the six months ended June 30,
2016, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 50,642,145 $ 50,383,858
First Trust Multi Income 738,893 182,140
First Trust Dorsey Wright -- --
9. BORROWINGS
The Trust, on behalf of First Trust Dow Jones and First Trust Multi Income,
along with First Trust Series Fund and First Trust Exchange-Traded Fund IV, has
a $135 million Credit Agreement with BNYM (the "BNYM Line of Credit") 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. These fees are reflected in the Statements of Operations in the
Commitment fees line item. To the extent that either fund accesses the BNYM Line
of Credit, there would also be an interest fee charged. Neither First Trust Dow
Jones or First Trust Multi Income drew on the BNYM Line of Credit during the six
months ended June 30, 2016.
10. 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.
11. 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 62
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (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 Form N-Qs
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
Page 63
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE 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.
The First Trust Dorsey Wright Tactical Core Portfolio (the "Portfolio") is not
sponsored, endorsed, sold or promoted by Dorsey Wright & Associates, LLC
("Licensor"). Licensor makes no representation or warranty, express or implied,
to the owners of the Portfolio or any member of the public regarding the
advisability of trading in the Portfolio. Licensor's only relationship to First
Trust Advisors L.P. ("First Trust") is the licensing of certain trademarks and
trade names of Licensor and of the Dorsey Wright Tactical Tilt Moderate Core
Index which is determined, composed and calculated by Licensor without regard to
First Trust or the Portfolio, Licensor has no obligation to take the needs of
First Trust or the owners of the Portfolio into consideration in determining,
composing or calculating Dorsey Wright Tactical Tilt Moderate Core Index.
Licensor is not responsible for and has not participated in the determination of
the timing of, prices at, or quantities of the Portfolio to be listed or in the
determination or calculation of the equation by which the Portfolio are to be
converted into cash. Licensor has no obligation or liability in connection with
the administration, marketing or trading of the Portfolio.
LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DORSEY
WRIGHT TACTICAL TILT MODERATE CORE OR ANY DATA INCLUDED THEREIN AND LICENSOR
SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
FIRST TRUST, OWNERS OF THE FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO, OR
ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DORSEY WRIGHT TACTICAL TILT
MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DORSEY WRIGHT
TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO
THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN LICENSOR AND
FIRST TRUST.
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' prospectuses
and statements of additional information, as well as other regulatory filings.
AFFILIATED FUND RISK. The First Trust Multi Income Allocation Portfolio and the
First Trust Dorsey Wright Tactical Core Portfolio invest in securities of
affiliated ETFs, which involves additional expenses that would not be present in
a direct investment in such affiliated ETFs. Furthermore, the Funds' investment
performance and risks are directly related to the investment performance and
risks of the affiliated ETFs.
CALL RISK. If an issuer calls higher-yielding debt instruments held by the
Funds, performance could be adversely impacted.
CONVERTIBLE SECURITIES RISK. The ETFs in which the First Trust Multi Income
Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio
invest may invest in convertible securities. Convertible securities have
characteristics of both equity and debt securities and, as a result, are exposed
to certain additional risks. The market values of convertible securities tend to
decline as interest rates increase and, conversely, to increase as interest
rates decline. However, a convertible security's market value also tends to
reflect the market price of the common stock of the issuing company,
particularly when the stock price is greater than the convertible security's
conversion price (i.e., the predetermined price or exchange ratio at which the
convertible security can be converted or exchanged for the underlying common
stock). Convertible securities are also exposed to the risk that an issuer is
unable to meet its obligation to make dividend or principal payments when due as
a result of changing financial or market conditions. Convertible securities
generally offer lower interest or dividend yields than non-convertible debt
securities of similar credit quality because of their potential for capital
appreciation.
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.
CURRENCY RISK. The ETFs in which the First Trust Multi Income Allocation
Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest may
hold investments that are denominated in non-U.S. currencies, or in securities
that provide exposure to such currencies, currency exchange rates or interest
rates denominated in such currencies. Changes in currency exchange rates and the
relative value of non-U.S. currencies will affect the value of the Funds'
investment and the value of your Fund shares. Currency exchange rates can be
very volatile and can change quickly and unpredictably. As a result, the value
of an investment in the Funds may change quickly and without warning and you may
lose money.
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DEPOSITORY RECEIPTS RISK. The First Trust Multi Income Allocation Portfolio and
the First Trust Dorsey Wright Tactical Core Portfolio invest 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.
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. Because the Funds and the ETFs in which the First Trust
Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical
Core Portfolio invest hold equity securities, the value of the Funds' 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 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 capital
rises and borrowing costs increase. The equity markets have experienced recent
volatility that may lead to sharp declines in the value of the underlying ETFs
and the Funds.
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 Funds bear their ratable share of the underlying fund's expenses,
and are 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.
FIXED INCOME SECURITIES RISK. An investment in the Funds involves risk
associated with an investment in fixed income securities including the risk that
certain of the securities in the Funds may not have the benefit of covenants
that would prevent the issuer from engaging in capital restructurings or
borrowing transactions in connection with corporate acquisitions, leveraged
buyouts or restructurings. This limitation could reduce the ability of the
issuer to meet its payment obligations and might result in increased credit
risk. In addition, certain of the securities may be redeemed or prepaid by the
issuer, resulting in lower interest payments by the Funds and reduced
distributions to shareholders.
FLOATING RATE LOAN RISK. The Funds and the ETFs in which the First Trust Multi
Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core
Portfolio invest may invest in floating rate loans, which may include high yield
securities, or "junk" loans. An investment in floating rate loans subjects the
Funds to credit risk, which is heightened for loans in which the Funds invest
because companies that issue such loans tend to be highly leveraged and thus are
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more susceptible to the risks of interest deferral 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. Loans are subject to a number of risks
described elsewhere in this annual report, including liquidity risk and the risk
of investing in below investment grade debt instruments. Floating rate loans 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. Floating rate loans may also not
be considered "securities" under the 1940 Act and therefore prevent the Funds
from relying on the anti-fraud provisions of the Act.
FUND OF FUNDS RISK. The First Trust Multi Income Allocation Portfolio and the
First Trust Dorsey Wright Tactical Core Portfolio invest in securities of other
ETFs, which involves additional expenses that would not be present in a direct
investment in such ETFs. Furthermore, the Funds' investment performance and
risks are directly related to the investment performance and risks of the
underlying ETFs in which the Funds invest.
HIGH YIELD SECURITIES RISK. The First Trust Multi Income Allocation Portfolio
and the First Trust Dorsey Wright Tactical Core Portfolio invest 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.
INDEX CONSTITUENT RISK. The Fund may be a constituent of one or more indices. As
a result, the Fund may be included in one or more index-tracking ETFs or mutual
funds. Being a component security of such a vehicle could greatly affect the
trading activity involving the Fund, the size of the Fund and the market
volatility of the Fund. Inclusion in an index could significantly increase
demand for the Fund and removal from an index could result in outsized selling
activity in a relatively short period of time. As a result, the Fund's NAV could
be negatively impacted and the Fund's market price may be significantly below
the Fund's net asset value during certain periods In addition, index rebalances
may potentially result in increased trading activity. To the extent buying or
selling activity increases, the Fund can be exposed to increased brokerage costs
and adverse tax consequences and the market price of the Fund can be negatively
affected.
INDEX REBALANCE RISK. Pursuant to the methodology that the Fund's index provider
uses to calculate and maintain the Fund's underlying index, the Fund may own a
significant portion of the First Trust ETF's included in the Fund. Such ETFs may
be removed from the underlying Index in the event that it does not comply with
the eligibility requirements of the underlying index. As a result, the Fund may
be forced to sell shares of certain First Trust ETFs at inopportune times or for
prices other than at current market values or may elect not to sell such shares
on the day that they are removed from the underlying index, due to market
conditions or otherwise. Due to these factors, the variation between the Fund's
annual return and the return of the underlying index may increase significantly.
Apart from scheduled rebalances, the index provider may carry out additional ad
hoc rebalances to the underlying index to, for example, correct an error in the
selection of constituents. When the Fund in turn rebalances its portfolio, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne by the Fund and its shareholders. Unscheduled rebalances may also
expose the Fund to additional tracking error risk. Therefore, errors and
additional ad hoc rebalances carried out by the index provider may increase the
Fund's costs and market exposure.
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. Mortgage-related securities
are particularly subject to the risk that interest rate volatility may adversely
impact the valuation and price of such securities. Additionally, the return on
the floating rate loans in which the Funds may invest will decline during a
period of falling interest rates.
INVESTMENT COMPANIES RISK. The Funds may invest in the shares of other
investment companies, and therefore, the Funds' investment performance and risks
may be related to the investment performance and risks of the underlying funds.
In general, as a shareholder in other investment companies, the Funds bear their
ratable share of the underlying Fund's expenses, and would be subject to
duplicative expenses to the extent the Funds invest in other investment
companies.
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LIQUIDITY RISK. The First Trust Multi Income Allocation Portfolio and the First
Trust Dorsey Wright Tactical Core Portfolio invest a portion of their assets in
other funds which invest in lower-quality debt issued by companies that are
highly leveraged. Lower-quality debt tends to be less liquid than higher-quality
debt. Moreover, smaller debt issues tend to be less liquid than larger debt
issues. If the economy experiences a sudden downturn, or if the debt markets for
such companies become distressed, the Funds may have particular difficulty
selling their assets in sufficient amounts, at reasonable prices and in a
sufficiently timely manner to raise the cash necessary to meet any potentially
heavy redemption requests by shareholders.
As of the fourth quarter of 2015, the market for high yield debt has experienced
decreased liquidity, and investor perception of increased risk has caused yield
spreads to widen. Decreased liquidity may negatively affect the First Trust
Multi Income Allocation Portfolio's and the First Trust Dorsey Wright Tactical
Core Portfolio's ability to mitigate risk and to meet redemptions.
LOAN PREPAYMENT RISK. Loans 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 the
Funds derive interest income will be reduced. The Funds may not be able to
reinvest the proceeds received on terms as favorable as the prepaid loan.
LOAN RISK. An investment in loans subjects the Funds to credit risk, which is
heightened for loans in which the Funds 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 annual report, including liquidity risk and
the risk of investing in below investment grade debt instruments.
MANAGEMENT RISK. The Funds are subject to management risk because they have
actively managed portfolios. The Advisor will apply investment techniques and
risk analyses in making investment decisions for the Funds, but there can be no
guarantee that the Funds will
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.
MLP TAX RISK. With respect to First Trust Multi Income Allocation Portfolio, the
Fund's ability to meet its investment objectives depends, in part, on the level
of taxable income and distributions it receives from the MLP and MLP-related
entities in which the Fund invests, a factor over which the Fund has no control.
The benefit the Fund derives from its investment in MLPs is dependent on the
MLPs being treated as partnerships for federal income tax purposes. As a
partnership, an MLP has no income tax liability at the entity level. If, as a
result of a change in an MLP's business, an MLP were treated as a corporation
for federal income tax purposes, such MLP would be obligated to pay federal
income tax on its income at the applicable corporate tax rate. If an MLP was
classified as a corporation for federal income tax purposes, the amount of cash
available for distribution with respect to its units would be reduced and any
such distributions received by the Fund would be taxed entirely as dividend
income if paid out of the earnings of the MLP. Therefore, treatment of an MLP as
a corporation for federal income tax purposes would result in a material
reduction in the after-tax return to the Fund, likely causing a substantial
reduction in the value of the shares of a Fund.
MORTGAGE SECURITIES RISK. The ETFs in which the First Trust Multi Income
Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio
invest in mortgage-related securities, including mortgage-backed securities,
which may make the Funds 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
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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.
MUNICIPAL BONDS RISK. Certain of the ETFs in which the First Trust Dorsey Wright
Tactical Core Portfolio invests may invest in municipal bonds. In addition to
being subject to credit, income and interest rate risk (as described in the
prospectus), municipal bonds are subject to tax risk. Interest income from
municipal bonds is normally not subject to regular federal income tax, but
income from municipal bonds held by the underlying ETFs could be declared
taxable because of, among other things, unfavorable changes in tax laws, adverse
interpretations by the Internal Revenue Service or state tax authorities or
noncompliant conduct of a bond issuer. Consequently, the attractiveness of
municipal bonds in relation to other investment alternatives is affected by
changes in federal income tax rates or changes in the tax-exempt status of
interest income from municipal bonds.
NEW FUND RISK. The First Trust Multi Income Allocation Portfolio and the First
Trust Dorsey Wright Tactical Core Portfolio currently have fewer assets than
larger funds, and like other relatively new funds, large inflows and outflows
may impact the Funds' 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-CORRELATION RISK. The Funds' returns may not match the return of an Index
for a number of reasons. For example, the Funds incur operating expenses not
applicable to the Indexes, and may incur costs in buying and selling securities,
especially when rebalancing the Funds' portfolio holdings to reflect changes in
the composition of the Indexes. In addition, the Funds' portfolio holdings may
not exactly replicate the securities included in the Indexes or the ratios
between the securities included in the Indexes.
NON-DIVERSIFICATION RISK. The First Trust Dorsey Wright Tactical Core Portfolio
is classified as "non-diversified" under the 1940 Act. As a result, the First
Trust Dorsey Wright Tactical Core Portfolio is only limited as to the percentage
of its assets that may be invested in the securities of any one issuer by the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"). The First Trust Dorsey Wright Tactical Core Portfolio may
invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the First Trust Dorsey Wright Tactical Core Portfolio may
be more susceptible to a single adverse economic or regulatory occurrence
affecting one or more of these issuers, experience increased volatility and be
highly invested in certain issuers.
NON-U.S. SECURITIES AND EMERGING MARKETS RISK. The First Trust Multi Income
Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio
invest 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 Funds and certain of the ETFs in which the First
Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright
Tactical Core Portfolio invest 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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SMALL FUND RISK. The Funds currently have fewer assets than larger funds, and
like other relatively smaller funds, large inflows and outflows may impact the
Funds' 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.
SMALLER COMPANY RISK. The Funds and certain of the ETFs in which the First Trust
Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical
Core Portfolio 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.
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT
AND INVESTMENT SUB-ADVISORY AGREEMENTS
The Board of Trustees (the "Board") of the First Trust Variable Insurance Trust
(the "Trust"), including the Independent Trustees, unanimously approved the
continuation of the Investment Management Agreement (the "Advisory Agreement")
with First Trust Advisors L.P. ("First Trust" or the "Advisor") on behalf of
each of First Trust/Dow Jones Dividend & Income Allocation Portfolio and First
Trust Multi Income Allocation Portfolio (each a "Fund" and together the
"Funds"); the Investment Sub-Advisory Agreement (the "Stonebridge Sub-Advisory
Agreement") among the Trust, on behalf of First Trust Multi Income Allocation
Portfolio, 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 First Trust Multi Income Allocation
Portfolio, the Advisor and Energy Income Partners, LLC ("Energy Income
Partners") for a one-year period ending June 30, 2017 at a meeting held on June
13, 2016. 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 individually referred to
as a "Sub-Advisor" and 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 determined that the continuation of the Advisory
Agreement is in the best interests of each Fund and the continuation of the
Sub-Advisory Agreements is in the best interests of First Trust Multi Income
Allocation Portfolio in light of the extent and quality of the 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. At meetings held on April 22, 2016 and June 13, 2016, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor and each of the Sub-Advisors responding to requests for information from
counsel to the Independent Trustees that, among other things, outlined the
services provided by the Advisor to the Funds and by the Sub-Advisors to First
Trust Multi Income Allocation Portfolio (including the relevant personnel
responsible for these services and their experience); the advisory fee rates
payable by each Fund and the sub-advisory fees for First Trust Multi Income
Allocation Portfolio as compared to fees charged to a peer group of funds
provided by Management Practice, Inc. ("MPI"), an independent source (the "MPI
Peer Group"), and as compared to fees charged to other clients of the Advisor
and the Sub-Advisor; expenses of each Fund as compared to expense ratios of the
funds in the Fund's MPI Peer Group; performance information for each Fund; the
nature of expenses incurred in providing services to the Funds and the potential
for economies of scale, if any; financial data on the Advisor and each
Sub-Advisor; any fall out benefits to the Advisor and its affiliate, First Trust
Portfolios L.P. ("FTP"), and the Sub-Advisors; and information on the Advisor's
and each Sub-Advisor's compliance program. The Board reviewed initial materials
with the Advisor at a special meeting held on April 22, 2016, prior to which the
Independent Trustees and their counsel met separately to discuss the information
provided by the Advisor and each of the Sub-Advisors. Following the April
meeting, independent legal counsel on behalf of the Independent Trustees
requested certain clarifications and supplements to the materials provided, and
the information provided in response to those requests was considered at an
executive session of the Independent Trustees and independent legal counsel held
prior to the June 13, 2016 meeting, as well as at the meeting held that day. The
Board applied its business judgment to determine whether the arrangements
between the Trust and the Advisor continue to be reasonable business
arrangements from the perspective of the Funds and the Funds' shareholders.
Similarly, the Board applied its business judgment to determine whether the
arrangements among the Trust, the Advisor and each of the Sub-Advisors continue
to be reasonable business arrangements from the perspective of First Trust Multi
Income Allocation Portfolio and the Fund's shareholders. The Board determined
that, given the totality of the information provided with respect to the
Agreements, the Board had received sufficient information to renew the
Agreements. The Board considered that shareholders chose to invest or remain
invested in the Funds knowing that the Advisor manages the Funds and knowing
that the Sub-Advisors serve as such for First Trust Multi Income Allocation
Portfolio and knowing the advisory fee.
Page 69
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
In reviewing the Agreements, the Board considered the nature, extent and quality
of the services provided by the Advisor and each Sub-Advisor under the
Agreements. With respect to the Advisory Agreement, the Board considered that
the Advisor is responsible for the overall management and administration of the
Trust and the Funds, and reviewed all of the services provided by the Advisor to
the Funds. The Board also considered the background and experience of the
persons responsible for the day-to-day management of the Funds, including for
the management of the Funds' investments and the oversight of the Sub-Advisors
for First Trust Multi Income Allocation Portfolio. In reviewing the services
provided, the Board noted the compliance program that had been developed by the
Advisor and considered that it includes a robust program for monitoring the
Advisor's, the Sub-Advisors' and the Funds' compliance with the 1940 Act, as
well as each Fund's compliance with its investment objective and policies. In
addition, as part of the Board's consideration of the Advisor's services, the
Advisor, in its written materials and at the April 22, 2016 meeting, described
to the Board the scope of its ongoing investment in additional infrastructure
and personnel to maintain and improve the quality of services provided to the
Funds and the other funds in the First Trust Fund Complex. With respect to the
Sub-Advisory Agreements for First Trust Multi Income Allocation Portfolio, the
Board considered the services that each Sub-Advisor provides to the Fund, noting
that Energy Income Partners is responsible for the day-to-day management of a
portion of the Fund's investments and that Stonebridge serves in a
non-discretionary capacity for a portion of the Fund's investments. The Board
noted the background and experience of each Sub-Advisor's portfolio management
team. In light of the information presented and the considerations made, the
Board concluded that the nature, extent and quality of the services provided to
the Funds by the Advisor and to First Trust Multi Income Allocation Portfolio by
the Sub-Advisors under the Agreements have been and are expected to remain
satisfactory and that the Advisor and, for First Trust Multi Income Allocation
Portfolio, the Sub-Advisors, have managed the Funds consistent with each Fund's
respective investment objectives and policies.
The Board considered the advisory fee rate payable by each Fund under the
Advisory Agreement and, for First Trust Multi Income Allocation Portfolio,
considered the sub-advisory fees paid under the Sub-Advisory Agreements for the
services provided, noting that the sub-advisory fees are paid by the Advisor
from its advisory fee. The Board considered that the Advisor had agreed to
extend the current expense caps for Class I and Class II shares of each Fund at
least until May 1, 2017. The Board noted that expenses borne or advisory fees
waived by First Trust are subject to reimbursement by the applicable Fund for up
to three years from the date the expense was incurred or advisory fee was
waived, 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 of the reimbursement or at the time the expenses were borne or
advisory fees were waived by First Trust. The Board also noted that the Advisor
had extended through May 1, 2017 its agreement to reduce the advisory fee
payable by First Trust Multi Income Allocation Portfolio in the amount of 0.37%
of the Fund's average daily net assets. The Board received and reviewed
information for each Fund showing the advisory fee rates and expense ratios of
the peer funds in the MPI Peer Group, as well as advisory fee rates charged by
the Advisor and the Sub-Advisor to other fund and non-fund clients, as
applicable. Based on the information provided, the Board noted that the advisory
fee of each Fund was below the median advisory fee of the peer funds in the
Fund's MPI Peer Group. The Board also noted that with respect to the total (net)
expense ratio of each Fund's Class I shares, First Trust Multi Income Allocation
Portfolio's net expense ratio was below, and First Trust/Dow Jones Dividend &
Income Allocation Portfolio's net expense ratio was above, the median expense
ratio of the peer funds in the Fund's MPI Peer Group. With respect to fees
charged to other clients, the Board considered differences between the Funds and
other clients that limited their comparability. In considering the advisory fee
rates overall, the Board also considered the Advisor's statement that it seeks
to meet investor needs through innovative and value-added investment solutions
and the Advisor's description of its long-term commitment to each Fund.
The Board considered performance information for the Funds. The Board noted the
process it has established for monitoring the Fund's performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor and Sub-Advisor for the Funds. The Board determined that this
process continues to be effective for reviewing the Funds' performance. The
Board received and reviewed information comparing each Fund's performance for
periods ended December 31, 2015 to the performance of the Fund's MPI Peer Group
and to benchmark indexes, including at least one blended benchmark. Based on the
information provided, the Board noted that First Trust/Dow Jones Dividend &
Income Allocation Portfolio's performance (Class I shares) outperformed the MPI
Peer Group average for the one-year period ended December 31, 2015 and
underperformed the MPI Peer Group average for the three-year period ended
December 31, 2015. The Board noted that First Trust Multi Income Allocation
Portfolio's performance (Class I shares) underperformed the MPI Peer Group
average for the one-year period ended December 31, 2015.
On the basis of all the information provided on the fees, expenses and
performance of the Funds and the ongoing oversight by the Board, the Board
concluded that the advisory fee for each Fund and the sub-advisory fees for
First Trust Multi Income Allocation Portfolio continue to be reasonable and
appropriate in light of the nature, extent and quality of the services provided
by the Advisor to each Fund under the Advisory Agreement and provided to First
Trust Multi Income Allocation Portfolio by the Sub-Advisors under the
Sub-Advisory Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
each Fund and noted the Advisor's statement that it expects its expenses to
increase over the next twelve months as the Advisor continues to make
investments in personnel and infrastructure. The Board considered the revenues
and allocated costs (including the allocation methodology) of the Advisor in
serving as investment advisor to each Fund for the twelve months ended December
31, 2015 and the estimated profitability level for each Fund calculated by the
Page 70
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2016 (UNAUDITED)
Advisor based on such data, as well as complex-wide and product-line
profitability data for the same period. The Board noted the inherent limitations
in the profitability analysis, and concluded that, based on the information
provided, the Advisor's profitability level for each Fund was not unreasonable.
The Board considered that the Advisor had identified as a fall out benefit to
the Advisor and FTP their exposure to investors and brokers who, absent their
exposure to the Funds, may have had no dealings with the Advisor or FTP. The
Board also considered the majority ownership interest of an affiliate of the
Advisor in Stonebridge and the investment by an affiliate of the Advisor in
Energy Income Partners and potential fall-out benefits to the Advisor from such
interests. The Board noted that FTP is compensated for services provided to the
Funds through Rule 12b 1 distribution and service fees payable by Class I
shares, and that the Advisor receives compensation from the Funds for providing
fund reporting services pursuant to a separate Fund Reporting Services
Agreement. The Board also noted that the Advisor does not utilize soft dollars
in connection with its management of the Funds' portfolios.
With respect to the Stonebridge Sub-Advisory Agreement, the Board considered
Stonebridge's expenses and noted Stonebridge's recent hiring of additional
personnel. The Board considered that the sub advisory fee rate was negotiated at
arm's length between the Advisor and Stonebridge. The Board also considered
information provided by Stonebridge with respect to the profitability of the
Stonebridge Sub Advisory Agreement to Stonebridge. The Board noted the inherent
limitations in the profitability analysis and concluded that the profitability
analysis for the Advisor was more relevant. The Board considered fall-out
benefits that may be realized by Stonebridge from its relationship with First
Trust Multi Income Allocation Portfolio, including potential fall-out benefits
to Stonebridge from the ownership interest of an affiliate of the Advisor in
Stonebridge. The Board noted that Stonebridge does not provide trade execution
services on behalf of First Trust Multi Income Allocation Portfolio.
With respect to the Energy Income Partners Sub-Advisory Agreement, the Board
considered that Energy Income Partners' investment services expenses are
primarily fixed, and that Energy Income Partners has made recent investments in
infrastructure and personnel. The Board considered that the sub advisory fee
rate was negotiated at arm's length between the Advisor and Energy Income
Partners. The Board also considered information provided by Energy Income
Partners as to the profitability of the Energy Income Partners Sub Advisory
Agreement to Energy Income Partners. The Board noted the inherent limitations in
the profitability analysis and concluded that the profitability analysis for the
Advisor was more relevant. The Board considered fall-out benefits that may be
realized by Energy Income Partners from its relationship with First Trust Multi
Income Allocation Portfolio, including the potential fall-out benefits to Energy
Income Partners from the ownership interest of an affiliate of the Advisor in
Energy Income Partners. The Board noted that Energy Income Partners does not
provide trade execution services on behalf of First Trust Multi Income
Allocation Portfolio.
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 continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of the applicable Funds. No single
factor was determinative in the Board's analysis.
Page 71
This Page Left Blank Intentionally.
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 Stonebridge Advisors, LLC
10 Wright Street 10 Westport Road, Suite C101
Westport, CT 06880 Wilton, CT 06897
ADMINISTRATOR & FUND ACCOUNTANT
FIRST TRUST/DOW JONES DIVIDEND & INCOME FIRST TRUST DORSEY WRIGHT TACTICAL
ALLOCATION PORTFOLIO CORE PORTFOLIO
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Brown Brothers Harriman & Co.
BNY Mellon Investment Servicing (US) Inc. 50 Post Office Square
301 Bellevue Parkway Boston, MA 02110
Wilmington, DE 19809
CUSTODIAN
FIRST TRUST/DOW JONES DIVIDEND & INCOME FIRST TRUST DORSEY WRIGHT TACTICAL
ALLOCATION PORTFOLIO CORE PORTFOLIO
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Brown Brothers Harriman & Co.
The Bank of New York Mellon 50 Post Office Square
101 Barclay Street, 20th Floor Boston, MA 02110
New York, NY 10286
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[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/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: August 22, 2016
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: August 22, 2016
-------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 22, 2016
-------------------
* Print the name and title of each signing officer under his or her signature.