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 ----------- First Trust Variable Insurance Trust ---------------------------------------------------------- (Exact name of registrant as specified in charter) 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ---------------------------------------------------------- (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 ---------------------------------------------------------- (Name and address of agent for service) registrant's telephone number, including area code: 630-765-8000 -------------- Date of fiscal year end: December 31 ------------- Date of reporting period: December 31, 2016 ------------------- 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 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & 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/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% ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- 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% ---------------------------------------------------------------------------------------------------------------------- (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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2016 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP EQUITY HOLDINGS INVESTMENTS ------------------------------------------------------ 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 ------------------------------------------------------ Total 4.5% ===== ------------------------------------------------------ % 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% ====== ------------------------------------------------------ % OF TOTAL FIXED-INCOME CREDIT QUALITY(1) INVESTMENTS ------------------------------------------------------ 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 ------------------------------------------------------ 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 ------------------------------------------------------ Total Common Stocks 55.9 ------------------------------------------------------ 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 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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 -------------------------------------------------------------------------------- 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; Page 62 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 Page 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -- -- Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 -- Page 65 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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 Page 66 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. Page 67 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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) ============ ============ ============ ============ Page 68 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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) ============ ============ ============ ============ Page 69 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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) =================================== Page 70 -------------------------------------------------------------------------------- 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. Page 71 -------------------------------------------------------------------------------- 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. Page 72 -------------------------------------------------------------------------------- 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 Page 73 -------------------------------------------------------------------------------- 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 Page 74 -------------------------------------------------------------------------------- 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 Page 75 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 76 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 77 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 78 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 79 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- 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. Page 80 -------------------------------------------------------------------------------- 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. Page 81 -------------------------------------------------------------------------------- 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. Page 82 -------------------------------------------------------------------------------- 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 This Page Left Blank Intentionally. FIRST TRUST INVESTMENT ADVISOR First Trust Advisors L.P. 120 E. Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISORS FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Energy Income Partners, LLC Stonebridge Advisors, LLC 10 Wright Street 10 Westport Road, Suite C101 Westport, CT 06880 Wilton, CT 06897 ADMINISTRATOR & FUND ACCOUNTANT FIRST TRUST/DOW JONES DIVIDEND & INCOME FIRST TRUST DORSEY WRIGHT 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 ------------------------------------------------- By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: February 10, 2017 ------------------- 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 ------------------- 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 ------------------- * Print the name and title of each signing officer under his or her signature.