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: December 31, 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
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2016
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL REPORT
DECEMBER 31, 2016
Shareholder Letter.......................................................... 1
Performance Summary and Portfolio Components
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 2
First Trust Multi Income Allocation Portfolio.......................... 7
First Trust Dorsey Wright Tactical Core Portfolio...................... 12
Understanding Your Fund Expenses............................................ 15
Portfolio of Investments
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 16
First Trust Multi Income Allocation Portfolio.......................... 40
First Trust Dorsey Wright Tactical Core Portfolio...................... 51
Statements of Assets and Liabilities........................................ 52
Statements of Operations.................................................... 53
Statements of Changes in Net Assets......................................... 54
Financial Highlights........................................................ 57
Notes to Financial Statements............................................... 60
Report of Independent Registered Public Accounting Firm..................... 73
Additional Information...................................................... 74
Board of Trustees and Officers.............................................. 81
Privacy Policy.............................................................. 83
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"), 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 objectives.
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.
By reading the portfolio commentary by each Fund's portfolio management team,
you may obtain an understanding of how the market environment affected 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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2016
Dear Shareholders:
Now that 2016 is over, many will remember some of the historic events that
occurred during the year: from the Brexit vote in the UK to leave the European
Union, to the results of the U.S. Presidential Election which seemed unlikely at
the beginning of the year, to the first World Series Championship for the
Chicago Cubs in 108 years!
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
annual report which contains detailed information about your investment for the
12 months ended December 31, 2016, including a performance analysis and the
financial statements for you to review. We encourage you to read this report and
discuss it with your financial advisor.
On November 8, Donald J. Trump was elected to become the 45th president of the
United States. While no one has a crystal ball and the ability to predict how
his presidency will shape our country (and the world), there is no doubt that
his populist message resonated for many Americans. His message of improving
lives for the "average" American, while reducing the size and scope of the
federal government, also won him millions of votes. Many of his supporters
believe that with his background in business, President Trump will make policy
changes that will continue to grow the economy and spur stock markets even
higher. Many analysts predicted the Dow Jones Industrial Average would hit a new
benchmark, 20,000, in the first days of the New Year. As with all change and a
new administration, only time will tell.
As of December 31, 2016, the S&P 500(R) Index was up 11.96% calendar
year-to-date, on a total return basis, as measured by Bloomberg. The current
bull market (measuring from March 9, 2009 through December 31, 2016) is the
second longest in history. We remain bullish on the economy, but continue to
have a long-term perspective. We believe investors should think long-term as
well, since no one can predict volatility and the inevitable ups and downs that
occur in the market.
Thank you for your investment in the First Trust Variable Insurance Trust and
for giving First Trust the opportunity to be a part of your investment plan. We
value our relationship with you and will continue our relentless focus on
bringing you the types of investments that we believe could help 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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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2016, the First Trust/Dow Jones Dividend &
Income Allocation Portfolio (the "Fund") Class I Shares returned 11.74% versus
9.54% for the Blended Benchmark: 50% Russell 3000(R) Index and 50% Bloomberg
Barclays U.S Corporate Investment-Grade Index. As of December 31, 2016, the
total investments for the Fund were allocated as follows: Equities, 55.9% and
Fixed Income, 44.1%.
EQUITIES COMMENTARY
U.S. equity markets extended a seven year bull market into an eighth year in
2016. During the first quarter, the Russell 3000(R) Index rallied back from the
worst-ever start to a year to end the quarter slightly positive. Fears over a
more hawkish Federal Reserve after the December 2015 rate hike, slowing global
growth and falling commodity prices, sent the Russell 3000(R) Index down 8% in
the first two weeks of the trading year. The sell-off continued until the middle
of February before rebounding sharply, led by economically sensitive sectors.
Domestic equities ended a volatile second quarter higher as the U.K.'s vote to
leave the European Union ("Brexit") was unable to derail the market. Stocks
benefited from a resilient consumer and policy makers continued support in
mitigating Brexit ramifications and sluggish global growth. The labor market
continued to add jobs, but at a slower pace in May with an initial reading of
38,000 jobs added, which was later revised higher. In the third quarter, U.S.
equities enjoyed solid gains in July, experienced a quiet August only to
experience some volatility in September. Signs of consumer strength were chiefly
responsible for the improved sentiment toward the domestic economy.
Internationally, newly installed U.K. Prime Minister Theresa May signaled
patience about the timing of Britain's exit from the European Union, reducing
near term uncertainty, while China reported stronger than expected second
quarter GDP growth, reassuring emerging market investors. Volatility returned in
September and started with equities selling off early in the month on the
European Central Bank decision not to announce an expansion of its quantitative
easing program, as many expected, and fears that the Federal Reserve might raise
rates at the September meeting. Volatility in energy prices also weighed on the
market as the International Energy Administration issued a revised forecast
calling for crude oil markets to remain in surplus during 2017. By the end of
September, however, equities rallied on the Federal Reserve decision to hold off
on raising its benchmark rate, and U.S. stocks finished unchanged on the month
with small-cap stocks higher. While U.S. equities declined early in the fourth
quarter, the Russell 3000(R) Index surged after the results of U.S. elections
handed over power to President-elect Donald Trump and a Republican congress,
increasing the possibility of pro-growth policies such as corporate tax cuts,
increased infrastructure spending and regulatory relief. All told, the Russell
3000(R) Index gained 4.21% for the fourth quarter, and had a robust 12.74%
return for 2016.
The equity portion of the Fund has a quarterly rebalance in early January,
April, July and October. The equity portion of the Fund seeks capital
appreciation, below market risk and above market dividend yield. To accomplish
this, the selection process is focused on dividend strength, capital strength
and price stability. This process resulted in overweight positions in Financials
and Industrials stocks, while Health Care, Information Technology, Energy and
Real Estate were underweight. The Utilities and Telecommunication Services
sectors were also underweight as the Fund had no stocks allocated in these
sectors.
The equity portion of the Fund outperformed the Russell 3000(R) Index. Of the 11
GICS sectors, seven had a positive total attribution effect (allocation effect
combined with selection effect) and four had a negative total attribution
effect. Six sectors had a positive selection effect: Industrials, Information
Technology, Health Care, Consumer Discretionary, Consumer Staples and Real
Estate. Two sectors had a negative selection effect: Materials and Energy. The
Financials sector had a flat selection effect. The equity portion of the Fund
benefited from both a positive selection effect and positive allocation effect,
which led to the outperformance of the Russell 3000(R) Index.
The Industrials sector was the largest overall contributor to relative
performance. The equity portion of the Fund was overweight this outperforming
sector in the Russell 3000(R) Index, which led to a positive allocation effect.
The Fund also had a positive selection effect for the sector which led to
positive overall relative performance for the sector. The Fund's relative
performance for the sector was helped by the selection of MSC Industrial Direct
Co., Inc., CLARCOR, Inc., Cummins, Inc., Toro (The) Co. and Donaldson Co., Inc.
Page 2
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
The Energy sector was the biggest detractor from relative performance. The
equity portion of the Fund was underweight the best performing sector in the
Russell 3000(R) Index. The Fund had negative selection and allocation effects,
which led to overall relative underperformance for the sector.
Relative to the Russell 3000(R) Index, the equity portion of the Fund also
outperformed in the Health Care sector and in the Financials sector. The Fund
was underweight the underperforming Health Care sector, resulting in a positive
allocation effect. The Fund's relative performance for the sector was also
helped by positive stock selection. In the Financials sector, the Fund was
overweight this outperforming sector, resulting in positive allocation effect.
The Fund's top five equity contributors to performance were MSC Industrial
Direct Co., Inc., Cummins, Inc., Toro (The) Co., Columbia Banking System, Inc.
and CLARCOR, Inc. The top five equity detractors from performance were East West
Bancorp, Inc., NIKE, Inc., CVS Health Corp., Wells Fargo & Co. and Carter's,
Inc.
As we look forward to 2017, after the Presidential Inauguration in January, we
believe the political landscape in America will look very different.
President-Elect Trump made some major campaign promises which would likely
impact U.S. financial markets if they come to fruition. These included the
repeal and replacement of Obamacare, personal and corporate tax reform, swaths
of deregulation and significant trade renegotiations. The U.S. economy remained
strong and steady to end 2016 and we believe any of these new pro-growth
policies may strengthen the economy further. However, economic strength also
increases the probability of future rate hikes by the Federal Reserve and rising
inflation. The equity portion of the Fund will remain consistent in its
objectives of capital appreciation, below market risk and above market dividend
yield.
FIXED-INCOME COMMENTARY
The investment-grade corporate bond market had a strong 2016. Following two
years of credit spread widening, the combined impact of improving fundamentals,
attractive valuations and strong demand from overseas accounts (seeking
alternatives to the negative yields available in their local currency) resulted
in an impressive recovery in credit spreads.
For the 12-month period ended December 31, 2016, corporate bonds outperformed
Treasuries. As measured by the Bloomberg Barclays U.S. Corporate Investment
Grade Index, spreads tightened 32 basis points to 123 basis points at year end.
Investment-grade corporate bonds had a positive total return for the year, as
the rally in credit spreads, along with the better carry provided by corporate
bonds, offset the dramatic post-election move higher in interest rates.
Corporate spreads actually began the year under significant pressure as concerns
about volatile energy prices, anemic global growth, and the adverse impact of
falling government bond yields on the Financials sector resulted in a sharp
spread widening early in the year. As sentiment improved, however, a dramatic
recovery followed and a period of spread tightening ensued, that was only
reversed by the surprising Brexit vote in June. Nonetheless, as was the case
with the widening earlier in the year, credit spreads quickly recovered and once
again continued their slow grind tighter. Later in the year, spreads again came
under pressure - this time as expectations for a tapering of global quantitative
easing, and rising inflation expectations, caused interest rates to begin a
steady climb from their post-Brexit lows. This bout of widening did not last
either, however, since credit spreads once again moved tighter following the
U.S. election, as risk appetite improved, and as the higher all-in-yields
resulting from the spike in interest rates were promptly met with increased
demand.
The total return on the fixed-income portion of the Fund was 5.26% (gross of
fees) versus the Bloomberg Barclays U.S. Corporate Investment-Grade Index which
was 6.11%. At year's end, fixed income was approximately 44% of the portfolio.
The fixed-income portion of the Fund seeks to provide income along with
preservation of capital. To accomplish this, the selection process is primarily
value oriented, strongly emphasizes downside protection and focuses on free cash
flow, leverage, interest coverage, and revenue growth rates. This process
resulted in overweight positions in Banking, Utilities, and Transportation
bonds, while Consumer Non-cyclical, Basic Industry and real estate investment
trusts ("REITs") were the largest underweight.
Page 3
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
Yield curve changes had a neutral effect on relative performance. Treasury
yields climbed higher during the second half of the year although yields in the
20-30 year part of the curve increased by less, resulting in a flatter curve.
The portfolio maintained a moderate duration underweight throughout the period.
Among credit quality and maturity cohorts, lower credit quality and long credit
duration risk had the best returns. The top performing credit rating category
was BBB's and the best by maturity bucket was 10+ years.
Among the 15 fixed-income industry groups, six had positive contributions to
relative performance from allocation decisions. The allocation to Treasury
securities was a seventh positive contributor. Allocations to Electric, Energy,
and Insurance Industry had the greatest positive impact. Allocations to Basic
Industry, Consumer Non-cyclical, and REITs had the greatest negative impact.
Overall, allocation effects subtracted from relative performance owing chiefly
to the strategy's underweight to Basic Industry.
As weighted by percent of market value, 24 of the top 25 issuers held in the
fixed-income portion of the Fund had positive contributions to relative
performance. Within this cohort, Conoco Philips, Citigroup, and Kinder Morgan
were the three largest contributors. Within industry categories, selections of
Technology and Consumer Non-cyclical issuers had the greatest positive impact.
However these were offset by issuer selections within Energy, Basic Industry,
and Communications. In sum, selection effects subtracted from relative
performance. With the strategy's higher quality bias, we believe it is not
surprising to see this result in an environment where riskier, lower quality
segments of the market perform best.
Looking into 2017, we have a positive outlook for credit spreads as we believe
modestly higher global growth should result in improved earnings and cash flow.
In particular, we expect continued improvement in the credit profiles for the
Energy and Basic Materials sectors, as well as for the Financials sector which
should benefit from rising interest rates. Moreover, we expect higher Treasury
yields to help longer-maturity credit spreads given the current steepness of
credit spread curves. While valuations are not as attractive as was the case at
the beginning of 2016, we believe that lower net supply amidst continued demand
for yield will provide support for the investment-grade corporate bond market.
Against this broadly constructive spread outlook, however, we believe Treasury
yields will continue their move higher as the Federal Reserve gradually
normalizes interest rates and its balance sheet. These developments will run
counter to the positive impacts of spread tightening and carry. Accordingly, our
focus for the portfolio will be on issuers and sectors where improving credit
profiles offer sufficient potential for spread tightening to offset the likely
headwind of higher interest rates.
Page 4
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2016
1 YEAR
ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 11.74% 8.25%
Blended Benchmark (a) 9.54% 8.37%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 6.11% 3.72%
Russell 3000(R) Index (c) 12.74% 12.86%
Secondary Blended Benchmark (d) 9.47% 8.55%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 5.84% 3.93%
Dow Jones U.S. Total Stock Market Index(SM) (f) 12.60% 12.76%
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1 YEAR
ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 12.07% 7.44%
Blended Benchmark (a) 9.54% 5.99%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 6.11% 3.05%
Russell 3000(R) Index (c) 12.74% 8.67%
Secondary Blended Benchmark (d) 9.47% 6.23%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 5.84% 3.34%
Dow Jones U.S. Total Stock Market Index(SM) (f) 12.60% 8.56%
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(a) The Blended Benchmark returns are a 50/50 split between the Russell
3000(R) Index and the Bloomberg Barclays U.S. Corporate Investment-Grade
Index returns.
(b) Bloomberg 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 - December 31, 2016
Bloomberg 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
12/31/2017 14,484 14,554 11,859 17,592 14,672 11,975 17,521
Page 5
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
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Endurance Specialty Holdings, Ltd. 0.5%
Columbia Banking System, Inc. 0.5
TCF Financial Corp. 0.5
Alaska Air Group, Inc. 0.5
Allied World Assurance Co. Holdings AG 0.5
Robert Half International, Inc. 0.4
CLARCOR, Inc. 0.4
Cracker Barrel Old Country Store, Inc. 0.4
MSC Industrial Direct Co., Inc., Class A 0.4
Landstar System, Inc. 0.4
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Total 4.5%
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% OF TOTAL
TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS
------------------------------------------------------
Goldman Sachs Group (The), Inc. 2.0%
Citigroup, Inc. 1.7
Wells Fargo & Co. 1.6
Bank of America Corp. 1.5
Verizon Communications, Inc. 1.4
JPMorgan Chase & Co. 1.3
Morgan Stanley 1.2
AT&T, Inc. 1.2
Ford Motor Credit Co., LLC 1.1
U.S. Government 1.0
------------------------------------------------------
Total 14.0%
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 4.3%
AA+ 0.7
AA 5.0
AA- 9.5
A+ 9.3
A 24.0
A- 18.8
BBB+ 8.7
BBB 10.6
BBB- 6.4
A-1 (short-term) 0.3
A-2 (short-term) 1.2
A-3 (short-term) 1.2
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Total 100.0%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Common Stocks:
Financials 17.3%
Industrials 15.3
Consumer Discretionary 7.0
Information Technology 6.1
Consumer Staples 5.1
Health Care 2.1
Materials 1.6
Energy 0.7
Real Estate 0.7
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Total Common Stocks 55.9
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Corporate Bonds & Notes:
Financials 14.0
Utilities 4.6
Energy 4.1
Consumer Staples 3.4
Industrials 3.0
Health Care 2.9
Information Technology 2.8
Consumer Discretionary 2.6
Telecommunication Services 2.6
Materials 0.4
Real Estate 0.2
------------------------------------------------------
Total Corporate Bonds & Notes 40.6
------------------------------------------------------
Foreign Corporate Bonds & Notes:
Financials 0.8
Energy 0.2
Health Care 0.2
Telecommunication Services 0.1
Materials 0.1
Consumer Discretionary 0.0*
------------------------------------------------------
Total Foreign Corporate Bonds & Notes 1.4
------------------------------------------------------
Commercial Paper:
Consumer Discretionary 0.3
Industrials 0.2
Information Technology 0.2
Consumer Staples 0.2
Energy 0.1
Health Care 0.1
------------------------------------------------------
Total Commercial Paper 1.1
------------------------------------------------------
U.S. Government Bonds & Notes 1.0
------------------------------------------------------
Total 100.0%
======
* Amount is less than 0.1%.
(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
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2016, the First Trust Multi Income Allocation
Portfolio (the "Fund") Class I Shares returned 9.27% versus 6.77% for the Broad
Blended Benchmark (60% Bloomberg Barclays U.S. Aggregate Index and 40% Russell
3000(R) Index) and 10.31% for the Multi Asset Class Blended Benchmark (15%
Russell 3000(R) Index; 8% BofA Merrill Lynch Fixed Rate Preferred Securities
Index; 15% Alerian MLP Index; 15% S&P U.S. REIT Index; 8% BofA Merrill Lynch
U.S. High Yield Index; 15% S&P/LSTA Leveraged Loan Index; 8% Bloomberg Barclays
U.S. Corporate Investment-Grade Index; 8% BofA Merrill Lynch U.S. MBS Index; and
8% BofA Merrill Lynch U.S. Inflation-Linked Treasury Index).
The Fund invests in nine asset classes which are: 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
("MBS") and Treasury Inflation Protected Securities ("TIPS"). The weight
assigned to each asset class is determined on a quarterly basis. As of December
31, 2016, the dividend-paying securities were the highest-weighted asset class,
while the preferred stocks asset class was the lowest-weighted asset class. The
MLPs and REITs had the most positive impact on the overall Fund performance,
while the MBS and TIPS asset classes had the most negative impact on the overall
Fund performance.
Dividend-paying stocks returned 5.50% (Gross of Fees) for the year ended
December 31, 2016 and represented 18.7% of the portfolio as of that date. Unlike
2015, a bias toward more growth-oriented dividend-paying names was a detriment
to the portfolio, especially in the first half of the year when growth concerns
and the prospect of "lower for longer" drove performance in defensive areas of
the market. Overall, the portfolio allocation effect was neutral to performance
for the year with the first half a drag on performance and the second half
positive for performance. Stock selection, especially in consumer discretionary,
consumer staples and health care names, was responsible for the underperformance
for the year versus the Russell 3000(R) Index. Within the health care sector,
drug distributors Cardinal Health, Inc. and AmerisourceBergen Corp., along with
generic pharmaceutical manufacturer Teva Pharmaceutical Industries, were notable
laggards in the portfolio. An underweight in the health care sector, the only
one in negative territory for the year, helped negate some of the
underperformance. Within consumer staples, CVS Health Corp. and Walgreens Boots
Alliance hurt relative performance while Toyota Motor Co. and Walt Disney Co.
were a drag on consumer discretionary performance. A roughly 11% allocation to
non-U.S. stocks over the course of the year was also a drag on relative
performance as foreign markets lagged the U.S. amid dollar strength. Stock
selection in the information technology and utilities sectors were among the few
bright spots in the portfolio for the year.
The preferred stocks and hybrid capital securities returned 6.15% (Gross of
Fees) for the year ended December 31, 2016 and represented 6.9% of the portfolio
as of that date. The positive performance was a result of security selection and
increased exposure to institutional hybrid capital securities, which
significantly outperformed retail $25 par securities as interest rates rose
during the last quarter of the year.
The energy infrastructure companies and MLPs returned 26.74% (Gross of Fees) for
the year ended December 31, 2016 and represented 13.2% of the portfolio as of
that date. Positive price performance was driven by continued dividend growth in
addition to improved sentiment in the Energy sector and the MLP asset class.
Owning non-cyclical energy infrastructure companies in North America with
long-lived assets, high dividend payout ratios, and stable cash flows also
helped performance.
REITs returned 15.19% (Gross of Fees) for the year ended December 31, 2016 and
represented 10.8% of the portfolio as of that date. While the REITs asset class
benchmark return trailed the broad equity market benchmark return for 2016,
largely due to the steady rise in market interest rates during the second half
of the year, superior selection and property allocation decisions drove
outperformance of the Fund's REITs component compared to the asset class
benchmark. Superior selection in the Diversified and Specialized property types
contributed most positively to relative performance versus the asset class
benchmark. An underweight position and poor selection in the Health Care
property type contributed negatively to relative performance. The top-performing
REITs for the year in terms of contribution were Hospitality Properties Trust,
Lexington Realty Trust and Washington Real Estate Investment Trust. The
bottom-performing REITs were Sabra Health Care REIT, Inc., Weyerhaeuser Co., and
STORE Capital Corp.
Page 7
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
High-yield bonds returned 8.20% (Gross of Fees) in 2016 and represented 7.0% of
the Fund as of December 31, 2016. The high-yield bond asset class experienced
its strongest annual return in 2016 since it returned 58.10% when exiting the
recession in 2009. This was predominantly driven by the renewed strength in
commodity industries. More specifically, the energy and metals/mining industries
experienced strong returns driven by the stabilization of the underlying
commodity prices. As of the writing of this report, fundamentals remain healthy
within the high-yield bond market and yet spreads remain well above the
pre-crisis tights of T+245 in May 2007. Additionally, the recent spike in
defaults, which was driven by the commodity industry, has tapered, leading to a
trailing 12-month default rate that is directly in line with the long-term
average default rate of 3.32% (March 1999 - December 2016). This figure is a
mere 0.68% when excluding the energy and metals/mining sectors. We believe the
commodity sector has bottomed and we expect the overall default rate to continue
to decline as a result.
Floating rate loans returned 7.36% (Gross of Fees) in 2016 and represented 16.1%
of the Fund as of December 31, 2016. Similar to the high-yield bond asset class,
the senior loan asset class experienced its strongest annual return in 2016
since it returned 51.62% in 2009. After several years of senior loan outflows
from retail investors, investors have begun to find favor with the senior loan
asset class again. According to JP Morgan, the senior loan asset class ended the
year with retail inflows totaling $6.9 billion. We believe the appeal of senior
loans has increased as LIBOR has been increasing and climbed from approximately
61 basis points ("bps") to 100 bps in 2016. Moreover, we believe that with the
potential for additional interest rate hikes on the horizon, LIBOR should
continue to migrate higher in 2017. In our view, the primary challenge in the
senior loan market will likely be the pace of refinancing, whereby issuers come
to the market to reduce the spread they are paying on their senior loans. This
could potentially reduce the yield to investors while we wait for LIBOR to move
higher and ultimately push the yield up on the asset class.
Corporate bonds returned 6.13% (Gross of Fees) for the year ended December 31,
2016 and represented 8.7% of the portfolio as of that date. Investment grade
corporate bond spreads rebounded sharply over 2016 following a weak start to the
year. This improvement in credit valuations caused corporate bond yields, as
measured by the Bloomberg Barclays US Corporate Index, to end the year lower
compared to the prior year end. This is noteworthy, in our view, as it occurred
amid a record level of new corporate bond issuance and rising Treasury yields.
Our outlook is constructive for corporate bonds as credit fundamentals are
broadly supportive of debt maintenance and we expect new issuance to decline
compared to recent years.
The MBS asset class returned 4.38% (Gross of Fees) in 2016 and represented 8.9%
of the portfolio as of December 31, 2016. Although a defensive duration was
maintained during 2016, the sleeve improved performance by reducing MBS basis
exposure, rotating some MBS exposure out of index and into higher-coupon,
lower-duration pools, maintaining elevated cash balances, and maintaining its
allocation to shorter, high-yielding and high credit quality Non-Agency
Residential MBS and Commercial MBS.
TIPS returned 4.80% (Gross of Fees) for the year ended December 31, 2016 and
represented 9.7% of the portfolio as of that date. Rising inflation was a market
theme during 2016 and this was the key factor driving returns in TIPS. On
average, year-over-year inflation as measured by the Consumer Price Index was
1.3% during the year compared to 0.1% during 2015. While Treasury returns were
held back by rising interest rates, TIPS outperformed nominal Treasury bonds
because TIPS investors are generally compensated for the effects of inflation.
This is observed by wider levels of breakeven rates of inflation. Within the
portfolio, returns were greatest in maturities over 10 years as wider inflation
breakevens more than offset the rise in yields. We expect inflationary pressures
to continue through 2017 and to be supportive of the allocation to TIPS.
A year ago we commented that if U.S. economic growth were to accelerate it might
cause interest rates to rise, something investors have been anticipating for
some time, in our opinion. As it turned out, the only strong quarter of GDP
growth occurred in Q3'16, with growth coming in at an annualized rate of 3.5%,
according to data from the Bureau of Economic Analysis. The other two quarters
(Q1'16 & Q2'16) failed to exceed 1.5% (annualized). The results for the fourth
quarter have yet to be released. U.S. GDP growth has averaged just 2.1% in the
current recovery, which commenced in Q3'09, according to the National Bureau of
Economic Research. Interest rates did not move much on a net basis in 2016. The
yield on the 10-year Treasury note ("T-note") rose 18 bps, from 2.27% to 2.45%,
Page 8
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
according to Bloomberg. Interest rates, however, did receive a spark after
Donald J. Trump's win in the U.S. presidential election on November 8, 2016. The
yield on the 10-year T-note surged from 1.86% to 2.45% by year-end. We believe
that the U.S. economy may be poised to strengthen following the election.
President-Elect Donald Trump's economic agenda looks to be pro-growth, in our
opinion.
For the second consecutive year, at its December Federal Open Market Committee
meeting, the Federal Reserve (the "Fed") initiated a 25 basis point increase to
the federal funds target rate trading range, which now stands at 0.50% to 0.75%.
The Fed commented in December that inflation expectations have increased
"considerably" and noted that the labor market is tightening, according to
Bloomberg. The Fed is forecasting three quarter-point increases in 2017. For the
30-year period ended December 31, 2016, the federal funds target rate (upper
bound) averaged 3.54%, compared to 2.70% for the Consumer Price Index, according
to Bloomberg. As of the close of 2016, the federal funds target rate (upper
bound) stood at 0.75%, while the Consumer Price Index stood at 2.10%. Instead of
being 84 bps point above inflation (CPI), it stood 135 bps below on December 31,
2016. We believe this suggests that the Fed is still pro-growth in its bias. The
combination of the Fed's easy monetary policy and President-Elect Donald J.
Trump's proposed pro-growth policies, including corporate tax cuts and less
government regulations on businesses, could prove to be a positive catalyst for
growth in 2017, in our opinion. Brian Wesbury, Chief Economist at First Trust
Advisors L.P., sees the yield on the 10-year T-note rising to 3.25% by the end
of 2017.
Investors continue to funnel capital into taxable bond mutual funds and
exchange-traded funds ("ETFs"). The estimated net inflows to Taxable Bond funds
and ETFs totaled $194.1 billion in 2016, according to Morningstar. That is more
than the total estimated net inflows to "All Long Term" funds and ETFs, which
was $164.6 billion in 2016. That indicates that some of the other categories
experienced net outflows in 2016, in our view. The Multisector Bond category
reported estimated net inflows totaling $2.5 billion.
Page 9
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2016
1 YEAR
ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 9.27% 3.84%
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 9.53% 4.08%
Broad Blended Benchmark (a) 6.77% 4.97%
Bloomberg Barclays U.S. Aggregate Index (b) 2.65% 2.31%
Russell 3000(R) Index (c) 12.74% 8.67%
Multi Asset Class Blended Benchmark (d) 10.31% 3.48%
----------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays
U.S. Aggregate Index (60%) and the Russell 3000(R) Index (40%).
(b) The Bloomberg 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%), Bloomberg 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 - December 31, 2016
First Trust Multi Broad Bloomberg
Income Allocation Blended Barclays U.S. Russell 3000(R) Multi Asset Class
Portfolio -- Class I Benchmark Aggregate Index Index Blended 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
12/31/2016 11,057 11,384 10,628 12,483 10,958
Page 10
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Senior Loan Fund 16.2%
iShares iBoxx $ Investment Grade Corporate
Bond ETF 8.7
First Trust Tactical High Yield ETF 7.0
First Trust Preferred Securities and
Income ETF 6.9
iShares MBS ETF 1.4
Enterprise Products Partners, L.P. 1.3
Spectra Energy Partners, L.P. 0.9
Enbridge Energy Partners, L.P. 0.8
Magellan Midstream Partners, L.P. 0.8
Plains All American Pipeline, L.P. 0.7
------------------------------------------------------
Total 44.7%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Exchange-Traded Funds 40.7%
------------------------------------------------------
Common Stocks:
Financials 3.6
Industrials 3.1
Information Technology 3.1
Energy 3.1
Utilities 3.0
Consumer Discretionary 2.5
Health Care 1.9
Consumer Staples 1.0
Materials 0.6
Telecommunication Services 0.3
------------------------------------------------------
Total Common Stocks 22.2
------------------------------------------------------
Real Estate Investment Trusts:
Financials 10.8
------------------------------------------------------
Total Real Estate Investment Trusts 10.8
------------------------------------------------------
U.S. Government Bonds & Notes 9.6
------------------------------------------------------
Master Limited Partnerships:
Energy 8.4
Utilities 0.8
Materials 0.3
------------------------------------------------------
Total Master Limited Partnerships 9.5
------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 6.4
------------------------------------------------------
Mortgage-Backed Securities 0.7
------------------------------------------------------
Asset-Backed Securities 0.1
------------------------------------------------------
Total 100.0%
======
Page 11
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
For the year ended December 31, 2016, the First Trust Dorsey Wright Tactical
Core Portfolio (the "Fund") Class I Shares returned 0.95% versus 8.31% for the
Broad Blended Benchmark, which includes the S&P 500(R) Index (60%) and the
Bloomberg Barclays U.S. Aggregate Bond Index (40%).
The Fund seeks to provide total return. The Fund seeks to achieve its investment
objective by investing, under normal market conditions, at least 80% of its net
assets (plus any investment borrowings) in exchange-traded funds ("ETFs") and
cash and cash equivalents that comprise the Dorsey Wright Tactical Tilt Moderate
Core Index (the "Index"). It is expected that a majority of the ETFs in which
the Fund invests will be advised by First Trust.
The Index is owned and was developed by Dorsey, Wright & Associates (the "Index
Provider"). The Index is constructed pursuant to the Index Provider's
proprietary methodology, which takes into account the performance of four
distinct assets classes relative to one another. The Index is designed to
strategically allocate its investments among (i) domestic equity securities;
(ii) international equity securities; (iii) fixed income securities; and (iv)
cash and cash equivalents. The Index will gain exposure to the first three asset
classes by investing in ETFs that invest in such assets. The Index Provider has
retained Nasdaq, Inc. ("Nasdaq") to calculate and maintain the Index.
The Index will utilize the Dynamic Asset Level Investing ("DALI") asset
allocation process developed by the Index Provider in order to allocate assets
over the four asset classes. The asset class allocations are determined using a
relative strength methodology that is based upon each asset class's market
performance and characteristics that offer the greatest potential to outperform
the other asset classes at a given time. Relative strength is a momentum
technique that relies on unbiased, unemotional and objective data, rather than
biased forecasting and subjective research. Relative strength is a way of
recording historic performance patterns, and the Index Provider uses relative
strength signals as a trend indicator for current momentum trends of each asset
class against the others.
PERFORMANCE REVIEW
The Fund started 2016 with the following allocations to the four asset classes:
domestic equity securities (74.4%), international equity securities (4.6%),
fixed income securities (19.8%), cash and cash equivalents (1.2%). In March
2016, the DALI asset allocation to domestic equity securities decreased to 20%,
while the fixed income securities allocation increased to 60%. Later in 2016,
the DALI asset allocation to domestic equity securities increased and by the end
of 2016, the Fund had the following allocations: domestic equity securities
(73.1%), international equity securities (4.6%), fixed income securities
(18.4%), cash and cash equivalents (3.9%).
The Fund's largest contributing holdings in 2016 were the First Trust Energy
AlphaDEX(R) Fund, the First Trust Utilities AlphaDEX(R) Fund, and the First
Trust Large Cap Growth AlphaDEX(R) Fund. The Fund's largest detracting holdings
were the First Trust NYSE Arca Biotechnology Index Fund, the First Trust Health
Care AlphaDEX(R) Fund, and the First Trust Small Cap Growth AlphaDEX(R) Fund.
Page 12
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2016
1 YEAR
ANNUAL SINCE INCEPTION AVERAGE
INCEPTION DATE TOTAL RETURN ANNUAL TOTAL RETURN
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 0.95% 0.30%
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 0.88% 0.33%
Broad Blended Benchmark (a) 8.31% 6.16%
Bloomberg Barclays U.S. Aggregate Index (b) 2.65% 1.75%
S&P 500(R) Index (c) 11.96% 8.95%
----------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between Bloomberg Barclays
U.S. Aggregate Index (40%) and the S&P 500(R) Index (60%).
(b) The Bloomberg 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 - December 31, 2016
First Trust Dorsey Wright
Tactical Core Portfolio - Broad Blended Bloomberg Barclays S&P 500(R)
Class I Benchmark U.S. Aggregate Index 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
12/31/16 10,035 10,722 10,204 11,053
Page 13
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2016 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Mid Cap Core AlphaDEX(R) Fund 10.4%
First Trust Small Cap Growth AlphaDEX(R)
Fund 9.7
First Trust Energy AlphaDEX(R) Fund 9.7
First Trust Large Cap Growth AlphaDEX(R)
Fund 9.4
First Trust Utilities AlphaDEX(R) Fund 8.9
First Trust Dow Jones Internet Index Fund 8.8
First Trust NASDAQ-100-Technology Sector
Index Fund 8.7
First Trust Industrials/Producer Durables
AlphaDEX(R) Fund 8.2
iShares Core U.S. Aggregate Bond ETF 5.7
SPDR Bloomberg Barclays Convertible
Securities ETF 3.4
------------------------------------------------------
Total 82.9%
======
Page 14
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 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 (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 December 31, 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 7/1/2016- VALUE VALUE 7/1/2016- EXPENSE
7/1/2016 12/31/2016 12/31/2016 (a) 7/1/2016 12/31/2016 12/31/2016 (a) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ----------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I $ 1,000.00 $ 1,049.10 $ 6.18 $ 1,000.00 $ 1,019.10 $ 6.09 1.20%
Class II $ 1,000.00 $ 1,050.30 $ 4.90 $ 1,000.00 $ 1,020.36 $ 4.82 0.95%
First Trust Multi Income Allocation
Portfolio
Class I $ 1,000.00 $ 1,014.40 $ 4.20 $ 1,000.00 $ 1,020.96 $ 4.22 0.83%
Class II $ 1,000.00 $ 1,016.60 $ 2.94 $ 1,000.00 $ 1,022.22 $ 2.95 0.58%
First Trust Dorsey Wright Tactical
Core Portfolio
Class I $ 1,000.00 $ 1,023.20 $ 4.02 $ 1,000.00 $ 1,021.17 $ 4.01 0.79%
Class II $ 1,000.00 $ 1,021.40 $ 2.69 $ 1,000.00 $ 1,022.47 $ 2.69 0.53%
(a) Expenses are equal to the annualized expense ratio as indicated in the
table, multiplied by the average account value over the period (July 1,
2016 through December 31, 2016), multiplied by 184/366 (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 15
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS - 54.8%
AEROSPACE & DEFENSE - 1.5%
11,946 General Dynamics Corp........................................................ $ 2,062,597
7,732 Lockheed Martin Corp......................................................... 1,932,536
8,664 Northrop Grumman Corp........................................................ 2,015,073
13,614 Raytheon Co.................................................................. 1,933,188
-------------
7,943,394
-------------
AIR FREIGHT & LOGISTICS - 0.7%
26,303 CH Robinson Worldwide, Inc................................................... 1,926,958
35,974 Expeditors International of Washington, Inc.................................. 1,905,183
-------------
3,832,141
-------------
AIRLINES - 0.9%
28,139 Alaska Air Group, Inc........................................................ 2,496,774
47,086 Delta Air Lines, Inc......................................................... 2,316,160
-------------
4,812,934
-------------
AUTOMOBILES - 0.4%
21,882 Thor Industries, Inc......................................................... 2,189,294
-------------
BANKS - 2.6%
25,521 Bank of Hawaii Corp.......................................................... 2,263,458
56,643 Columbia Banking System, Inc................................................. 2,530,809
39,504 Commerce Bancshares, Inc..................................................... 2,283,726
24,698 South State Corp............................................................. 2,158,605
127,730 TCF Financial Corp........................................................... 2,502,231
43,212 U.S. Bancorp................................................................. 2,219,800
-------------
13,958,629
-------------
BEVERAGES - 1.0%
43,794 Coca-Cola (The) Co........................................................... 1,815,699
20,297 Dr. Pepper Snapple Group, Inc................................................ 1,840,329
17,039 PepsiCo, Inc................................................................. 1,782,791
-------------
5,438,819
-------------
BUILDING PRODUCTS - 0.3%
37,521 A.O. Smith Corp.............................................................. 1,776,619
-------------
CAPITAL MARKETS - 3.2%
18,577 Ameriprise Financial, Inc.................................................... 2,060,932
5,114 BlackRock, Inc............................................................... 1,946,082
28,580 CBOE Holdings, Inc........................................................... 2,111,776
17,733 CME Group, Inc............................................................... 2,045,502
11,433 FactSet Research Systems, Inc................................................ 1,868,495
11,191 MarketAxess Holdings, Inc.................................................... 1,644,182
23,381 Morningstar, Inc............................................................. 1,719,906
27,441 Nasdaq, Inc.................................................................. 1,841,840
27,870 T. Rowe Price Group, Inc..................................................... 2,097,496
-------------
17,336,211
-------------
CHEMICALS - 0.9%
12,963 International Flavors & Fragrances, Inc...................................... 1,527,431
4,317 NewMarket Corp............................................................... 1,829,717
6,699 Sherwin-Williams (The) Co.................................................... 1,800,289
-------------
5,157,437
-------------
Page 16 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 0.7%
16,460 Cintas Corp.................................................................. $ 1,902,117
63,297 Rollins, Inc................................................................. 2,138,173
-------------
4,040,290
-------------
COMMUNICATIONS EQUIPMENT - 0.3%
58,429 Cisco Systems, Inc........................................................... 1,765,724
-------------
CONTAINERS & PACKAGING - 0.3%
23,826 Avery Dennison Corp.......................................................... 1,673,062
-------------
DISTRIBUTORS - 0.3%
18,450 Genuine Parts Co............................................................. 1,762,713
-------------
ELECTRICAL EQUIPMENT - 1.4%
38,789 AMETEK, Inc.................................................................. 1,885,145
34,001 Emerson Electric Co.......................................................... 1,895,556
17,201 Hubbell, Inc................................................................. 2,007,357
15,149 Rockwell Automation, Inc..................................................... 2,036,025
-------------
7,824,083
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 1.1%
28,547 Amphenol Corp., Class A...................................................... 1,918,358
45,137 Avnet, Inc................................................................... 2,148,973
28,789 TE Connectivity, Ltd......................................................... 1,994,502
-------------
6,061,833
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 1.0%
28,811 Equity Residential........................................................... 1,854,276
16,318 PS Business Parks, Inc....................................................... 1,901,373
8,306 Public Storage............................................................... 1,856,391
-------------
5,612,040
-------------
FOOD & STAPLES RETAILING - 0.6%
20,827 CVS Health Corp.............................................................. 1,643,458
25,698 Wal-Mart Stores, Inc......................................................... 1,776,246
-------------
3,419,704
-------------
FOOD PRODUCTS - 2.0%
48,862 Hormel Foods Corp............................................................ 1,700,886
13,929 Ingredion, Inc............................................................... 1,740,568
15,559 J&J Snack Foods Corp......................................................... 2,076,037
18,548 McCormick & Co., Inc......................................................... 1,731,085
42,218 Mondelez International, Inc., Class A........................................ 1,871,524
19,240 Sanderson Farms, Inc......................................................... 1,813,178
-------------
10,933,278
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.3%
23,642 Danaher Corp................................................................. 1,840,293
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.4%
14,789 Anthem, Inc.................................................................. 2,126,215
23,853 Cardinal Health, Inc......................................................... 1,716,700
40,343 Patterson Cos., Inc.......................................................... 1,655,273
13,238 UnitedHealth Group, Inc...................................................... 2,118,610
-------------
7,616,798
-------------
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
HOTELS, RESTAURANTS & LEISURE - 1.2%
37,023 Cheesecake Factory (The), Inc................................................ $ 2,216,937
14,017 Cracker Barrel Old Country Store, Inc........................................ 2,340,559
34,233 Starbucks Corp............................................................... 1,900,616
-------------
6,458,112
-------------
HOUSEHOLD PRODUCTS - 0.6%
38,675 Church & Dwight Co., Inc..................................................... 1,709,048
20,650 Procter & Gamble (The) Co.................................................... 1,736,252
-------------
3,445,300
-------------
INDUSTRIAL CONGLOMERATES - 1.4%
10,517 3M Co........................................................................ 1,878,020
18,069 Carlisle Cos., Inc........................................................... 1,992,830
15,987 Honeywell International, Inc................................................. 1,852,094
10,159 Roper Industries, Inc........................................................ 1,859,910
-------------
7,582,854
-------------
INSURANCE - 11.5%
25,789 AFLAC, Inc................................................................... 1,794,914
45,852 Allied World Assurance Co. Holdings AG....................................... 2,462,711
26,791 Allstate (The) Corp.......................................................... 1,985,749
24,710 American Financial Group, Inc................................................ 2,177,445
31,530 AMERISAFE, Inc............................................................... 1,965,896
16,477 Aon PLC...................................................................... 1,837,680
32,850 Argo Group International Holdings, Ltd....................................... 2,164,815
39,781 Aspen Insurance Holdings, Ltd................................................ 2,187,955
20,091 Assurant, Inc................................................................ 1,865,650
34,113 Axis Capital Holdings, Ltd................................................... 2,226,556
49,148 Brown & Brown, Inc........................................................... 2,204,779
14,750 Chubb, Ltd................................................................... 1,948,770
53,861 CNA Financial Corp........................................................... 2,235,231
28,316 Endurance Specialty Holdings, Ltd............................................ 2,616,398
9,755 Everest Re Group, Ltd........................................................ 2,110,982
47,184 First American Financial Corp................................................ 1,728,350
24,574 Hanover Insurance Group (The), Inc........................................... 2,236,480
43,282 Hartford Financial Services (The) Group, Inc................................. 2,062,387
50,567 Horace Mann Educators Corp................................................... 2,164,268
27,558 Marsh & McLennan Cos., Inc................................................... 1,862,645
105,184 Old Republic International Corp.............................................. 1,998,496
35,980 Principal Financial Group, Inc............................................... 2,081,803
35,315 ProAssurance Corp............................................................ 1,984,703
58,837 Progressive (The) Corp....................................................... 2,088,713
17,170 Reinsurance Group of America, Inc............................................ 2,160,501
15,423 RenaissanceRe Holdings, Ltd.................................................. 2,100,921
29,009 Torchmark Corp............................................................... 2,139,704
16,181 Travelers (The) Cos., Inc.................................................... 1,980,878
37,202 Validus Holdings, Ltd........................................................ 2,046,482
55,110 XL Group, Ltd................................................................ 2,053,399
-------------
62,475,261
-------------
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
IT SERVICES - 3.1%
15,170 Accenture PLC, Class A....................................................... $ 1,776,862
32,037 Amdocs, Ltd.................................................................. 1,866,155
21,015 Automatic Data Processing, Inc............................................... 2,159,922
27,339 Broadridge Financial Solutions, Inc.......................................... 1,812,576
11,669 International Business Machines Corp......................................... 1,936,937
21,664 Jack Henry & Associates, Inc................................................. 1,923,330
18,210 MasterCard, Inc., Class A.................................................... 1,880,183
32,026 Paychex, Inc................................................................. 1,949,743
22,411 Visa, Inc., Class A.......................................................... 1,748,506
-------------
17,054,214
-------------
LEISURE PRODUCTS - 0.4%
37,994 Brunswick Corp............................................................... 2,072,193
-------------
MACHINERY - 3.8%
28,513 CLARCOR, Inc................................................................. 2,351,467
14,462 Cummins, Inc................................................................. 1,976,522
49,647 Donaldson Co., Inc........................................................... 2,089,146
25,045 Graco, Inc................................................................... 2,080,989
19,808 IDEX Corp.................................................................... 1,783,908
15,464 Illinois Tool Works, Inc..................................................... 1,893,721
27,280 Ingersoll-Rand PLC........................................................... 2,047,091
12,196 Snap-On, Inc................................................................. 2,088,809
39,567 Toro (The) Co................................................................ 2,213,774
22,698 Wabtec Corp.................................................................. 1,884,388
-------------
20,409,815
-------------
MEDIA - 1.1%
82,923 Interpublic Group of (The) Cos., Inc......................................... 1,941,227
21,805 Omnicom Group, Inc........................................................... 1,855,824
19,958 Walt Disney (The) Co......................................................... 2,080,023
-------------
5,877,074
-------------
MULTILINE RETAIL - 0.4%
26,987 Target Corp.................................................................. 1,949,271
-------------
OIL, GAS & CONSUMABLE FUELS - 0.7%
21,234 Exxon Mobil Corp............................................................. 1,916,581
23,009 Phillips 66.................................................................. 1,988,208
-------------
3,904,789
-------------
PAPER & FOREST PRODUCTS - 0.4%
23,458 Neenah Paper, Inc............................................................ 1,998,622
-------------
PERSONAL PRODUCTS - 0.3%
20,926 Estee Lauder (The) Cos., Inc., Class A....................................... 1,600,630
-------------
PHARMACEUTICALS - 0.7%
15,688 Johnson & Johnson............................................................ 1,807,414
54,720 Pfizer, Inc.................................................................. 1,777,306
-------------
3,584,720
-------------
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
PROFESSIONAL SERVICES - 1.3%
36,298 Exponent, Inc................................................................ $ 2,188,770
25,648 ManpowerGroup, Inc........................................................... 2,279,338
48,953 Robert Half International, Inc............................................... 2,387,927
-------------
6,856,035
-------------
ROAD & RAIL - 1.2%
22,842 JB Hunt Transport Services, Inc.............................................. 2,217,273
27,223 Landstar System, Inc......................................................... 2,322,122
19,002 Union Pacific Corp........................................................... 1,970,127
-------------
6,509,522
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.4%
26,409 Texas Instruments, Inc....................................................... 1,927,065
-------------
SOFTWARE - 0.7%
56,027 CA, Inc...................................................................... 1,779,978
16,848 Intuit, Inc.................................................................. 1,930,949
-------------
3,710,927
-------------
SPECIALTY RETAIL - 1.8%
27,368 Foot Locker, Inc............................................................. 1,940,118
14,403 Home Depot (The), Inc........................................................ 1,931,154
28,824 Ross Stores, Inc............................................................. 1,890,854
24,784 TJX (The) Cos., Inc.......................................................... 1,862,022
27,517 Tractor Supply Co............................................................ 2,086,064
-------------
9,710,212
-------------
TEXTILES, APPAREL & LUXURY GOODS - 1.0%
21,374 Carter's, Inc................................................................ 1,846,500
35,201 NIKE, Inc., Class B.......................................................... 1,789,267
33,066 VF Corp...................................................................... 1,764,071
-------------
5,399,838
-------------
TOBACCO - 0.4%
39,307 Reynolds American, Inc....................................................... 2,202,764
-------------
TRADING COMPANIES & DISTRIBUTORS - 1.5%
44,360 Fastenal Co.................................................................. 2,084,033
25,247 MSC Industrial Direct Co., Inc., Class A..................................... 2,332,570
8,241 W.W. Grainger, Inc........................................................... 1,913,972
13,155 Watsco, Inc.................................................................. 1,948,519
-------------
8,279,094
-------------
TOTAL COMMON STOCKS.......................................................... 298,003,608
(Cost $265,906,159) -------------
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES - 39.8%
AEROSPACE & DEFENSE - 1.0%
$ 100,000 Boeing (The) Co..................................... 1.65% 10/30/20 $ 98,136
250,000 Boeing (The) Co..................................... 2.35% 10/30/21 251,636
100,000 Boeing (The) Co..................................... 2.20% 10/30/22 98,273
175,000 Boeing (The) Co..................................... 1.88% 06/15/23 167,061
150,000 Boeing (The) Co..................................... 2.50% 03/01/25 145,472
100,000 Boeing (The) Co..................................... 2.60% 10/30/25 97,304
175,000 Boeing (The) Co..................................... 2.25% 06/15/26 164,387
25,000 Boeing (The) Co..................................... 6.63% 02/15/38 33,914
308,000 Boeing (The) Co..................................... 3.38% 06/15/46 281,253
300,000 Boeing Capital Corp................................. 4.70% 10/27/19 323,773
200,000 Lockheed Martin Corp................................ 2.50% 11/23/20 201,872
250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 255,908
220,000 Lockheed Martin Corp................................ 4.70% 05/15/46 240,276
250,000 Northrop Grumman Corp............................... 3.20% 02/01/27 247,879
200,000 Northrop Grumman Corp............................... 5.05% 11/15/40 223,599
250,000 United Technologies Corp............................ 1.80% 06/01/17 250,668
285,000 United Technologies Corp. (a)....................... 1.24% 11/01/19 285,839
250,000 United Technologies Corp............................ 1.95% 11/01/21 245,234
650,000 United Technologies Corp............................ 3.10% 06/01/22 668,595
100,000 United Technologies Corp............................ 2.65% 11/01/26 96,147
100,000 United Technologies Corp............................ 6.05% 06/01/36 125,484
150,000 United Technologies Corp............................ 4.50% 06/01/42 160,933
500,000 United Technologies Corp............................ 3.75% 11/01/46 477,097
-------------
5,140,740
-------------
AIR FREIGHT & LOGISTICS - 0.5%
250,000 FedEx Corp.......................................... 2.30% 02/01/20 250,479
300,000 FedEx Corp.......................................... 3.20% 02/01/25 299,945
50,000 FedEx Corp.......................................... 3.25% 04/01/26 49,755
250,000 FedEx Corp.......................................... 4.75% 11/15/45 259,939
548,000 FedEx Corp.......................................... 4.55% 04/01/46 554,440
545,000 United Parcel Service, Inc.......................... 2.45% 10/01/22 543,184
500,000 United Parcel Service, Inc.......................... 2.40% 11/15/26 473,336
500,000 United Parcel Service, Inc.......................... 3.40% 11/15/46 462,164
-------------
2,893,242
-------------
AIRLINES - 0.2%
180,000 Southwest Airlines Co............................... 5.13% 03/01/17 181,054
385,000 Southwest Airlines Co............................... 2.75% 11/06/19 392,315
420,000 Southwest Airlines Co............................... 2.65% 11/05/20 421,436
250,000 Southwest Airlines Co............................... 3.00% 11/15/26 236,134
-------------
1,230,939
-------------
AUTOMOBILES - 0.1%
250,000 Ford Motor Co....................................... 4.35% 12/08/26 253,121
250,000 Ford Motor Co....................................... 5.29% 12/08/46 254,195
-------------
507,316
-------------
BANKS - 6.7%
657,000 Bank of America Corp................................ 3.88% 03/22/17 660,756
1,400,000 Bank of America Corp................................ 2.60% 01/15/19 1,412,662
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 400,000 Bank of America Corp. (a)........................... 1.87% 04/01/19 $ 402,014
100,000 Bank of America Corp................................ 2.63% 10/19/20 100,147
600,000 Bank of America Corp................................ 2.63% 04/19/21 596,483
725,000 Bank of America Corp................................ 5.70% 01/24/22 815,251
250,000 Bank of America Corp. (a)........................... 2.06% 10/21/22 254,502
250,000 Bank of America Corp................................ 2.50% 10/21/22 242,105
450,000 Bank of America Corp................................ 4.00% 04/01/24 464,830
100,000 Bank of America Corp................................ 4.00% 01/22/25 100,297
400,000 Bank of America Corp................................ 4.45% 03/03/26 412,989
950,000 Bank of America Corp................................ 3.50% 04/19/26 939,182
150,000 Bank of America Corp................................ 3.25% 10/21/27 143,527
250,000 Bank of America Corp................................ 4.18% 11/25/27 250,663
225,000 Bank of America Corp................................ 5.88% 02/07/42 272,911
225,000 Bank of America Corp................................ 4.88% 04/01/44 245,090
600,000 Bank of America N.A................................. 5.30% 03/15/17 604,677
1,000,000 BB&T Corp........................................... 2.05% 05/10/21 982,057
1,000,000 Citigroup, Inc. (a)................................. 1.49% 03/10/17 1,000,647
800,000 Citigroup, Inc...................................... 2.15% 07/30/18 802,955
300,000 Citigroup, Inc...................................... 2.50% 09/26/18 302,997
1,000,000 Citigroup, Inc. (a)................................. 1.88% 06/07/19 1,008,122
300,000 Citigroup, Inc...................................... 2.05% 06/07/19 299,043
250,000 Citigroup, Inc...................................... 2.40% 02/18/20 249,679
600,000 Citigroup, Inc...................................... 2.70% 03/30/21 599,223
350,000 Citigroup, Inc...................................... 2.35% 08/02/21 342,738
1,000,000 Citigroup, Inc. (a)................................. 2.02% 12/08/21 1,004,549
250,000 Citigroup, Inc...................................... 2.90% 12/08/21 249,610
775,000 Citigroup, Inc...................................... 4.50% 01/14/22 827,217
450,000 Citigroup, Inc...................................... 4.60% 03/09/26 465,982
300,000 Citigroup, Inc...................................... 3.40% 05/01/26 292,075
250,000 Citigroup, Inc...................................... 3.20% 10/21/26 239,552
300,000 Citigroup, Inc...................................... 4.30% 11/20/26 303,344
100,000 Citigroup, Inc...................................... 4.45% 09/29/27 101,800
350,000 Citigroup, Inc...................................... 4.13% 07/25/28 346,526
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 237,789
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 127,194
35,000 Citigroup, Inc...................................... 4.65% 07/30/45 37,040
250,000 Citigroup, Inc...................................... 4.75% 05/18/46 251,278
500,000 Discover Bank....................................... 3.45% 07/27/26 483,777
600,000 HSBC Bank USA N.A................................... 4.88% 08/24/20 636,392
100,000 HSBC USA, Inc....................................... 1.50% 11/13/17 99,946
1,000,000 HSBC USA, Inc....................................... 1.63% 01/16/18 998,404
400,000 JPMorgan Chase & Co................................. 1.85% 03/22/19 398,867
400,000 JPMorgan Chase & Co................................. 2.20% 10/22/19 401,769
150,000 JPMorgan Chase & Co................................. 2.55% 03/01/21 149,616
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 592,553
450,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 446,145
1,000,000 JPMorgan Chase & Co. (a)............................ 1.94% 01/15/23 1,004,423
325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 328,887
500,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 489,620
Page 22 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 250,000 JPMorgan Chase & Co. (a)............................ 2.11% 10/24/23 $ 255,228
400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 414,936
850,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 836,160
300,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 306,819
250,000 JPMorgan Chase & Co................................. 3.63% 12/01/27 243,087
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 519,312
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 111,538
150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 160,321
437,000 JPMorgan Chase Bank N.A............................. 6.00% 10/01/17 451,026
1,000,000 Wachovia Corp. (a).................................. 1.23% 06/15/17 1,000,308
600,000 Wells Fargo & Co.................................... 6.00% 11/15/17 622,754
575,000 Wells Fargo & Co.................................... 2.13% 04/22/19 577,054
200,000 Wells Fargo & Co.................................... 2.15% 01/30/20 199,143
100,000 Wells Fargo & Co.................................... 2.55% 12/07/20 100,170
900,000 Wells Fargo & Co.................................... 3.00% 01/22/21 916,343
550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 546,246
300,000 Wells Fargo & Co.................................... 2.10% 07/26/21 292,105
250,000 Wells Fargo & Co. (a)............................... 2.12% 10/31/23 253,293
425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 421,067
550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 525,458
100,000 Wells Fargo & Co.................................... 4.10% 06/03/26 101,437
250,000 Wells Fargo & Co.................................... 3.00% 10/23/26 238,399
200,000 Wells Fargo & Co.................................... 4.30% 07/22/27 205,976
200,000 Wells Fargo & Co.................................... 3.90% 05/01/45 190,178
100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 102,952
275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 263,827
750,000 Wells Fargo & Co.................................... 4.75% 12/07/46 762,971
1,000,000 Wells Fargo Bank N.A. (a)........................... 1.45% 11/28/18 1,000,473
250,000 Wells Fargo Bank N.A................................ 1.75% 05/24/19 248,878
500,000 Wells Fargo Bank N.A. (a)........................... 1.60% 12/06/19 501,427
200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 235,882
-------------
36,624,670
-------------
BEVERAGES - 1.5%
63,000 Anheuser-Busch InBev Finance, Inc................... 1.90% 02/01/19 63,122
690,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.65% 02/01/21 694,617
200,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 197,093
375,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.30% 02/01/23 382,159
600,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.65% 02/01/26 610,258
875,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.70% 02/01/36 923,264
1,100,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 02/01/46 1,193,672
250,000 Coca-Cola (The) Co.................................. 1.38% 05/30/19 248,426
150,000 Coca-Cola (The) Co.................................. 1.88% 10/27/20 148,807
250,000 Coca-Cola (The) Co.................................. 1.55% 09/01/21 243,090
975,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 1,007,819
100,000 Coca-Cola (The) Co.................................. 2.88% 10/27/25 98,797
100,000 Coca-Cola (The) Co.................................. 2.55% 06/01/26 94,901
250,000 Coca-Cola (The) Co.................................. 2.25% 09/01/26 235,744
250,000 Dr. Pepper Snapple Group, Inc....................... 3.13% 12/15/23 250,446
250,000 Dr. Pepper Snapple Group, Inc....................... 3.43% 06/15/27 249,762
See Notes to Financial Statements Page 23
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BEVERAGES (CONTINUED)
$ 250,000 Dr. Pepper Snapple Group, Inc....................... 4.42% 12/15/46 $ 255,803
100,000 Molson Coors Brewing Co............................. 2.10% 07/15/21 97,496
400,000 Molson Coors Brewing Co............................. 3.00% 07/15/26 378,898
550,000 Molson Coors Brewing Co............................. 4.20% 07/15/46 514,881
250,000 PepsiCo, Inc........................................ 3.45% 10/06/46 228,360
-------------
8,117,415
-------------
BIOTECHNOLOGY - 0.5%
350,000 AbbVie, Inc......................................... 2.50% 05/14/20 350,372
375,000 AbbVie, Inc......................................... 2.90% 11/06/22 370,899
250,000 AbbVie, Inc......................................... 3.60% 05/14/25 248,066
175,000 AbbVie, Inc......................................... 4.40% 11/06/42 165,249
300,000 AbbVie, Inc......................................... 4.70% 05/14/45 295,479
450,000 Amgen, Inc.......................................... 2.70% 05/01/22 446,130
200,000 Amgen, Inc.......................................... 3.63% 05/22/24 203,766
100,000 Amgen, Inc.......................................... 2.60% 08/19/26 92,166
200,000 Amgen, Inc.......................................... 5.38% 05/15/43 219,271
100,000 Amgen, Inc.......................................... 4.40% 05/01/45 96,235
100,000 Gilead Sciences, Inc................................ 2.95% 03/01/27 95,830
125,000 Gilead Sciences, Inc................................ 4.50% 02/01/45 125,192
100,000 Gilead Sciences, Inc................................ 4.15% 03/01/47 95,220
-------------
2,803,875
-------------
BUILDING PRODUCTS - 0.0%
100,000 Masco Corp.......................................... 3.50% 04/01/21 100,750
-------------
CAPITAL MARKETS - 3.2%
398,000 Goldman Sachs Group (The), Inc...................... 5.63% 01/15/17 398,489
800,000 Goldman Sachs Group (The), Inc. (a)................. 1.57% 06/04/17 801,326
825,000 Goldman Sachs Group (The), Inc...................... 6.15% 04/01/18 868,091
1,000,000 Goldman Sachs Group (The), Inc. (a)................. 2.09% 04/30/18 1,008,907
300,000 Goldman Sachs Group (The), Inc...................... 2.00% 04/25/19 298,976
600,000 Goldman Sachs Group (The), Inc...................... 2.55% 10/23/19 604,811
700,000 Goldman Sachs Group (The), Inc. (a)................. 1.76% 12/13/19 700,315
500,000 Goldman Sachs Group (The), Inc...................... 2.30% 12/13/19 499,785
500,000 Goldman Sachs Group (The), Inc...................... 2.60% 04/23/20 500,908
700,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 695,620
500,000 Goldman Sachs Group (The), Inc...................... 2.35% 11/15/21 486,333
700,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 715,955
600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 623,419
150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 148,262
600,000 Goldman Sachs Group (The), Inc...................... 4.25% 10/21/25 610,618
550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 552,652
500,000 Goldman Sachs Group (The), Inc...................... 3.50% 11/16/26 489,501
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 497,516
50,000 Goldman Sachs Group (The), Inc...................... 4.75% 10/21/45 52,992
800,000 Morgan Stanley (a).................................. 1.73% 01/24/19 805,235
695,000 Morgan Stanley...................................... 2.50% 01/24/19 702,656
400,000 Morgan Stanley...................................... 2.65% 01/27/20 402,178
750,000 Morgan Stanley...................................... 2.50% 04/21/21 742,597
550,000 Morgan Stanley...................................... 5.50% 07/28/21 610,095
Page 24 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 500,000 Morgan Stanley...................................... 2.63% 11/17/21 $ 494,541
300,000 Morgan Stanley...................................... 3.75% 02/25/23 308,564
500,000 Morgan Stanley (a).................................. 2.28% 10/24/23 505,965
450,000 Morgan Stanley...................................... 3.88% 04/29/24 462,240
800,000 Morgan Stanley...................................... 3.88% 01/27/26 809,620
250,000 Morgan Stanley...................................... 4.35% 09/08/26 256,692
350,000 Morgan Stanley...................................... 6.38% 07/24/42 451,395
100,000 Morgan Stanley...................................... 4.30% 01/27/45 100,061
300,000 Nasdaq, Inc......................................... 3.85% 06/30/26 298,608
-------------
17,504,923
-------------
CHEMICALS - 0.3%
250,000 Chevron Phillips Chemical Co., LLC/Chevron Phillips
Chemical Co., L.P. (b)........................... 3.40% 12/01/26 249,889
525,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 602,021
200,000 Dow Chemical (The) Co............................... 3.00% 11/15/22 200,358
25,000 Dow Chemical (The) Co............................... 4.25% 10/01/34 24,715
75,000 Dow Chemical (The) Co............................... 4.63% 10/01/44 75,548
228,000 Eastman Chemical Co................................. 4.65% 10/15/44 226,994
100,000 Westlake Chemical Corp. (b)......................... 3.60% 08/15/26 96,376
250,000 Westlake Chemical Corp. (b)......................... 5.00% 08/15/46 247,884
-------------
1,723,785
-------------
COMMUNICATIONS EQUIPMENT - 0.4%
100,000 Cisco Systems, Inc.................................. 1.40% 09/20/19 98,949
100,000 Cisco Systems, Inc.................................. 2.45% 06/15/20 101,059
800,000 Cisco Systems, Inc.................................. 2.20% 09/20/23 770,277
500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 522,401
100,000 Cisco Systems, Inc.................................. 2.95% 02/28/26 99,146
200,000 Cisco Systems, Inc.................................. 2.50% 09/20/26 190,465
225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 286,322
-------------
2,068,619
-------------
CONSUMER FINANCE - 2.3%
400,000 American Express Centurion Bank..................... 6.00% 09/13/17 412,408
50,000 American Express Co................................. 8.13% 05/20/19 56,901
450,000 American Express Co................................. 3.63% 12/05/24 452,631
800,000 American Express Credit Corp........................ 2.13% 07/27/18 805,340
200,000 American Express Credit Corp........................ 1.88% 11/05/18 200,342
297,000 American Express Credit Corp. (a) .................. 1.54% 03/18/19 297,663
500,000 American Express Credit Corp........................ 1.70% 10/30/19 495,322
150,000 American Express Credit Corp........................ 2.60% 09/14/20 151,332
575,000 American Express Credit Corp........................ 2.25% 05/05/21 568,498
550,000 Capital One Financial Corp.......................... 3.75% 04/24/24 558,038
350,000 Capital One Financial Corp.......................... 3.75% 07/28/26 339,962
250,000 Capital One N.A..................................... 2.25% 09/13/21 244,197
1,039,000 Caterpillar Financial Services Corp................. 1.70% 08/09/21 998,626
150,000 Caterpillar Financial Services Corp................. 3.25% 12/01/24 151,641
1,700,000 Ford Motor Credit Co., LLC (a)...................... 1.66% 01/17/17 1,700,377
1,000,000 Ford Motor Credit Co., LLC (a)...................... 1.63% 03/27/17 1,000,806
400,000 Ford Motor Credit Co., LLC.......................... 2.88% 10/01/18 404,949
See Notes to Financial Statements Page 25
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER FINANCE (CONTINUED)
$ 500,000 Ford Motor Credit Co., LLC.......................... 1.90% 08/12/19 $ 492,259
200,000 Ford Motor Credit Co., LLC.......................... 2.46% 03/27/20 197,584
100,000 Ford Motor Credit Co., LLC.......................... 3.22% 01/09/22 98,993
450,000 Ford Motor Credit Co., LLC.......................... 3.10% 05/04/23 435,191
725,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 749,266
350,000 Ford Motor Credit Co., LLC.......................... 4.13% 08/04/25 351,049
100,000 General Motors Financial Co., Inc................... 2.40% 05/09/19 99,792
400,000 General Motors Financial Co., Inc................... 4.20% 03/01/21 413,084
250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 248,172
200,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 210,472
100,000 General Motors Financial Co., Inc................... 4.00% 10/06/26 96,343
-------------
12,231,238
-------------
CONTAINERS & PACKAGING - 0.0%
100,000 International Paper Co.............................. 3.00% 02/15/27 94,547
150,000 International Paper Co.............................. 4.40% 08/15/47 142,332
-------------
236,879
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.3%
175,000 Berkshire Hathaway, Inc............................. 2.20% 03/15/21 174,740
125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 124,637
425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 422,742
350,000 Diamond 1 Finance Corp./Diamond 2 Finance
Corp. (b)........................................ 3.48% 06/01/19 357,488
250,000 Diamond 1 Finance Corp./Diamond 2 Finance
Corp. (b)........................................ 4.42% 06/15/21 258,942
-------------
1,338,549
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.5%
1,000,000 AT&T, Inc. (a)...................................... 1.42% 03/30/17 1,000,634
850,000 AT&T, Inc........................................... 1.70% 06/01/17 851,250
500,000 AT&T, Inc........................................... 2.30% 03/11/19 502,183
300,000 AT&T, Inc........................................... 2.45% 06/30/20 298,157
250,000 AT&T, Inc........................................... 2.80% 02/17/21 248,254
275,000 AT&T, Inc........................................... 3.88% 08/15/21 284,222
300,000 AT&T, Inc........................................... 3.00% 06/30/22 294,852
150,000 AT&T, Inc........................................... 3.60% 02/17/23 151,479
150,000 AT&T, Inc........................................... 3.90% 03/11/24 151,901
350,000 AT&T, Inc........................................... 3.40% 05/15/25 337,945
650,000 AT&T, Inc........................................... 4.13% 02/17/26 659,383
100,000 AT&T, Inc........................................... 4.50% 05/15/35 96,914
425,000 AT&T, Inc........................................... 4.80% 06/15/44 403,078
250,000 AT&T, Inc........................................... 4.35% 06/15/45 223,621
250,000 AT&T, Inc........................................... 4.75% 05/15/46 237,767
550,000 AT&T, Inc........................................... 5.65% 02/15/47 592,063
1,544,000 Verizon Communications, Inc. (a).................... 1.35% 06/09/17 1,545,890
523,000 Verizon Communications, Inc. (a).................... 2.71% 09/14/18 534,807
450,000 Verizon Communications, Inc. (a).................... 1.76% 06/17/19 454,254
250,000 Verizon Communications, Inc......................... 1.38% 08/15/19 246,266
1,006,000 Verizon Communications, Inc......................... 2.63% 02/21/20 1,016,411
250,000 Verizon Communications, Inc......................... 1.75% 08/15/21 240,088
525,000 Verizon Communications, Inc......................... 5.15% 09/15/23 581,344
650,000 Verizon Communications, Inc......................... 3.50% 11/01/24 649,016
Page 26 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
$ 100,000 Verizon Communications, Inc......................... 2.63% 08/15/26 $ 92,248
231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 221,803
298,000 Verizon Communications, Inc......................... 4.13% 08/15/46 270,800
500,000 Verizon Communications, Inc......................... 4.86% 08/21/46 508,643
250,000 Verizon Communications, Inc......................... 4.52% 09/15/48 240,716
249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 249,580
522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 492,322
-------------
13,677,891
-------------
ELECTRIC UTILITIES - 3.4%
250,000 AEP Transmission Co., LLC (b)....................... 3.10% 12/01/26 246,742
250,000 AEP Transmission Co., LLC (b)....................... 4.00% 12/01/46 249,068
100,000 Alabama Power Co.................................... 3.75% 03/01/45 94,727
675,000 American Electric Power Co., Inc.................... 1.65% 12/15/17 675,369
250,000 American Electric Power Co., Inc.................... 2.95% 12/15/22 251,914
300,000 Appalachian Power Co................................ 4.40% 05/15/44 305,616
250,000 Baltimore Gas & Electric Co......................... 2.40% 08/15/26 233,717
250,000 Baltimore Gas & Electric Co......................... 3.50% 08/15/46 225,544
240,000 CenterPoint Energy Houston Electric LLC............. 2.25% 08/01/22 234,873
250,000 CenterPoint Energy Houston Electric LLC............. 2.40% 09/01/26 234,933
295,000 CenterPoint Energy Houston Electric LLC............. 4.50% 04/01/44 321,250
200,000 Commonwealth Edison Co.............................. 2.55% 06/15/26 190,780
300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 311,500
300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 282,865
400,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 376,896
575,000 Constellation Energy Group, Inc..................... 5.15% 12/01/20 622,133
100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 99,196
250,000 Duke Energy Carolinas LLC........................... 2.95% 12/01/26 246,249
350,000 Duke Energy Carolinas LLC........................... 6.00% 01/15/38 434,355
50,000 Duke Energy Carolinas LLC........................... 3.75% 06/01/45 47,719
100,000 Duke Energy Carolinas LLC........................... 3.88% 03/15/46 98,074
200,000 Duke Energy Corp.................................... 2.10% 06/15/18 200,918
250,000 Duke Energy Corp.................................... 1.80% 09/01/21 241,092
300,000 Duke Energy Corp.................................... 3.55% 09/15/21 310,860
51,000 Duke Energy Corp.................................... 2.65% 09/01/26 47,700
450,000 Duke Energy Corp.................................... 3.75% 09/01/46 406,831
250,000 Duke Energy Florida LLC............................. 3.40% 10/01/46 223,440
100,000 Duke Energy Indiana LLC............................. 3.75% 05/15/46 94,302
250,000 Duke Energy Progress LLC............................ 3.70% 10/15/46 237,355
350,000 Entergy Corp........................................ 2.95% 09/01/26 328,082
200,000 Exelon Corp......................................... 2.45% 04/15/21 197,796
50,000 Exelon Corp......................................... 3.95% 06/15/25 51,492
50,000 Exelon Corp......................................... 5.10% 06/15/45 53,353
250,000 Exelon Corp......................................... 4.45% 04/15/46 245,721
350,000 Florida Power & Light Co............................ 3.25% 06/01/24 357,495
210,000 Florida Power & Light Co............................ 4.05% 06/01/42 214,588
100,000 Indiana Michigan Power Co........................... 4.55% 03/15/46 104,138
410,000 Metropolitan Edison Co. (b)......................... 3.50% 03/15/23 409,933
125,000 Monongahela Power Co. (b)........................... 5.40% 12/15/43 146,651
150,000 Ohio Edison Co...................................... 6.88% 07/15/36 190,993
See Notes to Financial Statements Page 27
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 295,000 Pacific Gas & Electric Co........................... 5.63% 11/30/17 $ 306,012
250,000 Pacific Gas & Electric Co........................... 3.50% 06/15/25 257,343
100,000 Pacific Gas & Electric Co........................... 2.95% 03/01/26 98,166
600,000 Pacific Gas & Electric Co........................... 4.30% 03/15/45 616,150
250,000 Pacific Gas & Electric Co........................... 4.25% 03/15/46 255,115
250,000 Pacific Gas & Electric Co........................... 4.00% 12/01/46 247,620
100,000 Public Service Electric & Gas Co.................... 1.90% 03/15/21 98,276
195,000 Public Service Electric & Gas Co.................... 2.38% 05/15/23 190,767
550,000 Public Service Electric & Gas Co.................... 2.25% 09/15/26 511,035
275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 275,200
100,000 Public Service Electric & Gas Co.................... 3.80% 03/01/46 97,301
550,000 Southern (The) Co................................... 1.85% 07/01/19 548,629
815,000 Southern (The) Co................................... 2.35% 07/01/21 802,003
250,000 Southern (The) Co................................... 3.25% 07/01/26 243,799
400,000 Southern (The) Co................................... 4.25% 07/01/36 399,101
425,000 Southern (The) Co................................... 4.40% 07/01/46 422,098
200,000 Southern California Edison Co....................... 3.50% 10/01/23 208,027
200,000 Southern California Edison Co....................... 3.60% 02/01/45 189,670
250,000 Southern Power Co................................... 1.85% 12/01/17 250,717
250,000 Southern Power Co................................... 2.50% 12/15/21 245,110
250,000 Southern Power Co................................... 4.95% 12/15/46 244,547
500,000 Southwestern Electric Power Co...................... 2.75% 10/01/26 472,788
100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 120,448
200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 205,844
100,000 Virginia Electric & Power Co........................ 3.15% 01/15/26 99,475
250,000 Virginia Electric & Power Co........................ 2.95% 11/15/26 243,536
475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 500,661
250,000 Virginia Electric & Power Co........................ 4.00% 11/15/46 250,326
250,000 Xcel Energy, Inc. 2.60% 03/15/22 249,281
-------------
18,495,305
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.2%
250,000 American Tower Corp................................. 2.25% 01/15/22 239,749
100,000 American Tower Corp................................. 3.13% 01/15/27 92,461
500,000 Crown Castle International Corp..................... 2.25% 09/01/21 484,253
100,000 Liberty Property L.P................................ 3.25% 10/01/26 95,957
100,000 Realty Income Corp.................................. 3.00% 01/15/27 94,350
100,000 Simon Property Group L.P............................ 2.35% 01/30/22 98,727
100,000 Simon Property Group L.P............................ 3.25% 11/30/26 98,259
100,000 Simon Property Group L.P............................ 4.25% 11/30/46 98,540
-------------
1,302,296
-------------
FOOD & STAPLES RETAILING - 1.2%
600,000 CVS Health Corp..................................... 1.90% 07/20/18 602,534
150,000 CVS Health Corp..................................... 2.80% 07/20/20 152,316
600,000 CVS Health Corp..................................... 2.13% 06/01/21 588,940
700,000 CVS Health Corp..................................... 4.00% 12/05/23 738,631
178,000 CVS Health Corp..................................... 3.88% 07/20/25 183,950
150,000 CVS Health Corp..................................... 2.88% 06/01/26 143,266
675,000 CVS Health Corp..................................... 5.13% 07/20/45 755,177
200,000 Kroger (The) Co..................................... 3.50% 02/01/26 201,301
Page 28 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
FOOD & STAPLES RETAILING (CONTINUED)
$ 250,000 Kroger (The) Co..................................... 2.65% 10/15/26 $ 232,757
300,000 Kroger (The) Co..................................... 5.15% 08/01/43 324,621
250,000 Kroger (The) Co..................................... 3.88% 10/15/46 228,559
100,000 Sysco Corp.......................................... 2.50% 07/15/21 99,038
150,000 Sysco Corp.......................................... 4.50% 04/01/46 151,839
325,000 Wal-Mart Stores, Inc................................ 3.30% 04/22/24 334,496
300,000 Wal-Mart Stores, Inc................................ 4.30% 04/22/44 317,350
300,000 Walgreens Boots Alliance, Inc....................... 3.10% 06/01/23 298,447
600,000 Walgreens Boots Alliance, Inc....................... 3.45% 06/01/26 590,133
600,000 Walgreens Boots Alliance, Inc....................... 4.65% 06/01/46 611,292
-------------
6,554,647
-------------
FOOD PRODUCTS - 0.3%
100,000 Kraft Heinz Foods Co................................ 2.80% 07/02/20 101,032
450,000 Kraft Heinz Foods Co................................ 3.50% 07/15/22 457,353
200,000 Kraft Heinz Foods Co................................ 3.95% 07/15/25 202,963
150,000 Kraft Heinz Foods Co................................ 3.00% 06/01/26 141,110
200,000 Kraft Heinz Foods Co................................ 5.00% 06/04/42 205,528
150,000 Kraft Heinz Foods Co................................ 5.20% 07/15/45 157,611
300,000 Kraft Heinz Foods Co................................ 4.38% 06/01/46 283,429
-------------
1,549,026
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.7%
250,000 Abbott Laboratories................................. 2.90% 11/30/21 249,571
250,000 Abbott Laboratories................................. 3.40% 11/30/23 249,441
250,000 Abbott Laboratories................................. 4.90% 11/30/46 257,593
139,000 Becton Dickinson and Co............................. 3.73% 12/15/24 142,381
200,000 Becton Dickinson and Co............................. 4.69% 12/15/44 207,998
50,000 Medtronic, Inc...................................... 1.50% 03/15/18 50,010
300,000 Medtronic, Inc...................................... 2.50% 03/15/20 303,496
750,000 Medtronic, Inc...................................... 3.15% 03/15/22 768,717
600,000 Medtronic, Inc...................................... 3.50% 03/15/25 618,487
900,000 Medtronic, Inc...................................... 4.63% 03/15/45 975,644
-------------
3,823,338
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.1%
715,000 Aetna, Inc.......................................... 2.80% 06/15/23 705,312
250,000 Aetna, Inc.......................................... 3.50% 11/15/24 254,060
300,000 Aetna, Inc.......................................... 3.20% 06/15/26 297,381
339,000 Aetna, Inc.......................................... 4.75% 03/15/44 357,996
500,000 UnitedHealth Group, Inc. (a)........................ 1.33% 01/17/17 500,089
750,000 UnitedHealth Group, Inc............................. 1.63% 03/15/19 747,361
275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 297,913
100,000 UnitedHealth Group, Inc............................. 2.13% 03/15/21 98,889
550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 557,889
100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 103,637
250,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 246,869
500,000 UnitedHealth Group, Inc............................. 3.45% 01/15/27 508,558
150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 204,505
573,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 632,762
500,000 UnitedHealth Group, Inc............................. 4.20% 01/15/47 507,033
-------------
6,020,254
-------------
See Notes to Financial Statements Page 29
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HOTELS, RESTAURANTS & LEISURE - 0.1%
$ 330,000 McDonald's Corp..................................... 2.10% 12/07/18 $ 332,116
150,000 McDonald's Corp..................................... 3.70% 01/30/26 153,001
100,000 McDonald's Corp..................................... 4.88% 12/09/45 107,530
-------------
592,647
-------------
HOUSEHOLD DURABLES - 0.3%
250,000 Newell Brands, Inc.................................. 3.15% 04/01/21 254,671
100,000 Newell Brands, Inc.................................. 4.00% 12/01/24 102,442
350,000 Newell Brands, Inc.................................. 4.20% 04/01/26 365,733
625,000 Newell Brands, Inc.................................. 5.50% 04/01/46 719,168
-------------
1,442,014
-------------
HOUSEHOLD PRODUCTS - 0.1%
250,000 Procter & Gamble (The) Co........................... 1.70% 11/03/21 245,892
250,000 Procter & Gamble (The) Co........................... 2.45% 11/03/26 239,878
100,000 Proctor & Gamble (The) Co........................... 1.85% 02/02/21 99,010
100,000 Proctor & Gamble (The) Co........................... 2.70% 02/02/26 98,455
-------------
683,235
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY
PRODUCERS - 0.2%
250,000 NextEra Energy Capital Holdings, Inc................ 2.06% 09/01/17 251,142
250,000 NextEra Energy Capital Holdings, Inc................ 2.30% 04/01/19 252,040
525,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 528,305
-------------
1,031,487
-------------
INDUSTRIAL CONGLOMERATES - 0.3%
250,000 3M Co............................................... 1.63% 09/19/21 243,792
250,000 3M Co............................................... 2.25% 09/19/26 234,970
250,000 3M Co............................................... 3.13% 09/19/46 223,427
129,000 General Electric Co................................. 6.75% 03/15/32 171,982
425,000 General Electric Co................................. 4.50% 03/11/44 457,326
250,000 Roper Technologies, Inc............................. 2.80% 12/15/21 250,167
250,000 Roper Technologies, Inc............................. 3.80% 12/15/26 252,435
-------------
1,834,099
-------------
INSURANCE - 1.3%
250,000 Allstate (The) Corp................................. 3.28% 12/15/26 251,348
250,000 Allstate (The) Corp................................. 4.20% 12/15/46 256,390
400,000 American International Group, Inc................... 3.38% 08/15/20 411,869
200,000 American International Group, Inc................... 4.13% 02/15/24 207,963
100,000 American International Group, Inc................... 3.90% 04/01/26 101,950
50,000 American International Group, Inc................... 3.88% 01/15/35 47,116
300,000 American International Group, Inc................... 6.25% 05/01/36 359,815
250,000 Arch Capital Finance LLC............................ 5.03% 12/15/46 262,711
490,000 Chubb INA Holdings, Inc............................. 2.30% 11/03/20 490,156
200,000 Chubb INA Holdings, Inc............................. 2.88% 11/03/22 201,794
350,000 Chubb INA Holdings, Inc............................. 3.35% 05/03/26 354,933
600,000 Chubb INA Holdings, Inc............................. 4.35% 11/03/45 635,358
150,000 Hartford Financial Services Group (The), Inc........ 5.95% 10/15/36 171,915
250,000 Lincoln National Corp............................... 3.63% 12/12/26 249,935
100,000 MetLife, Inc........................................ 3.00% 03/01/25 98,214
150,000 MetLife, Inc........................................ 3.60% 11/13/25 152,681
Page 30 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 300,000 MetLife, Inc........................................ 4.88% 11/13/43 $ 325,549
170,000 MetLife, Inc........................................ 4.60% 05/13/46 179,401
325,000 Metropolitan Life Global Funding I (a) (b).......... 1.42% 12/19/18 325,539
500,000 Metropolitan Life Global Funding I (b).............. 3.45% 12/18/26 505,240
200,000 Principal Financial Group, Inc...................... 3.10% 11/15/26 193,716
200,000 Principal Financial Group, Inc...................... 4.30% 11/15/46 196,769
275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 287,327
325,000 Travelers (The) Cos., Inc........................... 6.75% 06/20/36 436,925
80,000 Travelers (The) Cos., Inc........................... 3.75% 05/15/46 75,685
-------------
6,780,299
-------------
IT SERVICES - 0.8%
250,000 Fidelity National Information Services, Inc......... 2.25% 08/15/21 244,021
250,000 Fidelity National Information Services, Inc......... 3.00% 08/15/26 235,216
100,000 Fidelity National Information Services, Inc......... 4.50% 08/15/46 95,585
500,000 International Business Machines Corp................ 1.63% 05/15/20 494,158
100,000 International Business Machines Corp................ 3.63% 02/12/24 104,233
600,000 Visa, Inc........................................... 2.20% 12/14/20 602,198
950,000 Visa, Inc........................................... 2.80% 12/14/22 956,083
550,000 Visa, Inc........................................... 3.15% 12/14/25 553,039
303,000 Visa, Inc........................................... 4.15% 12/14/35 317,853
450,000 Visa, Inc........................................... 4.30% 12/14/45 476,171
-------------
4,078,557
-------------
MACHINERY - 0.1%
650,000 Caterpillar, Inc.................................... 3.90% 05/27/21 685,867
-------------
MEDIA - 1.4%
150,000 21st Century Fox America, Inc....................... 3.00% 09/15/22 149,489
175,000 21st Century Fox America, Inc....................... 5.40% 10/01/43 189,127
50,000 21st Century Fox America, Inc....................... 4.95% 10/15/45 51,582
610,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.91% 07/23/25 643,995
600,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 6.48% 10/23/45 696,067
300,000 Comcast Corp........................................ 1.63% 01/15/22 287,761
200,000 Comcast Corp........................................ 3.38% 08/15/25 201,426
200,000 Comcast Corp........................................ 3.15% 03/01/26 197,568
300,000 Comcast Corp........................................ 2.35% 01/15/27 276,914
50,000 Comcast Corp........................................ 3.20% 07/15/36 45,069
100,000 Comcast Corp........................................ 4.60% 08/15/45 105,079
400,000 Comcast Corp........................................ 3.40% 07/15/46 350,252
200,000 Discovery Communications LLC........................ 4.90% 03/11/26 210,985
100,000 Time Warner Cable LLC............................... 8.75% 02/14/19 112,750
329,000 Time Warner Cable, Inc.............................. 6.75% 07/01/18 351,372
200,000 Time Warner Cable, Inc.............................. 4.50% 09/15/42 181,792
350,000 Time Warner, Inc.................................... 4.88% 03/15/20 373,891
150,000 Time Warner, Inc.................................... 3.60% 07/15/25 149,432
100,000 Time Warner, Inc.................................... 2.95% 07/15/26 93,343
200,000 Time Warner, Inc.................................... 6.50% 11/15/36 242,619
50,000 Time Warner, Inc.................................... 4.85% 07/15/45 50,246
See Notes to Financial Statements Page 31
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA (CONTINUED)
$ 50,000 Viacom, Inc......................................... 2.75% 12/15/19 $ 49,970
250,000 Viacom, Inc......................................... 2.25% 02/04/22 235,214
125,000 Viacom, Inc......................................... 3.88% 04/01/24 121,504
250,000 Viacom, Inc......................................... 3.45% 10/04/26 231,519
500,000 Walt Disney (The) Co................................ 0.88% 07/12/19 490,131
100,000 Walt Disney (The) Co................................ 2.15% 09/17/20 100,500
150,000 Walt Disney (The) Co................................ 3.00% 02/13/26 149,425
350,000 Walt Disney (The) Co................................ 1.85% 07/30/26 315,511
475,000 Walt Disney (The) Co................................ 4.13% 06/01/44 492,297
250,000 Walt Disney (The) Co................................ 3.00% 07/30/46 213,207
-------------
7,360,037
-------------
MULTI-UTILITIES - 0.8%
250,000 Ameren Illinois Co.................................. 4.15% 03/15/46 256,901
493,000 CMS Energy Corp..................................... 3.00% 05/15/26 475,442
100,000 CMS Energy Corp..................................... 4.88% 03/01/44 107,614
95,000 Consolidated Edison Co. of New York, Inc............ 4.50% 12/01/45 100,981
230,000 Consolidated Edison Co. of New York, Inc............ 3.30% 12/01/24 234,015
335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 349,595
100,000 Consolidated Edison Co. of New York, Inc............ 3.85% 06/15/46 95,660
250,000 Consolidated Edison Co. of New York, Inc............ 4.30% 12/01/56 250,369
100,000 Consolidated Edison, Inc............................ 2.00% 05/15/21 97,834
100,000 Consumers Energy Co................................. 3.25% 08/15/46 88,523
50,000 Dominion Gas Holdings LLC........................... 2.50% 12/15/19 50,585
250,000 Dominion Resources, Inc............................. 1.60% 08/15/19 246,345
200,000 Dominion Resources, Inc............................. 5.20% 08/15/19 215,133
495,000 Dominion Resources, Inc............................. 4.70% 12/01/44 510,861
250,000 Public Service Enterprise Group, Inc................ 1.60% 11/15/19 246,578
250,000 Public Service Enterprise Group, Inc................ 2.00% 11/15/21 242,348
500,000 Southern Co. Gas Capital Corp....................... 2.45% 10/01/23 480,285
500,000 Southern Co. Gas Capital Corp....................... 3.95% 10/01/46 464,617
-------------
4,513,686
-------------
OIL, GAS & CONSUMABLE FUELS - 4.1%
150,000 Anadarko Petroleum Corp............................. 5.55% 03/15/26 168,189
761,000 Anadarko Petroleum Corp............................. 6.45% 09/15/36 908,405
344,000 Anadarko Petroleum Corp............................. 6.60% 03/15/46 425,797
250,000 Boardwalk Pipelines L.P............................. 5.95% 06/01/26 272,042
550,000 Chevron Corp........................................ 1.56% 05/16/19 547,931
175,000 Chevron Corp........................................ 2.19% 11/15/19 176,816
200,000 Chevron Corp........................................ 1.96% 03/03/20 199,426
750,000 Chevron Corp........................................ 2.10% 05/16/21 744,032
182,000 Chevron Corp. (a)................................... 1.47% 03/03/22 181,988
550,000 Chevron Corp........................................ 2.57% 05/16/23 542,712
150,000 Chevron Corp........................................ 3.33% 11/17/25 153,045
1,110,000 Chevron Corp........................................ 2.95% 05/16/26 1,093,206
368,000 ConocoPhillips...................................... 5.75% 02/01/19 395,561
225,000 ConocoPhillips...................................... 6.50% 02/01/39 285,748
300,000 ConocoPhillips Co................................... 4.20% 03/15/21 318,968
350,000 ConocoPhillips Co................................... 2.40% 12/15/22 338,886
250,000 ConocoPhillips Co................................... 4.95% 03/15/26 276,505
Page 32 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 50,000 ConocoPhillips Co................................... 4.15% 11/15/34 $ 49,025
250,000 ConocoPhillips Co................................... 5.95% 03/15/46 310,542
325,000 Devon Energy Corp................................... 3.25% 05/15/22 323,332
50,000 Enbridge Energy Partners L.P........................ 4.38% 10/15/20 52,243
185,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 184,320
310,000 Enbridge Energy Partners L.P........................ 7.38% 10/15/45 385,793
50,000 Energy Transfer Partners L.P........................ 4.15% 10/01/20 51,820
400,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 393,934
50,000 Energy Transfer Partners L.P........................ 4.05% 03/15/25 49,581
50,000 Energy Transfer Partners L.P........................ 4.75% 01/15/26 51,785
175,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 189,664
50,000 Energy Transfer Partners L.P........................ 6.13% 12/15/45 53,381
450,000 Enterprise Products Operating LLC................... 3.70% 02/15/26 452,480
100,000 Exxon Mobil Corp.................................... 1.71% 03/01/19 100,248
500,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 501,437
150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 146,179
200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 199,967
200,000 Exxon Mobil Corp.................................... 3.57% 03/06/45 186,806
825,000 Exxon Mobil Corp.................................... 4.11% 03/01/46 847,172
250,000 HollyFrontier Corp.................................. 5.88% 04/01/26 255,922
450,000 Kinder Morgan Energy Partners L.P................... 6.00% 02/01/17 451,372
220,000 Kinder Morgan Energy Partners L.P................... 3.50% 03/01/21 223,560
100,000 Kinder Morgan Energy Partners L.P................... 4.15% 02/01/24 101,514
175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 203,590
300,000 Kinder Morgan, Inc.................................. 3.05% 12/01/19 304,512
715,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 737,403
650,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 645,873
250,000 Marathon Oil Corp................................... 3.85% 06/01/25 242,863
259,000 Marathon Oil Corp................................... 5.20% 06/01/45 244,999
200,000 Occidental Petroleum Corp........................... 4.40% 04/15/46 204,027
250,000 Occidental Petroleum Corp........................... 4.10% 02/15/47 244,134
750,000 ONEOK Partners L.P.................................. 2.00% 10/01/17 752,194
400,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 402,170
200,000 ONEOK Partners L.P.................................. 4.90% 03/15/25 214,878
250,000 Phillips 66 Partners L.P............................ 3.55% 10/01/26 242,435
250,000 Phillips 66 Partners L.P............................ 4.90% 10/01/46 240,992
50,000 Pioneer Natural Resources Co........................ 3.45% 01/15/21 51,141
425,000 Pioneer Natural Resources Co........................ 3.95% 07/15/22 441,474
50,000 Pioneer Natural Resources Co........................ 4.45% 01/15/26 53,171
300,000 Plains All American Pipeline L.P./PAA Finance Corp.. 4.65% 10/15/25 310,484
250,000 Plains All American Pipeline L.P./PAA Finance Corp.. 4.50% 12/15/26 254,107
350,000 Spectra Energy Capital LLC.......................... 3.30% 03/15/23 338,820
250,000 Spectra Energy Partners L.P......................... 3.38% 10/15/26 239,610
250,000 Spectra Energy Partners L.P......................... 4.50% 03/15/45 238,640
100,000 Sunoco Logistics Partners Operations L.P............ 4.40% 04/01/21 105,410
350,000 Sunoco Logistics Partners Operations L.P............ 3.90% 07/15/26 339,444
250,000 Valero Energy Corp.................................. 3.40% 09/15/26 239,992
125,000 Valero Energy Corp.................................. 6.63% 06/15/37 146,730
500,000 Valero Energy Partners L.P.......................... 4.38% 12/15/26 505,472
300,000 Williams Partners L.P............................... 3.60% 03/15/22 301,932
See Notes to Financial Statements Page 33
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 250,000 Williams Partners L.P............................... 3.90% 01/15/25 $ 245,607
95,000 Williams Partners L.P............................... 4.00% 09/15/25 94,105
625,000 Williams Partners L.P............................... 4.90% 01/15/45 579,746
270,000 Williams Partners L.P............................... 5.10% 09/15/45 257,563
-------------
22,014,852
-------------
PHARMACEUTICALS - 0.5%
125,000 Merck & Co, Inc..................................... 1.85% 02/10/20 125,134
450,000 Merck & Co, Inc..................................... 3.70% 02/10/45 430,195
300,000 Merck & Co., Inc.................................... 2.75% 02/10/25 294,877
300,000 Pfizer, Inc......................................... 1.20% 06/01/18 299,276
100,000 Pfizer, Inc......................................... 1.45% 06/03/19 99,426
100,000 Pfizer, Inc......................................... 1.70% 12/15/19 99,949
100,000 Pfizer, Inc......................................... 1.95% 06/03/21 98,965
100,000 Pfizer, Inc......................................... 2.20% 12/15/21 99,853
250,000 Pfizer, Inc......................................... 3.40% 05/15/24 258,660
100,000 Pfizer, Inc......................................... 2.75% 06/03/26 97,204
100,000 Pfizer, Inc......................................... 3.00% 12/15/26 98,847
100,000 Pfizer, Inc......................................... 4.00% 12/15/36 102,666
250,000 Pfizer, Inc......................................... 4.40% 05/15/44 264,705
250,000 Pfizer, Inc......................................... 4.13% 12/15/46 254,974
-------------
2,624,731
-------------
ROAD & RAIL - 0.7%
425,000 CSX Corp............................................ 3.40% 08/01/24 433,613
350,000 CSX Corp............................................ 2.60% 11/01/26 328,340
250,000 CSX Corp............................................ 3.80% 11/01/46 232,772
200,000 CSX Corp............................................ 4.50% 08/01/54 196,879
250,000 CSX Corp............................................ 4.25% 11/01/66 229,261
100,000 Kansas City Southern................................ 4.95% 08/15/45 101,856
250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 241,066
300,000 Ryder System, Inc................................... 3.50% 06/01/17 302,569
425,000 Ryder System, Inc................................... 2.45% 09/03/19 427,620
300,000 Ryder System, Inc................................... 2.65% 03/02/20 301,985
250,000 Ryder System, Inc................................... 2.25% 09/01/21 244,413
300,000 Union Pacific Corp.................................. 3.75% 03/15/24 315,378
100,000 Union Pacific Corp.................................. 2.75% 03/01/26 97,630
183,000 Union Pacific Corp.................................. 4.15% 01/15/45 184,738
225,000 Union Pacific Corp.................................. 4.05% 03/01/46 226,216
100,000 Union Pacific Corp.................................. 3.35% 08/15/46 89,823
70,000 Union Pacific Corp.................................. 3.80% 10/01/51 65,526
-------------
4,019,685
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.3%
100,000 Intel Corp.......................................... 1.70% 05/19/21 97,721
100,000 Intel Corp.......................................... 3.10% 07/29/22 102,911
375,000 Intel Corp.......................................... 2.70% 12/15/22 377,000
100,000 Intel Corp.......................................... 2.60% 05/19/26 96,838
160,000 Intel Corp.......................................... 4.80% 10/01/41 176,527
150,000 Intel Corp.......................................... 4.90% 07/29/45 168,204
300,000 Intel Corp.......................................... 4.10% 05/19/46 298,110
75,000 QUALCOMM, Inc....................................... 3.45% 05/20/25 76,395
-------------
1,393,706
-------------
Page 34 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE - 0.9%
$ 150,000 Microsoft Corp...................................... 1.30% 11/03/18 $ 149,921
250,000 Microsoft Corp...................................... 1.10% 08/08/19 246,732
75,000 Microsoft Corp...................................... 1.85% 02/12/20 74,986
150,000 Microsoft Corp...................................... 2.00% 11/03/20 150,236
250,000 Microsoft Corp...................................... 1.55% 08/08/21 242,638
450,000 Microsoft Corp...................................... 2.65% 11/03/22 452,983
100,000 Microsoft Corp...................................... 2.00% 08/08/23 95,668
150,000 Microsoft Corp...................................... 3.63% 12/15/23 158,128
200,000 Microsoft Corp...................................... 3.13% 11/03/25 202,461
100,000 Microsoft Corp...................................... 2.40% 08/08/26 94,590
100,000 Microsoft Corp...................................... 3.45% 08/08/36 95,236
275,000 Microsoft Corp...................................... 4.45% 11/03/45 293,713
350,000 Microsoft Corp...................................... 3.70% 08/08/46 330,379
100,000 Oracle Corp......................................... 2.25% 10/08/19 101,253
200,000 Oracle Corp......................................... 1.90% 09/15/21 195,569
100,000 Oracle Corp......................................... 2.50% 05/15/22 99,380
500,000 Oracle Corp......................................... 2.40% 09/15/23 484,846
250,000 Oracle Corp......................................... 3.40% 07/08/24 254,971
350,000 Oracle Corp......................................... 2.65% 07/15/26 332,638
50,000 Oracle Corp......................................... 3.85% 07/15/36 48,895
400,000 Oracle Corp......................................... 5.38% 07/15/40 465,827
350,000 Oracle Corp......................................... 4.00% 07/15/46 335,626
-------------
4,906,676
-------------
SPECIALTY RETAIL - 0.6%
500,000 Home Depot (The), Inc............................... 2.00% 04/01/21 496,326
770,000 Home Depot (The), Inc............................... 4.40% 04/01/21 835,397
100,000 Home Depot (The), Inc............................... 3.35% 09/15/25 102,669
550,000 Home Depot (The), Inc............................... 3.00% 04/01/26 549,605
250,000 Home Depot (The), Inc............................... 2.13% 09/15/26 230,901
200,000 Home Depot (The), Inc............................... 5.40% 09/15/40 238,837
100,000 Home Depot (The), Inc............................... 4.40% 03/15/45 106,831
500,000 Home Depot (The), Inc............................... 4.25% 04/01/46 526,257
250,000 Home Depot (The), Inc............................... 3.50% 09/15/56 219,498
-------------
3,306,321
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.4%
250,000 Apple, Inc.......................................... 1.10% 08/02/19 246,358
450,000 Apple, Inc.......................................... 2.85% 05/06/21 459,616
250,000 Apple, Inc.......................................... 1.55% 08/04/21 241,865
375,000 Apple, Inc.......................................... 2.40% 05/03/23 365,463
100,000 Apple, Inc.......................................... 2.45% 08/04/26 93,973
100,000 Apple, Inc.......................................... 4.45% 05/06/44 103,796
100,000 Apple, Inc.......................................... 3.45% 02/09/45 88,492
100,000 Apple, Inc.......................................... 4.65% 02/23/46 108,249
150,000 Hewlett Packard Enterprise Co....................... 2.45% 10/05/17 150,862
50,000 Hewlett Packard Enterprise Co....................... 2.85% 10/05/18 50,505
100,000 Hewlett Packard Enterprise Co....................... 3.60% 10/15/20 101,819
150,000 Hewlett Packard Enterprise Co....................... 4.40% 10/15/22 156,399
125,000 Hewlett Packard Enterprise Co....................... 4.90% 10/15/25 128,825
50,000 Hewlett Packard Enterprise Co....................... 6.35% 10/15/45 50,671
-------------
2,346,893
-------------
See Notes to Financial Statements Page 35
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
TEXTILES, APPAREL & LUXURY GOODS - 0.1%
$ 250,000 NIKE, Inc........................................... 2.38% 11/01/26 $ 236,180
100,000 NIKE, Inc........................................... 3.88% 11/01/45 98,821
250,000 NIKE, Inc........................................... 3.38% 11/01/46 226,368
-------------
561,369
-------------
TOBACCO - 0.3%
450,000 Reynolds American, Inc.............................. 4.00% 06/12/22 471,240
300,000 Reynolds American, Inc.............................. 4.45% 06/12/25 317,287
525,000 Reynolds American, Inc.............................. 5.85% 08/15/45 623,984
-------------
1,412,511
-------------
WATER UTILITIES - 0.1%
350,000 American Water Capital Corp......................... 3.40% 03/01/25 358,544
350,000 American Water Capital Corp......................... 4.00% 12/01/46 352,366
-------------
710,910
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................. 216,245,279
(Cost $218,728,016) -------------
FOREIGN CORPORATE BONDS AND NOTES - 1.3%
AUTO COMPONENTS - 0.0%
100,000 Delphi Automotive PLC............................... 4.40% 10/01/46 92,245
-------------
BANKS - 0.5%
500,000 HSBC Holdings PLC (a)............................... 3.19% 03/08/21 523,315
700,000 HSBC Holdings PLC (a)............................... 2.59% 05/25/21 715,436
475,000 HSBC Holdings PLC................................... 2.65% 01/05/22 464,047
625,000 HSBC Holdings PLC................................... 3.90% 05/25/26 630,006
350,000 HSBC Holdings PLC................................... 4.38% 11/23/26 353,302
250,000 Standard Chartered PLC (b).......................... 2.10% 08/19/19 247,300
-------------
2,933,406
-------------
BIOTECHNOLOGY - 0.1%
100,000 Shire Acquisitions Investments Ireland DAC.......... 1.90% 09/23/19 98,797
100,000 Shire Acquisitions Investments Ireland DAC.......... 2.40% 09/23/21 96,706
100,000 Shire Acquisitions Investments Ireland DAC.......... 2.88% 09/23/23 95,188
-------------
290,691
-------------
CAPITAL MARKETS - 0.0%
200,000 Credit Suisse....................................... 5.40% 01/14/20 214,578
-------------
CHEMICALS - 0.0%
75,000 LYB International Finance, B.V...................... 4.88% 03/15/44 77,962
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.3%
444,000 GE Capital International Funding Co................. 4.42% 11/15/35 466,171
250,000 Shell International Finance, B.V.................... 2.88% 05/10/26 241,992
250,000 Shell International Finance, B.V.................... 2.50% 09/12/26 234,865
250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 239,671
250,000 Shell International Finance, B.V.................... 3.75% 09/12/46 230,633
-------------
1,413,332
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1%
150,000 Deutsche Telekom International Finance, B.V. (b).... 1.95% 09/19/21 144,698
150,000 Deutsche Telekom International Finance, B.V. (b).... 2.49% 09/19/23 143,498
-------------
288,196
-------------
Page 36 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
METALS & MINING - 0.0%
$ 186,000 Rio Tinto Finance USA, Ltd.......................... 3.75% 06/15/25 $ 191,881
-------------
OIL, GAS & CONSUMABLE FUELS - 0.2%
100,000 BP Capital Markets PLC.............................. 2.11% 09/16/21 98,181
100,000 BP Capital Markets PLC.............................. 3.12% 05/04/26 97,784
100,000 BP Capital Markets PLC.............................. 3.02% 01/16/27 96,630
100,000 Canadian Natural Resources, Ltd..................... 3.80% 04/15/24 99,814
250,000 Enbridge, Inc....................................... 4.25% 12/01/26 256,478
250,000 Enbridge, Inc....................................... 5.50% 12/01/46 268,510
200,000 Petroleos Mexicanos (b)............................. 5.38% 03/13/22 205,046
-------------
1,122,443
-------------
PHARMACEUTICALS - 0.1%
300,000 Actavis Funding SCS................................. 3.45% 03/15/22 304,852
300,000 Actavis Funding SCS................................. 3.80% 03/15/25 300,879
100,000 Actavis Funding SCS................................. 4.75% 03/15/45 98,551
-------------
704,282
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 7,329,016
(Cost $7,369,073) -------------
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
COMMERCIAL PAPER - 1.1%
BUILDING PRODUCTS - 0.2%
900,000 Tyco International Holding S.a.r.l.................. 0.90% 01/03/17 899,924
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS - 0.2%
900,000 Amphenol Corp....................................... 0.80% 01/03/17 899,924
-------------
FOOD & STAPLES RETAILING - 0.2%
900,000 Kroger (The) Co..................................... 0.85% 01/03/17 899,924
-------------
HEALTH CARE PROVIDERS & SERVICES - 0.1%
693,000 UnitedHealth Group, Inc............................. 0.80% 01/03/17 692,943
-------------
HOTELS, RESTAURANTS & LEISURE - 0.2%
950,000 Wyndham Worldwide Corp.............................. 0.85% 01/03/17 949,891
-------------
OIL, GAS & CONSUMABLE FUELS - 0.1%
900,000 Energy Transfer Partners L.P........................ 1.50% 01/04/17 899,870
-------------
SPECIALTY RETAIL - 0.1%
875,000 AutoNation, Inc..................................... 1.25% 01/03/17 874,900
-------------
TOTAL COMMERCIAL PAPER....................................................... 6,117,376
(Cost $6,117,624) -------------
See Notes to Financial Statements Page 37
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES - 1.0%
$ 350,000 U.S. Treasury Bond.................................. 2.25% 08/15/46 $ 294,301
1,125,000 U.S. Treasury Note (c).............................. 0.88% 10/15/17 1,125,307
240,000 U.S. Treasury Note.................................. 1.75% 11/30/21 238,242
3,800,000 U.S. Treasury Note.................................. 2.13% 11/30/23 3,775,285
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 5,433,135
(Cost $5,403,305) -------------
TOTAL INVESTMENTS - 98.0%.................................................... 533,128,414
(Cost $503,524,177) (d)
NET OTHER ASSETS AND LIABILITIES - 2.0%...................................... 10,840,144
-------------
NET ASSETS - 100.0%.......................................................... $ 543,968,558
=============
-----------------------------
(a) Floating rate security. The interest rate shown reflects the rate in
effect at December 31, 2016.
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the 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 December 31, 2016, securities noted as such
amounted to $3,834,294 or 0.70% of net assets.
(c) All or a portion of this security is segregated as collateral for open
futures contracts.
(d) Aggregate cost for federal income tax purposes is $503,810,641. As of
December 31, 2016, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$35,897,512 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$6,579,739.
Page 38 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
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
12/31/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*.................................... $298,003,608 $298,003,608 $ -- $ --
Corporate Bonds and Notes*........................ 216,245,279 -- 216,245,279 --
Foreign Corporate Bonds and Notes*................ 7,329,016 -- 7,329,016 --
Commercial Paper*................................. 6,117,376 -- 6,117,376 --
U.S. Government Bonds and Notes................... 5,433,135 -- 5,433,135 --
------------ ------------ ------------ ------------
Total Investments................................. $533,128,414 $298,003,608 $235,124,806 $ --
------------ ------------ ------------ ------------
Other Financial Instruments:
Futures Contracts**............................... 15,531 15,531 -- --
------------ ------------ ------------ ------------
Total............................................. $533,143,945 $298,019,139 $235,124,806 $ --
============ ============ ============ ============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Futures Contracts**............................... $ (9,656) $ (9,656) $ -- $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
** Includes accumulated 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 December 31, 2016.
OPEN FUTURES CONTRACTS AT DECEMBER 31, 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 45 Mar-2017 $ 5,294,883 $ 7,031
U.S. Treasury 10-Year Notes 24 Mar-2017 2,982,750 6,375
U.S. Treasury CME Ultra Long Term Bonds 3 Mar-2017 480,750 (9,656)
U.S. Treasury Ultra 10-Year Notes 50 Mar-2017 6,703,125 2,125
------------ ------------
Total Futures Contracts $ 15,461,508 $ 5,875
============ ============
See Notes to Financial Statements Page 39
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 40.0%
CAPITAL MARKETS -- 40.0%
600 First Trust Low Duration Opportunities ETF (a)............................... $ 31,308
64,727 First Trust Preferred Securities and Income ETF (a).......................... 1,229,166
59,444 First Trust Senior Loan Fund (a)............................................. 2,886,006
25,954 First Trust Tactical High Yield ETF (a)...................................... 1,251,761
250 iShares 20+ Year Treasury Bond ETF........................................... 29,783
255 iShares 7-10 Year Treasury Bond ETF.......................................... 26,729
13,168 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 1,543,026
2,302 iShares MBS ETF.............................................................. 244,795
1 Vanguard Mortgage-Backed Securities ETF...................................... 52
-------------
TOTAL EXCHANGE-TRADED FUNDS.................................................. 7,242,626
(Cost $7,308,806) -------------
COMMON STOCKS -- 21.8%
AEROSPACE & DEFENSE -- 0.8%
434 General Dynamics Corp........................................................ 74,935
492 Raytheon Co.................................................................. 69,864
-------------
144,799
-------------
BANKS -- 1.9%
1,144 JPMorgan Chase & Co.......................................................... 98,716
1,501 U.S. Bancorp................................................................. 77,106
1,661 Webster Financial Corp....................................................... 90,159
1,338 Wells Fargo & Co............................................................. 73,737
-------------
339,718
-------------
CAPITAL MARKETS -- 0.3%
168 BlackRock, Inc............................................................... 63,931
-------------
CHEMICALS -- 0.6%
486 International Flavors & Fragrances, Inc...................................... 57,265
567 LyondellBasell Industries N.V., Class A...................................... 48,637
-------------
105,902
-------------
COMMUNICATIONS EQUIPMENT -- 0.4%
2,326 Cisco Systems, Inc........................................................... 70,292
-------------
CONSUMER FINANCE -- 0.5%
984 Capital One Financial Corp................................................... 85,844
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
1,180 Verizon Communications, Inc.................................................. 62,988
-------------
ELECTRIC UTILITIES -- 1.8%
496 Alliant Energy Corp.......................................................... 18,793
566 American Electric Power Co., Inc............................................. 35,635
382 Duke Energy Corp............................................................. 29,651
911 Edison International......................................................... 65,583
354 Emera, Inc. (CAD)............................................................ 11,967
643 Eversource Energy............................................................ 35,513
446 NextEra Energy, Inc.......................................................... 53,279
867 Pinnacle West Capital Corp................................................... 67,652
-------------
318,073
-------------
Page 40 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT -- 0.3%
915 Eaton Corp. PLC.............................................................. $ 61,387
-------------
ENERGY EQUIPMENT & SERVICES -- 0.3%
584 Schlumberger Ltd............................................................. 49,027
-------------
FOOD & STAPLES RETAILING -- 0.3%
712 CVS Health Corp.............................................................. 56,184
-------------
GAS UTILITIES -- 0.3%
176 Atmos Energy Corp............................................................ 13,050
177 Chesapeake Utilities Corp.................................................... 11,850
337 New Jersey Resources Corp.................................................... 11,964
502 UGI Corp..................................................................... 23,132
-------------
59,996
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7%
1,621 Abbott Laboratories.......................................................... 62,263
862 Medtronic PLC................................................................ 61,400
-------------
123,663
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.8%
582 Aetna, Inc................................................................... 72,174
1,010 Cardinal Health, Inc......................................................... 72,690
-------------
144,864
-------------
HOTELS, RESTAURANTS & LEISURE -- 0.7%
1,401 Carnival Corp................................................................ 72,936
1,039 Starbucks Corp............................................................... 57,685
-------------
130,621
-------------
INDUSTRIAL CONGLOMERATES -- 1.2%
2,210 General Electric Co.......................................................... 69,836
635 Honeywell International, Inc................................................. 73,565
624 Siemens AG, ADR.............................................................. 76,390
-------------
219,791
-------------
INSURANCE -- 0.8%
1,999 FNF Group.................................................................... 67,886
1,478 MetLife, Inc................................................................. 79,649
-------------
147,535
-------------
IT SERVICES -- 0.8%
716 Accenture PLC, Class A....................................................... 83,865
880 Fidelity National Information Services, Inc.................................. 66,563
-------------
150,428
-------------
MACHINERY -- 0.4%
379 Snap-on, Inc................................................................. 64,911
-------------
MEDIA -- 0.3%
771 Scripps Networks Interactive, Inc., Class A.................................. 55,026
-------------
MULTI-UTILITIES -- 0.8%
407 National Grid PLC, ADR....................................................... 23,740
808 Public Service Enterprise Group, Inc......................................... 35,455
473 SCANA Corp................................................................... 34,661
340 Sempra Energy................................................................ 34,218
398 WEC Energy Group, Inc........................................................ 23,343
-------------
151,417
-------------
See Notes to Financial Statements Page 41
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS -- 2.8%
585 Chevron Corp................................................................. $ 68,855
1,377 Enbridge Income Fund Holdings, Inc. (CAD).................................... 35,660
263 Enbridge, Inc................................................................ 11,078
884 Exxon Mobil Corp............................................................. 79,790
1,073 Inter Pipeline Ltd. (CAD).................................................... 23,687
3,406 Kinder Morgan, Inc........................................................... 70,538
618 Targa Resources Corp......................................................... 34,651
1,585 TOTAL S.A., ADR.............................................................. 80,788
2,092 TransCanada Corp............................................................. 94,454
-------------
499,501
-------------
PHARMACEUTICALS -- 0.4%
677 Johnson & Johnson............................................................ 77,997
-------------
ROAD & RAIL -- 0.3%
619 Union Pacific Corp........................................................... 64,178
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7%
327 Broadcom Ltd................................................................. 57,804
1,695 Intel Corp................................................................... 61,478
-------------
119,282
-------------
SOFTWARE -- 0.8%
1,448 Microsoft Corp............................................................... 89,979
1,468 Oracle Corp.................................................................. 56,445
-------------
146,424
-------------
SPECIALTY RETAIL -- 0.8%
619 Home Depot (The), Inc........................................................ 82,996
860 TJX (The) Cos., Inc.......................................................... 64,612
-------------
147,608
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.4%
574 Apple, Inc................................................................... 66,481
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.6%
1,145 NIKE, Inc., Class B.......................................................... 58,200
876 VF Corp...................................................................... 46,735
-------------
104,935
-------------
TOBACCO -- 0.7%
955 Altria Group, Inc............................................................ 64,577
505 British American Tobacco PLC, ADR............................................ 56,898
-------------
121,475
-------------
TOTAL COMMON STOCKS.......................................................... 3,954,278
(Cost $3,672,069) -------------
REAL ESTATE INVESTMENT TRUSTS -- 10.6%
DIVERSIFIED REITS -- 1.7%
7,511 Lexington Realty Trust....................................................... 81,119
685 PS Business Parks, Inc....................................................... 79,816
2,752 STORE Capital Corp........................................................... 68,002
2,551 Washington Real Estate Investment Trust...................................... 83,392
-------------
312,329
-------------
Page 42 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
HEALTH CARE REITS -- 1.2%
1,006 National Health Investors, Inc............................................... $ 74,615
2,409 Omega Healthcare Investors, Inc.............................................. 75,305
3,829 Physicians Realty Trust...................................................... 72,598
-------------
222,518
-------------
HOTEL & RESORT REITS -- 1.0%
2,683 Hospitality Properties Trust................................................. 85,158
4,671 Host Hotels & Resorts, Inc................................................... 88,002
-------------
173,160
-------------
INDUSTRIAL REITS -- 0.9%
2,925 Duke Realty Corp............................................................. 77,688
1,445 Prologis, Inc................................................................ 76,282
-------------
153,970
-------------
RESIDENTIAL REITS -- 1.7%
1,661 Apartment Investment & Management Co., Class A............................... 75,492
430 AvalonBay Communities, Inc................................................... 76,174
1,023 Equity LifeStyle Properties, Inc............................................. 73,758
781 Mid-America Apartment Communities, Inc....................................... 76,476
-------------
301,900
-------------
RETAIL REITS -- 1.6%
2,879 Kimco Realty Corp............................................................ 72,436
1,661 National Retail Properties, Inc.............................................. 73,416
4,902 Retail Properties of America, Inc., Class A.................................. 75,148
403 Simon Property Group, Inc.................................................... 71,601
-------------
292,601
-------------
SPECIALIZED REITS -- 2.5%
1,703 CyrusOne, Inc................................................................ 76,175
786 Digital Realty Trust, Inc.................................................... 77,232
1,045 EPR Properties............................................................... 75,000
990 Extra Space Storage, Inc..................................................... 76,468
897 Life Storage, Inc............................................................ 76,478
1,615 QTS Realty Trust, Inc., Class A.............................................. 80,185
-------------
461,538
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 1,918,016
(Cost $1,777,125) -------------
See Notes to Financial Statements Page 43
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES -- 9.4%
$ 29,366 U.S. Treasury Inflation Indexed Bond................ 2.38% 01/15/27 $ 34,433
68,075 U.S. Treasury Inflation Indexed Bond................ 1.75% 01/15/28 76,084
39,405 U.S. Treasury Inflation Indexed Bond................ 2.50% 01/15/29 47,584
5,881 U.S. Treasury Inflation Indexed Bond................ 3.88% 04/15/29 8,033
30,096 U.S. Treasury Inflation Indexed Bond................ 3.38% 04/15/32 41,655
23,485 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/40 29,133
37,308 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/41 46,519
27,599 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/42 26,181
42,685 U.S. Treasury Inflation Indexed Bond................ 0.63% 02/15/43 39,161
32,982 U.S. Treasury Inflation Indexed Bond................ 1.38% 02/15/44 36,052
31,103 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/45 29,321
29,584 U.S. Treasury Inflation Indexed Bond................ 1.00% 02/15/46 29,742
88,151 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/18 88,979
38,112 U.S. Treasury Inflation Indexed Note................ 1.38% 07/15/18 39,563
2,252 U.S. Treasury Inflation Indexed Note................ 2.13% 01/15/19 2,380
98,929 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/19 100,195
20,377 U.S. Treasury Inflation Indexed Note................ 1.88% 07/15/19 21,707
29,510 U.S. Treasury Inflation Indexed Note................ 1.38% 01/15/20 31,050
75,350 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/20 76,159
50,985 U.S. Treasury Inflation Indexed Note................ 1.25% 07/15/20 53,873
57,680 U.S. Treasury Inflation Indexed Note................ 1.13% 01/15/21 60,554
45,895 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/21 46,189
55,769 U.S. Treasury Inflation Indexed Note................ 0.63% 07/15/21 57,590
63,971 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/22 64,134
62,016 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/22 62,225
61,785 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/23 61,382
61,282 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/23 61,884
61,121 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/24 62,248
60,266 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/24 59,258
60,212 U.S. Treasury Inflation Indexed Note................ 0.25% 01/15/25 59,257
53,218 U.S. Treasury Inflation Indexed Note................ 2.38% 01/15/25 61,149
60,138 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/25 59,848
63,072 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/26 63,664
35,927 U.S. Treasury Inflation Indexed Note................ 2.00% 01/15/26 40,510
35,295 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/26 34,151
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 1,711,847
(Cost $1,722,791) -------------
UNITS DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS -- 9.3%
CHEMICALS -- 0.2%
2,068 Westlake Chemical Partners, L.P.............................................. 44,876
-------------
GAS UTILITIES -- 0.4%
1,404 AmeriGas Partners, L.P....................................................... 67,280
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.4%
3,018 NextEra Energy Partners, L.P................................................. 77,080
-------------
Page 44 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
UNITS DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS (CONTINUED)
OIL, GAS & CONSUMABLE FUELS -- 8.3%
916 Alliance Holdings GP, L.P.................................................... $ 25,740
2,603 Alliance Resource Partners, L.P.............................................. 58,437
480 Buckeye Partners, L.P........................................................ 31,757
810 Dominion Midstream Partners L.P.............................................. 23,935
5,548 Enbridge Energy Partners, L.P................................................ 141,363
8,777 Enterprise Products Partners, L.P............................................ 237,330
1,410 EQT Midstream Partners, L.P.................................................. 108,119
3,579 Holly Energy Partners, L.P................................................... 114,743
1,867 Magellan Midstream Partners, L.P............................................. 141,201
1,681 NGL Energy Partners, L.P..................................................... 35,301
1,322 ONEOK Partners, L.P.......................................................... 56,859
726 Phillips 66 Partners, L.P.................................................... 35,313
3,774 Plains All American Pipeline, L.P............................................ 121,862
816 Shell Midstream Partners L.P................................................. 23,737
3,368 Spectra Energy Partners, L.P................................................. 154,389
755 Tallgrass Energy Partners, L.P............................................... 35,825
2,060 TC PipeLines, L.P............................................................ 121,210
260 TransMontaigne Partners, L.P................................................. 11,510
622 Williams Partners, L.P....................................................... 23,655
-------------
1,502,286
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................ 1,691,522
(Cost $1,449,962) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 6.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.6%
Fannie Mae REMICS
$ 59 Series 1988-16, Class B.......................... 9.50% 06/25/18 60
991 Series 1988-30, Class D.......................... 9.50% 12/25/18 1,034
289 Series 1989-69, Class G.......................... 7.60% 10/25/19 301
888 Series 1989-82, Class G.......................... 8.40% 11/25/19 953
21,956 Series 1990-37, Class K.......................... 9.50% 04/25/20 23,082
3,034 Series 1990-109, Class J......................... 7.00% 09/25/20 3,170
1,363 Series 1992-24, Class Z.......................... 6.50% 04/25/22 1,471
50 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 52
3,028 Series 1993-1, Class KA.......................... 7.90% 01/25/23 3,392
2,053 Series 1993-62, Class E.......................... 7.00% 04/25/23 2,249
720 Series 1993-119, Class H......................... 6.50% 07/25/23 789
4,588 Series 1993-178, Class PK........................ 6.50% 09/25/23 5,048
4,491 Series 1995-24, Class G.......................... 6.50% 04/25/23 4,871
2,540 Series 1999-56, Class Z.......................... 7.00% 12/18/29 2,872
67 Series 2002-2, Class UC.......................... 6.00% 02/25/17 66
49,067 Series 2002-9, Class MS, IO (b).................. 7.34% 03/25/32 10,092
420 Series 2002-10, Class FB (b)..................... 1.26% 03/25/17 420
56 Series 2002-19, Class PE......................... 6.00% 04/25/17 56
2,124 Series 2002-67, Class PE......................... 5.50% 11/25/32 2,357
5,620 Series 2002-90, Class A1......................... 6.50% 06/25/42 6,554
139 Series 2003-9, Class EB.......................... 5.00% 02/25/18 141
See Notes to Financial Statements Page 45
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Fannie Mae REMICS (Continued)
$ 5,519 Series 2003-14, Class AQ......................... 3.50% 03/25/33 $ 5,633
7,887 Series 2003-41, Class OA......................... 4.00% 05/25/33 8,245
255 Series 2003-92, Class HP......................... 4.50% 09/25/18 261
10,508 Series 2004-10, Class ZB......................... 6.00% 02/25/34 12,576
7,294 Series 2004-76, Class CL......................... 4.00% 10/25/19 7,408
6,020 Series 2004-92, Class S, IO (b).................. 5.94% 08/25/34 409
1,674 Series 2005-46, Class LW......................... 5.00% 06/25/20 1,702
252 Series 2005-48, Class MD......................... 5.00% 04/25/34 256
11,794 Series 2005-68, Class BC......................... 5.25% 06/25/35 12,397
6,394 Series 2005-70, Class KJ......................... 5.50% 09/25/34 6,600
24,558 Series 2005-79, Class NF (b)..................... 1.17% 09/25/35 24,530
224 Series 2005-120, Class NF (b).................... 0.86% 01/25/21 224
21 Series 2010-39, Class PG......................... 4.00% 06/25/38 21
1,558 Series 2011-38, Class AH......................... 2.75% 05/25/20 1,573
4,004 Series 2012-35, Class PL......................... 2.00% 11/25/41 3,936
1,354 Series 2013-14, Class QE......................... 1.75% 03/25/43 1,322
60,686 Series 2013-31, Class NT......................... 3.00% 04/25/43 61,833
Fannie Mae REMIC Trust
24,719 Series 2007-W8, Class 1A5 (b).................... 6.27% 09/25/37 26,292
Fannie Mae Trust
7,466 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 8,576
FHLMC - GNMA
579 Series 1993-5, Class HA.......................... 7.50% 02/25/23 628
1,271 Series 1994-27, Class D.......................... 7.00% 03/25/24 1,413
Freddie Mac REMICS
1,547 Series 1988-23, Class F.......................... 9.60% 04/15/20 1,622
1,178 Series 1989-84, Class F.......................... 9.20% 10/15/20 1,254
5,114 Series 1991-1074, Class I........................ 6.75% 05/15/21 5,342
3,141 Series 1991-1078, Class GZ....................... 6.50% 05/15/21 3,234
990 Series 1992-1250, Class J........................ 7.00% 05/15/22 1,082
29,636 Series 1992-1401, Class Q (b).................... 1.30% 10/15/22 29,964
7,876 Series 1994-1673, Class FB (b)................... 1.76% 02/15/24 7,840
1,514 Series 1996-1807, Class G........................ 9.00% 10/15/20 1,592
95 Series 1996-1847, Class LL....................... 7.50% 04/15/26 106
20,175 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 2,741
290 Series 1998-2056, Class TD....................... 6.50% 05/15/18 297
5,238 Series 1999-2130, Class KB....................... 6.38% 03/15/29 5,723
15,931 Series 1999-2174, Class PN....................... 6.00% 07/15/29 17,672
10,735 Series 2001-2277, Class B........................ 7.50% 01/15/31 12,288
23 Series 2002-2399, Class PG....................... 6.00% 01/15/17 23
113 Series 2002-2447, Class LB....................... 5.50% 05/15/17 113
761 Series 2002-2453, Class BD....................... 6.00% 05/15/17 771
10,112 Series 2002-2542, Class ES....................... 5.00% 12/15/17 10,236
677 Series 2003-2559, Class PB....................... 5.50% 08/15/30 701
5,056 Series 2003-2590, Class NV....................... 5.00% 03/15/18 5,142
3,347 Series 2003-2649, Class KA....................... 4.50% 07/15/18 3,405
23,695 Series 2004-2768, Class PW....................... 4.25% 03/15/34 24,301
10,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 10,972
Page 46 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Freddie Mac REMICS (Continued)
$ 1,288 Series 2004-2780, Class JA....................... 4.50% 04/15/19 $ 1,335
1,080 Series 2005-2922, Class QE....................... 5.00% 05/15/34 1,110
33,449 Series 2005-2958, Class QJ....................... 4.00% 04/15/20 34,245
41,210 Series 2006-3114, Class GI, IO (b)............... 5.90% 02/15/36 9,261
59,178 Series 2006-3199, Class DS, IO (b)............... 6.45% 08/15/36 11,629
1,880 Series 2006-3237, Class CB....................... 5.50% 07/15/36 1,967
27,926 Series 2010-3758, Class M........................ 4.50% 10/15/38 29,300
6,354 Series 2010-3775, Class KZ....................... 4.00% 08/15/25 6,561
15,965 Series 2011-3824, Class FA (b)................... 0.85% 03/15/26 15,932
3,974 Series 2012-3994, Class AE....................... 1.63% 02/15/22 3,970
2,774 Series 2012-4097, Class DC....................... 1.50% 06/15/41 2,668
19,381 Series 2013-4178, Class ZN....................... 3.50% 03/15/43 17,155
5,070 Series 2013-4253, Class TD....................... 2.00% 07/15/40 5,079
Freddie Mac Strips
28,368 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 5,687
Government National Mortgage Association
16,071 Series 1999-30, Class S, IO (b).................. 7.89% 08/16/29 3,482
48,227 Series 2002-92, Class PB......................... 5.50% 12/20/32 53,505
1,562 Series 2004-42, Class LE......................... 5.50% 07/20/33 1,568
323 Series 2008-85, Class HP......................... 4.00% 04/20/38 325
12,032 Series 2009-29, Class TA......................... 4.50% 03/16/39 12,725
367 Series 2009-81, Class PA......................... 5.50% 02/16/38 385
1,916 Series 2009-93, Class PB......................... 3.00% 12/16/38 1,938
11,376 Series 2009-102, Class MA........................ 4.00% 06/16/39 11,778
7,927 Series 2010-44, Class NK......................... 4.00% 10/20/37 8,073
601 Series 2010-117, Class MA........................ 2.50% 09/16/23 606
4,939 Series 2010-121, Class PQ........................ 3.00% 02/20/39 5,007
4,698 Series 2011-136, Class GB........................ 2.50% 05/20/40 4,713
41,510 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 7,243
-------------
658,533
-------------
PASS-THROUGH SECURITIES -- 2.7%
Federal Home Loan Mortgage Corporation
19,679 Pool A47829...................................... 4.00% 08/01/35 20,760
11,679 Pool C01252...................................... 6.50% 11/01/31 13,587
25,289 Pool G06358...................................... 4.00% 04/01/41 26,754
4,968 Pool G11418...................................... 6.50% 07/01/17 5,000
4,801 Pool O20138...................................... 5.00% 11/01/30 5,225
27,990 Pool U90316...................................... 4.00% 10/01/42 29,670
Federal National Mortgage Association
8,868 Pool 888366...................................... 7.00% 04/01/37 10,420
19,934 Pool 890383...................................... 4.00% 01/01/42 21,080
57,300 Pool AD0659...................................... 6.00% 02/01/23 61,794
14,940 Pool AH1568...................................... 4.50% 12/01/40 16,157
12,588 Pool AL0791...................................... 4.00% 02/01/41 13,331
32,861 Pool AS9194...................................... 4.50% 12/01/44 35,939
61,971 Pool AU4289...................................... 4.00% 09/01/43 65,508
9,924 Pool MA0561...................................... 4.00% 11/01/40 10,475
48,718 Pool MA1028...................................... 4.00% 04/01/42 51,474
See Notes to Financial Statements Page 47
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association
$ 15,514 Pool 3428........................................ 5.00% 08/20/33 $ 17,296
16,786 Pool 3500........................................ 5.50% 01/20/34 18,850
11,813 Pool 3711........................................ 5.50% 05/20/35 13,269
37,364 Pool MA3525...................................... 5.50% 03/20/46 41,810
-------------
478,399
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 1,136,932
(Cost $1,135,892) -------------
MORTGAGE-BACKED SECURITIES -- 0.6%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
Credit Suisse First Boston Mortgage Securities Corp.
2,391 Series 2004-4, Class 1A3......................... 5.75% 08/25/34 2,429
13,180 Series 2004-6, Class 2A1......................... 4.75% 09/25/19 13,419
Jefferies Resecuritization Trust
4,827 Series 2009-R7, Class 4A1 (b) (c)................ 3.21% 09/26/34 4,815
JPMorgan Resecuritization Trust
6,196 Series 2009-7, Class 5A1 (b) (c)................. 6.00% 02/27/37 6,216
MASTR Alternative Loan Trust
5,142 Series 2004-10, Class 2A1........................ 5.50% 10/25/19 5,277
MASTR Asset Securitization Trust
5,288 Series 2003-5, Class 2A1......................... 5.00% 06/25/18 5,485
7,201 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 7,374
RAAC Trust
3,040 Series 2005-SP1, Class 2A1....................... 5.25% 09/25/34 3,099
Structured Asset Mortgage Investments Trust
13,240 Series 1999-1, Class 2A (b)...................... 8.91% 06/25/29 13,490
Structured Asset Securities Corp. Mortgage
Pass-Through Certificates
2,650 Series 2004-21XS, Class 2A6A..................... 5.24% 12/25/34 2,699
WAMU Mortgage Pass-Through Certificates
374 Series 2002-S8, Class 2A7........................ 5.25% 01/25/18 376
Wells Fargo Alternative Loan Trust
657 Series 2007-PA5, Class 2A1....................... 6.00% 11/25/22 661
Wells Fargo Mortgage Backed-Securities Trust
2,606 Series 2006-17, Class A4......................... 5.50% 11/25/21 2,681
-------------
68,021
-------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.2%
Bear Stearns Commercial Mortgage Securities Trust
29,172 Series 2007-PW16, Class A1A (b).................. 5.71% 06/11/40 29,455
18,850 Series 2007-PW16, Class A4 (b)................... 5.71% 06/11/40 18,874
-------------
48,329
-------------
TOTAL MORTGAGE-BACKED SECURITIES............................................. 116,350
(Cost $115,593) -------------
Page 48 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
ASSET-BACKED SECURITIES -- 0.1%
AFC Home Equity Loan Trust
$ 991 Series 1997-4, Class 1A2 (b)..................... 1.29% 12/22/27 $ 888
Bear Stearns Asset Backed Securities Trust
7,027 Series 2005-SD1, Class 1A3 (b)................... 0.98% 08/25/43 6,984
Conseco Financial Corp.
1,134 Series 1993-4, Class A5.......................... 7.05% 01/15/19 1,151
-------------
TOTAL ASSET-BACKED SECURITIES................................................ 9,023
(Cost $8,752) -------------
TOTAL INVESTMENTS -- 98.1%................................................... 17,780,594
(Cost $17,190,990) (d)
NET OTHER ASSETS AND LIABILITIES -- 1.9%..................................... 340,466
-------------
NET ASSETS -- 100.0%......................................................... $ 18,121,060
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Floating or variable rate security. The interest rate shown reflects the
rate in effect at December 31, 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 December 31, 2016, securities noted as such
amounted to $11,031 or 0.06% of net assets.
(d) Aggregate cost for federal income tax purposes is $17,497,434. As of
December 31, 2016, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$605,524 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$322,364.
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.
See Notes to Financial Statements Page 49
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2016
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
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
12/31/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 7,242,626 $ 7,242,626 $ -- $ --
Common Stocks*.................................... 3,954,278 3,954,278 -- --
Real Estate Investment Trusts*.................... 1,918,016 1,918,016 -- --
U.S. Government Bonds and Notes................... 1,711,847 -- 1,711,847 --
Master Limited Partnerships*...................... 1,691,522 1,691,522 -- --
U.S. Government Agency Mortgage-Backed
Securities..................................... 1,136,932 -- 1,136,932 --
Mortgage-Backed Securities........................ 116,350 -- 116,350 --
Asset-Backed Securities........................... 9,023 -- 9,023 --
------------ ------------ ------------ ------------
Total Investments................................. $ 17,780,594 $ 14,806,442 $ 2,974,152 $ --
============ ============ ============ ============
* 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 December 31, 2016.
Page 50 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2016
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS - 97.1%
CAPITAL MARKETS - 97.1%
3,508 First Trust Brazil AlphaDEX(R) Fund (a)...................................... $ 47,954
2,576 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 121,845
11,472 First Trust Dow Jones Internet Index Fund (a) (b)............................ 915,810
5,922 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 120,217
60,848 First Trust Energy AlphaDEX(R) Fund (a)...................................... 1,004,600
1,348 First Trust Germany AlphaDEX(R) Fund (a)..................................... 49,013
26,079 First Trust Industrials/Producer Durables AlphaDEX(R) Fund (a)............... 857,478
1,666 First Trust Chindia ETF (a).................................................. 45,532
19,913 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 976,533
2,700 First Trust Latin America AlphaDEX(R) Fund (a)............................... 50,247
19,138 First Trust Mid Cap Core AlphaDEX(R) Fund (a)................................ 1,079,192
17,281 First Trust NASDAQ-100-Technology Sector Index Fund (a)...................... 910,017
29,139 First Trust Small Cap Growth AlphaDEX(R) Fund (a)............................ 1,009,666
1,248 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 50,943
34,767 First Trust Utilities AlphaDEX(R) Fund (a)................................... 929,322
5,453 iShares Core U.S. Aggregate Bond ETF......................................... 589,251
7,766 SPDR Bloomberg Barclays Convertible Securities ETF........................... 354,518
9,371 SPDR Bloomberg Barclays High Yield Bond ETF.................................. 341,573
9,637 SPDR Bloomberg Barclays Intermediate Term Corporate Bond ETF................. 326,791
7,709 SPDR Wells Fargo Preferred Stock ETF......................................... 323,393
-------------
TOTAL INVESTMENTS - 97.1%.................................................... 10,103,895
(Cost $9,912,996) (c)
NET OTHER ASSETS AND LIABILITIES - 2.9%...................................... 306,098
-------------
NET ASSETS - 100.0%.......................................................... $ 10,409,993
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes is $9,929,647. As of
December 31, 2016, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$270,937 and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over value was
$96,689.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
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
12/31/2016 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 10,103,895 $ 10,103,895 $ -- $ --
============ ============ ============ ============
* 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 December 31, 2016.
See Notes to Financial Statements Page 51
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2016
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................................................... $ 533,128,414 $ 12,382,353 $ 1,935,526
Investments in affiliated funds, at value............................... -- 5,398,241 8,168,369
Cash and cash equivalents............................................... 13,018,354 403,696 388,671
Receivables:
Interest............................................................. 1,899,395 11,052 --
Investment securities sold........................................... 791,530 258,828 --
Dividends............................................................ 526,734 18,101 5,972
Fund shares sold..................................................... 462,829 11,767 3,452
From investment advisor.............................................. -- 11,800 3,587
Reclaim.............................................................. -- 583 --
Prepaid expenses........................................................ 6,247 171 32
--------------- --------------- ---------------
Total Assets......................................................... 549,833,503 18,496,592 10,505,609
--------------- --------------- ---------------
LIABILITIES:
Payables:
Investment securities purchased...................................... 5,126,920 282,741 --
Investment advisory fees............................................. 175,097 -- --
12b-1 service fees (Class I)......................................... 112,249 3,752 4,081
Fund shares redeemed................................................. 92,502 9,048 899
Administrative service fees.......................................... 89,802 3,028 1,734
Accounting and administration fees................................... 52,031 1,653 32,319
Variation margin..................................................... 47,445 -- --
Custodian fees....................................................... 42,257 2,123 9,254
Licensing fees....................................................... 41,259 -- 2,507
Audit and tax fees................................................... 28,909 50,908 22,620
Transfer agent fees.................................................. 26,433 16,993 17,729
Printing fees........................................................ 18,366 3,236 1,101
Legal fees........................................................... 6,994 394 1,921
Commitment fees...................................................... 2,756 1,504 --
Financial reporting fees............................................. 771 -- 503
Trustees' fees and expenses.......................................... -- -- 415
Other liabilities....................................................... 1,154 152 533
--------------- --------------- ---------------
Total Liabilities.................................................... 5,864,945 375,532 95,616
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 543,968,558 $ 18,121,060 $ 10,409,993
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... $ 509,575,375 $ 17,898,158 $ 10,235,745
Accumulated net investment income (loss)................................ 200,834 -- 71
Accumulated net realized gain (loss) on investments, futures and foreign
currency transactions................................................ 4,582,237 (366,703) (16,722)
Net unrealized appreciation (depreciation) on investments, futures and
foreign currency translation......................................... 29,610,112 589,605 190,899
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 543,968,558 $ 18,121,060 $ 10,409,993
=============== =============== ===============
Investments, at cost.................................................... $ 503,524,177 $ 11,751,919 $ 1,982,239
=============== =============== ===============
Investments in affiliated funds, at cost................................ $ -- $ 5,439,071 $ 7,930,757
=============== =============== ===============
CLASS I SHARES:
NET ASSETS.............................................................. $ 543,951,263 $ 17,965,521 $ 10,359,787
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 12.85 $ 10.54 $ 9.85
=============== =============== ===============
Number of Shares outstanding............................................ 42,344,252 1,705,087 1,052,004
=============== =============== ===============
CLASS II SHARES:
NET ASSETS.............................................................. $ 17,295 $ 155,539 $ 50,206
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 12.87 $ 10.54 $ 9.83
=============== =============== ===============
Number of Shares outstanding............................................ 1,344 14,764 5,106
=============== =============== ===============
Page 52 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
INVESTMENT INCOME:
Dividends............................................................... $ 4,764,216 $ 189,761 $ 107,922
Dividends from affiliated funds......................................... -- 197,337 72,500
Interest................................................................ 4,631,959 53,389 887
Foreign withholding tax on dividend income.............................. -- (2,403) --
Other................................................................... -- -- 25
--------------- --------------- ---------------
Total investment income.............................................. 9,396,175 438,084 181,334
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees................................................ 2,265,103 89,761 35,073
12b-1 distribution and service fees (Class I)........................... 943,755 37,129 24,931
Administrative service fees............................................. 755,024 29,714 19,866
Accounting and administration fees...................................... 252,610 11,552 32,140
Custodian fees.......................................................... 213,125 10,515 8,004
Licensing fees.......................................................... 124,812 -- 10,021
Transfer agent fees..................................................... 89,700 51,874 55,623
Printing fees........................................................... 69,312 4,112 3,823
Legal fees.............................................................. 58,349 2,179 1,231
Commitment fees......................................................... 31,713 17,958 --
Audit and tax fees...................................................... 29,211 51,211 22,923
Trustees' fees and expenses............................................. 17,915 17,280 17,661
Financial reporting fees................................................ 9,250 -- 7,309
Excise tax.............................................................. -- -- 248
Other................................................................... 9,040 8,816 1,844
--------------- --------------- ---------------
Total expenses....................................................... 4,868,919 332,101 240,697
Fees waived or expenses reimbursed by the investment advisor......... (338,513) (208,203) (157,770)
--------------- --------------- ---------------
Net expenses............................................................ 4,530,406 123,898 82,927
--------------- -------------- ---------------
NET INVESTMENT INCOME (LOSS)............................................ 4,865,769 314,186 98,407
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.......................................................... 8,279,545 (102,522) 153,379
Investments in affiliated funds...................................... -- (15,620) (80,502)
Futures.............................................................. 107,733 -- --
Capital gains distributions received from investment companies....... -- 354 --
Foreign currency transactions........................................ -- 6 --
--------------- --------------- ---------------
Net realized gain (loss)................................................ 8,387,278 (117,782) 72,877
--------------- --------------- ---------------
Net increase from payment by the advisor................................ 1,000 -- --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments.......................................................... 27,993,302 962,579 (44,500)
Investments in affiliated funds...................................... -- 101,809 287,250
Futures.............................................................. (16,930) -- --
Foreign currency translation......................................... -- 1 --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation).................... 27,976,372 1,064,389 242,750
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 36,364,650 946,607 315,627
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS...................................................... $ 41,230,419 $ 1,260,793 $ 414,034
=============== =============== ===============
See Notes to Financial Statements Page 53
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND
& INCOME ALLOCATION PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2016 12/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 4,865,769 $ 3,342,508
Net realized gain (loss)............................................................. 8,387,278 8,084,683
Net increase from payment by the advisor............................................. 1,000 --
Net change in unrealized appreciation (depreciation)................................. 27,976,372 (12,219,844)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 41,230,419 (792,653)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (4,438,978) (5,442,059)
Class II............................................................................. (208) (382)
------------ ------------
(4,439,186) (5,442,441)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (10,878,302) (4,388,357)
Class II............................................................................. (458) (185)
------------ ------------
(10,878,760) (4,388,542)
------------ ------------
Total distributions to shareholders.................................................. (15,317,946) (9,830,983)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 269,075,333 112,078,962
Proceeds from shares reinvested...................................................... 15,317,510 9,830,537
Cost of shares redeemed.............................................................. (9,596,894) (63,164,485)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 274,795,949 58,745,014
------------ ------------
Total increase (decrease) in net assets.............................................. 300,708,422 48,121,378
NET ASSETS:
Beginning of period.................................................................. 243,260,136 195,138,758
------------ ------------
End of period........................................................................ $543,968,558 $243,260,136
============ ============
Accumulated net investment income (loss) at end of period............................ $ 200,834 $ --
============ ============
Page 54 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME
ALLOCATION PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2016 12/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 314,186 $ 236,497
Net realized gain (loss)............................................................. (117,782) (192,777)
Net increase from payment by the advisor............................................. -- 5,471
Net change in unrealized appreciation (depreciation)................................. 1,064,389 (564,737)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 1,260,793 (515,546)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (363,323) (234,799)
Class II............................................................................. (3,315) (2,203)
------------ ------------
Total distributions to shareholders.................................................. (366,638) (237,002)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 6,360,314 9,660,473
Proceeds from shares reinvested...................................................... 364,038 234,279
Cost of shares redeemed.............................................................. (1,854,130) (3,784,387)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 4,870,222 6,110,365
------------ ------------
Total increase (decrease) in net assets.............................................. 5,764,377 5,357,817
NET ASSETS:
Beginning of period.................................................................. 12,356,683 6,998,866
------------ ------------
End of period........................................................................ $ 18,121,060 $ 12,356,683
============ ============
Accumulated net investment income (loss) at end of period............................ $ -- $ 24,736
============ ============
See Notes to Financial Statements Page 55
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT
TACTICAL CORE PORTFOLIO
--------------------------------
FOR THE
YEAR PERIOD
ENDED ENDED
12/31/2016 12/31/2015 (a)
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 98,407 $ 6,431
Net realized gain (loss)............................................................. 72,877 --
Net change in unrealized appreciation (depreciation)................................. 242,750 (51,851)
------------ ------------
Net increase (decrease) in net assets resulting from operations...................... 414,034 (45,420)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (96,102) --
Class II............................................................................. (572) --
------------ ------------
(96,674) --
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (97,931) --
Class II............................................................................. (477) --
------------ ------------
(98,408) --
------------ ------------
Total distributions to shareholders.................................................. (195,082) --
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 13,236,943 5,538,309
Proceeds from shares reinvested...................................................... 195,082 --
Cost of shares redeemed.............................................................. (8,731,398) (2,475)
------------ ------------
Net increase (decrease) in net assets resulting from capital transactions............ 4,700,627 5,535,834
------------ ------------
Total increase (decrease) in net assets.............................................. 4,919,579 5,490,414
NET ASSETS:
Beginning of period.................................................................. 5,490,414 --
------------ ------------
End of period........................................................................ $ 10,409,993 $ 5,490,414
============ ============
Accumulated net investment income (loss) at end of period............................ $ 71 $ 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.
Page 56 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
FOR THE
YEAR ENDED DECEMBER 31, PERIOD
------------------------------------------------------------------ ENDED
2016 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)............... 0.14 0.16 0.15 0.14 0.15
Net realized and unrealized gain (loss).... 1.25 (b) (0.15) 0.99 1.17 0.29
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 1.39 0.01 1.14 1.31 0.44
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.13) (0.27) (0.10) (0.09) (0.07)
Net realized gain.......................... (0.35) (0.21) -- (0.16) (0.04)
Return of capital.......................... -- -- -- -- (0.02)
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.48) (0.48) (0.10) (0.25) (0.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 12.85 $ 11.94 $ 12.41 $ 11.37 $ 10.31
========== ========== ========== ========== ==========
TOTAL RETURN (c) (d)....................... 11.74% (b) 0.09% 10.04% 12.75% 4.38%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 543,951 $ 243,244 $ 195,128 $ 106,079 $ 32,176
Ratio of total expenses to average net
assets................................... 1.29% 1.34% 1.43% 1.65% 2.69% (e)
Ratio of net expenses to average net
assets................................... 1.20% 1.20% 1.20% 1.20% 1.20% (e)
Ratio of net investment income (loss)
to average net assets.................... 1.29% 1.35% 1.40% 1.27% 2.25% (e)
Portfolio turnover rate.................... 96% 81% 65% 73% 34%
CLASS II SHARES
FOR THE
YEAR ENDED DECEMBER 31, PERIOD
------------------------------ ENDED
2016 2015 12/31/2014 (f)
------------ ------------ ------------
Net asset value, beginning of period....... $ 11.95 $ 12.43 $ 11.63
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.19 0.17 0.14
Net realized and unrealized gain (loss).... 1.24 (b) (0.14) 0.77
---------- ---------- ----------
Total from investment operations........... 1.43 0.03 0.91
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.16) (0.30) (0.11)
Net realized gain.......................... (0.35) (0.21) --
---------- ---------- ----------
Total from distributions................... (0.51) (0.51) (0.11)
---------- ---------- ----------
Net asset value, end of period............. $ 12.87 $ 11.95 $ 12.43
========== ========== ==========
TOTAL RETURN (c) (d)....................... 12.07% (b) 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................................... 1.04% 1.09% 1.21% (e)
Ratio of net expenses to average net
assets................................... 0.95% 0.95% 0.95% (e)
Ratio of net investment income (loss)
to average net assets.................... 1.53% 1.64% 1.69% (e)
Portfolio turnover rate.................... 96% 81% 65%
-----------------------------
(a) The Fund's Class I shares were seeded on April 12, 2012, and commenced
operations on May 1, 2012.
(b) First Trust/Dow Jones Dividend & Income Allocation Portfolio received a
reimbursement from the Advisor in the amount of $1,000 in connection with
a trade error, 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.
(f) The Fund's Class II shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
See Notes to Financial Statements Page 57
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
FOR THE
YEAR ENDED DECEMBER 31, PERIOD
------------------------------ ENDED
2016 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)............... 0.20 0.19 0.07
Net realized and unrealized gain (loss).... 0.71 (0.53) (b) 0.39
---------- ---------- ----------
Total from investment operations........... 0.91 (0.34) 0.46
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.23) (0.19) (0.07)
---------- ---------- ----------
Total from distributions................... (0.23) (0.19) (0.07)
---------- ---------- ----------
Net asset value, end of period............. $ 10.54 $ 9.86 $ 10.39
========== ========== ==========
TOTAL RETURN (c) (d)....................... 9.27% (3.24)% (b) 4.57%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 17,965 $ 12,257 $ 6,894
Ratio of total expenses to average net
assets................................... 2.22% 2.60% 6.00% (e)
Ratio of net expenses to average net
assets................................... 0.83% 0.90% 1.20% (e)
Ratio of net investment income (loss)
to average net assets................... 2.10% 2.17% 2.35% (e)
Portfolio turnover rate.................... 46% 93% 15%
CLASS II SHARES
FOR THE
YEAR ENDED DECEMBER 31, PERIOD
------------------------------ ENDED
2016 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)............... 0.20 0.24 0.04
Net realized and unrealized gain (loss).... 0.74 (0.55) (b) 0.43
---------- ---------- ----------
Total from investment operations........... 0.94 (0.31) 0.47
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.26) (0.22) (0.08)
---------- ---------- ----------
Total from distributions................... (0.26) (0.22) (0.08)
---------- ---------- ----------
Net asset value, end of period............. $ 10.54 $ 9.86 $ 10.39
========== ========== ==========
TOTAL RETURN (c) (d)....................... 9.53% (3.01)% (b) 4.74%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 156 $ 100 $ 105
Ratio of total expenses to average net
assets................................... 1.99% 2.31% 14.44% (e)
Ratio of net expenses to average net
assets................................... 0.58% 0.67% 0.95% (e)
Ratio of net investment income (loss)
to average net assets................... 2.34% 2.32% 0.54% (e)
Portfolio turnover rate.................... 46% 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 in connection with a trade error,
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.
Page 58 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
YEAR FOR THE
ENDED PERIOD ENDED
12/31/2016 12/31/2015 (a)
------------ ------------
Net asset value, beginning of period....... $ 9.94 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.09 0.01
Net realized and unrealized gain (loss).... 0.01 (0.07)
---------- ----------
Total from investment operations........... 0.10 (0.06)
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.09) --
Net realized gain.......................... (0.10) --
---------- ----------
Total from distributions................... (0.19) --
---------- ----------
Net asset value, end of period............. $ 9.85 $ 9.94
========== ==========
TOTAL RETURN (b) (c)....................... 0.95% (0.60)%
========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 10,360 $ 5,440
Ratio of total expenses to average net
assets................................... 2.13% 11.71% (d)
Ratio of net expenses to average net
assets................................... 0.83% 0.79% (d)
Ratio of net investment income (loss)
to average net assets................... 0.98% 1.54% (d)
Portfolio turnover rate.................... 265% --%
CLASS II SHARES
YEAR FOR THE
ENDED PERIOD ENDED
12/31/2016 12/31/2015 (a)
------------ ------------
Net asset value, beginning of period....... $ 9.95 $ 10.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.11 0.01
Net realized and unrealized gain (loss).... (0.02) (0.06)
---------- ----------
Total from investment operations........... 0.09 (0.05)
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.11) --
Net realized gain.......................... (0.10) --
---------- ----------
Total from distributions................... (0.21) --
---------- ----------
Net asset value, end of period............. $ 9.83 $ 9.95
========== ==========
TOTAL RETURN (b) (c)....................... 0.88% (0.50)%
========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 50 $ 50
Ratio of total expenses to average net
assets................................... 57.64% 37.40% (d)
Ratio of net expenses to average net
assets................................... 0.57% 0.51% (d)
Ratio of net investment income (loss)
to average net assets................... 1.13% 0.86% (d)
Portfolio turnover rate.................... 265% --%
-----------------------------
(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.
See Notes to Financial Statements Page 59
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
1. ORGANIZATION
First Trust Variable Insurance Trust (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on December 14,
2011 and is registered with the Securities and Exchange Commission (the "SEC")
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 60
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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 are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 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 61
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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.
Commercial paper, 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 third-party 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 third-party 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 third-party pricing services;
6) relationships among various securities;
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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 December 31, 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
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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. Permanent differences
incurred during the tax year ended December 31, 2016, have been reclassified at
year end to reflect the following:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) on
Income (Loss) Investments Paid-in Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ (225,749) $ 225,749 $ --
First Trust Multi Income 27,716 (40,134) 12,418
First Trust Dorsey Wright (8,093) 8,809 (716)
The tax character of distributions paid by each applicable Fund during the year
ended December 31, 2016 was as follows:
Distributions paid Distributions paid Distributions paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ 8,174,962 $ 7,142,984 $ --
First Trust Multi Income 366,638 -- --
First Trust Dorsey Wright 195,082 -- --
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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, 2016, the components of distributable earnings on a tax basis
for each Fund were as follows:
Undistributed Accumulated Net Unrealized
Ordinary Capital and Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ------------------ ------------------
First Trust Dow Jones $ 200,834 $ 4,874,576 $ 29,317,773
First Trust Multi Income -- (60,259) 283,161
First Trust Dorsey Wright -- -- 174,248
F. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended (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 2013, 2014,
2015 and 2016 remain open to federal and state audit for First Trust Dow Jones.
Taxable years ended 2014, 2015 and 2016 remain open to federal and state audit
for First Trust Multi Income. Also, taxable years ended 2015 and 2016 remain
open to federal and state audit for First Trust Dorsey Wright. As of December
31, 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, 2016, for
federal income tax purposes, the Fund's 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 60,259
First Trust Dorsey Wright --
During the taxable year ended December 31, 2016, the following Funds utilized
capital loss carryforwards in the following amounts:
Capital Loss
Carryforward
Utilized
---------------
First Trust Dow Jones $ --
First Trust Multi Income 53,421
First Trust Dorsey Wright --
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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.
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.
J. NEW AND AMENDED FINANCIAL REPORTING RULES AND FORMS
On October 13, 2016, the SEC adopted new rules and forms, and amended existing
rules and forms. The new and amended rules and forms are intended to modernize
the reporting of information provided by funds and to improve the quality and
type of information that funds provide to the SEC and investors. The new and
amended rules and forms will be effective for the First Trust funds, including
the Funds, for reporting periods beginning on and after June 1, 2018. Management
is evaluating the new and amended rules and forms to determine the impact to the
Funds.
K. NEW ACCOUNTING PRONOUNCEMENT
In December 2016, the FASB released accounting standards update ("ASU") 2016-19
that makes technical changes to various sections of the ASC, including Topic
820, Fair Value Measurement. The changes to Topic 820 are intended to clarify
the difference between a valuation approach and a valuation technique. The
changes to ASC 820-10-50-2 require a reporting entity to disclose, for Level 2
and Level 3 fair value measurements, a change in either or both a valuation
approach and a valuation technique and the reason(s) for the change. The changes
to Topic 820 are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2016. At this time, management is
evaluating the implications of the ASU and has not yet determined its impact on
the financial statements and disclosures.
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
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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, 2016, First Trust Dow Jones received a
reimbursement from the Advisor of $1,000 in connection with a trade error.
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, 2018. 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 each
Fund's average daily net assets per year at least until May 1, 2018. 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.
The advisory fee waivers and expense reimbursements for the year ended December
31, 2016, and the expenses borne by First Trust subject to recovery from the
applicable Fund at December 31, 2016, are included in the table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY
-------------------------------------------------------------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31,
WAIVED REIMBURSED 2014 2015 2016 TOTAL
------------ ------------ ------------ ------------ ------------ ----------
First Trust Dow Jones $ 338,513 $ -- $ 308,178 $ 347,277 $ 338,513 $ 993,968
First Trust Multi Income 89,761 63,090 101,172 151,967 152,851 405,990
First Trust Dorsey Wright 35,073 122,697 -- 48,180 157,770 205,950
During the year ended December 31, 2016, First Trust did not recover any fees
that were previously waived or reimbursed.
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
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, 2018. During the
period ended December 31, 2016, First Trust reimbursed First Trust Multi Income
$55,352 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.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. CAPITAL SHARE TRANSACTIONS
Capital transactions for First Trust Dow Jones were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 21,522,285 $269,075,266 9,010,497 $112,072,958
Class II 5 67 485 6,004
------------ ------------ ------------ ------------
Total Sales: 21,522,290 $269,075,333 9,010,982 $112,078,962
============ ============ ============ ============
Dividend Reinvestment:
Class I 1,224,785 $ 15,317,280 810,396 $ 9,830,416
Class II 18 230 11 121
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 1,224,803 $ 15,317,510 810,407 $ 9,830,537
============ ============ ============ ============
Redemptions:
Class I (782,373) $ (9,596,410) (5,160,259) $(63,164,485)
Class II (42) (484) -- --
------------ ------------ ------------ ------------
Total Redemptions: (782,415) $ (9,596,894) (5,160,259) $(63,164,485)
============ ============ ============ ============
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
Capital transactions for First Trust Multi Income were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 607,792 $ 6,311,829 929,411 $ 9,657,422
Class II 4,618 48,485 290 3,051
------------ ------------ ------------ ------------
Total Sales: 612,410 $ 6,360,314 929,701 $ 9,660,473
============ ============ ============ ============
Dividend Reinvestment:
Class I 34,761 $ 363,323 23,869 $ 234,274
Class II 68 715 -- 5
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 34,829 $ 364,038 23,869 $ 234,279
============ ============ ============ ============
Redemptions:
Class I (180,072) $ (1,854,107) (374,076) $ (3,781,375)
Class II (2) (23) (290) (3,012)
------------ ------------ ------------ ------------
Total Redemptions: (180,074) $ (1,854,130) (374,366) $ (3,784,387)
============ ============ ============ ============
Capital transactions for First Trust Dorsey Wright were as follows:
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2016 DECEMBER 31, 2015
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 1,367,166 $ 13,236,943 547,381 $ 5,488,309
Class II -- -- 5,000 50,000
------------ ------------ ------------ ------------
Total Sales: 1,367,166 $ 13,236,943 552,381 $ 5,538,309
============ ============ ============ ============
Dividend Reinvestment:
Class I 19,542 $ 194,032 -- $ --
Class II 106 1,050 -- --
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 19,648 $ 195,082 -- $ --
============ ============ ============ ============
Redemptions:
Class I (881,838) $ (8,731,398) (247) $ (2,475)
Class II -- -- -- --
------------ ------------ ------------ ------------
Total Redemptions: (881,838) $ (8,731,398) (247) $ (2,475)
============ ============ ============ ============
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by First Trust Dow
Jones at December 31, 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 December 31, 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 $ -- Variation Margin Payable $ 47,445
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the year ended
December 31, 2016, on derivatives instruments held by First Trust Dow Jones, 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 $ 107,733
Net change in unrealized gain (loss) on futures (16,930)
During the year ended December 31, 2016, the amount of notional values of
futures contracts opened and closed were $69,325,788 and $65,014,124,
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. Each Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Amounts relating to these investments in First Trust Multi Income at December
31, 2016, and for the year then ended are as follows:
SHARE ACTIVITY
--------------------------------------------
BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED
SECURITY NAME 12/31/2015 PURCHASES SALES 12/31/2016 12/31/2016 INCOME GAIN (LOSS)
------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- -----------
First Trust Low Duration
Opportunities ETF -- 4,897 (4,297) 600 $ 31,308 $ 212 $ 654
First Trust Preferred Securities and
Income ETF 45,430 25,417 (6,120) 64,727 1,229,166 57,628 (2,496)
First Trust Senior Loan Fund 37,730 23,926 (2,212) 59,444 2,886,006 87,149 (4,122)
First Trust Tactical High Yield ETF 17,680 11,164 (2,890) 25,954 1,251,761 52,348 (9,656)
-----------------------------------
$5,398,241 $ 197,337 $ (15,620)
===================================
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
Amounts relating to these investments in First Trust Dorsey Wright at December
31, 2016, and for the year then ended are as follows:
SHARE ACTIVITY
--------------------------------------------
BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED
SECURITY NAME 12/31/2015 PURCHASES SALES 12/31/2016 12/31/2016 INCOME GAIN (LOSS)
------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- -----------
First Trust Brazil AlphaDEX(R) Fund -- 5,608 (2,100) 3,508 $ 47,954 $ 272 $ 2,761
First Trust Consumer Discretionary
AlphaDEX(R) Fund 11,835 37,029 (48,864) -- -- 4,582 30,758
First Trust Consumer Staples
AlphaDEX(R) Fund 10,272 25,667 (35,939) -- -- 7,666 (9,799)
First Trust Developed Markets ex-US
AlphaDEX(R) Fund 1,405 3,020 (1,849) 2,576 121,845 2,618 3,182
First Trust Dow Jones Internet Index Fund 7,025 16,391 (11,944) 11,472 915,810 -- 1,191
First Trust Emerging Markets AlphaDEX(R)
Fund 3,196 7,621 (4,895) 5,922 120,217 3,452 14,314
First Trust Energy AlphaDEX(R) Fund -- 86,879 (26,031) 60,848 1,004,600 8,030 27,254
First Trust Germany AlphaDEX(R) Fund 760 1,497 (909) 1,348 49,013 902 1,678
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 Industrials/Producer Durables
AlphaDEX(R) Fund -- 26,079 -- 26,079 857,478 1,046 --
First Trust Chindia ETF 870 2,140 (1,344) 1,666 45,532 687 3,615
First Trust Japan AlphaDEX(R) Fund -- 1,663 (1,663) -- -- 335 2,230
First Trust Large Cap Growth AlphaDEX(R)
Fund -- 39,056 (19,143) 19,913 976,533 6,446 70,387
First Trust Latin America AlphaDEX(R) Fund -- 3,543 (843) 2,700 50,247 4 (114)
First Trust Mid Cap Core AlphaDEX(R) Fund 10,218 30,863 (21,943) 19,138 1,079,192 9,493 (35,022)
First Trust Mid Cap Growth AlphaDEX(R)
Fund 18,758 45,113 (63,871) -- -- 1,701 68,402
First Trust NASDAQ-100-Technology
Sector Index Fund -- 17,281 -- 17,281 910,017 1,804 --
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 35,689 (25,126) 29,139 1,009,666 1,929 (39,815)
First Trust Switzerland AlphaDEX(R) Fund 692 1,399 (843) 1,248 50,943 1,336 1,359
First Trust United Kingdom AlphaDEX(R)
Fund 698 1,215 (1,913) -- -- 732 (10,726)
First Trust Utilities AlphaDEX(R) Fund -- 67,930 (33,163) 34,767 929,322 19,465 42,656
-----------------------------------
$8,168,369 $ 72,500 $ (80,502)
===================================
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
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016
During the year ended December 31, 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 year ended
December 31, 2016, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 446,203,005 $ 192,981,120
First Trust Multi Income 9,595,478 6,410,969
First Trust Dorsey Wright 29,760,912 25,414,552
Cost of purchases and proceeds from sales of U.S. Government investment
securities, excluding short-term investments, for the year ended December 31,
2016, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 148,975,063 $ 159,764,991
First Trust Multi Income 2,006,100 405,678
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
year ended December 31, 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 was the following subsequent event.
On February 3, 2017, the commitment amount under the BNYM Line of Credit was
increased to $200 million.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST VARIABLE INSURANCE
TRUST:
We have audited the accompanying statements of assets and liabilities of First
Trust/Dow Jones Dividend & Income Allocation Portfolio, First Trust Multi Income
Allocation Portfolio, and First Trust Dorsey Wright Tactical Core Portfolio,
each a series of the First Trust Variable Insurance Trust (the "Funds"),
including the portfolios of investments, as of December 31, 2016, and the
related statements of operations for the year then ended and changes in net
assets and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
are not required to have, nor were we engaged to perform, an audit of their
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Funds' internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2016 by correspondence with the Funds'
custodian and brokers; when replies were not received from brokers, we performed
other auditing procedures. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the funds listed above included in the First Trust Variable Insurance Trust,
as of December 31, 2016, and the results of their operations for the year then
ended and changes in their net assets and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 10, 2017
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 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.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2016, the following percentages of
income dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
DIVIDENDS RECEIVED DEDUCTION
-------------------------------------
First Trust/Dow Jones Dividend & Income Allocation Portfolio 50.51%
First Trust Multi Income Allocation Portfolio 18.77%
First Trust Dorsey Wright Tactical Core Portfolio 0.00%
For the year ended December 31, 2016, the amount of long-term capital gain
distributions designated by the Funds which are taxable at the applicable
taxable gains rates for federal income tax purposes were:
LONG-TERM CAPITAL GAIN DISTRIBUTIONS
-------------------------------------
First Trust/Dow Jones Dividend & Income Allocation Portfolio $7,142,984
First Trust Multi Income Allocation Portfolio --
First Trust Dorsey Wright Tactical Core Portfolio --
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
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
advisor. Inclusion of a security within an index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it considered to
be investment advice.
NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT
BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS
OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE 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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
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.
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
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
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
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.
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.
Since 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 achieve their investment objectives.
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
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
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
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.
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.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, ADDRESS, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
DATE OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson,Trustee o Indefinite Term Physician; Officer, Wheaton Orthopedics; 138 None
c/o First Trust Advisors L.P. Limited Partner, Gundersen Real Estate
120 E. Liberty Drive, o Since Trust Inception Limited Partnership (June 1992 to
Suite 400 December 2016); Member, Sportsmed LLC
Wheaton, IL 60187 (April 2007 to November 2015)
D.O.B.: 04/51
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 138 Director of ADM
c/o First Trust Advisors L.P. (Futures Commission Merchant) Investor Services,
120 E. Liberty Drive, o Since Trust Inception Inc., ADM
Suite 400 Investor Services
Wheaton, IL 60187 International, and
D.O.B.: 11/57 Futures Industry
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 138 Director of Trust
c/o First Trust Advisors L.P. and Management Consulting) Company of
120 E. Liberty Drive, o Since Trust Inception Illinois
Suite 400
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Indefinite Term Managing Director and Chief Operating 138 Director of
c/o First Trust Advisors L.P. Officer (January 2015 to Present), Covenant
120 E. Liberty Drive, o Since Trust Inception Pelita Harapan Educational Foundation Transport, Inc.
Suite 400 (Educational Products and Services); (May 2003 to
Wheaton, IL 60187 President and Chief Executive Officer May 2014)
D.O.B.: 03/54 (June 2012 to September 2014),
Servant Interactive LLC (Educational
Products and Services); President and
Chief Executive Officer (June 2012 to
September 2014), Dew Learning LLC
(Educational Products and Services);
President (June 2002 to June 2012),
Covenant College
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee o Indefinite Term Chief Executive Officer, First Trust 138 None
and Chairman of the Board Advisors L.P. and First Trust
120 E. Liberty Drive, o Since Trust Inception Portfolios L.P.; Chairman of the Board
Suite 400 of Directors, BondWave LLC (Software
Wheaton, IL 60187 Development Company) and Stonebridge
D.O.B.: 09/55 Advisors LLC (Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME, ADDRESS OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
120 E. Liberty Drive, Executive Officer (January 2016 to Present), Controller (January 2011
Suite 400 o Since January 2016 to January 2016), Senior Vice President (April 2007
Wheaton, IL 60187 to January 2016), First Trust Advisors L.P. and First
D.O.B.: 01/66 Trust Portfolios L.P.; Chief Financial Officer,
BondWave LLC (Software Development Company)
(January 2016 to Present) and Stonebridge Advisors
LLC (Investment Advisor) (January 2016 to Present)
Donald P. Swade Treasurer, Chief o Indefinite Term Senior Vice President (July 2016 to Present), Vice
120 E. Liberty Drive, Financial Officer and President (April 2012 to July 2016), First Trust
Suite 400 Chief Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.; Vice
Wheaton, IL 60187 President (September 2006 to April 2012),
D.O.B.: 08/72 Guggenheim Funds Investment Advisors, LLC/
Claymore Securities, Inc.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First
120 E. Liberty Drive, Legal Officer Trust Portfolios L.P.; Secretary and General
Suite 400 o Since Trust Inception Counsel, BondWave LLC; Secretary of
Wheaton, IL 60187 Stonebridge Advisors LLC
D.O.B.: 05/60
Daniel J. Lindquist Vice President o Indefinite Term Managing Director (July 2012 to Present), Senior
120 E. Liberty Drive, Vice President (September 2005 to July 2012),
Suite 400 o Since Trust Inception First Trust Advisors L.P. and First Trust Portfolios L.P.
Wheaton, IL 60187
D.O.B: 02/70
Kristi A. Maher Chief Compliance o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
120 E. Liberty Drive, Officer and and First Trust Portfolios L.P.
Suite 400 Assistant Secretary o Since Trust Inception
Wheaton, IL 60187
D.O.B.: 12/66
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
120 E. Liberty Drive, and First Trust Portfolios L.P.
Suite 400 o Since Trust Inception
Wheaton, IL 60187
D.O.B.: 06/66
-----------------------------
(2) Officers of the Trust have an indefinite term. The term "officer" means
the president, vice president, secretary, treasurer, controller or any
other officer who performs a policy making function.
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2016 (UNAUDITED)
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
PRIVACY ONLINE
We allow third-party companies, including AddThis (a social media sharing
service), to collect certain anonymous information when you visit our website.
These companies may use non-personally identifiable information during your
visits to this and other websites in order to provide advertisements about goods
and services likely to be of greater interest to you. These companies typically
use a cookie, third party web beacon or pixel tags, to collect this information.
To learn more about this behavioral advertising practice, you can visit
www.networkadvertising.org.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2016
Page 83
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FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
Energy Income Partners, LLC 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
ALLOCATION PORTFOLIO TACTICAL 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
ALLOCATION PORTFOLIO TACTICAL 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.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the Registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees -- The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements were $90,750 for the fiscal year ended December 31, 2015
and $90,750 for the fiscal year ended December 31, 2016.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed for each
of the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item were $0 for the fiscal year ended December 31, 2015 and $275.73 for
the fiscal year ended December 31, 2016.
Audit-Related Fees (Investment Adviser and Distributor) -- The aggregate
fees billed for each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for the Advisor and $0 for
Distributor for the fiscal year ended December 31, 2015 and $0 for the Advisor
and $0 for the Distributor for the fiscal year ended December 31, 2016.
(c) Tax Fees (Registrant) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant
were $9,250 for the fiscal year ended December 31, 2015 and $12,175 for the
fiscal year ended December 31, 2016.
Tax Fees (Investment Adviser and Distributor) -- The aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning to the
registrant's adviser and distributor were $0 for the fiscal year ended December
31, 2015 and $0 for the fiscal year ended December 31, 2016.
(d) All Other Fees (Registrant) -- The aggregate fees for each of the last
two fiscal years for products and services provided by the principal accountant
to the registrant, other than the services reported in paragraphs (a) through
(c) of this Item were $3000 for the fiscal year ended December 31, 2015 and $0
for the fiscal year ended December 31, 2016.
All Other Fees (Investment Adviser and Distributor) -- The aggregate fees
billed for each of the last two fiscal years for products and services provided
by the principal accountant to the registrant's investment adviser and
distributor, other than the services reported in paragraphs (a) through (c) of
this Item were $0 for the fiscal year ended December 31, 2015 and $0 for the
fiscal year ended December 31, 2016.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the pre-approval
exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for the fiscal year
ended December 31, 2015 were $12,500 for the registrant, $12,500 for the
registrant's investment adviser and $29,000 for the registrant's distributor,
and for the fiscal year ended December 31, 2016 were $12,175 for the registrant,
$13,000 for the registrant's investment adviser and $32,500 for the registrant's
distributor.
(h) The registrant's audit committee of its Board of Trustees has
determined that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
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) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Variable Insurance Trust
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By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: February 10, 2017
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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: February 10, 2017
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By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: February 10, 2017
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* Print the name and title of each signing officer under his or her signature.