UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22652
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First Trust Variable Insurance Trust
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2017
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2017
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL REPORT
DECEMBER 31, 2017
Shareholder Letter.......................................................... 1
Portfolio Commentary and Performance Summary
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.......................... 42
First Trust Dorsey Wright Tactical Core Portfolio...................... 53
Statements of Assets and Liabilities........................................ 54
Statements of Operations.................................................... 55
Statements of Changes in Net Assets......................................... 56
Financial Highlights........................................................ 59
Notes to Financial Statements............................................... 62
Report of Independent Registered Public Accounting Firm..................... 75
Additional Information...................................................... 76
Board of Trustees and Officers.............................................. 83
Privacy Policy.............................................................. 85
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
https://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 https://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund and presents data and analysis
that provide insight into each Fund's performance.
By reading the portfolio commentary by each Fund's portfolio management team,
you may obtain an understanding of how the market environment affected each
Fund's performance. The statistical information that follows may help you
understand each Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of
First Trust and the Sub-Advisors are just that: informed opinions. They should
not be considered to be promises or advice. The opinions, like the statistics,
cover the period through the date on the cover of this report. The material
risks of investing in each Fund are spelled out in the prospectus, the statement
of additional information, this report and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2017
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the First Trust
Variable Insurance Trust, which contains detailed information about your
investment for the 12 months ended December 31, 2017, including a market
overview and a performance analysis for the period. We encourage you to read
this report carefully and discuss it with your financial advisor.
This was a very strong year for U.S. markets. The three major indices--the S&P
500(R) Index, the Dow Jones Industrial Average and the Nasdaq posted their best
performance since 2013. And there was more good news for Wall Street:
o The S&P 500(R) achieved something it had not previously finishing
2017 with 12 months of gains;
o The Dow Jones realized a milestone as well closing above 24,000 for
the first time ever on November 30; and
o The Nasdaq set a record by having 11 months of gains in 2017 (June
was the only down month, and by just 0.86%).
In 2017, stocks benefitted from increased global demand, growth in corporate
profits (especially technology stocks) and an accommodative Federal Reserve. The
housing market in the United States continued to grow due to a strong job
market, low interest rates and tight inventory. As the year came to a close,
President Trump signed the tax reform package, called the "Tax Cuts and Jobs
Act," which was seen as a promise kept by then-candidate Trump to accomplish
sweeping reform. It is hoped this tax reform will boost economic activity to
greater highs.
At First Trust, we are optimistic about the U.S. economy. We also continue to
believe that you should invest for the long term and be prepared for market
volatility, which can happen at any time. This can be achieved by keeping
current on your portfolio and investing goals by speaking regularly with your
investment professional. It's important to keep in mind that past performance of
the U.S. and global stock markets or investment products can never guarantee
future results. As we've said before, markets go up and they also go down, but
savvy investors are prepared for either through careful attention to their
portfolios and investment goals.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will report on your investment
again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2017, the First Trust/Dow Jones Dividend &
Income Allocation Portfolio (the "Fund") Class I Shares returned 13.47% versus
13.58% for the Blended Benchmark: 50% Russell 3000(R) Index and 50% Bloomberg
Barclays U.S. Corporate Investment-Grade Index. As of December 31, 2017, the
total investments for the Fund were allocated as follows: Equities, 57.27% and
Fixed Income, 42.73%.
EQUITIES COMMENTARY
U.S. equities continued their steady ascent during the first quarter of 2017,
with the Russell 3000(R) Index gaining 5.7% for the quarter, as U.S. investors
retained their optimism despite macroeconomic data that was less uniformly
positive than expected. U.S. macroeconomic growth accelerated during the second
quarter after the weak start to the year. Investors were also encouraged by
strong earnings reports as over 75% of S&P 500(R) companies beat profit
estimates for the first quarter of 2017. The second quarter of 2017 showed the
Russell 3000(R) Index gaining 3.0% as domestic macroeconomic reports pointed to
healthy growth overall. However, not all data released during the second quarter
was uniformly positive, as lower than expected core inflation provided some
cause for concern during the quarter. Rolling into the third quarter, U.S.
equities experienced some volatility during the month of August as North Korean
ballistic missile testing sparked bellicose rhetoric between the United States
and the Communist nation. The market eventually returned its focus to the robust
macroeconomic backdrop and stocks gained significantly during the third quarter
of 2017 and the Russell 3000(R) Index gained 4.6%. Labor market data remained
consistent with strong economic growth. U.S. equity markets surged higher during
the fourth quarter as the much-anticipated GOP tax reform package, which
included a drastic cut in corporate tax rates, was finally signed into law by
President Trump in December. Beyond the impact of the legislation on bullish
sentiment, robust economic data and another strong earnings season also
propelled stocks upward as the Russell 3000(R) climbed 6.34% during the fourth
quarter. Growth outperformed value for the fourth consecutive quarter. In total,
the Russell 3000(R) Growth Index returned 29.6% while the Russell 3000(R) Value
Index returned 13.2% over the course of 2017. The Russell 3000(R) Index was up
21.13% for 2017 which was the best return for the index since 2013. During 2017,
the Russell 3000(R) Index was led by Technology, Consumer Discretionary and
Health Care in returns; while Energy, Utilities and Consumer Staples were
laggards.
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, Industrials, Consumer Discretionary and Consumer Staples stocks,
while Information Technology, Health Care, Energy, Real Estate and Utilities
were underweight. The Telecommunication Services sector was also underweight as
the Fund had no stocks allocated in this sector.
Of the 11 GICS sectors, seven had a positive total attribution effect
(allocation effect combined with selection effect), three had a negative total
attribution effect and one was flat. Five sectors had a positive selection
effect: Industrials, Consumer Staples, Materials, Energy and Health Care. Four
sectors had a negative selection effect: Financials, Information Technology,
Consumer Discretionary and Real Estate. The Utilities and Telecommunication
Services sectors had a flat selection effect. The equity portion of the Fund
benefited from both a positive selection effect and positive allocation effect.
The Energy sector was the largest overall contributor to relative performance.
The equity portion of the Fund was underweight this underperforming sector 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 had positions in Phillips 66 and Exxon Mobil Corporation.
The Information Technology 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.
Page 2
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
Relative to the Russell 3000(R) Index, the equity portion of the Fund also
outperformed in the Industrials and Consumer Staples sectors. The Fund was
overweight the market-performing Industrials sector resulting in a flat
allocation effect, but the relative performance for the sector was helped by
positive stock selection. In the Consumer Staples sector, the Fund was
overweight this underperforming sector resulting in a negative allocation
effect, however the Fund's positions in the sector outperformed the Russell
3000(R) Index's positions resulting in a positive selection effect.
The equity portion of the Fund's top five contributors to performance were Estee
Lauder Companies Inc., Sanderson Farms, Inc., The Progressive Corporation, First
American Financial Corporation and D.R. Horton. The top five detractors from
performance were Foot Locker Retail, Inc., Xperi Corporation, Aspen Insurance
Holdings Limited, Axis Capital Holdings Limited and W.W. Grainger, Inc.
Heading into 2018, the overall state of the economy remains strong from
employment and wage markets, to corporate earnings, gross domestic product
("GDP") growth and industrial production. We believe lower taxes and growing
corporate earnings along with GDP growth should continue to drive U.S. demand.
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 another strong year in 2017.
Spreads tightened for the second year in a row, helped by the combination of
synchronized global growth and ongoing central bank stimulus, along with solid
earnings, a lack of inflationary pressures, and muted volatility in the Treasury
market.
For the 12-month period ended December 31, 2017, corporate bonds outperformed
Treasuries. As measured by the Bloomberg Barclays U.S. Corporate
Investment-Grade Index, spreads tightened 20 basis points to 93 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, added to the move lower in interest rates.
Spread performance was generally steady, the exception being during August when
issuers began to front-load debt offerings due to fear of higher interest rates
later in the year. As a result, the investment-grade market struggled to absorb
the rapid increase in supply. The resultant spread weakness was exacerbated by a
sharp drop in Treasury yields resulting from escalating tension between the U.S.
and North Korea, increased doubts as to the ultimate success of the Trump
agenda; as well as by uncertainty as to the impact of hurricanes Harvey and
Irma. Credit spreads widened, bringing new issue supply to a halt. Then, as
geopolitical fears died down, the strong demand dynamic which has characterized
the investment-grade market this year once again became evident, and the spread
widening was more than retraced. A less dramatic period of spread weakness
occurred during November 2017 when a second sharp pickup in new issue supply,
along with another bout of Treasury volatility, caused spreads to widen before
once again quickly reversing.
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, Electric, and Transportation bonds,
while Consumer Non-Cyclical, Real Estate Investment Trusts ("REITs"), and
Communications were the largest underweights.
Yield curve changes had a positive effect on relative performance. Treasury
yields were mixed during the year with short-term yields rising while
longer-term yields fell. The result was a dramatically flatter curve. The
portfolio maintained a moderate duration underweight throughout the period, with
the underweight primarily at the front-end of the curve. Among credit quality
and maturity cohorts, lower credit quality and long credit duration had the best
returns. The top performing credit rating category was BBB's and the best
maturity bucket was 25+ years.
Page 3
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
Among the 18 fixed-income industry groups, eight had positive contributions to
relative performance from allocation decisions. The allocations to Treasury
securities and to Government Owned, No Guarantee were the ninth and tenth
positive contributors. Allocations to Banking, Electric, and Energy had the
greatest positive impacts. Allocations to Consumer Non-Cyclical, Basic Industry
and REITs had the greatest negative impacts. Overall, the allocation effect had
a net positive impact on relative performance.
As weighted by percent of market value, 22 of the top 25 issuers held in the
fixed-income portion of the Fund had positive contributions to relative
performance. Within this cohort, Citibank, Bank of America, and Morgan Stanley
were the three largest contributors. Overall, security selection 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.
As we begin 2018, we have a positive outlook for credit spreads as we believe
steady global growth should continue to support earnings and cashflow. We
anticipate continued recovery in the Energy sector, as well as strength in
financials which should benefit from rising interest rates and less onerous
regulation. That said, a second straight year of spread tightening has left
valuation in the investment-grade market less attractive in our view. Moreover,
the dual impact of further Federal Reserve ("the Fed") rate increases and the
drawdown of the Fed's balance sheet as quantitative easing is unwound are
difficult to gauge with a high degree of certainty since the Fed, and by
extension, the market, is entering uncharted territory, in our view. As a
result, our outlook becomes more cautious as we look further into 2018 and
beyond. Accordingly, our focus for the portfolio will continue to be on issuers
and sectors with credit profiles that we believe are well suited to weather the
likely headwinds of higher interest rates and the gradual removal of global
monetary stimulus.
Page 4
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2017
1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ANNUAL ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 13.47% 9.50% 9.15%
Blended Benchmark (a) 13.58% 9.51% 9.27%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 6.42% 3.48% 4.19%
Russell 3000(R) Index (c) 21.13% 15.58% 14.28%
Secondary Blended Benchmark (d) 13.43% 9.61% 9.39%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 5.98% 3.52% 4.29%
Dow Jones U.S. Total Stock Market Index(SM) (f) 21.16% 15.51% 14.19%
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1 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE TOTAL
DATE TOTAL RETURN TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 13.75% 9.12%
Blended Benchmark (a) 13.58% 8.01%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 6.42% 3.96%
Russell 3000(R) Index (c) 21.13% 11.93%
Secondary Blended Benchmark (d) 13.43% 8.15%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 5.98% 4.05%
Dow Jones U.S. Total Stock Market Index(SM) (f) 21.16% 11.86%
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(a) The Blended Benchmark returns are a 50/50 split between the Russell
3000(R) Index and the Bloomberg Barclays U.S. Corporate Investment-Grade
Index returns.
(b) Bloomberg Barclays U.S. Corporate Investment-Grade Index measures the
performance of investment grade U.S. corporate bonds. The index includes
all publicly issued, dollar-denominated corporate bonds with a minimum of
$250 million par outstanding that are investment grade-rated (Baa3/BBB- or
higher). The index excludes bonds having less than one year to final
maturity as well as floating rate bonds, non-registered private
placements, structured notes, hybrids, and convertible securities.
(Bloomberg). (The index reflects no deduction for fees, expenses or
taxes).
(c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. This index represents approximately
98% of the investable U.S. equity market. (Bloomberg). (The index reflects
no deduction for fees, expenses or taxes).
(d) The Secondary Blended Benchmark return is a 50/50 split between the Dow
Jones U.S. Total Stock Market Index(SM) and the Dow Jones Equal Weight
U.S. Issued Corporate Bond Index(SM) returns.
(e) The Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) measures
the return of readily tradable, high-grade U.S. corporate bonds. The index
includes an equally weighted basket of 96 recently issued investment-grade
corporate bonds with laddered maturities. (The index reflects no deduction
for fees, expenses or taxes).
(f) The Dow Jones U.S. Total Stock Market Index(SM) measures all U.S. equity
securities that have readily available prices. (The index reflects no
deduction for fees, expenses or taxes).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
May 1, 2012 - December 31, 2017
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
6/30/2017 15,285 15,478 12,310 19,163 15,592 12,395 19,093
12/31/2017 16,436 16,531 12,621 21,309 16,643 12,691 21,228
Page 5
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
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Foot Locker, Inc. 0.5%
DR Horton, Inc. 0.5
Wal-Mart Stores, Inc. 0.5
Ross Stores, Inc. 0.4
Intel Corp. 0.4
NIKE, Inc., Class B 0.4
Best Buy Co., Inc. 0.4
Fastenal Co. 0.4
Pool Corp. 0.4
FLIR Systems, Inc. 0.4
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Total 4.3%
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% OF TOTAL
TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS
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Citigroup, Inc. 2.0%
Goldman Sachs Group (The), Inc. 1.8
Bank of America Corp. 1.7
JPMorgan Chase & Co. 1.5
Wells Fargo & Co. 1.5
Morgan Stanley 1.5
AT&T, Inc. 1.0
Apple, Inc. 0.9
UnitedHealth Group, Inc. 0.8
Ford Motor Credit Co., LLC 0.7
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Total 13.4%
======
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 3.5%
AA+ 2.1
AA 4.0
AA- 5.0
A+ 15.7
A 27.4
A- 14.1
BBB+ 8.7
BBB 12.5
BBB- 6.6
A-2 (short-term) 0.2
A-3 (short-term) 0.2
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Total 100.0%
======
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
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Common Stocks:
Financials 16.1%
Industrials 12.6
Consumer Discretionary 9.2
Information Technology 7.5
Consumer Staples 5.4
Health Care 3.1
Materials 1.9
Real Estate 0.7
Energy 0.4
Utilities 0.4
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Total Common Stocks 57.3
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Corporate Bonds & Notes:
Financials 14.0
Utilities 5.6
Energy 3.8
Information Technology 3.8
Industrials 3.3
Health Care 2.9
Consumer Discretionary 2.2
Consumer Staples 1.8
Telecommunication Services 1.7
Materials 1.2
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Total Corporate Bonds & Notes 40.3
------------------------------------------------------
Foreign Corporate Bonds & Notes:
Financials 0.7
Energy 0.5
Materials 0.2
Utilities 0.2
Health Care 0.1
Information Technology 0.0*
Industrials 0.0*
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Total Foreign Corporate Bonds & Notes 1.7
------------------------------------------------------
U.S. Government Bonds & Notes 0.5
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Commercial Paper:
Energy 0.2
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Total Commercial Paper 0.2
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Total 100.0%
======
* Amount is less than 0.1%.
(1) The credit quality information presented reflects the ratings assigned by
one or more nationally recognized statistical rating organizations
(NRSROs), including Standard & Poor's Ratings Group, a division of the
McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Fitch
Ratings or a comparably rated NRSRO. For situations in which a security is
rated by more than one NRSRO and ratings are not equivalent, the highest
ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or
lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The
credit ratings shown relate to the creditworthiness of the issuers of the
underlying securities in the Fund, and not to the Fund or its shares.
Credit ratings are subject to change.
Page 6
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2017, the First Trust Multi Income Allocation
Portfolio (the "Fund") Class I Shares returned 6.04% versus 10.30% for the Broad
Blended Benchmark (60% Bloomberg Barclays U.S. Aggregate Bond Index and 40%
Russell 3000(R) Index) and 5.72% for the Multi Asset Class Blended Benchmark
(15% Russell 3000(R) Index; 8% ICE BofAML Fixed Rate Preferred Securities Index;
15% Alerian MLP Index; 15%; S&P U.S. REIT Index; 8% ICE BofAML U.S. High Yield
Index; 15% S&P/LSTA Leveraged Loan Index; 8% Bloomberg Barclays U.S. Corporate
Investment-Grade Index; 8% ICE BofAML U.S. MBS Index; and 8% ICE BofAML 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, 2017, the Fund held approximately 2.9% in cash. The following asset classes
had the most positive impact on the overall Fund performance: preferred stocks
and dividend-paying stocks, while the following asset classes had the most
negative impact on the overall Fund performance: MLPs and floating-rate loans.
Dividend-paying stocks returned 18.83% (Gross of Fees) for the year ended
December 31, 2017 and represented 18.7% of the portfolio as of that date.
Dividend paying stocks faced headwinds throughout 2017 as investors showed a
clear preference for growth names amid a strengthening economy and rising
interest rates. Dividend yield was the second worst performing factor among the
six tracked, with only value performing worse for the year. Growth stocks
outperformed value by over 1,600 basis points ("bps") as measured by the Russell
3000(R) Growth and Value Indices, respectively. The portfolio experienced
underperformance due to both allocation and selection effects. The industrial
sector was the biggest drag on relative performance due to stock selection.
General Electric was the worst performing stock in the portfolio over the period
as its restructuring plan was not well received by the market. The information
technology sector was the second biggest detractor due to both allocation and
selection. The portfolio was underweight this top performing sector. As
mentioned earlier, growth stocks (tech stocks in particular) drove the market in
2017, many of which do not pay a dividend. The utilities sector was also a drag
on relative performance as Edison International fell sharply in the fourth
quarter amid potential liability for some of the California wildfires.
Additionally, an overweight to energy, the worst performing sector for the year,
weighed on relative performance though strong stock selection helped mitigate
some of the underperformance. The second half of the year saw the tides change
as energy stocks outperformed as oil prices rose 31% amid a strengthening global
outlook and demand for oil. Good stock selection in the consumer staples and
materials sectors also contributed positively to relative performance.
Preferred securities returned 11.11% (Gross of Fees) for the year ended December
31, 2017 and represented 6.0% of the portfolio as of that date. The positive
performance in preferred and hybrid securities during the period was supported
by stable interest rates, strong investor appetite for yield, moderate net new
issuance activity and solid credit quality. Strong performance was a result of
individual security selection within institutional ($1,000 par) securities and
exposure to floating rate securities that benefited from the increase in short
term interest rates.
The energy infrastructure companies and MLPs returned 1.93% (Gross of Fees) for
the year ended December 31, 2017 and represented 15.8% of the portfolio as of
that date. The performance of the equity securities of energy infrastructure
companies underperformed the overall performance of the Fund. Negative sentiment
across the entire energy sector weighed on the pipeline-related MLPs that more
than offset the positive contribution from the regulated utilities in the
portfolio.
REITs returned 5.76% (Gross of Fees) for the year ended December 31, 2017 and
represented 12.8% of the portfolio as of that date. REITs did not keep pace with
the broader U.S. equity market during 2017. Sentiment toward the asset class was
generally muted largely due to the market's anticipation of tax reform, the
passage of which would not immediately benefit their already tax-advantaged
status. Interest rate concerns at times also weighed on sentiment, although
higher long-term rates ultimately did not materialize. Regardless, the Fund's
REIT allocation outperformed its asset class benchmark, due to superior
allocation among property types. Specialized REITs contributed the most to
relative performance, both from the decision to overweight the property type and
from selection within the type. Significant positive contribution came also from
Page 7
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
the Retail property type; primarily from the decision to underweight this
property type. The Hotel & Resort property type was the single biggest detractor
from relative performance due to a negative selection effect. The top-performing
REITs for the year in terms of contribution were CyrusOne, Prologis and Equity
LifeStyle Properties. The bottom-performing REITs were Kimco Realty
Corporation., Retail Properties of America, Inc. and Corporate Office Properties
Trust.
The high-yield bond asset class performed well in 2017 with a return of 6.49%
(Gross of Fees) for the year ended December 31, 2017. High-yield bonds
represented 5.9% of the portfolio as of December 31, 2017. We believe this
strong performance was attributable to the positive tone from equities, low
volatility in interest rates over the course of the year and healthy
fundamentals for issuers of high-yield bonds. Spreads over U.S. Treasuries
tightened by 59 bps during the year to end the period at T+363 bps. While
spreads are in fact tight to the historic average (the long-term average spread
over U.S. Treasuries is T+582, December 1997 - December 2017), we believe there
is room for further tightening throughout the remaining cycle given that spreads
remain wide of the pre-crisis tights reached at the top of the last cycle in May
2007 of T+245. Moreover, the high-yield bond default rate has fallen from 3.32%
a year ago to 1.27% within the JP Morgan High-Yield Bond Universe. This is well
below the long-term average default rate of 3.23% (March 1999 - December 2017).
Floating-rate loans returned 2.52% (Gross of Fees) for the year ended December
31, 2017 and represented 13.9% of the portfolio as of that date. The performance
of floating-rate loans was attributable to the positive tone from equities, low
volatility in interest rates over the course of the year and healthy
fundamentals for issuers of senior loans. Moreover, investors have continued to
find favor with the senior loan asset class as evidenced by two consecutive
years of inflows. According to JP Morgan, the senior loan asset class
experienced inflows from retail investors into mutual funds totaling $13.5
billion in 2017, which followed $9.2 billion of inflows in 2016. Retail loan
inflows were accompanied by strong institutional demand, largely from
collateralized loan obligations ("CLOs"), where issuance (which excludes
refi's/resets) totaled $117.1 billion in 2017, the second strongest year for CLO
issuance on record (JP Morgan). Given the strong demand for the asset class,
spreads over 3-month London Interbank Offered Rate ("LIBOR") declined 60 bps
during the year to end the period at L+405 bps. This compares favorably to the
pre-credit crisis average spread of L+372 (December 1997 - June 2007) but is
inside the long-term average spread of L+521 (December 1997 - December 2017).
Importantly, the default rate for senior loans remains low, at 2.05% and we
believe it is likely to remain low given the overall health of the U.S. economy.
This is below the long-term average default rate of 3.03% (March 1999 - December
2017).
Corporate bonds returned 6.23% (Gross of Fees) for the year ended December 31,
2017 and represented 9.0% of the portfolio as of that date. Investment-grade
corporate bonds had another solid year of performance. Credit spreads improved
and were supported by an accelerating global economic expansion, profit growth,
modest inflation, low volatility and ample liquidity provided by global central
banks. As of December 31, 2017, the asset class has logged nine consecutive
quarters of excess returns; a stretch seen only once before in the last 20 years
(ICE BofAML US Corporate Index 4Q 2002-4Q 2004).
The MBS asset class returned 3.13% (Gross of Fees) for the year ended December
31, 2017 and represented 8.9% of the portfolio as of that date. The MBS sleeve
improved performance by positioning some of its overall defensive duration in
longer maturity securities and benefited from a flatter yield curve. Overall,
the Fund continues to manage its duration defensively with a focus on high
coupon, lower duration pools with elevated cash and exposure to higher yielding
Non-Agency residential MBS and commercial mortgage-backed securities ("CMBS").
TIPS returned 3.26% (Gross of Fees) for the year ended December 31, 2017 and
represented 9.0% of the portfolio as of that date. Inflation ran hot coming into
the year but cooled off materially in the second and third quarters. Soft
measures of inflation were a market theme during 2017 and contributed to lower
long-term Treasury yields and a flatter yield curve. The year-over-year rate of
inflation according to the Consumer Price Index was 2.5% in January 2017 and
reached a low of 1.6% in June before ending the year at 2.1%. TIPS outperformed
nominal Treasury bonds as inflation break-evens on TIPS in the belly of the
curve (4-7 years) increased slightly although it declined on bonds in the short
and long end of the maturity curve. Within the portfolio, returns were greatest
in maturities over 10 years as yields fell in that part of the yield curve.
Page 8
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
INVESTMENT CLIMATE
In our opinion, the top story in 2017 was the passage of the Tax Cuts and Jobs
Act in December. One of the goals of the new tax law is to hopefully boost
economic activity in the U.S. moving forward. The biggest boost to the U.S.
economy and markets could come from the reduction in the federal corporate tax
rate from 35% to 21%. In addition to the cut in the corporate tax rate,
multinational companies are now going to be able to repatriate their cash
holdings stored overseas. When companies bring that cash back to the U.S., they
will be taxed at 15.5% on income held as cash and cash equivalents and 8% for
illiquid assets. Those rates apply to an estimated $3.1 trillion in earnings
stockpiled overseas since 1986, according to Fortune.
We expect a good chunk of that capital to be returned to shareholders in the
form of stock buybacks and increased stock dividend payments. S&P Dow Jones
Indices announced that total dividend distributions for U.S. common stocks
increased by a net (increases less decreases) 56.9% to $37.1 billion in 2017.
There were 2,642 dividend increases throughout the year, up slightly from the
2,634 dividend increases in 2016. The number of dividends cut or suspended
totaled 445, down from the 659 cut or suspended in 2016.
The Federal Reserve (the "Fed") is poised to raise the federal funds target rate
(upper bound) three times in 2018, according to CNBC. The Fed has already raised
this rate five times during the current tightening cycle, dating back to its
first hike on December 16, 2015. Each hike totaled 25 bps. The rate increased
from 0.25% to 1.50%, where it stood at the end of 2017. The year-over-year rate
of inflation, as measured by the Consumer Price Index, increased from 0.7% on
December 31, 2015 to 2.1% on December 31, 2017, according to data from the
Bureau of Labor Statistics. Despite the 125 bps increase in the federal funds
target rate, the yield on the 10-year T-note rose just 11 bps, from 2.30% as of
December 16, 2015 to 2.41%, as of December 29, 2017, according to Bloomberg.
Brian Wesbury, Chief Economist at First Trust Advisors L.P., anticipates the
yield on the 10-year T-note rising to 3.00% by the end of 2018.
Page 9
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2017
-------------------------------------------------------------------------------------------------------------------------
1 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 6.04% 4.43%
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 6.22% 4.66%
Broad Blended Benchmark (a) 10.30% 6.40%
Bloomberg Barclays U.S. Aggregate Bond Index (b) 3.54% 2.64%
Russell 3000(R) Index (c) 21.13% 11.93%
Multi Asset Class Blended Benchmark (d) 5.72% 4.09%
-------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays
U.S. Aggregate Bond Index (60%) and the Russell 3000(R) Index (40%).
(b) The Bloomberg Barclays U.S. Aggregate Bond 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%), ICE BofAML Fixed Rate Preferred
Securities Index (8%), Alerian MLP Index (15%), S&P U.S. REIT Index (15%),
ICE BofAML U.S. High Yield Index (8%), S&P/LSTA Leveraged Loan Index
(15%), Bloomberg Barclays U.S. Corporate Investment-Grade Index (8%), ICE
BofAML U.S. MBS Index (8%), and ICE BofAML 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, 2017
First Trust Multi Broad Bloomberg Barclays
Income Allocation Blended Barclays U.S. Russell 3000(R) Multi Asset Class
Portfolio -- Class I Benchmark Aggregate Bond 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
6/30/2017 11,437 11,942 10,869 13,598 11,299
12/31/2017 11,725 12,556 11,004 15,121 11,585
Page 10
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Senior Loan Fund 14.0%
iShares iBoxx $ Investment Grade Corporate
Bond ETF 7.6
First Trust Preferred Securities and
Income ETF 6.0
First Trust Tactical High Yield ETF 6.0
Enterprise Products Partners, L.P. 1.6
iShares Floating Rate Bond ETF 1.5
TransCanada Corp. 1.0
TC Pipelines, L.P. 1.0
Magellan Midstream Partners, L.P. 0.9
Spectra Energy Partners, L.P. 0.9
------------------------------------------------------
Total 40.5%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Exchange-Traded Funds 35.7%
------------------------------------------------------
Common Stocks:
Information Technology 3.9
Energy 3.9
Financials 3.7
Industrials 2.9
Health Care 2.8
Utilities 2.5
Consumer Discretionary 1.5
Consumer Staples 1.1
Materials 1.0
Telecommunication Services 0.3
------------------------------------------------------
Total Common Stocks 23.6
------------------------------------------------------
Real Estate Investment Trusts:
Financials 12.9
------------------------------------------------------
Total Real Estate Investment Trusts 12.9
------------------------------------------------------
Master Limited Partnerships:
Energy 9.7
Utilities 1.0
Materials 0.3
------------------------------------------------------
Total Master Limited Partnerships 11.0
------------------------------------------------------
U.S. Government Bonds & Notes 9.2
------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 7.4
------------------------------------------------------
Mortgage-Backed Securities 0.2
------------------------------------------------------
Asset-Backed Securities 0.0*
------------------------------------------------------
Total 100.0%
======
* Amount is less than 0.1%.
Page 11
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
For the year ended December 31, 2017, the First Trust Dorsey Wright Tactical
Core Portfolio (the "Fund") Class I Shares returned 17.50% versus 14.21% for the
Broad Blended Benchmark: 60% S&P 500(R) Index and 40% Bloomberg Barclays U.S.
Aggregate Bond Index.
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 began 2017 with the following allocations to the four asset classes:
domestic equity securities (73.1%), international equity securities (4.6%),
fixed income securities (18.4%), cash and cash equivalents (3.9%). Throughout
2017, the DALI asset allocation to the four asset classes remained largely the
same. At the end of 2017, the Fund had the following allocations: domestic
equity securities (74.3%), international equity securities (4.9%), fixed income
securities (18.8%), and cash and cash equivalents (2.0%).
The Fund's largest contributing holdings in 2017 were the First Trust
NASDAQ-100-Technology Sector Index Fund and First Trust Dow Jones Internet Index
Fund. The Fund's largest detracting holdings were the First Trust Technology
AlphaDEX(R) Fund and First Trust Energy AlphaDEX(R) Fund.
Page 12
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2017
1 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 17.50% 7.89%
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 17.94% 8.09%
Broad Blended Benchmark (a) 14.21% 9.79%
Bloomberg Barclays U.S. Aggregate Bond Index (b) 3.54% 2.57%
S&P 500(R) Index (c) 21.83% 14.70%
-------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between Bloomberg Barclays
U.S. Aggregate Bond Index (40%) and the S&P 500(R) Index (60%).
(b) The Bloomberg Barclays U.S. Aggregate Bond 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, 2017
First Trust Dorsey Wright Broad Bloomberg Barclays
Tactical Core Portfolio - Blended U.S. Aggregate S&P 500(R)
Class I Benchmark Bond 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
6/30/17 10,773 11,417 10,436 12,085
12/31/17 11,791 12,246 10,565 13,465
Page 13
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2017 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Large Cap Growth AlphaDEX(R)
Fund 10.2%
First Trust Mid Cap Core AlphaDEX(R) Fund 10.2
First Trust Small Cap Growth AlphaDEX(R)
Fund 9.9
First Trust Industrials/Producer Durables
AlphaDEX(R) Fund 9.3
First Trust Dow Jones Internet Index Fund 9.2
First Trust Nasdaq Bank ETF 9.2
First Trust NASDAQ-100-Technology Sector
Index Fund 9.1
First Trust Technology AlphaDEX(R) Fund 8.7
iShares Core U.S. Aggregate Bond ETF 5.8
SPDR Barclays Emerging Markets Local Bond
ETF 3.4
------------------------------------------------------
Total 85.0%
======
Page 14
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2017 (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, 2017.
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 7/1/2017- VALUE VALUE 7/1/2017- EXPENSE
7/1/2017 12/31/2017 12/31/2017 (a) 7/1/2017 12/31/2017 12/31/2017 (a) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ----------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I $1,000.00 $1,075.30 $ 6.28 $1,000.00 $1,019.16 $ 6.11 1.20%
Class II $1,000.00 $1,075.80 $ 4.97 $1,000.00 $1,020.42 $ 4.84 0.95%
First Trust Multi Income Allocation
Portfolio
Class I $1,000.00 $1,025.20 $ 4.24 $1,000.00 $1,021.02 $ 4.23 0.83%
Class II $1,000.00 $1,025.60 $ 2.96 $1,000.00 $1,022.28 $ 2.96 0.58%
First Trust Dorsey Wright Tactical
Core Portfolio
Class I $1,000.00 $1,094.50 $ 3.96 $1,000.00 $1,021.42 $ 3.82 0.75%
Class II $1,000.00 $1,098.10 $ 2.64 $1,000.00 $1,022.68 $ 2.55 0.50%
(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,
2017 through December 31, 2017), multiplied by 184/365 (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, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS - 56.5%
AEROSPACE & DEFENSE - 2.5%
12,593 General Dynamics Corp........................................................ $ 2,562,046
28,822 HEICO Corp................................................................... 2,719,356
11,431 Huntington Ingalls Industries, Inc........................................... 2,694,287
8,343 Lockheed Martin Corp......................................................... 2,678,520
8,996 Northrop Grumman Corp........................................................ 2,760,962
13,874 Raytheon Co.................................................................. 2,606,231
22,301 United Technologies Corp..................................................... 2,844,938
-------------
18,866,340
-------------
AIR FREIGHT & LOGISTICS - 0.8%
34,017 CH Robinson Worldwide, Inc................................................... 3,030,574
43,246 Expeditors International of Washington, Inc.................................. 2,797,584
-------------
5,828,158
-------------
AUTO COMPONENTS - 0.4%
14,957 Lear Corp.................................................................... 2,642,304
-------------
BANKS - 2.8%
31,055 Bank of Hawaii Corp.......................................................... 2,661,414
64,394 Cathay General Bancorp....................................................... 2,715,495
96,592 CenterState Bank Corp........................................................ 2,485,312
47,049 Commerce Bancshares, Inc..................................................... 2,627,216
135,179 First Horizon National Corp.................................................. 2,702,228
60,299 First Merchants Corp......................................................... 2,536,176
28,747 South State Corp............................................................. 2,505,301
48,304 U.S. Bancorp................................................................. 2,588,128
-------------
20,821,270
-------------
BEVERAGES - 0.8%
29,259 Dr. Pepper Snapple Group, Inc................................................ 2,839,879
23,231 PepsiCo, Inc................................................................. 2,785,861
-------------
5,625,740
-------------
BUILDING PRODUCTS - 1.4%
43,559 A.O. Smith Corp.............................................................. 2,669,295
29,937 Allegion PLC................................................................. 2,381,788
38,504 Fortune Brands Home & Security, Inc.......................................... 2,635,214
52,788 Simpson Manufacturing Co., Inc............................................... 3,030,559
-------------
10,716,856
-------------
CAPITAL MARKETS - 2.6%
5,790 BlackRock, Inc............................................................... 2,974,381
19,079 CME Group, Inc............................................................... 2,786,488
14,372 FactSet Research Systems, Inc................................................ 2,770,346
58,160 Franklin Resources, Inc...................................................... 2,520,073
37,680 Intercontinental Exchange, Inc............................................... 2,658,701
14,029 MarketAxess Holdings, Inc.................................................... 2,830,351
28,557 T. Rowe Price Group, Inc..................................................... 2,996,486
-------------
19,536,826
-------------
CHEMICALS - 1.1%
17,119 Air Products & Chemicals, Inc................................................ 2,808,886
20,127 Ecolab, Inc.................................................................. 2,700,641
6,078 NewMarket Corp............................................................... 2,415,336
-------------
7,924,863
-------------
Page 16 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 0.7%
17,942 Cintas Corp.................................................................. $ 2,795,902
56,106 Rollins, Inc................................................................. 2,610,612
-------------
5,406,514
-------------
COMMUNICATIONS EQUIPMENT - 0.8%
76,974 Cisco Systems, Inc........................................................... 2,948,104
35,100 InterDigital, Inc............................................................ 2,672,865
-------------
5,620,969
-------------
CONTAINERS & PACKAGING - 0.4%
51,310 Sonoco Products Co........................................................... 2,726,613
-------------
DISTRIBUTORS - 0.8%
27,064 Genuine Parts Co............................................................. 2,571,351
23,931 Pool Corp.................................................................... 3,102,654
-------------
5,674,005
-------------
DIVERSIFIED CONSUMER SERVICES - 0.4%
75,034 Service Corp. International.................................................. 2,800,269
-------------
ELECTRIC UTILITIES - 0.4%
17,663 NextEra Energy, Inc.......................................................... 2,758,784
-------------
ELECTRICAL EQUIPMENT - 0.8%
22,313 Hubbell, Inc................................................................. 3,019,841
14,526 Rockwell Automation, Inc..................................................... 2,852,180
-------------
5,872,021
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 1.9%
30,584 Amphenol Corp., Class A...................................................... 2,685,275
86,519 Corning, Inc................................................................. 2,767,743
66,528 FLIR Systems, Inc............................................................ 3,101,535
13,215 Littelfuse, Inc.............................................................. 2,614,191
31,167 TE Connectivity, Ltd......................................................... 2,962,112
-------------
14,130,856
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.7%
19,391 PS Business Parks, Inc....................................................... 2,425,620
12,098 Public Storage............................................................... 2,528,482
-------------
4,954,102
-------------
FOOD & STAPLES RETAILING - 0.7%
31,833 CVS Health Corp.............................................................. 2,307,892
33,129 Wal-Mart Stores, Inc......................................................... 3,271,489
-------------
5,579,381
-------------
FOOD PRODUCTS - 2.3%
50,013 General Mills, Inc........................................................... 2,965,271
80,543 Hormel Foods Corp............................................................ 2,930,960
21,458 Ingredion, Inc............................................................... 2,999,828
19,715 J&J Snack Foods Corp......................................................... 2,993,328
21,551 Lancaster Colony Corp........................................................ 2,784,605
16,027 Sanderson Farms, Inc......................................................... 2,224,227
-------------
16,898,219
-------------
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
HEALTH CARE EQUIPMENT & SUPPLIES - 0.8%
30,178 Danaher Corp................................................................. $ 2,801,122
18,227 Stryker Corp................................................................. 2,822,269
-------------
5,623,391
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.6%
16,280 Aetna, Inc................................................................... 2,936,749
13,632 Anthem, Inc.................................................................. 3,067,336
27,644 Quest Diagnostics, Inc....................................................... 2,722,658
13,217 UnitedHealth Group, Inc...................................................... 2,913,820
-------------
11,640,563
-------------
HOTELS, RESTAURANTS & LEISURE - 1.9%
61,460 Cheesecake Factory (The), Inc................................................ 2,961,143
17,074 Cracker Barrel Old Country Store, Inc........................................ 2,712,888
71,906 International Speedway Corp., Class A........................................ 2,865,454
48,199 Starbucks Corp............................................................... 2,768,068
11,349 Vail Resorts, Inc............................................................ 2,411,322
-------------
13,718,875
-------------
HOUSEHOLD DURABLES - 0.4%
64,830 DR Horton, Inc............................................................... 3,310,868
-------------
HOUSEHOLD PRODUCTS - 0.7%
53,429 Church & Dwight Co., Inc..................................................... 2,680,533
28,452 Procter & Gamble (The), Co................................................... 2,614,170
-------------
5,294,703
-------------
INDUSTRIAL CONGLOMERATES - 1.2%
12,332 3M Co........................................................................ 2,902,583
25,812 Carlisle Cos., Inc........................................................... 2,933,534
18,263 Honeywell International, Inc................................................. 2,800,813
-------------
8,636,930
-------------
INSURANCE - 9.7%
31,805 AFLAC, Inc................................................................... 2,791,843
28,166 Allstate (The) Corp.......................................................... 2,949,262
25,024 American Financial Group, Inc................................................ 2,716,105
17,719 Aon PLC...................................................................... 2,374,346
42,091 Argo Group International Holdings, Ltd....................................... 2,594,910
64,075 Aspen Insurance Holdings Ltd................................................. 2,601,445
27,100 Assurant, Inc................................................................ 2,732,764
68,573 Assured Guaranty Ltd......................................................... 2,322,567
45,169 Axis Capital Holdings Ltd.................................................... 2,270,194
53,717 Brown & Brown, Inc........................................................... 2,764,277
18,160 Chubb, Ltd................................................................... 2,653,721
51,516 CNA Financial Corp........................................................... 2,732,924
11,335 Everest Re Group, Ltd........................................................ 2,507,982
51,804 First American Financial Corp................................................ 2,903,096
55,700 FNF Group.................................................................... 2,185,668
26,707 Hanover Insurance Group (The), Inc........................................... 2,886,493
30,886 Marsh & McLennan Cos., Inc................................................... 2,513,811
131,470 Old Republic International Corp.............................................. 2,810,829
40,235 Principal Financial Group, Inc............................................... 2,838,982
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
47,370 ProAssurance Corp............................................................ $ 2,707,195
53,462 Progressive (The) Corp....................................................... 3,010,980
18,553 Reinsurance Group of America, Inc............................................ 2,892,969
19,155 RenaissanceRe Holdings Ltd................................................... 2,405,676
32,323 Torchmark Corp............................................................... 2,932,019
21,129 Travelers (The) Cos., Inc.................................................... 2,865,938
52,604 Validus Holdings Ltd......................................................... 2,468,180
65,619 XL Group, Ltd................................................................ 2,307,164
-------------
71,741,340
-------------
IT SERVICES - 2.8%
19,165 Accenture PLC, Class A....................................................... 2,933,970
17,080 Black Knight, Inc............................................................ 754,082
32,030 Broadridge Financial Solutions, Inc.......................................... 2,901,277
17,843 International Business Machines Corp......................................... 2,737,473
25,184 Jack Henry & Associates, Inc................................................. 2,945,521
18,333 MasterCard, Inc., Class A.................................................... 2,774,883
43,174 Paychex, Inc................................................................. 2,939,286
24,598 Visa, Inc., Class A.......................................................... 2,804,664
-------------
20,791,156
-------------
MACHINERY - 2.7%
15,407 Cummins, Inc................................................................. 2,721,492
21,311 IDEX Corp.................................................................... 2,812,413
17,497 Illinois Tool Works, Inc..................................................... 2,919,374
29,032 Ingersoll-Rand PLC........................................................... 2,589,364
17,372 Snap-on, Inc................................................................. 3,027,940
17,148 Stanley Black & Decker, Inc.................................................. 2,909,844
41,711 Toro (The) Co................................................................ 2,720,809
-------------
19,701,236
-------------
MEDIA - 0.7%
124,515 Interpublic Group of (The) Cos., Inc......................................... 2,510,223
26,263 Walt Disney (The) Co......................................................... 2,823,535
-------------
5,333,758
-------------
MORTGAGE REAL ESTATE INVESTMENT TRUSTS - 0.7%
212,360 Annaly Capital Management, Inc............................................... 2,524,961
295,509 MFA Financial, Inc........................................................... 2,340,431
-------------
4,865,392
-------------
MULTILINE RETAIL - 0.4%
48,322 Big Lots, Inc................................................................ 2,713,280
-------------
OIL, GAS & CONSUMABLE FUELS - 0.4%
28,257 Phillips 66.................................................................. 2,858,196
-------------
PAPER & FOREST PRODUCTS - 0.4%
30,260 Neenah Paper, Inc............................................................ 2,743,069
-------------
PERSONAL PRODUCTS - 0.4%
24,006 Estee Lauder (The) Cos., Inc., Class A....................................... 3,054,523
-------------
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS - 0.7%
19,911 Johnson & Johnson............................................................ $ 2,781,965
72,512 Pfizer, Inc.................................................................. 2,626,385
-------------
5,408,350
-------------
PROFESSIONAL SERVICES - 1.1%
24,425 Equifax, Inc................................................................. 2,880,196
35,028 Exponent, Inc................................................................ 2,490,491
21,972 ManpowerGroup, Inc........................................................... 2,770,889
-------------
8,141,576
-------------
ROAD & RAIL - 0.4%
25,977 Landstar System, Inc......................................................... 2,704,206
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.2%
67,980 Intel Corp................................................................... 3,137,957
13,990 Lam Research Corp............................................................ 2,575,139
28,878 Texas Instruments, Inc....................................................... 3,016,018
-------------
8,729,114
-------------
SOFTWARE - 0.7%
18,211 Intuit, Inc.................................................................. 2,873,332
53,541 Oracle Corp.................................................................. 2,531,418
-------------
5,404,750
-------------
SPECIALTY RETAIL - 2.9%
45,446 Best Buy Co., Inc............................................................ 3,111,688
73,499 Foot Locker, Inc............................................................. 3,445,633
15,828 Home Depot (The), Inc........................................................ 2,999,881
32,384 Lowe's Cos., Inc............................................................. 3,009,769
40,090 Ross Stores, Inc............................................................. 3,217,222
35,110 TJX (The) Cos., Inc.......................................................... 2,684,510
40,901 Tractor Supply Co............................................................ 3,057,350
-------------
21,526,053
-------------
TEXTILES, APPAREL & LUXURY GOODS - 1.2%
26,214 Carter's, Inc................................................................ 3,079,883
49,927 NIKE, Inc., Class B.......................................................... 3,122,934
40,723 VF Corp...................................................................... 3,013,502
-------------
9,216,319
-------------
TOBACCO - 0.4%
40,816 Altria Group, Inc............................................................ 2,914,671
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.8%
56,794 Fastenal Co.................................................................. 3,106,064
16,072 Watsco, Inc.................................................................. 2,732,883
-------------
5,838,947
-------------
TOTAL COMMON STOCKS.......................................................... 416,295,356
(Cost $347,625,152) -------------
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES - 39.8%
AEROSPACE & DEFENSE - 0.8%
$ 250,000 Boeing (The) Co..................................... 2.35% 10/30/21 $ 251,142
553,000 Boeing (The) Co..................................... 2.13% 03/01/22 548,633
175,000 Boeing (The) Co..................................... 1.88% 06/15/23 168,705
100,000 Boeing (The) Co..................................... 2.60% 10/30/25 98,745
175,000 Boeing (The) Co..................................... 2.25% 06/15/26 166,472
250,000 Boeing (The) Co..................................... 2.80% 03/01/27 247,868
308,000 Boeing (The) Co..................................... 3.38% 06/15/46 300,122
250,000 Boeing (The) Co..................................... 3.65% 03/01/47 253,708
300,000 Boeing Capital Corp................................. 4.70% 10/27/19 313,502
250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 260,035
248,000 Lockheed Martin Corp................................ 4.09% 09/15/52 260,826
250,000 Northrop Grumman Corp............................... 2.08% 10/15/20 248,129
500,000 Northrop Grumman Corp............................... 2.55% 10/15/22 496,993
250,000 Northrop Grumman Corp............................... 2.93% 01/15/25 248,907
500,000 Northrop Grumman Corp............................... 3.25% 01/15/28 501,797
200,000 Northrop Grumman Corp............................... 5.05% 11/15/40 235,414
500,000 Northrop Grumman Corp............................... 4.03% 10/15/47 524,831
250,000 Rockwell Collins, Inc............................... 3.20% 03/15/24 252,261
250,000 Rockwell Collins, Inc............................... 3.50% 03/15/27 255,031
250,000 Rockwell Collins, Inc............................... 4.35% 04/15/47 272,666
-------------
5,905,787
-------------
AIR FREIGHT & LOGISTICS - 1.0%
250,000 FedEx Corp.......................................... 2.30% 02/01/20 250,097
300,000 FedEx Corp.......................................... 3.20% 02/01/25 304,302
850,000 FedEx Corp.......................................... 3.30% 03/15/27 857,350
250,000 FedEx Corp.......................................... 4.75% 11/15/45 281,064
648,000 FedEx Corp.......................................... 4.55% 04/01/46 714,543
550,000 FedEx Corp.......................................... 4.40% 01/15/47 589,305
1,000,000 United Parcel Service, Inc.......................... 2.05% 04/01/21 995,176
500,000 United Parcel Service, Inc.,
3 Mo. LIBOR + 0.38% (a).......................... 1.80% 05/16/22 501,167
500,000 United Parcel Service, Inc.......................... 2.35% 05/16/22 498,061
545,000 United Parcel Service, Inc.......................... 2.45% 10/01/22 544,051
500,000 United Parcel Service, Inc.......................... 2.50% 04/01/23 497,583
250,000 United Parcel Service, Inc.......................... 2.80% 11/15/24 251,340
500,000 United Parcel Service, Inc.......................... 2.40% 11/15/26 476,927
250,000 United Parcel Service, Inc.......................... 3.05% 11/15/27 250,336
500,000 United Parcel Service, Inc.......................... 3.40% 11/15/46 484,913
-------------
7,496,215
-------------
AIRLINES - 0.1%
385,000 Southwest Airlines Co............................... 2.75% 11/06/19 387,924
420,000 Southwest Airlines Co............................... 2.65% 11/05/20 421,986
250,000 Southwest Airlines Co............................... 3.00% 11/15/26 243,160
-------------
1,053,070
-------------
AUTOMOBILES - 0.0%
250,000 Ford Motor Co....................................... 5.29% 12/08/46 273,089
-------------
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS - 6.8%
$ 202,000 Bank of America Corp................................ 2.60% 01/15/19 $ 202,722
400,000 Bank of America Corp., 3 Mo. LIBOR + 0.87% (a)...... 2.56% 04/01/19 403,268
100,000 Bank of America Corp................................ 2.63% 10/19/20 100,880
600,000 Bank of America Corp................................ 2.63% 04/19/21 603,345
500,000 Bank of America Corp. (b)........................... 2.37% 07/21/21 499,308
250,000 Bank of America Corp. (b)........................... 2.33% 10/01/21 249,394
250,000 Bank of America Corp................................ 2.50% 10/21/22 247,507
250,000 Bank of America Corp., 3 Mo. LIBOR + 1.18% (a)...... 2.54% 10/21/22 255,075
1,000,000 Bank of America Corp., 3 Mo. LIBOR + 1.16% (a)...... 2.52% 01/20/23 1,021,370
500,000 Bank of America Corp. (b)........................... 2.88% 04/24/23 501,038
500,000 Bank of America Corp. (b)........................... 2.82% 07/21/23 499,341
1,207,000 Bank of America Corp. (b) (c)....................... 3.00% 12/20/23 1,210,931
450,000 Bank of America Corp................................ 4.00% 04/01/24 476,101
500,000 Bank of America Corp. (b)........................... 3.09% 10/01/25 499,306
400,000 Bank of America Corp................................ 4.45% 03/03/26 427,695
950,000 Bank of America Corp................................ 3.50% 04/19/26 972,328
150,000 Bank of America Corp................................ 3.25% 10/21/27 149,034
250,000 Bank of America Corp................................ 4.18% 11/25/27 261,551
500,000 Bank of America Corp. (b)........................... 3.82% 01/20/28 517,778
500,000 Bank of America Corp. (b)........................... 3.71% 04/24/28 513,802
500,000 Bank of America Corp. (b)........................... 3.59% 07/21/28 508,841
1,091,000 Bank of America Corp. (b) (c)....................... 3.42% 12/20/28 1,092,608
250,000 Bank of America Corp. (b)........................... 4.24% 04/24/38 271,678
225,000 Bank of America Corp................................ 5.88% 02/07/42 298,579
250,000 Bank of America Corp. (b)........................... 4.44% 01/20/48 282,460
500,000 Citibank N.A., 3 Mo. LIBOR + 0.34% (a).............. 1.97% 03/20/19 500,522
500,000 Citibank N.A........................................ 1.85% 09/18/19 497,044
300,000 Citigroup, Inc...................................... 2.05% 06/07/19 299,234
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 0.93% (a)............ 2.45% 06/07/19 1,008,091
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 0.79% (a)............ 2.50% 01/10/20 1,006,230
500,000 Citigroup, Inc...................................... 2.45% 01/10/20 500,466
250,000 Citigroup, Inc...................................... 2.40% 02/18/20 249,836
600,000 Citigroup, Inc...................................... 2.70% 03/30/21 602,101
350,000 Citigroup, Inc...................................... 2.35% 08/02/21 346,480
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (a)............ 2.59% 12/08/21 1,016,661
250,000 Citigroup, Inc...................................... 2.90% 12/08/21 251,873
775,000 Citigroup, Inc...................................... 4.50% 01/14/22 825,177
500,000 Citigroup, Inc...................................... 2.75% 04/25/22 499,492
500,000 Citigroup, Inc...................................... 2.70% 10/27/22 495,213
500,000 Citigroup, Inc. (b)................................. 2.88% 07/24/23 498,022
500,000 Citigroup, Inc., 3 Mo. LIBOR + 1.10% (a)............ 2.52% 05/17/24 508,071
450,000 Citigroup, Inc...................................... 4.60% 03/09/26 479,719
300,000 Citigroup, Inc...................................... 3.40% 05/01/26 302,336
250,000 Citigroup, Inc...................................... 3.20% 10/21/26 248,330
300,000 Citigroup, Inc...................................... 4.30% 11/20/26 314,295
100,000 Citigroup, Inc...................................... 4.45% 09/29/27 105,996
500,000 Citigroup, Inc. (b)................................. 3.89% 01/10/28 518,131
1,000,000 Citigroup, Inc. (b)................................. 3.67% 07/24/28 1,015,771
500,000 Citigroup, Inc...................................... 4.13% 07/25/28 516,429
Page 22 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Citigroup, Inc. (b)................................. 3.52% 10/27/28 $ 503,396
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 263,989
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 138,890
750,000 Citigroup, Inc...................................... 4.75% 05/18/46 830,108
500,000 Citigroup, Inc. (b)................................. 4.28% 04/24/48 545,187
600,000 HSBC Bank USA N.A................................... 4.88% 08/24/20 634,760
400,000 JPMorgan Chase & Co................................. 1.85% 03/22/19 398,607
400,000 JPMorgan Chase & Co................................. 2.20% 10/22/19 399,728
150,000 JPMorgan Chase & Co................................. 2.55% 03/01/21 150,146
1,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.55% (a)....... 2.09% 03/09/21 1,002,777
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 587,494
450,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 447,804
1,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 1.00% (a)....... 2.71% 01/15/23 1,014,159
325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 331,732
250,000 JPMorgan Chase & Co. (b)............................ 2.78% 04/25/23 250,394
500,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 497,092
250,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 1.23% (a)....... 2.59% 10/24/23 256,673
400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 420,719
500,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.85% (a)....... 2.56% 01/10/25 502,409
850,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 857,599
300,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 317,067
250,000 JPMorgan Chase & Co................................. 3.63% 12/01/27 253,206
500,000 JPMorgan Chase & Co. (b)............................ 3.78% 02/01/28 518,722
500,000 JPMorgan Chase & Co. (b)............................ 3.54% 05/01/28 509,277
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 551,430
250,000 JPMorgan Chase & Co. (b)............................ 3.88% 07/24/38 257,521
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 118,407
150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 174,754
500,000 JPMorgan Chase & Co. (b)............................ 4.26% 02/22/48 542,583
500,000 JPMorgan Chase & Co. (b)............................ 4.03% 07/24/48 522,812
250,000 JPMorgan Chase & Co. (b)............................ 3.96% 11/15/48 258,816
250,000 Santander Holdings USA, Inc. (c).................... 3.70% 03/28/22 253,251
250,000 Santander Holdings USA, Inc. (c).................... 3.40% 01/18/23 249,312
250,000 Santander Holdings USA, Inc. (c).................... 4.40% 07/13/27 256,159
575,000 Wells Fargo & Co.................................... 2.13% 04/22/19 575,020
200,000 Wells Fargo & Co.................................... 2.15% 01/30/20 199,622
100,000 Wells Fargo & Co.................................... 2.55% 12/07/20 100,447
900,000 Wells Fargo & Co.................................... 3.00% 01/22/21 913,219
550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 549,998
300,000 Wells Fargo & Co.................................... 2.10% 07/26/21 295,128
1,000,000 Wells Fargo & Co., 3 Mo. LIBOR + 0.93% (a).......... 2.34% 02/11/22 1,012,925
500,000 Wells Fargo & Co.................................... 2.63% 07/22/22 497,629
1,000,000 Wells Fargo & Co., 3 Mo. LIBOR + 1.11% (a).......... 2.47% 01/24/23 1,020,454
250,000 Wells Fargo & Co., 3 Mo. LIBOR + 1.23% (a).......... 2.61% 10/31/23 256,820
425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 431,979
550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 540,194
100,000 Wells Fargo & Co.................................... 4.10% 06/03/26 104,974
250,000 Wells Fargo & Co.................................... 3.00% 10/23/26 245,321
200,000 Wells Fargo & Co.................................... 4.30% 07/22/27 213,212
See Notes to Financial Statements Page 23
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Wells Fargo & Co. (b)............................... 3.58% 05/22/28 $ 510,336
100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 113,449
275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 290,745
750,000 Wells Fargo & Co.................................... 4.75% 12/07/46 840,294
1,000,000 Wells Fargo Bank N.A., 3 Mo. LIBOR + 0.50% (a)...... 1.97% 11/28/18 1,003,345
250,000 Wells Fargo Bank N.A................................ 1.75% 05/24/19 248,662
500,000 Wells Fargo Bank N.A., 3 Mo. LIBOR + 0.65% (a)...... 2.16% 12/06/19 504,806
200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 256,790
-------------
50,213,809
-------------
BEVERAGES - 0.8%
690,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.65% 02/01/21 693,959
200,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 198,694
625,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.30% 02/01/23 640,281
600,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.65% 02/01/26 620,238
875,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.70% 02/01/36 981,384
1,100,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 02/01/46 1,279,996
150,000 Coca-Cola (The) Co.................................. 1.88% 10/27/20 149,286
975,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 1,013,214
-------------
5,577,052
-------------
BIOTECHNOLOGY - 0.7%
350,000 AbbVie, Inc......................................... 2.50% 05/14/20 351,272
375,000 AbbVie, Inc......................................... 2.90% 11/06/22 376,513
250,000 AbbVie, Inc......................................... 3.60% 05/14/25 257,421
275,000 AbbVie, Inc......................................... 4.40% 11/06/42 295,978
300,000 AbbVie, Inc......................................... 4.70% 05/14/45 337,721
500,000 Amgen, Inc.......................................... 1.90% 05/10/19 498,554
500,000 Amgen, Inc.......................................... 2.20% 05/11/20 497,520
450,000 Amgen, Inc.......................................... 2.70% 05/01/22 449,978
500,000 Amgen, Inc.......................................... 2.65% 05/11/22 499,164
200,000 Amgen, Inc.......................................... 3.63% 05/22/24 208,083
100,000 Amgen, Inc.......................................... 2.60% 08/19/26 95,936
500,000 Amgen, Inc.......................................... 3.20% 11/02/27 500,428
200,000 Amgen, Inc.......................................... 5.38% 05/15/43 236,042
350,000 Amgen, Inc.......................................... 4.40% 05/01/45 382,357
-------------
4,986,967
-------------
BUILDING PRODUCTS - 0.2%
450,000 Masco Corp.......................................... 3.50% 04/01/21 459,292
250,000 Masco Corp.......................................... 3.50% 11/15/27 246,967
250,000 Masco Corp.......................................... 4.50% 05/15/47 255,408
500,000 Owens Corning....................................... 4.30% 07/15/47 494,363
-------------
1,456,030
-------------
CAPITAL MARKETS - 3.3%
300,000 Goldman Sachs Group (The), Inc...................... 2.00% 04/25/19 299,192
500,000 Goldman Sachs Group (The), Inc...................... 1.95% 07/23/19 497,273
600,000 Goldman Sachs Group (The), Inc...................... 2.55% 10/23/19 601,393
500,000 Goldman Sachs Group (The), Inc...................... 2.30% 12/13/19 499,915
700,000 Goldman Sachs Group (The), Inc.,
3 Mo. LIBOR + 0.80% (a).......................... 2.36% 12/13/19 705,074
500,000 Goldman Sachs Group (The), Inc...................... 2.60% 04/23/20 500,950
Page 24 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 500,000 Goldman Sachs Group (The), Inc.,
3 Mo. LIBOR + 0.73% (a).......................... 2.40% 12/27/20 $ 501,985
700,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 700,065
500,000 Goldman Sachs Group (The), Inc...................... 2.35% 11/15/21 492,871
497,000 Goldman Sachs Group (The), Inc.,
3 Mo. LIBOR + 1.11% (a).......................... 2.48% 04/26/22 503,019
500,000 Goldman Sachs Group (The), Inc...................... 3.00% 04/26/22 502,196
500,000 Goldman Sachs Group (The), Inc. (b)................. 2.88% 10/31/22 498,836
700,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 723,955
250,000 Goldman Sachs Group (The), Inc.,
3 Mo. LIBOR + 1.05% (a).......................... 2.54% 06/05/23 252,387
250,000 Goldman Sachs Group (The), Inc. (b)................. 2.91% 06/05/23 248,593
500,000 Goldman Sachs Group (The), Inc. (b)................. 2.91% 07/24/23 497,035
600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 629,998
150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 152,513
500,000 Goldman Sachs Group (The), Inc. (b)................. 3.27% 09/29/25 498,434
600,000 Goldman Sachs Group (The), Inc...................... 4.25% 10/21/25 627,702
550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 565,311
500,000 Goldman Sachs Group (The), Inc...................... 3.50% 11/16/26 503,443
750,000 Goldman Sachs Group (The), Inc...................... 3.85% 01/26/27 770,791
250,000 Goldman Sachs Group (The), Inc. (b)................. 3.69% 06/05/28 253,916
500,000 Goldman Sachs Group (The), Inc. (b)................. 4.02% 10/31/38 515,253
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 540,151
800,000 Morgan Stanley, 3 Mo. LIBOR + 0.85% (a)............. 2.21% 01/24/19 804,295
695,000 Morgan Stanley...................................... 2.50% 01/24/19 696,952
400,000 Morgan Stanley...................................... 2.65% 01/27/20 402,007
100,000 Morgan Stanley, 3 Mo. LIBOR + 0.80% (a)............. 2.21% 02/14/20 100,415
1,000,000 Morgan Stanley...................................... 2.50% 04/21/21 998,798
550,000 Morgan Stanley...................................... 5.50% 07/28/21 602,102
500,000 Morgan Stanley...................................... 2.63% 11/17/21 497,995
875,000 Morgan Stanley, 3 Mo. LIBOR + 1.18% (a)............. 2.54% 01/20/22 889,864
500,000 Morgan Stanley...................................... 2.75% 05/19/22 498,471
300,000 Morgan Stanley...................................... 3.75% 02/25/23 311,126
500,000 Morgan Stanley, 3 Mo. LIBOR + 1.40% (a)............. 2.76% 10/24/23 514,568
450,000 Morgan Stanley...................................... 3.88% 04/29/24 470,229
500,000 Morgan Stanley, 3 Mo. LIBOR + 1.22% (a)............. 2.62% 05/08/24 510,893
800,000 Morgan Stanley...................................... 3.88% 01/27/26 834,759
250,000 Morgan Stanley...................................... 4.35% 09/08/26 262,438
250,000 Morgan Stanley...................................... 3.63% 01/20/27 256,159
500,000 Morgan Stanley (b).................................. 3.59% 07/22/28 505,211
500,000 Morgan Stanley (b).................................. 3.97% 07/22/38 519,516
350,000 Morgan Stanley...................................... 6.38% 07/24/42 488,357
100,000 Morgan Stanley...................................... 4.30% 01/27/45 108,123
250,000 Morgan Stanley...................................... 4.38% 01/22/47 274,744
300,000 Nasdaq, Inc......................................... 3.85% 06/30/26 308,583
-------------
23,937,856
-------------
CHEMICALS - 0.4%
250,000 CF Industries, Inc. (c)............................. 3.40% 12/01/21 252,795
525,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 568,855
200,000 Dow Chemical (The) Co............................... 3.00% 11/15/22 201,276
75,000 Dow Chemical (The) Co............................... 4.63% 10/01/44 82,311
140,000 EI du Pont de Nemours & Co.,
3 Mo. LIBOR + 0.53% (a).......................... 1.91% 05/01/20 140,927
See Notes to Financial Statements Page 25
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CHEMICALS (CONTINUED)
$ 250,000 EI du Pont de Nemours & Co.......................... 2.20% 05/01/20 $ 249,864
500,000 Sherwin-Williams (The) Co........................... 3.13% 06/01/24 503,466
250,000 Sherwin-Williams (The) Co........................... 3.45% 06/01/27 254,496
100,000 Westlake Chemical Corp.............................. 3.60% 08/15/26 100,758
250,000 Westlake Chemical Corp.............................. 5.00% 08/15/46 281,943
500,000 Westlake Chemical Corp.............................. 4.38% 11/15/47 521,437
-------------
3,158,128
-------------
COMMERCIAL SERVICES & SUPPLIES - 0.1%
500,000 Waste Management, Inc............................... 3.15% 11/15/27 500,770
-------------
COMMUNICATIONS EQUIPMENT - 0.3%
100,000 Cisco Systems, Inc.................................. 2.45% 06/15/20 100,690
800,000 Cisco Systems, Inc.................................. 2.20% 09/20/23 784,622
500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 527,177
100,000 Cisco Systems, Inc.................................. 2.95% 02/28/26 100,581
200,000 Cisco Systems, Inc.................................. 2.50% 09/20/26 193,686
225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 308,240
-------------
2,014,996
-------------
CONSTRUCTION MATERIALS - 0.3%
250,000 CRH America Finance, Inc. (c)....................... 3.40% 05/09/27 250,441
250,000 CRH America Finance, Inc. (c)....................... 4.40% 05/09/47 264,101
500,000 Martin Marietta Materials, Inc...................... 3.50% 12/15/27 497,303
500,000 Martin Marietta Materials, Inc...................... 4.25% 12/15/47 496,816
250,000 Vulcan Materials Co................................. 3.90% 04/01/27 255,957
250,000 Vulcan Materials Co................................. 4.50% 06/15/47 256,291
-------------
2,020,909
-------------
CONSUMER FINANCE - 2.7%
250,000 American Express Co................................. 2.20% 10/30/20 248,118
250,000 American Express Co................................. 2.50% 08/01/22 247,248
500,000 American Express Co................................. 3.00% 10/30/24 499,936
450,000 American Express Co................................. 3.63% 12/05/24 463,725
297,000 American Express Credit Corp.,
3 Mo. LIBOR + 0.55% (a).......................... 2.15% 03/18/19 298,223
500,000 American Express Credit Corp........................ 1.70% 10/30/19 494,972
250,000 American Express Credit Corp........................ 2.20% 03/03/20 249,322
150,000 American Express Credit Corp........................ 2.60% 09/14/20 150,816
575,000 American Express Credit Corp........................ 2.25% 05/05/21 570,736
250,000 American Express Credit Corp.,
3 Mo. LIBOR + 0.70% (a).......................... 2.19% 03/03/22 251,510
250,000 American Express Credit Corp........................ 2.70% 03/03/22 250,955
500,000 American Express Credit Corp........................ 3.30% 05/03/27 507,990
500,000 Capital One Financial Corp.,
3 Mo. LIBOR + 0.95% (a).......................... 2.49% 03/09/22 501,742
550,000 Capital One Financial Corp.......................... 3.75% 04/24/24 565,804
500,000 Capital One Financial Corp.......................... 3.30% 10/30/24 498,131
350,000 Capital One Financial Corp.......................... 3.75% 07/28/26 349,163
250,000 Capital One N.A..................................... 2.25% 09/13/21 245,452
500,000 Capital One N.A..................................... 2.65% 08/08/22 495,297
1,000,000 Capital One N.A., 3 Mo. LIBOR + 1.15% (a)........... 2.53% 01/30/23 1,006,296
500,000 Caterpillar Financial Services Corp.,
3 Mo. LIBOR + 0.13% (a).......................... 1.61% 11/29/19 499,994
500,000 Caterpillar Financial Services Corp................. 2.00% 11/29/19 499,064
Page 26 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER FINANCE (CONTINUED)
$ 300,000 Caterpillar Financial Services Corp.,
3 Mo. LIBOR + 0.51% (a).......................... 2.22% 01/10/20 $ 302,357
500,000 Caterpillar Financial Services Corp................. 2.10% 01/10/20 499,111
250,000 Caterpillar Financial Services Corp................. 1.85% 09/04/20 247,177
1,039,000 Caterpillar Financial Services Corp................. 1.70% 08/09/21 1,013,818
250,000 Caterpillar Financial Services Corp................. 2.40% 06/06/22 248,631
1,000,000 Caterpillar Financial Services Corp................. 2.55% 11/29/22 997,486
150,000 Caterpillar Financial Services Corp................. 3.25% 12/01/24 154,031
250,000 Ford Motor Credit Co., LLC.......................... 2.26% 03/28/19 249,700
386,000 Ford Motor Credit Co., LLC.......................... 1.90% 08/12/19 383,245
200,000 Ford Motor Credit Co., LLC.......................... 2.68% 01/09/20 200,580
200,000 Ford Motor Credit Co., LLC.......................... 2.46% 03/27/20 199,465
500,000 Ford Motor Credit Co., LLC.......................... 2.43% 06/12/20 497,330
100,000 Ford Motor Credit Co., LLC.......................... 3.22% 01/09/22 100,710
250,000 Ford Motor Credit Co., LLC.......................... 3.34% 03/28/22 253,139
500,000 Ford Motor Credit Co., LLC.......................... 2.98% 08/03/22 498,765
450,000 Ford Motor Credit Co., LLC.......................... 3.10% 05/04/23 447,969
725,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 764,374
200,000 Ford Motor Credit Co., LLC.......................... 3.81% 01/09/24 204,439
350,000 Ford Motor Credit Co., LLC.......................... 4.13% 08/04/25 362,564
1,000,000 Ford Motor Credit Co., LLC.......................... 3.82% 11/02/27 1,002,298
250,000 General Motors Financial Co., Inc................... 2.65% 04/13/20 250,190
250,000 General Motors Financial Co., Inc................... 2.45% 11/06/20 248,289
250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 252,644
250,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 1.55% (a).......................... 3.27% 01/14/22 256,216
250,000 General Motors Financial Co., Inc................... 3.50% 11/07/24 249,866
200,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 220,281
100,000 General Motors Financial Co., Inc................... 4.00% 10/06/26 101,886
250,000 General Motors Financial Co., Inc................... 4.35% 01/17/27 260,486
500,000 Synchrony Financial................................. 3.95% 12/01/27 498,910
-------------
19,860,451
-------------
CONTAINERS & PACKAGING - 0.3%
200,000 International Paper Co.............................. 3.00% 02/15/27 194,293
150,000 International Paper Co.............................. 4.40% 08/15/47 157,397
250,000 International Paper Co.............................. 4.35% 08/15/48 262,122
250,000 Packaging Corp. of America.......................... 2.45% 12/15/20 250,513
500,000 Packaging Corp. of America.......................... 3.40% 12/15/27 502,275
250,000 WestRock Co. (c).................................... 3.00% 09/15/24 248,156
250,000 WestRock Co. (c).................................... 3.38% 09/15/27 248,755
-------------
1,863,511
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.3%
250,000 Berkshire Hathaway Finance Corp.,
3 Mo. LIBOR + 0.32% (a).......................... 2.03% 01/10/20 251,174
175,000 Berkshire Hathaway, Inc............................. 2.20% 03/15/21 174,532
125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 125,905
425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 430,260
350,000 Dell International LLC/EMC Corp. (c)................ 3.48% 06/01/19 354,506
250,000 Dell International LLC/EMC Corp. (c)................ 4.42% 06/15/21 260,708
See Notes to Financial Statements Page 27
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
$ 250,000 Voya Financial, Inc................................. 3.13% 07/15/24 $ 248,114
-------------
1,845,199
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.7%
500,000 AT&T, Inc........................................... 2.30% 03/11/19 500,681
300,000 AT&T, Inc........................................... 2.45% 06/30/20 299,852
250,000 AT&T, Inc........................................... 3.20% 03/01/22 252,938
250,000 AT&T, Inc........................................... 2.85% 02/14/23 251,284
250,000 AT&T, Inc........................................... 3.80% 03/01/24 256,369
150,000 AT&T, Inc........................................... 3.90% 03/11/24 154,146
250,000 AT&T, Inc........................................... 3.40% 08/14/24 251,645
350,000 AT&T, Inc........................................... 3.40% 05/15/25 344,658
650,000 AT&T, Inc........................................... 4.13% 02/17/26 665,969
250,000 AT&T, Inc........................................... 3.90% 08/14/27 252,161
545,000 AT&T, Inc. (c)...................................... 4.10% 02/15/28 547,905
462,000 AT&T, Inc. (c)...................................... 4.30% 02/15/30 461,356
250,000 AT&T, Inc........................................... 5.25% 03/01/37 265,203
500,000 AT&T, Inc........................................... 4.90% 08/14/37 507,866
425,000 AT&T, Inc........................................... 4.80% 06/15/44 421,922
250,000 AT&T, Inc........................................... 4.35% 06/15/45 231,542
250,000 AT&T, Inc........................................... 4.75% 05/15/46 245,453
550,000 AT&T, Inc........................................... 5.65% 02/15/47 604,153
250,000 AT&T, Inc........................................... 5.15% 02/14/50 254,108
250,000 AT&T, Inc........................................... 5.70% 03/01/57 275,708
250,000 AT&T, Inc........................................... 5.30% 08/14/58 251,864
1,277,000 Verizon Communications, Inc......................... 2.95% 03/15/22 1,286,041
100,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 1.00% (a).......................... 2.60% 03/16/22 102,029
650,000 Verizon Communications, Inc......................... 3.50% 11/01/24 662,621
522,000 Verizon Communications, Inc. (c).................... 3.38% 02/15/25 524,795
100,000 Verizon Communications, Inc......................... 2.63% 08/15/26 94,368
250,000 Verizon Communications, Inc......................... 4.13% 03/16/27 261,177
231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 230,517
298,000 Verizon Communications, Inc......................... 4.13% 08/15/46 276,411
500,000 Verizon Communications, Inc......................... 4.86% 08/21/46 522,855
250,000 Verizon Communications, Inc......................... 4.52% 09/15/48 247,174
249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 256,490
522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 506,141
-------------
12,267,402
-------------
ELECTRIC UTILITIES - 3.9%
500,000 AEP Texas, Inc. (c)................................. 2.40% 10/01/22 493,115
500,000 AEP Texas, Inc. (c)................................. 3.80% 10/01/47 516,367
250,000 AEP Transmission Co., LLC........................... 3.10% 12/01/26 250,780
500,000 AEP Transmission Co., LLC (c)....................... 3.10% 12/01/26 501,561
250,000 AEP Transmission Co., LLC........................... 4.00% 12/01/46 265,470
500,000 AEP Transmission Co., LLC (c)....................... 3.75% 12/01/47 515,599
250,000 Alabama Power Co.................................... 2.45% 03/30/22 248,581
250,000 Alabama Power Co.................................... 3.70% 12/01/47 255,903
250,000 American Electric Power Co., Inc.................... 2.95% 12/15/22 253,835
500,000 American Electric Power Co., Inc.................... 3.20% 11/13/27 497,489
300,000 Appalachian Power Co................................ 4.40% 05/15/44 332,021
Page 28 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 250,000 Baltimore Gas & Electric Co......................... 2.40% 08/15/26 $ 236,363
250,000 Baltimore Gas & Electric Co......................... 3.50% 08/15/46 245,602
250,000 Baltimore Gas & Electric Co......................... 3.75% 08/15/47 256,820
240,000 CenterPoint Energy Houston Electric LLC............. 2.25% 08/01/22 236,686
250,000 CenterPoint Energy Houston Electric LLC............. 2.40% 09/01/26 237,992
500,000 CenterPoint Energy Houston Electric LLC............. 3.00% 02/01/27 498,169
295,000 CenterPoint Energy Houston Electric LLC............. 4.50% 04/01/44 343,541
500,000 Cleveland Electric Illuminating (The) Co. (c)....... 3.50% 04/01/28 501,617
200,000 Commonwealth Edison Co.............................. 2.55% 06/15/26 193,629
300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 308,884
250,000 Commonwealth Edison Co.............................. 2.95% 08/15/27 247,476
300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 306,207
400,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 405,088
500,000 Commonwealth Edison Co.............................. 3.75% 08/15/47 520,967
100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 99,179
350,000 Duke Energy Carolinas LLC........................... 6.00% 01/15/38 471,811
250,000 Duke Energy Corp.................................... 1.80% 09/01/21 243,377
300,000 Duke Energy Corp.................................... 3.55% 09/15/21 309,860
500,000 Duke Energy Corp.................................... 2.40% 08/15/22 491,779
250,000 Duke Energy Corp.................................... 3.15% 08/15/27 248,704
450,000 Duke Energy Corp.................................... 3.75% 09/01/46 446,952
500,000 Duke Energy Corp.................................... 3.95% 08/15/47 516,060
350,000 Duke Energy Florida LLC............................. 2.10% 12/15/19 349,772
500,000 Duke Energy Florida LLC............................. 3.20% 01/15/27 506,777
250,000 Duke Energy Florida LLC............................. 3.40% 10/01/46 242,886
250,000 Duke Energy Progress LLC............................ 3.70% 10/15/46 256,015
250,000 Duke Energy Progress LLC............................ 3.60% 09/15/47 251,308
500,000 Eversource Energy................................... 2.75% 03/15/22 501,390
500,000 Eversource Energy................................... 2.90% 10/01/24 496,951
500,000 Exelon Corp......................................... 3.50% 06/01/22 510,059
575,000 Exelon Corp......................................... 5.15% 12/01/20 612,660
200,000 Exelon Corp......................................... 2.45% 04/15/21 199,249
250,000 Exelon Corp......................................... 4.45% 04/15/46 272,797
250,000 FirstEnergy Corp.................................... 2.85% 07/15/22 247,989
350,000 Florida Power & Light Co............................ 3.25% 06/01/24 360,099
210,000 Florida Power & Light Co............................ 4.05% 06/01/42 230,799
100,000 Indiana Michigan Power Co........................... 4.55% 03/15/46 114,527
500,000 Indiana Michigan Power Co........................... 3.75% 07/01/47 510,497
410,000 Metropolitan Edison Co. (c)......................... 3.50% 03/15/23 418,136
125,000 Monongahela Power Co. (c)........................... 5.40% 12/15/43 156,208
150,000 Ohio Edison Co...................................... 6.88% 07/15/36 207,060
250,000 Pacific Gas & Electric Co........................... 3.50% 06/15/25 255,823
100,000 Pacific Gas & Electric Co........................... 2.95% 03/01/26 97,464
600,000 Pacific Gas & Electric Co........................... 4.30% 03/15/45 628,458
250,000 Pacific Gas & Electric Co........................... 4.25% 03/15/46 263,038
750,000 Pacific Gas & Electric Co........................... 4.00% 12/01/46 752,680
250,000 PECO Energy Co...................................... 3.70% 09/15/47 257,325
100,000 Public Service Electric & Gas Co.................... 1.90% 03/15/21 98,524
195,000 Public Service Electric & Gas Co.................... 2.38% 05/15/23 191,837
550,000 Public Service Electric & Gas Co.................... 2.25% 09/15/26 517,960
See Notes to Financial Statements Page 29
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 250,000 Public Service Electric & Gas Co.................... 3.00% 05/15/27 $ 248,856
275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 294,832
100,000 Public Service Electric & Gas Co.................... 3.80% 03/01/46 105,466
500,000 Public Service Electric & Gas Co.................... 3.60% 12/01/47 513,368
550,000 Southern (The) Co................................... 1.85% 07/01/19 546,873
815,000 Southern (The) Co................................... 2.35% 07/01/21 810,840
250,000 Southern (The) Co................................... 3.25% 07/01/26 245,632
425,000 Southern (The) Co................................... 4.40% 07/01/46 454,475
200,000 Southern California Edison Co....................... 3.50% 10/01/23 207,278
200,000 Southern California Edison Co....................... 3.60% 02/01/45 202,157
500,000 Southern California Edison Co....................... 4.00% 04/01/47 538,442
500,000 Southern Co. Gas Capital Corp....................... 4.40% 05/30/47 537,926
250,000 Southern Power Co................................... 4.95% 12/15/46 275,309
500,000 Southwestern Electric Power Co...................... 2.75% 10/01/26 482,469
100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 133,971
500,000 Virginia Electric & Power Co........................ 2.75% 03/15/23 498,273
200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 206,785
450,000 Virginia Electric & Power Co........................ 2.95% 11/15/26 446,541
250,000 Virginia Electric & Power Co........................ 3.50% 03/15/27 258,970
475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 538,037
250,000 Virginia Electric & Power Co........................ 4.00% 11/15/46 268,725
250,000 Virginia Electric & Power Co........................ 3.80% 09/15/47 259,960
-------------
29,080,957
-------------
ENERGY EQUIPMENT & SERVICES - 0.0%
250,000 Halliburton Co...................................... 5.00% 11/15/45 288,220
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.2%
500,000 American Tower Corp................................. 3.00% 06/15/23 499,313
500,000 American Tower Corp................................. 3.60% 01/15/28 498,100
250,000 Duke Realty L.P..................................... 3.38% 12/15/27 250,931
-------------
1,248,344
-------------
FOOD & STAPLES RETAILING - 0.6%
150,000 CVS Health Corp..................................... 2.80% 07/20/20 150,714
600,000 CVS Health Corp..................................... 2.13% 06/01/21 586,023
700,000 CVS Health Corp..................................... 4.00% 12/05/23 728,722
178,000 CVS Health Corp..................................... 3.88% 07/20/25 183,607
150,000 CVS Health Corp..................................... 2.88% 06/01/26 144,080
1,000,000 Wal-Mart Stores, Inc................................ 2.35% 12/15/22 997,183
325,000 Wal-Mart Stores, Inc................................ 3.30% 04/22/24 337,929
500,000 Wal-Mart Stores, Inc................................ 2.65% 12/15/24 498,494
1,000,000 Wal-Mart Stores, Inc................................ 3.63% 12/15/47 1,050,530
-------------
4,677,282
-------------
FOOD PRODUCTS - 0.2%
500,000 Tyson Foods, Inc.................................... 3.55% 06/02/27 512,979
500,000 Tyson Foods, Inc.................................... 4.55% 06/02/47 546,819
-------------
1,059,798
-------------
Page 30 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HEALTH CARE EQUIPMENT & SUPPLIES - 1.0%
$ 250,000 Abbott Laboratories................................. 2.90% 11/30/21 $ 253,122
500,000 Abbott Laboratories................................. 3.40% 11/30/23 509,311
500,000 Abbott Laboratories................................. 3.75% 11/30/26 514,380
1,100,000 Abbott Laboratories................................. 4.90% 11/30/46 1,266,256
550,000 Becton Dickinson and Co............................. 3.36% 06/06/24 552,310
800,000 Becton Dickinson and Co............................. 3.70% 06/06/27 807,728
600,000 Becton Dickinson and Co............................. 4.67% 06/06/47 652,283
300,000 Medtronic, Inc...................................... 2.50% 03/15/20 301,872
750,000 Medtronic, Inc...................................... 3.15% 03/15/22 768,636
600,000 Medtronic, Inc...................................... 3.50% 03/15/25 623,002
1,150,000 Medtronic, Inc...................................... 4.63% 03/15/45 1,343,096
-------------
7,591,996
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.0%
500,000 Express Scripts Holding Co.......................... 3.05% 11/30/22 499,716
500,000 Humana, Inc......................................... 2.50% 12/15/20 499,970
500,000 Humana, Inc......................................... 2.90% 12/15/22 499,743
500,000 UnitedHealth Group, Inc............................. 1.95% 10/15/20 495,630
275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 292,539
100,000 UnitedHealth Group, Inc............................. 2.13% 03/15/21 99,310
550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 557,313
500,000 UnitedHealth Group, Inc............................. 2.38% 10/15/22 495,499
100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 105,506
250,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 252,120
500,000 UnitedHealth Group, Inc............................. 3.45% 01/15/27 517,833
500,000 UnitedHealth Group, Inc............................. 3.38% 04/15/27 514,413
500,000 UnitedHealth Group, Inc............................. 2.95% 10/15/27 499,173
150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 217,972
573,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 678,489
500,000 UnitedHealth Group, Inc............................. 4.20% 01/15/47 540,155
500,000 UnitedHealth Group, Inc............................. 4.25% 04/15/47 551,711
250,000 UnitedHealth Group, Inc............................. 3.75% 10/15/47 255,750
-------------
7,572,842
-------------
HOTELS, RESTAURANTS & LEISURE - 0.0%
150,000 McDonald's Corp..................................... 3.70% 01/30/26 156,623
100,000 McDonald's Corp..................................... 4.88% 12/09/45 116,309
-------------
272,932
-------------
HOUSEHOLD DURABLES - 0.3%
250,000 DR Horton, Inc...................................... 2.55% 12/01/20 249,800
250,000 DR Horton, Inc...................................... 4.38% 09/15/22 263,564
250,000 Newell Brands, Inc.................................. 3.15% 04/01/21 252,986
100,000 Newell Brands, Inc.................................. 4.00% 12/01/24 103,997
350,000 Newell Brands, Inc.................................. 4.20% 04/01/26 365,915
525,000 Newell Brands, Inc.................................. 5.50% 04/01/46 627,386
-------------
1,863,648
-------------
HOUSEHOLD PRODUCTS - 0.2%
250,000 Procter & Gamble (The) Co........................... 1.70% 11/03/21 244,073
500,000 Procter & Gamble (The) Co........................... 2.15% 08/11/22 494,768
100,000 Procter & Gamble (The) Co........................... 2.70% 02/02/26 98,957
See Notes to Financial Statements Page 31
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HOUSEHOLD PRODUCTS (CONTINUED)
$ 250,000 Procter & Gamble (The) Co........................... 2.45% 11/03/26 $ 241,358
500,000 Procter & Gamble (The) Co........................... 2.85% 08/11/27 496,515
250,000 Procter & Gamble (The) Co........................... 3.50% 10/25/47 253,139
-------------
1,828,810
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY
PRODUCERS - 0.2%
250,000 NextEra Energy Capital Holdings, Inc................ 2.30% 04/01/19 249,941
525,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 526,557
500,000 NextEra Energy Capital Holdings, Inc................ 2.80% 01/15/23 500,398
500,000 NextEra Energy Capital Holdings, Inc................ 3.55% 05/01/27 510,307
-------------
1,787,203
-------------
INDUSTRIAL CONGLOMERATES - 0.4%
250,000 3M Co............................................... 1.63% 09/19/21 244,040
250,000 3M Co............................................... 3.13% 09/19/46 235,389
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc. (c)......................................... 2.77% 12/15/22 499,717
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc. (c)......................................... 3.34% 12/15/27 499,791
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc. (c)......................................... 4.08% 12/15/47 509,844
129,000 General Electric Co................................. 6.75% 03/15/32 176,978
425,000 General Electric Co................................. 4.50% 03/11/44 471,926
250,000 Honeywell International, Inc.,
3 Mo. LIBOR + 0.04% (a).......................... 1.42% 10/30/19 249,580
250,000 Honeywell International, Inc........................ 1.80% 10/30/19 248,745
-------------
3,136,010
-------------
INSURANCE - 0.9%
300,000 AIG Global Funding (c).............................. 2.15% 07/02/20 297,451
400,000 American International Group, Inc................... 3.38% 08/15/20 408,999
200,000 American International Group, Inc................... 4.13% 02/15/24 211,606
100,000 American International Group, Inc................... 3.90% 04/01/26 103,879
300,000 American International Group, Inc................... 6.25% 05/01/36 388,374
490,000 Chubb INA Holdings, Inc............................. 2.30% 11/03/20 489,420
200,000 Chubb INA Holdings, Inc............................. 2.88% 11/03/22 202,856
350,000 Chubb INA Holdings, Inc............................. 3.35% 05/03/26 357,573
600,000 Chubb INA Holdings, Inc............................. 4.35% 11/03/45 679,151
100,000 MetLife, Inc........................................ 3.00% 03/01/25 100,187
150,000 MetLife, Inc........................................ 3.60% 11/13/25 156,195
300,000 MetLife, Inc........................................ 4.88% 11/13/43 352,865
170,000 MetLife, Inc........................................ 4.60% 05/13/46 194,392
325,000 Metropolitan Life Global Funding I,
3 Mo. LIBOR + 0.43% (a) (c)...................... 2.04% 12/19/18 326,033
500,000 Metropolitan Life Global Funding I (c).............. 1.75% 09/19/19 496,529
500,000 Metropolitan Life Global Funding I (c).............. 2.65% 04/08/22 500,213
250,000 Metropolitan Life Global Funding I (c).............. 3.00% 09/19/27 247,963
275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 313,493
500,000 Travelers (The) Cos., Inc........................... 4.00% 05/30/47 533,817
-------------
6,360,996
-------------
Page 32 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
IT SERVICES - 0.8%
$ 250,000 IBM Credit LLC...................................... 1.63% 09/06/19 $ 248,374
250,000 IBM Credit LLC...................................... 1.80% 01/20/21 246,218
250,000 IBM Credit LLC...................................... 2.20% 09/08/22 244,983
500,000 International Business Machines Corp................ 1.63% 05/15/20 494,041
100,000 International Business Machines Corp................ 3.63% 02/12/24 104,799
600,000 Visa, Inc........................................... 2.20% 12/14/20 599,783
500,000 Visa, Inc........................................... 2.15% 09/15/22 493,376
950,000 Visa, Inc........................................... 2.80% 12/14/22 964,562
550,000 Visa, Inc........................................... 3.15% 12/14/25 562,838
250,000 Visa, Inc........................................... 2.75% 09/15/27 246,978
303,000 Visa, Inc........................................... 4.15% 12/14/35 337,048
450,000 Visa, Inc........................................... 4.30% 12/14/45 513,362
500,000 Visa, Inc........................................... 3.65% 09/15/47 514,380
-------------
5,570,742
-------------
MACHINERY - 0.1%
490,000 Parker-Hannifin Corp................................ 3.25% 03/01/27 494,893
245,000 Parker-Hannifin Corp................................ 4.10% 03/01/47 264,493
-------------
759,386
-------------
MEDIA - 1.0%
250,000 CBS Corp. (c)....................................... 2.90% 06/01/23 246,096
500,000 CBS Corp............................................ 3.38% 02/15/28 482,530
610,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.91% 07/23/25 649,540
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.20% 03/15/28 248,653
750,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 6.48% 10/23/45 877,464
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.38% 05/01/47 257,285
100,000 Comcast Corp........................................ 4.60% 08/15/45 112,438
250,000 Comcast Corp........................................ 3.40% 07/15/46 237,173
500,000 Comcast Corp........................................ 4.00% 08/15/47 523,118
250,000 Cox Communications, Inc. (c)........................ 3.50% 08/15/27 247,087
250,000 Discovery Communications LLC........................ 2.95% 03/20/23 247,716
250,000 Discovery Communications LLC........................ 3.95% 03/20/28 249,183
250,000 Discovery Communications LLC........................ 5.00% 09/20/37 259,828
275,000 Discovery Communications LLC........................ 5.20% 09/20/47 288,120
100,000 Time Warner, Inc.................................... 2.95% 07/15/26 94,757
200,000 Time Warner, Inc.................................... 6.50% 11/15/36 251,406
50,000 Time Warner, Inc.................................... 4.85% 07/15/45 52,713
500,000 Walt Disney (The) Co................................ 0.88% 07/12/19 491,015
150,000 Walt Disney (The) Co................................ 3.00% 02/13/26 150,699
350,000 Walt Disney (The) Co................................ 1.85% 07/30/26 320,902
500,000 Walt Disney (The) Co................................ 2.95% 06/15/27 498,159
475,000 Walt Disney (The) Co................................ 4.13% 06/01/44 514,256
250,000 Walt Disney (The) Co................................ 3.00% 07/30/46 222,899
-------------
7,523,037
-------------
See Notes to Financial Statements Page 33
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
METALS & MINING - 0.1%
$ 500,000 Glencore Funding LLC (c)............................ 3.00% 10/27/22 $ 496,038
500,000 Glencore Funding LLC (c)............................ 3.88% 10/27/27 495,150
-------------
991,188
-------------
MULTI-UTILITIES - 1.3%
250,000 Ameren Illinois Co.................................. 3.70% 12/01/47 256,496
500,000 CenterPoint Energy, Inc............................. 2.50% 09/01/22 493,014
95,000 Consolidated Edison Co. of New York, Inc............ 4.50% 12/01/45 109,530
335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 382,579
185,000 Consolidated Edison Co. of New York, Inc............ 3.85% 06/15/46 193,172
500,000 Consolidated Edison Co. of New York, Inc............ 3.88% 06/15/47 524,294
250,000 Consolidated Edison Co. of New York, Inc............ 4.30% 12/01/56 273,595
250,000 Consolidated Edison, Inc............................ 2.00% 03/15/20 248,770
100,000 Consolidated Edison, Inc............................ 2.00% 05/15/21 98,552
1,000,000 Dominion Energy, Inc................................ 2.58% 07/01/20 1,001,019
250,000 Dominion Resources, Inc............................. 1.88% 01/15/19 249,314
250,000 Dominion Resources, Inc............................. 1.60% 08/15/19 247,347
200,000 Dominion Resources, Inc............................. 5.20% 08/15/19 208,867
250,000 Dominion Resources, Inc............................. 2.75% 01/15/22 249,844
495,000 Dominion Resources, Inc............................. 4.70% 12/01/44 563,574
330,000 NiSource Finance Corp............................... 2.65% 11/17/22 327,882
500,000 NiSource Finance Corp............................... 3.49% 05/15/27 509,911
750,000 NiSource Finance Corp............................... 4.38% 05/15/47 825,542
500,000 NiSource Finance Corp............................... 3.95% 03/30/48 514,457
250,000 Public Service Enterprise Group, Inc................ 1.60% 11/15/19 245,994
250,000 Public Service Enterprise Group, Inc................ 2.00% 11/15/21 244,286
500,000 Public Service Enterprise Group, Inc................ 2.65% 11/15/22 496,164
500,000 Southern Co. Gas Capital Corp....................... 2.45% 10/01/23 484,530
500,000 Southern Co. Gas Capital Corp....................... 3.95% 10/01/46 498,566
-------------
9,247,299
-------------
OIL, GAS & CONSUMABLE FUELS - 3.6%
150,000 Anadarko Petroleum Corp............................. 5.55% 03/15/26 168,572
450,000 Andeavor............................................ 3.80% 04/01/28 452,007
500,000 Andeavor............................................ 4.50% 04/01/48 507,743
250,000 Andeavor Logistics L.P./Tesoro Logistics Finance
Corp............................................. 5.25% 01/15/25 263,238
250,000 Andeavor Logistics L.P./Tesoro Logistics Finance
Corp............................................. 4.25% 12/01/27 252,642
250,000 Boardwalk Pipelines L.P............................. 5.95% 06/01/26 279,330
750,000 Boardwalk Pipelines L.P............................. 4.45% 07/15/27 764,480
550,000 Chevron Corp........................................ 1.56% 05/16/19 546,968
250,000 Chevron Corp., 3 Mo. LIBOR + 0.21% (a).............. 1.70% 03/03/20 250,936
750,000 Chevron Corp........................................ 2.10% 05/16/21 744,221
182,000 Chevron Corp., 3 Mo. LIBOR + 0.53% (a).............. 2.02% 03/03/22 184,025
550,000 Chevron Corp........................................ 2.57% 05/16/23 549,183
500,000 Chevron Corp........................................ 2.90% 03/03/24 504,857
150,000 Chevron Corp........................................ 3.33% 11/17/25 154,493
1,360,000 Chevron Corp........................................ 2.95% 05/16/26 1,361,063
500,000 Cimarex Energy Co................................... 3.90% 05/15/27 512,237
225,000 ConocoPhillips...................................... 6.50% 02/01/39 315,897
250,000 ConocoPhillips Co................................... 5.95% 03/15/46 338,059
325,000 Devon Energy Corp................................... 3.25% 05/15/22 330,905
Page 34 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 500,000 Enable Midstream Partners L.P....................... 4.40% 03/15/27 $ 509,369
185,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 203,209
400,000 Enbridge Energy Partners L.P........................ 7.38% 10/15/45 533,319
400,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 400,862
250,000 Energy Transfer Partners L.P........................ 4.20% 04/15/27 249,175
175,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 198,785
250,000 Energy Transfer Partners L.P........................ 5.30% 04/15/47 248,982
250,000 EnLink Midstream Partners L.P....................... 5.45% 06/01/47 265,157
500,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 499,108
150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 149,636
200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 203,302
825,000 Exxon Mobil Corp.................................... 4.11% 03/01/46 925,744
65,000 Hess Corp........................................... 5.80% 04/01/47 72,597
220,000 Kinder Morgan Energy Partners L.P................... 3.50% 03/01/21 223,929
100,000 Kinder Morgan Energy Partners L.P................... 4.15% 02/01/24 103,845
175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 218,226
800,000 Kinder Morgan, Inc.................................. 3.05% 12/01/19 807,365
500,000 Kinder Morgan, Inc.................................. 3.15% 01/15/23 497,529
715,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 745,912
300,000 Kinder Morgan, Inc.................................. 5.55% 06/01/45 329,509
650,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 677,205
250,000 Marathon Oil Corp................................... 3.85% 06/01/25 254,893
500,000 Marathon Oil Corp................................... 4.40% 07/15/27 523,529
259,000 Marathon Oil Corp................................... 5.20% 06/01/45 288,156
600,000 MPLX L.P............................................ 4.13% 03/01/27 615,685
705,000 MPLX L.P............................................ 5.20% 03/01/47 776,684
250,000 Noble Energy, Inc................................... 3.85% 01/15/28 251,272
250,000 Noble Energy, Inc................................... 4.95% 08/15/47 268,600
400,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 403,220
500,000 ONEOK Partners L.P.................................. 4.90% 03/15/25 536,904
250,000 ONEOK, Inc.......................................... 4.00% 07/13/27 253,871
250,000 ONEOK, Inc.......................................... 4.95% 07/13/47 261,113
300,000 Plains All American Pipeline L.P./PAA Finance
Corp............................................. 4.65% 10/15/25 309,637
250,000 Plains All American Pipeline L.P./PAA Finance
Corp............................................. 4.50% 12/15/26 253,879
500,000 Sabine Pass Liquefaction LLC........................ 5.00% 03/15/27 536,918
250,000 Sabine Pass Liquefaction LLC........................ 4.20% 03/15/28 253,446
350,000 Spectra Energy Capital LLC.......................... 3.30% 03/15/23 349,633
100,000 Sunoco Logistics Partners Operations L.P............ 4.40% 04/01/21 104,069
350,000 Sunoco Logistics Partners Operations L.P............ 3.90% 07/15/26 343,114
500,000 Sunoco Logistics Partners Operations L.P............ 4.00% 10/01/27 491,254
500,000 Sunoco Logistics Partners Operations L.P............ 5.40% 10/01/47 505,228
500,000 TC PipeLines L.P.................................... 3.90% 05/25/27 503,459
300,000 Williams Partners L.P............................... 3.60% 03/15/22 307,160
250,000 Williams Partners L.P............................... 3.90% 01/15/25 255,173
95,000 Williams Partners L.P............................... 4.00% 09/15/25 97,361
250,000 Williams Partners L.P............................... 3.75% 06/15/27 251,004
625,000 Williams Partners L.P............................... 4.90% 01/15/45 665,559
270,000 Williams Partners L.P............................... 5.10% 09/15/45 298,072
-------------
26,502,514
-------------
See Notes to Financial Statements Page 35
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS - 0.2%
$ 250,000 Johnson & Johnson................................... 3.63% 03/03/37 $ 264,662
250,000 Johnson & Johnson................................... 3.75% 03/03/47 267,670
125,000 Merck & Co., Inc.................................... 1.85% 02/10/20 124,342
300,000 Merck & Co., Inc.................................... 2.75% 02/10/25 299,073
450,000 Merck & Co., Inc.................................... 3.70% 02/10/45 470,979
-------------
1,426,726
-------------
ROAD & RAIL - 0.5%
425,000 CSX Corp............................................ 3.40% 08/01/24 437,416
350,000 CSX Corp............................................ 2.60% 11/01/26 334,646
250,000 CSX Corp............................................ 3.80% 11/01/46 249,655
200,000 CSX Corp............................................ 4.50% 08/01/54 211,525
250,000 CSX Corp............................................ 4.25% 11/01/66 251,082
250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 246,373
250,000 Ryder System, Inc................................... 2.25% 09/01/21 246,345
500,000 Ryder System, Inc................................... 2.80% 03/01/22 499,308
300,000 Union Pacific Corp.................................. 3.75% 03/15/24 317,327
250,000 Union Pacific Corp.................................. 3.00% 04/15/27 251,540
183,000 Union Pacific Corp.................................. 4.15% 01/15/45 198,331
225,000 Union Pacific Corp.................................. 4.05% 03/01/46 243,929
250,000 Union Pacific Corp.................................. 4.10% 09/15/67 261,673
-------------
3,749,150
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.7%
250,000 Applied Materials, Inc.............................. 3.30% 04/01/27 254,570
350,000 Applied Materials, Inc.............................. 4.35% 04/01/47 393,633
500,000 Broadcom Corp./Broadcom Cayman Finance, Ltd. (c).... 2.65% 01/15/23 482,566
250,000 Broadcom Corp./Broadcom Cayman Finance, Ltd. (c).... 3.13% 01/15/25 239,364
250,000 Broadcom Corp./Broadcom Cayman Finance, Ltd. (c).... 3.50% 01/15/28 238,825
250,000 Intel Corp., 3 Mo. LIBOR + 0.08% (a)................ 1.49% 05/11/20 249,465
250,000 Intel Corp.......................................... 1.85% 05/11/20 248,937
100,000 Intel Corp.......................................... 1.70% 05/19/21 98,257
250,000 Intel Corp., 3 Mo. LIBOR + 0.35% (a)................ 1.76% 05/11/22 251,451
250,000 Intel Corp.......................................... 2.35% 05/11/22 249,353
100,000 Intel Corp.......................................... 3.10% 07/29/22 102,931
375,000 Intel Corp.......................................... 2.70% 12/15/22 379,433
500,000 Intel Corp.......................................... 2.88% 05/11/24 505,013
100,000 Intel Corp.......................................... 2.60% 05/19/26 97,575
250,000 Intel Corp.......................................... 3.15% 05/11/27 255,256
300,000 Intel Corp.......................................... 4.10% 05/19/46 331,668
500,000 Intel Corp.......................................... 4.10% 05/11/47 552,343
163,000 Intel Corp. (c)..................................... 3.73% 12/08/47 169,724
-------------
5,100,364
-------------
SOFTWARE - 1.0%
250,000 Microsoft Corp...................................... 1.10% 08/08/19 246,715
250,000 Microsoft Corp...................................... 1.85% 02/06/20 249,337
150,000 Microsoft Corp...................................... 2.00% 11/03/20 149,477
250,000 Microsoft Corp...................................... 1.55% 08/08/21 243,545
800,000 Microsoft Corp...................................... 2.40% 02/06/22 800,749
150,000 Microsoft Corp...................................... 3.63% 12/15/23 158,156
Page 36 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE (CONTINUED)
$ 250,000 Microsoft Corp...................................... 2.88% 02/06/24 $ 253,826
200,000 Microsoft Corp...................................... 3.13% 11/03/25 204,395
100,000 Microsoft Corp...................................... 2.40% 08/08/26 96,548
500,000 Microsoft Corp...................................... 3.30% 02/06/27 516,343
100,000 Microsoft Corp...................................... 3.45% 08/08/36 103,308
250,000 Microsoft Corp...................................... 4.10% 02/06/37 279,684
275,000 Microsoft Corp...................................... 4.45% 11/03/45 323,135
350,000 Microsoft Corp...................................... 3.70% 08/08/46 365,846
950,000 Microsoft Corp...................................... 4.25% 02/06/47 1,088,933
200,000 Oracle Corp......................................... 1.90% 09/15/21 196,948
100,000 Oracle Corp......................................... 2.50% 05/15/22 100,217
500,000 Oracle Corp......................................... 2.40% 09/15/23 494,139
250,000 Oracle Corp......................................... 3.40% 07/08/24 259,450
350,000 Oracle Corp......................................... 2.65% 07/15/26 341,619
400,000 Oracle Corp......................................... 5.38% 07/15/40 506,805
350,000 Oracle Corp......................................... 4.00% 07/15/46 373,363
250,000 VMware, Inc......................................... 2.95% 08/21/22 249,570
-------------
7,602,108
-------------
SPECIALTY RETAIL - 0.6%
500,000 Home Depot (The), Inc............................... 2.00% 04/01/21 495,303
770,000 Home Depot (The), Inc............................... 4.40% 04/01/21 818,108
100,000 Home Depot (The), Inc............................... 3.35% 09/15/25 103,449
550,000 Home Depot (The), Inc............................... 3.00% 04/01/26 551,302
250,000 Home Depot (The), Inc............................... 2.13% 09/15/26 234,340
1,000,000 Home Depot (The), Inc............................... 2.80% 09/14/27 985,013
100,000 Home Depot (The), Inc............................... 4.40% 03/15/45 113,525
500,000 Home Depot (The), Inc............................... 4.25% 04/01/46 559,815
500,000 Home Depot (The), Inc............................... 3.90% 06/15/47 528,696
250,000 Home Depot (The), Inc............................... 3.50% 09/15/56 241,247
-------------
4,630,798
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 1.0%
250,000 Apple, Inc., 3 Mo. LIBOR + 0.08% (a)................ 1.48% 02/08/19 250,136
250,000 Apple, Inc., 3 Mo. LIBOR + 0.20% (a)................ 1.59% 02/07/20 250,563
450,000 Apple, Inc.......................................... 2.85% 05/06/21 457,437
250,000 Apple, Inc.......................................... 1.55% 08/04/21 243,006
110,000 Apple, Inc., 3 Mo. LIBOR + 0.50% (a)................ 1.90% 02/09/22 111,580
250,000 Apple, Inc.......................................... 2.10% 09/12/22 245,468
250,000 Apple, Inc.......................................... 2.40% 01/13/23 248,027
375,000 Apple, Inc.......................................... 2.40% 05/03/23 371,418
250,000 Apple, Inc.......................................... 3.00% 02/09/24 253,379
500,000 Apple, Inc.......................................... 2.85% 05/11/24 502,665
500,000 Apple, Inc.......................................... 2.75% 01/13/25 496,123
100,000 Apple, Inc.......................................... 2.45% 08/04/26 95,955
250,000 Apple, Inc.......................................... 3.35% 02/09/27 256,387
500,000 Apple, Inc.......................................... 3.20% 05/11/27 506,948
250,000 Apple, Inc.......................................... 2.90% 09/12/27 247,350
500,000 Apple, Inc.......................................... 3.00% 11/13/27 497,601
100,000 Apple, Inc.......................................... 4.45% 05/06/44 114,505
100,000 Apple, Inc.......................................... 4.65% 02/23/46 117,393
See Notes to Financial Statements Page 37
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (CONTINUED)
$ 600,000 Apple, Inc.......................................... 4.25% 02/09/47 $ 668,455
250,000 Apple, Inc.......................................... 3.75% 09/12/47 256,885
250,000 Apple, Inc.......................................... 3.75% 11/13/47 257,817
500,000 Hewlett Packard Enterprise Co. (c).................. 2.10% 10/04/19 496,790
100,000 Hewlett Packard Enterprise Co....................... 3.60% 10/15/20 102,165
150,000 Hewlett Packard Enterprise Co....................... 4.40% 10/15/22 157,800
125,000 Hewlett Packard Enterprise Co....................... 4.90% 10/15/25 132,175
50,000 Hewlett Packard Enterprise Co....................... 6.35% 10/15/45 53,109
-------------
7,391,137
-------------
TOBACCO - 0.1%
250,000 BAT Capital Corp. (c)............................... 3.22% 08/15/24 250,360
250,000 BAT Capital Corp. (c)............................... 3.56% 08/15/27 250,820
250,000 BAT Capital Corp. (c)............................... 4.39% 08/15/37 263,383
250,000 BAT Capital Corp. (c)............................... 4.54% 08/15/47 264,310
-------------
1,028,873
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.0%
250,000 Air Lease Corp...................................... 2.75% 01/15/23 246,637
-------------
WATER UTILITIES - 0.1%
155,000 American Water Capital Corp......................... 2.95% 09/01/27 153,589
250,000 American Water Capital Corp......................... 3.75% 09/01/47 258,660
-------------
412,249
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................. 293,382,487
(Cost $288,696,125) -------------
FOREIGN CORPORATE BONDS AND NOTES - 1.6%
BANKS - 0.5%
500,000 HSBC Holdings PLC, 3 Mo. LIBOR + 2.24% (a).......... 3.76% 03/08/21 526,893
700,000 HSBC Holdings PLC, 3 Mo. LIBOR + 1.66% (a).......... 3.12% 05/25/21 726,773
475,000 HSBC Holdings PLC................................... 2.65% 01/05/22 472,114
200,000 HSBC Holdings PLC (b)............................... 3.26% 03/13/23 202,903
625,000 HSBC Holdings PLC................................... 3.90% 05/25/26 648,907
350,000 HSBC Holdings PLC................................... 4.38% 11/23/26 366,079
200,000 HSBC Holdings PLC (b)............................... 4.04% 03/13/28 208,668
250,000 Royal Bank of Scotland Group PLC (b)................ 3.50% 05/15/23 250,797
-------------
3,403,134
-------------
CAPITAL MARKETS - 0.1%
500,000 Credit Suisse Group AG (c).......................... 3.57% 01/09/23 508,829
250,000 UBS Group Funding Switzerland AG,
3 Mo. LIBOR + 1.22% (a) (c)...................... 2.68% 05/23/23 254,199
-------------
763,028
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.1%
444,000 GE Capital International Funding Co. Unlimited Co... 4.42% 11/15/35 481,427
250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 266,953
250,000 Shell International Finance, B.V.................... 3.75% 09/12/46 255,655
-------------
1,004,035
-------------
Page 38 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES - 0.1%
$ 250,000 Enel Finance International, N.V. (c)................ 2.75% 04/06/23 $ 246,638
250,000 Enel Finance International, N.V. (c)................ 3.50% 04/06/28 245,054
500,000 Enel Finance International, N.V. (c)................ 4.75% 05/25/47 543,600
-------------
1,035,292
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1%
250,000 Medtronic Global Holdings SCA....................... 1.70% 03/28/19 249,008
250,000 Medtronic Global Holdings SCA....................... 3.35% 04/01/27 256,815
-------------
505,823
-------------
INTERNET SOFTWARE & SERVICES - 0.0%
250,000 Alibaba Group Holding, Ltd.......................... 3.40% 12/06/27 250,251
-------------
METALS & MINING - 0.2%
250,000 Anglo American Capital PLC (c)...................... 3.63% 09/11/24 249,096
250,000 Anglo American Capital PLC (c)...................... 4.00% 09/11/27 248,725
330,000 BHP Billiton Finance USA, Ltd....................... 5.00% 09/30/43 405,542
186,000 Rio Tinto Finance USA, Ltd.......................... 3.75% 06/15/25 195,156
350,000 Vale Overseas, Ltd.................................. 6.25% 08/10/26 406,350
-------------
1,504,869
-------------
OIL, GAS & CONSUMABLE FUELS - 0.5%
100,000 BP Capital Markets PLC.............................. 3.12% 05/04/26 101,180
500,000 Canadian Natural Resources, Ltd..................... 2.95% 01/15/23 498,339
100,000 Canadian Natural Resources, Ltd..................... 3.80% 04/15/24 103,122
500,000 Canadian Natural Resources, Ltd..................... 3.85% 06/01/27 511,316
500,000 Canadian Natural Resources, Ltd..................... 4.95% 06/01/47 561,822
100,000 Cenovus Energy, Inc................................. 5.40% 06/15/47 105,627
250,000 Enbridge, Inc....................................... 2.90% 07/15/22 248,749
250,000 Enbridge, Inc....................................... 4.25% 12/01/26 261,882
250,000 Enbridge, Inc....................................... 3.70% 07/15/27 251,544
250,000 Enbridge, Inc....................................... 5.50% 12/01/46 301,787
200,000 Petroleos Mexicanos (c)............................. 5.38% 03/13/22 212,500
250,000 Suncor Energy, Inc.................................. 4.00% 11/15/47 256,982
-------------
3,414,850
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.0%
250,000 AerCap Ireland Capital DAC/AerCap Global Aviation
Trust............................................ 3.50% 01/15/25 248,194
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 12,129,476
(Cost $11,738,589) -------------
U.S. GOVERNMENT BONDS AND NOTES - 0.5%
270,000 U.S. Treasury Bond.................................. 2.75% 08/15/47 270,396
400,000 U.S. Treasury Note (d).............................. 1.38% 09/30/19 396,594
850,000 U.S. Treasury Note.................................. 1.50% 10/31/19 844,256
400,000 U.S. Treasury Note.................................. 1.75% 11/15/20 397,750
200,000 U.S. Treasury Note.................................. 2.00% 11/30/22 198,203
1,225,000 U.S. Treasury Note.................................. 2.13% 11/30/24 1,209,089
240,000 U.S. Treasury Note.................................. 2.25% 11/15/27 236,653
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 3,552,941
(Cost $3,561,451) -------------
See Notes to Financial Statements Page 39
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
COMMERCIAL PAPER - 0.2%
OIL, GAS & CONSUMABLE FUELS - 0.2%
$ 750,000 Enbridge Energy Partners L.P........................ 2.20% 01/02/18 $ 749,861
750,000 Energy Transfer L.P................................. 2.10% 01/02/18 749,832
-------------
TOTAL COMMERCIAL PAPER....................................................... 1,499,693
(Cost $1,499,911) -------------
TOTAL INVESTMENTS - 98.6%.................................................... 726,859,953
(Cost $653,121,228) (e)
NET OTHER ASSETS AND LIABILITIES - 1.4%...................................... 10,662,588
-------------
NET ASSETS - 100.0%.......................................................... $ 737,522,541
=============
FUTURES CONTRACTS (see Note 2D - Futures Contracts in the Notes to Financial
Statements):
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS MONTH VALUE VALUE
--------------------------------------- ------------ ------------ ------------ ------------- ---------------
U.S. Treasury 5-Year Notes Short 52 Mar-2018 $ 6,040,531 $ 27,633
U.S. Treasury 10-Year Notes Short 20 Mar-2018 2,480,938 16,719
U.S. Treasury CME Ultra Long Term Bonds Short 15 Mar-2018 2,514,844 (13,125)
U.S. Treasury Ultra 10-Year Notes Short 102 Mar-2018 13,623,375 62,953
------------- ---------------
Total Futures Contracts $ 24,659,688 $ 94,180
============= ===============
-----------------------------
(a) Floating or variable rate security.
(b) Fixed-to-floating or fixed-to-variable rate security. The interest rate
shown reflects the fixed rate in effect at December 31, 2017. At a
predetermined date, the fixed rate will change to a floating rate or a
variable rate.
(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 judgement. At December 31, 2017, securities noted as such
amounted to $19,605,077 or 2.66% of net assets.
(d) All or a portion of this security is segregated as collateral for open
futures contracts.
(e) Aggregate cost for federal income tax purposes was $653,487,217. As of
December 31, 2017, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$77,751,397 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$4,284,481. The net unrealized appreciation was $73,466,916. The amounts
presented are inclusive of derivative contracts.
LIBOR London Interbank Offered Rate
Page 40 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2017 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
12/31/2017 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*.................................... $416,295,356 $416,295,356 $ -- $ --
Corporate Bonds and Notes*........................ 293,382,487 -- 293,382,487 --
Foreign Corporate Bonds and Notes*................ 12,129,476 -- 12,129,476 --
U.S. Government Bonds and Notes................... 3,552,941 -- 3,552,941 --
Commercial Paper*................................. 1,499,693 -- 1,499,693 --
------------ ------------ ------------ ------------
Total Investments................................. 726,859,953 416,295,356 310,564,597 --
Futures Contracts**............................... 107,305 107,305 -- --
------------ ------------ ------------ ------------
Total............................................. $726,967,258 $416,402,661 $310,564,597 $ --
============ ============ ============ ============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2017 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Futures Contracts**............................... $ (13,125) $ (13,125) $ -- $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
** Includes cumulative appreciation (depreciation) on futures contracts as
reported in the Futures Contracts table. 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 occur on
the last day of the period at their current value. There were no transfers
between Levels at December 31, 2017.
See Notes to Financial Statements Page 41
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 34.7%
CAPITAL MARKETS - 34.7%
71 First Trust Low Duration Opportunities ETF (a)............................... $ 3,668
59,280 First Trust Preferred Securities and Income ETF (a).......................... 1,186,193
57,460 First Trust Senior Loan Fund (a)............................................. 2,763,251
24,290 First Trust Tactical High Yield ETF (a)...................................... 1,179,765
250 iShares 20+ Year Treasury Bond ETF........................................... 31,715
330 iShares 7-10 Year Treasury Bond ETF.......................................... 34,838
5,745 iShares Floating Rate Bond ETF............................................... 291,961
12,395 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 1,506,736
300 iShares MBS ETF.............................................................. 31,977
1 Vanguard Mortgage-Backed Securities ETF...................................... 53
-------------
TOTAL EXCHANGE-TRADED FUNDS.................................................. 7,030,157
(Cost $6,984,067) -------------
COMMON STOCKS - 23.0%
AEROSPACE & DEFENSE - 0.8%
374 General Dynamics Corp........................................................ 76,090
403 Raytheon Co.................................................................. 75,704
-------------
151,794
-------------
BANKS - 2.1%
1,073 JPMorgan Chase & Co.......................................................... 114,747
457 M&T Bank Corp................................................................ 78,142
1,408 U.S. Bancorp................................................................. 75,441
1,474 Webster Financial Corp....................................................... 82,780
1,242 Wells Fargo & Co............................................................. 75,352
-------------
426,462
-------------
CAPITAL MARKETS - 0.4%
158 BlackRock, Inc............................................................... 81,166
-------------
CHEMICALS - 0.9%
410 Ecolab, Inc.................................................................. 55,014
461 International Flavors & Fragrances, Inc...................................... 70,353
570 LyondellBasell Industries N.V., Class A...................................... 62,882
-------------
188,249
-------------
COMMUNICATIONS EQUIPMENT - 0.4%
2,206 Cisco Systems, Inc........................................................... 84,490
-------------
CONSUMER FINANCE - 0.4%
899 Capital One Financial Corp................................................... 89,522
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.3%
1,293 Verizon Communications, Inc.................................................. 68,438
-------------
ELECTRIC UTILITIES - 1.3%
541 Alliant Energy Corp.......................................................... 23,052
424 American Electric Power Co., Inc............................................. 31,194
285 Duke Energy Corp............................................................. 23,971
849 Emera, Inc. (CAD)............................................................ 31,731
494 Eversource Energy............................................................ 31,211
450 Fortis, Inc. (CAD)........................................................... 16,507
882 Hydro One Ltd. (CAD) (b)..................................................... 15,717
413 NextEra Energy, Inc.......................................................... 64,506
Page 42 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
616 Southern (The) Co............................................................ $ 29,623
-------------
267,512
-------------
ELECTRICAL EQUIPMENT - 0.3%
857 Eaton Corp. PLC.............................................................. 67,712
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 0.4%
808 TE Connectivity Ltd.......................................................... 76,792
-------------
ENERGY EQUIPMENT & SERVICES - 0.2%
544 Schlumberger Ltd............................................................. 36,660
-------------
FOOD & STAPLES RETAILING - 0.8%
938 CVS Health Corp.............................................................. 68,005
878 Wal-Mart Stores, Inc......................................................... 86,703
-------------
154,708
-------------
GAS UTILITIES - 0.3%
190 Atmos Energy Corp............................................................ 16,319
364 New Jersey Resources Corp.................................................... 14,633
650 UGI Corp..................................................................... 30,518
-------------
61,470
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.8%
1,411 Abbott Laboratories.......................................................... 80,526
904 STERIS PLC................................................................... 79,073
-------------
159,599
-------------
HEALTH CARE PROVIDERS & SERVICES - 0.4%
476 Aetna, Inc................................................................... 85,866
-------------
HOTELS, RESTAURANTS & LEISURE - 0.7%
1,335 Carnival Corp................................................................ 88,604
959 Starbucks Corp............................................................... 55,075
-------------
143,679
-------------
INDUSTRIAL CONGLOMERATES - 1.1%
2,810 General Electric Co.......................................................... 49,035
565 Honeywell International, Inc................................................. 86,648
1,203 Siemens AG, ADR.............................................................. 83,332
-------------
219,015
-------------
INSURANCE - 0.7%
1,830 FNF Group.................................................................... 71,809
1,391 MetLife, Inc................................................................. 70,329
-------------
142,138
-------------
IT SERVICES - 0.9%
694 Accenture PLC, Class A....................................................... 106,244
858 Fidelity National Information Services, Inc.................................. 80,729
-------------
186,973
-------------
MACHINERY - 0.3%
354 Snap-on, Inc................................................................. 61,702
-------------
See Notes to Financial Statements Page 43
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
MULTI-UTILITIES - 0.8%
997 National Grid PLC, ADR....................................................... $ 58,634
984 Public Service Enterprise Group, Inc......................................... 50,676
392 Sempra Energy................................................................ 41,913
236 WEC Energy Group, Inc........................................................ 15,678
-------------
166,901
-------------
OIL, GAS & CONSUMABLE FUELS - 3.6%
551 Chevron Corp................................................................. 68,980
2,618 Enbridge Income Fund Holdings, Inc. (CAD).................................... 62,086
1,671 Enbridge, Inc................................................................ 65,353
848 Exxon Mobil Corp............................................................. 70,927
1,627 Inter Pipeline Ltd. (CAD).................................................... 33,692
4,391 Kinder Morgan, Inc........................................................... 79,345
1,621 ONEOK, Inc................................................................... 86,642
1,215 TOTAL S.A., ADR.............................................................. 67,165
3,913 TransCanada Corp............................................................. 190,328
-------------
724,518
-------------
PHARMACEUTICALS - 1.5%
801 Eli Lilly & Co............................................................... 67,652
641 Johnson & Johnson............................................................ 89,561
1,258 Merck & Co., Inc............................................................. 70,788
836 Novartis AG, ADR............................................................. 70,191
-------------
298,192
-------------
ROAD & RAIL - 0.4%
594 Union Pacific Corp........................................................... 79,655
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.8%
327 Broadcom Ltd................................................................. 84,006
1,785 Intel Corp................................................................... 82,396
-------------
166,402
-------------
SOFTWARE - 0.8%
1,026 Microsoft Corp............................................................... 87,764
1,458 Oracle Corp.................................................................. 68,934
-------------
156,698
-------------
SPECIALTY RETAIL - 0.5%
477 Home Depot (The), Inc........................................................ 90,406
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.5%
551 Apple, Inc................................................................... 93,246
-------------
TEXTILES, APPAREL & LUXURY GOODS - 0.3%
1,047 NIKE, Inc., Class B.......................................................... 65,490
-------------
TOBACCO - 0.3%
948 British American Tobacco PLC, ADR............................................ 63,507
-------------
TOTAL COMMON STOCKS.......................................................... 4,658,962
(Cost $4,024,350) -------------
Page 44 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS - 12.6%
DIVERSIFIED REITS - 1.5%
10,035 Lexington Realty Trust....................................................... $ 96,838
782 PS Business Parks, Inc....................................................... 97,820
3,204 Washington Real Estate Investment Trust...................................... 99,709
-------------
294,367
-------------
HEALTH CARE REITS - 1.5%
1,361 National Health Investors, Inc............................................... 102,592
3,743 Omega Healthcare Investors, Inc.............................................. 103,082
5,805 Physicians Realty Trust...................................................... 104,432
-------------
310,106
-------------
HOTEL & RESORT REITS - 1.6%
3,574 Hospitality Properties Trust................................................. 106,684
5,265 Host Hotels & Resorts, Inc................................................... 104,510
4,862 Xenia Hotels & Resorts, Inc.................................................. 104,971
-------------
316,165
-------------
INDUSTRIAL REITS - 1.5%
3,623 Duke Realty Corp............................................................. 98,582
1,573 Prologis, Inc................................................................ 101,474
3,719 STAG Industrial, Inc......................................................... 101,640
-------------
301,696
-------------
OFFICE REITS - 1.0%
3,254 Corporate Office Properties Trust............................................ 95,017
2,040 Highwoods Properties, Inc.................................................... 103,856
-------------
198,873
-------------
RESIDENTIAL REITS - 1.5%
2,319 Apartment Investment & Management Co., Class A............................... 101,364
561 AvalonBay Communities, Inc................................................... 100,088
995 Mid-America Apartment Communities, Inc....................................... 100,057
-------------
301,509
-------------
RETAIL REITS - 1.1%
2,479 National Retail Properties, Inc.............................................. 106,919
658 Simon Property Group, Inc.................................................... 113,005
-------------
219,924
-------------
SPECIALIZED REITS - 2.9%
703 American Tower Corp.......................................................... 100,297
1,644 CyrusOne, Inc................................................................ 97,867
860 Digital Realty Trust, Inc.................................................... 97,954
1,525 EPR Properties............................................................... 99,827
1,214 Extra Space Storage, Inc..................................................... 106,164
1,727 QTS Realty Trust, Inc., Class A.............................................. 93,534
-------------
595,643
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 2,538,283
(Cost $2,398,306) -------------
See Notes to Financial Statements Page 45
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
UNITS DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS - 10.7%
CHEMICALS - 0.2%
2,065 Westlake Chemical Partners, L.P.............................................. $ 51,522
-------------
GAS UTILITIES - 0.4%
1,763 AmeriGas Partners, L.P....................................................... 81,504
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.6%
2,715 NextEra Energy Partners, L.P................................................. 117,044
-------------
OIL, GAS & CONSUMABLE FUELS - 9.5%
738 Alliance Resource Partners, L.P.............................................. 14,538
1,659 BP Midstream Partners, L.P. (c).............................................. 34,126
511 Buckeye Partners, L.P........................................................ 25,320
11,233 Enbridge Energy Partners, L.P................................................ 155,128
12,186 Enterprise Products Partners, L.P............................................ 323,051
1,975 EQT Midstream Partners, L.P.................................................. 144,372
4,678 Holly Energy Partners, L.P................................................... 151,988
2,536 Magellan Midstream Partners, L.P............................................. 179,904
2,532 Phillips 66 Partners, L.P.................................................... 132,550
5,220 Plains All American Pipeline, L.P............................................ 107,741
3,998 Shell Midstream Partners, L.P................................................ 119,220
4,423 Spectra Energy Partners, L.P................................................. 174,885
227 Tallgrass Energy Partners, L.P............................................... 10,408
3,538 TC PipeLines, L.P............................................................ 187,868
375 TransMontaigne Partners, L.P................................................. 14,794
358 Valero Energy Partners, L.P.................................................. 15,930
3,379 Williams Partners, L.P....................................................... 131,038
-------------
1,922,861
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................ 2,172,931
(Cost $2,074,274) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES - 8.9%
$ 67,114 U.S. Treasury Inflation Indexed Bond (d)............ 1.75% 01/15/28 75,477
42,509 U.S. Treasury Inflation Indexed Bond (d)............ 2.50% 01/15/29 51,595
22,507 U.S. Treasury Inflation Indexed Bond (d)............ 3.88% 04/15/29 30,642
9,867 U.S. Treasury Inflation Indexed Bond (d)............ 3.38% 04/15/32 13,661
23,966 U.S. Treasury Inflation Indexed Bond (d)............ 2.13% 02/15/40 31,215
38,072 U.S. Treasury Inflation Indexed Bond (d)............ 2.13% 02/15/41 49,937
34,714 U.S. Treasury Inflation Indexed Bond (d)............ 0.75% 02/15/42 35,094
33,903 U.S. Treasury Inflation Indexed Bond (d)............ 0.63% 02/15/43 33,215
33,657 U.S. Treasury Inflation Indexed Bond (d)............ 1.38% 02/15/44 38,898
33,834 U.S. Treasury Inflation Indexed Bond (d)............ 0.75% 02/15/45 34,038
29,149 U.S. Treasury Inflation Indexed Bond (d)............ 1.00% 02/15/46 31,170
26,568 U.S. Treasury Inflation Indexed Bond (d)............ 0.88% 02/15/47 27,633
16,085 U.S. Treasury Inflation Indexed Note (d)............ 2.13% 01/15/19 16,421
76,742 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 04/15/19 76,584
28,882 U.S. Treasury Inflation Indexed Note (d)............ 1.88% 07/15/19 29,785
30,114 U.S. Treasury Inflation Indexed Note (d)............ 1.38% 01/15/20 30,910
74,786 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 04/15/20 74,647
Page 46 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES (CONTINUED)
$ 52,029 U.S. Treasury Inflation Indexed Note (d)............ 1.25% 07/15/20 $ 53,731
57,734 U.S. Treasury Inflation Indexed Note (d)............ 1.13% 01/15/21 59,466
66,609 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 04/15/21 66,354
55,816 U.S. Treasury Inflation Indexed Note (d)............ 0.63% 07/15/21 56,899
63,102 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 01/15/22 62,859
43,614 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 04/15/22 43,316
62,213 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 07/15/22 62,145
61,982 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 01/15/23 61,517
61,477 U.S. Treasury Inflation Indexed Note (d)............ 0.38% 07/15/23 61,955
61,315 U.S. Treasury Inflation Indexed Note (d)............ 0.63% 01/15/24 62,406
60,460 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 07/15/24 59,768
62,486 U.S. Treasury Inflation Indexed Note (d)............ 0.25% 01/15/25 61,951
50,381 U.S. Treasury Inflation Indexed Note (d)............ 2.38% 01/15/25 57,428
60,329 U.S. Treasury Inflation Indexed Note (d)............ 0.38% 07/15/25 60,445
63,325 U.S. Treasury Inflation Indexed Note (d)............ 0.63% 01/15/26 64,362
34,177 U.S. Treasury Inflation Indexed Note (d)............ 2.00% 01/15/26 38,454
53,511 U.S. Treasury Inflation Indexed Note (d)............ 0.13% 07/15/26 52,305
55,142 U.S. Treasury Inflation Indexed Note (d)............ 0.38% 01/15/27 54,810
27,521 U.S. Treasury Inflation Indexed Note (d)............ 2.38% 01/15/27 32,209
53,444 U.S. Treasury Inflation Indexed Note (d)............ 0.38% 07/15/27 53,176
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 1,806,478
(Cost $1,798,889) -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 7.2%
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.9%
Fannie Mae REMICS...................................
1 Series 1988-16, Class B.......................... 9.50% 06/25/18 1
236 Series 1988-30, Class D.......................... 9.50% 12/25/18 240
133 Series 1989-69, Class G.......................... 7.60% 10/25/19 136
480 Series 1989-82, Class G.......................... 8.40% 11/25/19 500
4,505 Series 1990-37, Class K.......................... 9.50% 04/25/20 4,589
2,019 Series 1990-109, Class J......................... 7.00% 09/25/20 2,096
876 Series 1992-24, Class Z.......................... 6.50% 04/25/22 923
11 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 11
2,188 Series 1993-1, Class KA.......................... 7.90% 01/25/23 2,393
1,509 Series 1993-62, Class E.......................... 7.00% 04/25/23 1,618
530 Series 1993-119, Class H......................... 6.50% 07/25/23 567
3,466 Series 1993-178, Class PK........................ 6.50% 09/25/23 3,736
3,378 Series 1995-24, Class G.......................... 6.50% 04/25/23 3,591
2,085 Series 1999-56, Class Z.......................... 7.00% 12/18/29 2,312
38,850 Series 2002-9, Class MS, IO,
1 Mo. LIBOR x -1 + 8.10% (e).................. 6.55% 03/25/32 7,172
1,712 Series 2002-67, Class PE......................... 5.50% 11/25/32 1,888
4,990 Series 2002-90, Class A1......................... 6.50% 06/25/42 5,708
3 Series 2003-9, Class EB.......................... 5.00% 02/25/18 3
4,204 Series 2003-14, Class AQ......................... 3.50% 03/25/33 4,340
6,131 Series 2003-41, Class OA......................... 4.00% 05/25/33 6,301
59 Series 2003-92, Class HP......................... 4.50% 09/25/18 60
11,156 Series 2004-10, Class ZB......................... 6.00% 02/25/34 12,891
2,111 Series 2004-76, Class CL......................... 4.00% 10/25/19 2,118
See Notes to Financial Statements Page 47
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Fannie Mae REMICS (Continued)
$ 3,282 Series 2004-92, Class S, IO,
1 Mo. LIBOR x -1 + 6.70% (e).................. 5.15% 08/25/34 $ 124
248 Series 2005-46, Class LW......................... 5.00% 06/25/20 250
5 Series 2005-48, Class MD......................... 5.00% 04/25/34 5
7,348 Series 2005-68, Class BC......................... 5.25% 06/25/35 7,539
2,346 Series 2007-70, Class KJ......................... 5.50% 09/25/34 2,363
19,338 Series 2005-79, Class NF,
1 Mo. LIBOR + 0.41% (f)....................... 1.96% 09/25/35 19,413
17 Series 2005-120, Class NF,
1 Mo. LIBOR + 0.10% (f)....................... 1.65% 01/25/21 17
78,506 Series 2007-10, Class Z.......................... 6.00% 02/25/37 87,262
74,771 Series 2009-86, Class IP, IO..................... 5.50% 10/25/39 13,628
427 Series 2011-38, Class AH......................... 2.75% 05/25/20 427
3,020 Series 2012-35, Class PL......................... 2.00% 11/25/41 2,945
1,076 Series 2013-14, Class QE......................... 1.75% 03/25/43 1,014
52,636 Series 2013-31, Class NT......................... 3.00% 04/25/43 52,924
Fannie Mae REMIC Trust
17,646 Series 2007-W8, Class 1A5 (g).................... 6.39% 09/25/37 18,470
Fannie Mae Trust
5,905 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 6,841
FHLMC - GNMA
420 Series 1993-5, Class HA.......................... 7.50% 02/25/23 452
986 Series 1994-27, Class D.......................... 7.00% 03/25/24 1,076
Freddie Mac REMICS
611 Series 1988-23, Class F.......................... 9.60% 04/15/20 624
549 Series 1989-84, Class F.......................... 9.20% 10/15/20 572
2,125 Series 1991-1074, Class I........................ 6.75% 05/15/21 2,171
1,893 Series 1991-1078, Class GZ....................... 6.50% 05/15/21 1,952
630 Series 1992-1250, Class J........................ 7.00% 05/15/22 639
20,984 Series 1992-1401, Class Q,
1 Mo. LIBOR + 0.60% (f)....................... 2.08% 10/15/22 21,193
34,113 Series 1993-1487, Class P, IO,
1 Mo. LIBOR x -1 + 9.50% (e).................. 8.02% 03/15/23 4,345
5,780 Series 1994-1673, Class FB,
10 Yr. U.S. Treasury Yield
Curve - 0.50% (f)............................. 1.85% 02/15/24 5,781
767 Series 1996-1807, Class G........................ 9.00% 10/15/20 811
77 Series 1996-1847, Class LL....................... 7.50% 04/15/26 85
16,264 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 2,104
44 Series 1998-2056, Class TD....................... 6.50% 05/15/18 44
4,080 Series 1999-2130, Class KB....................... 6.38% 03/15/29 4,527
59,250 Series 1999-2174, Class PN....................... 6.00% 07/15/29 64,669
10,285 Series 2001-2277, Class B........................ 7.50% 01/15/31 12,056
379 Series 2003-2559, Class PB....................... 5.50% 08/15/30 387
564 Series 2003-2590, Class NV....................... 5.00% 03/15/18 564
663 Series 2003-2649, Class KA....................... 4.50% 07/15/18 665
43,000 Series 2003-2676, Class LL....................... 5.50% 09/15/33 47,348
23,340 Series 2004-2768, Class PW....................... 4.25% 03/15/34 25,019
9,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 9,846
1,235 Series 2004-2780, Class JA....................... 4.50% 04/15/19 1,249
560 Series 2005-2922, Class QE....................... 5.00% 05/15/34 569
21,449 Series 2005-2953, Class LZ....................... 6.00% 03/15/35 26,404
Page 48 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Freddie Mac REMICS (Continued)
$ 28,906 Series 2005-2958, Class QJ....................... 4.00% 04/15/20 $ 29,208
37,525 Series 2006-3114, Class GI, IO,
1 Mo. LIBOR x -1 + 6.60% (e).................. 5.12% 02/15/36 7,878
49,406 Series 2006-3199, Class DS, IO,
1 Mo. LIBOR x -1 + 7.15% (e).................. 5.67% 08/15/36 9,039
3,433 Series 2006-3237, Class CB....................... 5.50% 07/15/36 3,586
18,782 Series 2010-3758, Class M........................ 4.50% 10/15/38 19,409
6,613 Series 2010-3775, Class KZ....................... 4.00% 08/15/25 6,786
3,902 Series 2011-3824, Class FA,
1 Mo. LIBOR + 0.15% (f)....................... 1.63% 03/15/26 3,901
2,542 Series 2012-3994, Class AE....................... 1.63% 02/15/22 2,514
20,070 Series 2013-4178, Class ZN....................... 3.50% 03/15/43 19,857
2,985 Series 2013-4253, Class TD....................... 2.00% 07/15/40 2,977
Freddie Mac Strips
22,100 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 3,636
Government National Mortgage Association
14,014 Series 1999-30, Class S, IO,
1 Mo. LIBOR x -1 + 8.60% (e).................. 7.11% 08/16/29 141
39,869 Series 2002-92, Class PB......................... 5.50% 12/20/32 43,904
9,831 Series 2006-16, Class OP, PO..................... (h) 03/20/36 8,974
55,000 Series 2007-35, Class NE......................... 6.00% 06/16/37 64,368
7,991 Series 2009-29, Class TA......................... 4.50% 03/16/39 8,287
880 Series 2009-81, Class PA......................... 5.50% 02/16/38 905
6,741 Series 2009-102, Class MA........................ 4.00% 06/16/39 6,876
824 Series 2010-44, Class NK......................... 4.00% 10/20/37 824
2,794 Series 2010-121, Class PQ........................ 3.00% 02/20/39 2,802
34,371 Series 2011-136, Class GB........................ 2.50% 05/20/40 34,161
32,011 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 6,043
-------------
797,644
-------------
PASS-THROUGH SECURITIES -- 3.3%
Federal Home Loan Mortgage Corporation
18,102 Pool A47829......................................... 4.00% 08/01/35 19,006
9,244 Pool C01252......................................... 6.50% 11/01/31 10,338
67,256 Pool G01731......................................... 6.50% 12/01/29 75,442
37,950 Pool G06358......................................... 4.00% 04/01/41 40,145
4,040 Pool O20138......................................... 5.00% 11/01/30 4,369
23,739 Pool U90316......................................... 4.00% 10/01/42 25,045
Federal National Mortgage Association
2,075 Pool 745121......................................... 5.50% 12/01/18 2,083
6,961 Pool 888366......................................... 7.00% 04/01/37 8,149
19,721 Pool 890383......................................... 4.00% 01/01/42 20,826
27,367 Pool AA9393......................................... 4.50% 07/01/39 29,538
39,160 Pool AD0659......................................... 6.00% 02/01/23 41,240
20,748 Pool AE0050......................................... 5.50% 12/01/22 21,685
12,542 Pool AH1568......................................... 4.50% 12/01/40 13,514
31,313 Pool AL0791......................................... 4.00% 02/01/41 33,143
31,135 Pool AS9194......................................... 4.50% 12/01/44 33,361
55,613 Pool AU4289......................................... 4.00% 09/01/43 58,656
8,261 Pool MA0561......................................... 4.00% 11/01/40 8,683
40,413 Pool MA1028......................................... 4.00% 04/01/42 42,462
See Notes to Financial Statements Page 49
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association
$ 12,632 Pool 3428........................................... 5.00% 08/20/33 $ 13,869
19,320 Pool 3500........................................... 5.50% 01/20/34 21,426
9,620 Pool 3711........................................... 5.50% 05/20/35 10,672
29,239 Pool 667422......................................... 5.00% 10/15/39 32,231
14,514 Pool 706201......................................... 5.50% 04/20/39 16,086
17,173 Pool 736558......................................... 5.00% 02/15/40 18,632
30,513 Pool 759248......................................... 4.00% 02/15/41 32,026
24,788 Pool MA3525......................................... 5.50% 03/20/46 27,697
-------------
660,324
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 1,457,968
(Cost $1,458,877) -------------
MORTGAGE-BACKED SECURITIES - 0.2%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.2%
Credit Suisse First Boston Mortgage Securities Corp.
604 Series 2004-4, Class 1A3......................... 5.75% 08/25/34 607
5,876 Series 2004-6, Class 2A1......................... 4.75% 09/25/19 5,887
JP Morgan Resecuritization Trust
194 Series 2009-7, Class 5A1 (i)..................... 6.00% 02/27/37 194
MASTR Alternative Loan Trust
3,016 Series 2004-10, Class 2A1........................ 5.50% 10/25/19 3,075
989 Series 2005-1, Class 5A1......................... 5.50% 01/25/20 1,010
MASTR Asset Securitization Trust
7,201 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 7,387
RAAC Trust
1,624 Series 2005-SP1, Class 2A1....................... 5.25% 09/25/34 1,646
Structured Asset Mortgage Investments Trust
9,381 Series 1999-1, Class 2A (j)...................... 8.91% 06/25/29 9,367
Structured Asset Securities Corp.
Mortgage Pass-Through Certificates
551 Series 2004-21XS, Class 2A6A..................... 5.24% 12/25/34 548
WAMU Mortgage Pass-Through Certificates
151 Series 2002-S8, Class 2A7........................ 5.25% 01/25/18 151
Wells Fargo Alternative Loan Trust
108 Series 2007-PA5, Class 2A1....................... 6.00% 11/25/22 108
Wells Fargo Mortgage Backed-Securities Trust
1,450 Series 2006-17, Class A4......................... 5.50% 11/25/21 1,423
-------------
TOTAL MORTGAGE-BACKED SECURITIES............................................. 31,403
(Cost $31,163) -------------
Page 50 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
ASSET-BACKED SECURITIES - 0.0%
AFC Home Equity Loan Trust
$ 557 Series 1997-4, Class 1A2,
1 Mo. LIBOR + 0.71% (f)....................... 2.04% 12/22/27 $ 540
Bear Stearns Asset Backed Securities Trust
12 Series 2005-SD1, Class 1A3,
1 Mo. LIBOR + 0.80% (f)....................... 2.35% 08/25/43 13
-------------
TOTAL ASSET-BACKED SECURITIES................................................ 553
(Cost $543) -------------
TOTAL INVESTMENTS - 97.3%.................................................... 19,696,735
(Cost $18,770,469) (k)
NET OTHER ASSETS AND LIABILITIES - 2.7%...................................... 545,602
-------------
NET ASSETS - 100.0%.......................................................... $ 20,242,337
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended (the "1933 Act"). This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(c) Non-income producing security.
(d) Security whose principal value is adjusted in accordance with changes to
the country's Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.
(e) Inverse floating rate security.
(f) Floating or variable rate security.
(g) Weighted Average Coupon security. Coupon is based on the blended interest
rate of the underlying holdings, which may have different coupons. The
coupon may change in any period.
(h) Zero coupon security.
(i) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the 1933 Act,
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, 2017, securities noted as such amounted to $194 or 0.00% of net
assets.
(j) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(k) Aggregate cost for federal income tax purposes was $18,910,633. As of
December 31, 2017, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$1,133,777 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$347,675. The net unrealized appreciation was $786,102.
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.
LIBOR London Interbank Offered Rate
PO Principal-Only Security
See Notes to Financial Statements Page 51
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2017
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2017 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
12/31/2017 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 7,030,157 $ 7,030,157 $ -- $ --
Common Stocks*.................................... 4,658,962 4,658,962 -- --
Real Estate Investment Trusts*.................... 2,538,283 2,538,283 -- --
Master Limited Partnerships*...................... 2,172,931 2,172,931 -- --
U.S. Government Bonds and Notes................... 1,806,478 -- 1,806,478 --
U.S. Government Agency Mortgage-Backed
Securities..................................... 1,457,968 -- 1,457,968 --
Mortgage-Backed Securities........................ 31,403 -- 31,403 --
Asset-Backed Securities........................... 553 -- 553 --
------------ ------------ ------------ ------------
Total Investments................................. $ 19,696,735 $ 16,400,333 $ 3,296,402 $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to occur on
the last day of the period at their current value. There were no transfers
between Levels at December 31, 2017.
Page 52 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2017
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS - 97.5%
CAPITAL MARKETS - 97.5%
3,582 First Trust BICK Index Fund (a).............................................. $ 108,141
2,735 First Trust Chindia ETF (a).................................................. 108,306
6,245 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 389,688
18,466 First Trust Dow Jones Internet Index Fund (a) (b)............................ 2,029,044
9,521 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 265,731
2,220 First Trust Germany AlphaDEX(R) Fund (a)..................................... 113,686
50,529 First Trust Industrials/Producer Durables AlphaDEX(R) Fund (a)............... 2,050,972
36,638 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 2,242,246
33,948 First Trust Mid Cap Core AlphaDEX(R) Fund (a)................................ 2,231,742
68,921 First Trust Nasdaq Bank ETF (a).............................................. 2,026,277
27,895 First Trust NASDAQ-100-Technology Sector Index Fund (a)...................... 2,006,766
50,699 First Trust Small Cap Growth AlphaDEX(R) Fund (a)............................ 2,165,861
2,061 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 108,841
37,157 First Trust Technology AlphaDEX(R) Fund (a).................................. 1,906,897
11,630 iShares Core U.S. Aggregate Bond ETF......................................... 1,271,508
25,008 SPDR Barclays Emerging Markets Local Bond ETF................................ 742,238
14,460 SPDR Bloomberg Barclays Convertible Securities ETF........................... 731,676
19,951 SPDR Bloomberg Barclays High Yield Bond ETF.................................. 732,601
16,651 SPDR Wells Fargo Preferred Stock ETF......................................... 733,310
-------------
TOTAL INVESTMENTS - 97.5%.................................................... 21,965,531
(Cost $19,578,032) (c)
NET OTHER ASSETS AND LIABILITIES - 2.5%...................................... 570,410
-------------
NET ASSETS - 100.0%.......................................................... $ 22,535,941
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes was $19,593,848. As of
December 31, 2017, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,432,004 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$60,321. The net unrealized appreciation was $2,371,683.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2017 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
12/31/2017 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 21,965,531 $ 21,965,531 $ -- --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
All transfers in and out of the Levels during the period are assumed to occur on
the last day of the period at their current value. There were no transfers
between Levels at December 31, 2017.
See Notes to Financial Statements Page 53
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2017
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 - Unaffiliated.................................... $ 726,859,953 $ 14,563,858 $ 4,211,333
Investments, at value - Affiliated...................................... -- 5,132,877 17,754,198
Cash and cash equivalents............................................... 6,943,636 586,992 450,018
Foreign currency, at value.............................................. -- 131 --
Receivables:
Interest............................................................. 2,469,912 12,588 --
Investment securities sold........................................... 1,056,342 -- --
Dividends............................................................ 780,775 19,728 --
Fund shares sold..................................................... 356,166 997 170,139
From investment advisor.............................................. -- 13,471 15,455
Reclaim.............................................................. -- 1,365 --
Prepaid expenses........................................................ 6,120 174 165
--------------- --------------- ---------------
Total Assets......................................................... 738,472,904 20,332,181 22,601,308
--------------- --------------- ---------------
LIABILITIES:
Payables:
Investment advisory fees............................................. 330,255 -- --
12b-1 service fees (Class I)......................................... 154,524 4,196 4,647
Administrative service fees.......................................... 123,645 3,384 3,747
Accounting and administration fees................................... 65,577 7,042 4,678
Licensing fees....................................................... 62,427 -- 5,245
Printing fees........................................................ 60,591 4,314 1,260
Custodian fees....................................................... 44,278 3,271 1,927
Variation margin..................................................... 44,188 -- --
Audit and tax fees................................................... 29,323 50,908 23,249
Transfer agent fees.................................................. 18,473 12,260 12,200
Legal fees........................................................... 7,573 170 1,970
Commitment fees...................................................... 4,658 3,266 --
Fund shares redeemed................................................. 3,072 796 4,381
Financial reporting fees............................................. 771 -- 956
Trustees' fees and expenses.......................................... 511 223 633
Other liabilities....................................................... 497 14 474
--------------- --------------- ---------------
Total Liabilities.................................................... 950,363 89,844 65,367
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 737,522,541 $ 20,242,337 $ 22,535,941
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... $ 662,461,510 $ 19,411,692 $ 20,120,380
Accumulated net investment income (loss)................................ 160,172 -- 12,014
Accumulated net realized gain (loss) on investments, futures and
foreign currency transactions........................................ 1,067,954 (95,623) 16,048
Net unrealized appreciation (depreciation) on investments, futures and
foreign currency translation......................................... 73,832,905 926,268 2,387,499
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 737,522,541 $ 20,242,337 $ 22,535,941
=============== =============== ===============
Investments, at cost - Unaffiliated..................................... $ 653,121,228 $ 13,646,109 $ 4,201,950
=============== =============== ===============
Investments, at cost - Affiliated....................................... $ -- $ 5,124,360 $ 15,376,082
=============== =============== ===============
Foreign currency, at cost............................................... $ -- $ 129 $ --
=============== =============== ===============
CLASS I SHARES:
NET ASSETS.............................................................. $ 737,320,130 $ 20,083,541 $ 22,476,768
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 13.73 $ 10.89 $ 11.41
=============== =============== ===============
Number of Shares outstanding............................................ 53,711,100 1,844,797 1,969,611
=============== =============== ===============
CLASS II SHARES:
NET ASSETS.............................................................. $ 202,411 $ 158,796 $ 59,173
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 13.75 $ 10.88 $ 11.40
=============== =============== ===============
Number of Shares outstanding............................................ 14,720 14,589 5,192
=============== =============== ===============
Page 54 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
INVESTMENT INCOME:
Interest................................................................ $ 8,518,251 $ 87,132 $ 2,566
Dividends - Unaffiliated................................................ 7,923,207 266,316 121,012
Dividends - Affiliated.................................................. -- 247,174 114,308
Foreign withholding tax on dividend income.............................. -- (3,426) --
--------------- --------------- ---------------
Total investment income.............................................. 16,441,458 597,196 237,886
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees................................................ 3,872,078 116,567 55,418
12b-1 distribution and service fees (Class I)........................... 1,613,278 48,170 39,448
Administrative service fees............................................. 1,290,672 38,620 31,561
Accounting and administration fees...................................... 408,393 39,636 52,498
Licensing fees.......................................................... 219,714 -- 15,833
Custodian fees.......................................................... 186,709 12,425 8,847
Printing fees........................................................... 90,627 7,089 7,702
Transfer agent fees..................................................... 89,894 51,423 49,510
Legal fees.............................................................. 57,782 1,548 1,233
Commitment fees......................................................... 41,197 28,162 --
Audit and tax fees...................................................... 29,739 51,323 23,779
Trustees' fees and expenses............................................. 17,960 16,631 16,621
Financial reporting fees................................................ 9,250 -- 9,250
Other................................................................... 20,603 10,398 5,406
--------------- --------------- ---------------
Total expenses....................................................... 7,947,896 421,992 317,106
Fees waived and expenses reimbursed by the investment advisor........ (203,355) (261,140) (199,184)
--------------- --------------- ---------------
Net expenses............................................................ 7,744,541 160,852 117,922
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)............................................ 8,696,917 436,344 119,964
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated........................................... 30,318,262 343,059 7,606
Investments - Affiliated............................................. -- 17,745 229,681
Futures.............................................................. (307,925) -- --
Foreign currency transactions........................................ -- 42 --
--------------- --------------- ---------------
Net realized gain (loss)................................................ 30,010,337 360,846 237,287
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated........................................... 44,134,488 287,315 56,096
Investments - Affiliated............................................. -- 49,347 2,140,504
Futures.............................................................. 88,305 -- --
Foreign currency translation......................................... -- 1 --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation).................... 44,222,793 336,663 2,196,600
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 74,233,130 697,509 2,433,887
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS...................................................... $ 82,930,047 $ 1,133,853 $ 2,553,851
=============== =============== ===============
See Notes to Financial Statements Page 55
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND
& INCOME ALLOCATION PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2017 12/31/2016
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 8,696,917 $ 4,865,769
Net realized gain (loss)............................................................. 30,010,337 8,387,278
Net increase from payment by the advisor............................................. -- 1,000
Net change in unrealized appreciation (depreciation)................................. 44,222,793 27,976,372
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 82,930,047 41,230,419
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (8,735,680) (4,438,978)
Class II............................................................................. (1,899) (208)
-------------- --------------
(8,737,579) (4,439,186)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (33,516,612) (10,878,302)
Class II............................................................................. (8,008) (458)
-------------- --------------
(33,524,620) (10,878,760)
-------------- --------------
Total distributions to shareholders.................................................. (42,262,199) (15,317,946)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 163,541,447 269,075,333
Proceeds from shares reinvested...................................................... 42,261,441 15,317,510
Cost of shares redeemed.............................................................. (52,916,753) (9,596,894)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 152,886,135 274,795,949
-------------- --------------
Total increase (decrease) in net assets.............................................. 193,553,983 300,708,422
NET ASSETS:
Beginning of period.................................................................. 543,968,558 243,260,136
-------------- --------------
End of period........................................................................ $ 737,522,541 $ 543,968,558
============== ==============
Accumulated net investment income (loss) at end of period............................ $ 160,172 $ 200,834
============== ==============
Page 56 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
12/31/2017 12/31/2016
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 436,344 $ 314,186
Net realized gain (loss)............................................................. 360,846 (117,782)
Net change in unrealized appreciation (depreciation)................................. 336,663 1,064,389
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 1,133,853 1,260,793
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (458,181) (363,323)
Class II............................................................................. (4,071) (3,315)
-------------- --------------
(462,252) (366,638)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (53,156) --
Class II............................................................................. (472) --
-------------- --------------
(53,628) --
-------------- --------------
Total distributions to shareholders.................................................. (515,880) (366,638)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 5,744,312 6,360,314
Proceeds from shares reinvested...................................................... 512,743 364,038
Cost of shares redeemed.............................................................. (4,753,751) (1,854,130)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 1,503,304 4,870,222
-------------- --------------
Total increase (decrease) in net assets.............................................. 2,121,277 5,764,377
NET ASSETS:
Beginning of period.................................................................. 18,121,060 12,356,683
-------------- --------------
End of period........................................................................ $ 20,242,337 $ 18,121,060
============== ==============
Accumulated net investment income (loss) at end of period............................ $ -- $ --
============== ==============
See Notes to Financial Statements Page 57
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT
TACTICAL CORE PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2017 12/31/2016
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 119,964 $ 98,407
Net realized gain (loss)............................................................. 237,287 72,877
Net change in unrealized appreciation (depreciation)................................. 2,196,600 242,750
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 2,553,851 414,034
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (107,556) (96,102)
Class II............................................................................. (444) (572)
-------------- --------------
(108,000) (96,674)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (204,003) (97,931)
Class II............................................................................. (535) (477)
-------------- --------------
(204,538) (98,408)
-------------- --------------
Total distributions to shareholders.................................................. (312,538) (195,082)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 11,844,556 13,236,943
Proceeds from shares reinvested...................................................... 312,538 195,082
Cost of shares redeemed.............................................................. (2,272,459) (8,731,398)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 9,884,635 4,700,627
-------------- --------------
Total increase (decrease) in net assets.............................................. 12,125,948 4,919,579
NET ASSETS:
Beginning of period.................................................................. 10,409,993 5,490,414
-------------- --------------
End of period........................................................................ $ 22,535,941 $ 10,409,993
============== ==============
Accumulated net investment income (loss) at end of period............................ $ 12,014 $ 71
============== ==============
Page 58 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
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
2017 2016 2015 2014 2013
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 12.85 $ 11.94 $ 12.41 $ 11.37 $ 10.31
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.18 0.14 0.16 0.15 0.14
Net realized and unrealized gain (loss).... 1.54 1.25 (a) (0.15) 0.99 1.17
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 1.72 1.39 0.01 1.14 1.31
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.18) (0.13) (0.27) (0.10) (0.09)
Net realized gain.......................... (0.66) (0.35) (0.21) -- (0.16)
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.84) (0.48) (0.48) (0.10) (0.25)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 13.73 $ 12.85 $ 11.94 $ 12.41 $ 11.37
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 13.47% 11.74% (a) 0.09% 10.04% 12.75%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 737,320 $ 543,951 $ 243,244 $ 195,128 $ 106,079
Ratio of total expenses to average net
assets.................................. 1.23% 1.29% 1.34% 1.43% 1.65%
Ratio of net expenses to average net
assets.................................. 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income (loss)
to average net assets................... 1.35% 1.29% 1.35% 1.40% 1.27%
Portfolio turnover rate.................... 71% 96% 81% 65% 73%
CLASS II SHARES
YEAR ENDED DECEMBER 31, PERIOD
------------------------------------------------ ENDED
2017 2016 2015 12/31/2014 (d)
------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 12.87 $ 11.95 $ 12.43 $ 11.63
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.14 0.19 0.17 0.14
Net realized and unrealized gain (loss).... 1.61 1.24 (a) (0.14) 0.77
---------- ---------- ---------- ----------
Total from investment operations........... 1.75 1.43 0.03 0.91
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.21) (0.16) (0.30) (0.11)
Net realized gain.......................... (0.66) (0.35) (0.21) --
---------- ---------- ---------- ----------
Total from distributions................... (0.87) (0.51) (0.51) (0.11)
---------- ---------- ---------- ----------
Net asset value, end of period............. $ 13.75 $ 12.87 $ 11.95 $ 12.43
========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 13.75% 12.07% (a) 0.25% 7.82%
========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 202 $ 17 $ 16 $ 11
Ratio of total expenses to average net
assets.................................. 1.00% 1.04% 1.09% 1.21% (e)
Ratio of net expenses to average net
assets.................................. 0.95% 0.95% 0.95% 0.95% (e)
Ratio of net investment income (loss)
to average net assets.................... 1.88% 1.53% 1.64% 1.69% (e)
Portfolio turnover rate.................... 71% 96% 81% 65%
-----------------------------
(a) 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.
(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) The Fund's Class II shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
(e) Annualized.
See Notes to Financial Statements Page 59
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
YEAR ENDED DECEMBER 31, PERIOD
------------------------------------------------ ENDED
2017 2016 2015 12/31/2014 (a)
------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.54 $ 9.86 $ 10.39 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.24 0.20 0.19 0.07
Net realized and unrealized gain (loss).... 0.39 0.71 (0.53) (b) 0.39
---------- ---------- ---------- ----------
Total from investment operations........... 0.63 0.91 (0.34) 0.46
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.25) (0.23) (0.19) (0.07)
Net realized gain.......................... (0.03) -- -- --
---------- ---------- ---------- ----------
Total from distributions................... (0.28) (0.23) (0.19) (0.07)
---------- ---------- ---------- ----------
Net asset value, end of period............. $ 10.89 $ 10.54 $ 9.86 $ 10.39
========== ========== ========== ==========
TOTAL RETURN (c) (d)....................... 6.04% 9.27% (3.24)% (b) 4.57%
========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 20,083 $ 17,965 $ 12,257 $ 6,894
Ratio of total expenses to average net
assets.................................. 2.17% 2.22% 2.60% 6.00% (e)
Ratio of net expenses to average net
assets.................................. 0.83% 0.83% 0.90% 1.20% (e)
Ratio of net investment income (loss)
to average net assets................... 2.24% 2.10% 2.17% 2.35% (e)
Portfolio turnover rate.................... 46% 46% 93% 15%
CLASS II SHARES
YEAR ENDED DECEMBER 31, PERIOD
------------------------------------------------ ENDED
2017 2016 2015 12/31/2014 (a)
------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.54 $ 9.86 $ 10.39 $ 10.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.27 0.20 0.24 0.04
Net realized and unrealized gain (loss).... 0.38 0.74 (0.55) (b) 0.43
---------- ---------- ---------- ----------
Total from investment operations........... 0.65 0.94 (0.31) 0.47
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.28) (0.26) (0.22) (0.08)
Net realized gain.......................... (0.03) -- -- --
---------- ---------- ---------- ----------
Total from distributions................... (0.31) (0.26) (0.22) (0.08)
---------- ---------- ---------- ----------
Net asset value, end of period............. $ 10.88 $ 10.54 $ 9.86 $ 10.39
========== ========== ========== ==========
TOTAL RETURN (c) (d)....................... 6.22% 9.53% (3.01)% (b) 4.74%
========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 159 $ 156 $ 100 $ 105
Ratio of total expenses to average net
assets.................................. 1.92% 1.99% 2.31% 14.44% (e)
Ratio of net expenses to average net
assets.................................. 0.58% 0.58% 0.67% 0.95% (e)
Ratio of net investment income (loss)
to average net assets................... 2.49% 2.34% 2.32% 0.54% (e)
Portfolio turnover rate.................... 46% 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 60 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 ENDED DECEMBER 31, PERIOD
------------------------------ ENDED
2017 2016 12/31/2015 (a)
------------ ------------ ------------
Net asset value, beginning of period....... $ 9.85 $ 9.94 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.06 0.09 0.01
Net realized and unrealized gain (loss).... 1.66 0.01 (0.07)
---------- ---------- ----------
Total from investment operations........... 1.72 0.10 (0.06)
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.06) (0.09) --
Net realized gain.......................... (0.10) (0.10) --
---------- ---------- ----------
Total from distributions................... (0.16) (0.19) --
---------- ---------- ----------
Net asset value, end of period............. $ 11.41 $ 9.85 $ 9.94
========== ========== ==========
TOTAL RETURN (b) (c)....................... 17.50% 0.95% (0.60)%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 22,477 $ 10,360 $ 5,440
Ratio of total expenses to average net
assets.................................. 1.85% 2.13% 11.71% (d)
Ratio of net expenses to average net
assets.................................. 0.75% 0.83% 0.79% (d)
Ratio of net investment income (loss)
to average net assets................... 0.76% 0.98% 1.54% (d)
Portfolio turnover rate.................... 31% 265% --%
CLASS II SHARES
YEAR ENDED DECEMBER 31, PERIOD
------------------------------ ENDED
2017 2016 12/31/2015 (a)
------------ ------------ ------------
Net asset value, beginning of period....... $ 9.83 $ 9.95 $ 10.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.10 0.11 0.01
Net realized and unrealized gain (loss).... 1.66 (0.02) (0.06)
---------- ---------- ----------
Total from investment operations........... 1.76 0.09 (0.05)
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.09) (0.11) --
Net realized gain.......................... (0.10) (0.10) --
---------- ---------- ----------
Total from distributions................... (0.19) (0.21) --
---------- ---------- ----------
Net asset value, end of period............. $ 11.40 $ 9.83 $ 9.95
========== ========== ==========
TOTAL RETURN (b) (c)....................... 17.94% 0.88% (0.50)%
========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 59 $ 50 $ 50
Ratio of total expenses to average net
assets.................................. 46.41% 57.64% 37.40% (d)
Ratio of net expenses to average net
assets.................................. 0.50% 0.57% 0.51% (d)
Ratio of net investment income (loss)
to average net assets................... 0.93% 1.13% 0.86% (d)
Portfolio turnover rate.................... 31% 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 61
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NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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 primary 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 62
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
First Trust Dorsey Wright's investment objective is to seek 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 Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America ("U.S. GAAP") requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The net asset value ("NAV") for each class of shares in each Fund is determined
daily as of the close of regular trading on the New York Stock Exchange
("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for
trading. If the NYSE closes early on a valuation day, the NAV is determined as
of that time. Domestic debt securities and foreign securities are priced using
data reflecting the earlier closing of the principal markets for those
securities. The NAV for each class is calculated by dividing the value of each
Fund's total assets attributable to such class (including accrued interest and
dividends), less all liabilities attributable to such class (including accrued
expenses, dividends declared but unpaid, and any borrowings of each Fund) by the
total number of shares of the class outstanding. Differences in the NAV of each
class of each Fund's shares are generally expected to be due to the daily
expense accruals of the specified service (12b-1) fees, if any, and transfer
agency costs applicable to such class of shares and the resulting differential
in the dividends that may be paid on each class of shares.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee, in
accordance with valuation procedures adopted by the Trust's Board of Trustees
(the "Board"), and in accordance with provisions of the 1940 Act. Investments
valued by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. Each Fund's investments are valued as
follows:
Common stocks, preferred stocks, MLPs, ETFs, REITs and other equity
securities listed on any national or foreign exchange (excluding The
Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Corporate bonds, corporate notes, U.S. government securities and other
debt securities are fair valued on the basis of valuations provided by
dealers who make markets in such securities or by a third-party pricing
service approved by the Trust's Board, which may use the following
valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Page 63
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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 sixty 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 64
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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, 2017, 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 65
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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, 2017, 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 $ -- $ -- $ --
First Trust Multi Income 25,908 (36,138) 10,230
First Trust Dorsey Wright (21) 21 --
The tax character of distributions paid by each applicable Fund during the year
ended December 31, 2017 was as follows:
Distributions paid Distributions paid Distributions paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ 26,821,760 $ 15,440,439 $ --
First Trust Multi Income 462,252 53,628 --
First Trust Dorsey Wright 145,137 167,401 --
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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 -- --
As of December 31, 2017, 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 $ 453,576 $ 1,140,539 $ 73,466,916
First Trust Multi Income -- 44,541 786,104
First Trust Dorsey Wright 11,964 31,914 2,371,683
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 its net investment income and net realized gains to
shareholders. Accordingly, no provision has been made for federal or 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 2014, 2015,
2016 and 2017 remain open to federal and state audit for First Trust Dow Jones
and First Trust Multi Income. Also, the taxable years ended 2015, 2016 and 2017
remain open to federal and state audit for First Trust Dorsey Wright. As of
December 31, 2017, 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, 2017, the
Funds had no capital loss carryforwards for federal income tax purposes.
During the taxable year ended December 31, 2017, the following Funds utilized
capital loss carryforwards in the following amounts:
Capital Loss
Carryforward
Utilized
---------------
First Trust Dow Jones $ --
First Trust Multi Income 127,844
First Trust Dorsey Wright --
G. EXPENSES
Each Fund will pay all expenses directly related to its operations.
Each Participating Insurance Company performs certain administrative services
for the Funds, their Accounts and the Contracts. Each Fund pays an
administrative services fee of 0.20% of average daily net assets to cover
expenses incurred by Participating Insurance Companies in connection with these
services.
First Trust has entered into various licensing agreements, which allow First
Trust to use certain trademarks and trade names of the applicable licensors (see
Licensing Information in the Additional Information section of this report). The
Trust, on behalf of First Trust Dow Jones and First Trust Dorsey Wright, is a
sub-licensee to these license agreements and is required to pay licensing fees,
which are shown on the Statements of Operations.
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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 Statement 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. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
K. 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. In part, the
new and amended rules and forms amend Regulation S-X and require standardized,
enhanced disclosures about derivatives in a fund's financial statements, as well
as other amendments. The compliance date for the amendments of Regulation S-X
was August 1, 2017, which resulted in additional disclosure for variable
interest rate securities and derivative instruments within the Portfolio of
Investments. The new form types and other rule amendments 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 form types and other
rule amendments that are effective on and after June 1, 2018 to determine the
impact to the Funds.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust provides each Fund with discretionary investment services and certain
administrative services necessary for the management of the Funds. For its
investment advisory and management services, First Trust is entitled to a
monthly fee calculated at an annual rate of 0.60% of the average daily net
assets for both First Trust Dow Jones and First Trust Multi Income, and 0.35% of
the average daily net assets for First Trust Dorsey Wright. First Trust also
provides fund reporting services to First Trust Dow Jones and First Trust Dorsey
Wright for a flat annual fee in the amount of $9,250 per Fund.
First Trust Multi Income and First Trust have retained Energy Income Partners,
LLC ("EIP") and Stonebridge Advisors LLC ("Stonebridge") (collectively, the
"Sub-Advisors"), affiliates of First Trust, to serve as investment sub-advisors.
In this capacity, the Sub-Advisors provide recommendations to the Advisor
regarding the selection and ongoing 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
Page 68
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
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.
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. FTCP also owns, through a wholly-owned
subsidiary, a 51% ownership interest in 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.
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 annual
operating expenses of Class I shares and Class II shares (excluding interest
expense, brokerage commissions and other trading expenses, acquired fund fees
and expenses, if any, and taxes and extraordinary expenses) from exceeding 1.20%
and 0.95% (each an "Expense Cap"), respectively, of each Fund's average daily
net assets per year at least until May 1, 2019. 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% (each an "Expense Cap"),
respectively, of each Fund's average daily net assets per year at least until
May 1, 2019. 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, 2017, and the expenses borne and fees waived by First Trust subject to
recovery from the applicable Fund at December 31, 2017, 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 2015 2016 2017 TOTAL
------------ ------------ ------------ ------------ ------------ ----------
First Trust Dow Jones $ 203,355 $ -- $ 347,277 $ 338,513 $ 203,355 $ 889,145
First Trust Multi Income 116,567 72,690 151,967 152,851 189,257 494,075
First Trust Dorsey Wright 55,418 143,766 48,180 157,770 199,184 405,134
During the year ended December 31, 2017, First Trust did not recover any fees
that were previously waived or reimbursed.
First Trust agreed to waive and/or reimburse the acquired fund fees and expenses
of the shares of investment companies held by First Trust Multi Income up to
0.37% of the Fund's average daily net assets through May 1, 2019. During the
year ended December 31, 2017, First Trust reimbursed First Trust Multi Income
$71,883 of fees that are not subject to recovery.
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as First Trust Down
Jones', First Trust Multi Income's and First Trust Dorsey Wright's transfer
agent in accordance with certain fee arrangements. 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.
Page 69
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
The Bank of New York Mellon ("BNYM") serves as First Trust Dow Jones' and First
Trust Multi Income's administrator, fund accountant and custodian in accordance
with certain fee arrangements. As administrator and fund accountant, BNYM 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 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.
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, 2017 DECEMBER 31, 2016
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 12,209,439 $163,359,896 21,522,285 $269,075,266
Class II 12,731 181,551 5 67
------------ ------------ ------------ ------------
Total Sales: 12,222,170 $163,541,447 21,522,290 $269,075,333
============ ============ ============ ============
Dividend Reinvestment:
Class I 3,094,656 $ 42,252,292 1,224,785 $ 15,317,280
Class II 667 9,149 18 230
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 3,095,323 $ 42,261,441 1,224,803 $ 15,317,510
============ ============ ============ ============
Redemptions:
Class I (3,937,247) $(52,916,444) (782,373) $ (9,596,410)
Class II (22) (309) (42) (484)
------------ ------------ ------------ ------------
Total Redemptions: (3,937,269) $(52,916,753) (782,415) $ (9,596,894)
============ ============ ============ ============
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
Capital transactions for First Trust Multi Income were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2017 DECEMBER 31, 2016
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 529,437 $ 5,744,312 607,792 $ 6,311,829
Class II -- -- 4,618 48,485
------------ ------------ ------------ ------------
Total Sales: 529,437 $ 5,744,312 612,410 $ 6,360,314
============ ============ ============ ============
Dividend Reinvestment:
Class I 47,398 $ 511,337 34,761 $ 363,323
Class II 130 1,406 68 715
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 47,528 $ 512,743 34,829 $ 364,038
============ ============ ============ ============
Redemptions:
Class I (437,125) $ (4,750,415) (180,072) $ (1,854,107)
Class II (305) (3,336) (2) (23)
------------ ------------ ------------ ------------
Total Redemptions: (437,430) $ (4,753,751) (180,074) $ (1,854,130)
============ ============ ============ ============
Capital transactions for First Trust Dorsey Wright were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2017 DECEMBER 31, 2016
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 1,099,884 $ 11,844,556 1,367,166 $ 13,236,943
Class II -- -- -- --
------------ ------------ ------------ ------------
Total Sales: 1,099,884 $ 11,844,556 1,367,166 $ 13,236,943
============ ============ ============ ============
Dividend Reinvestment:
Class I 27,252 $ 311,559 19,542 $ 194,032
Class II 86 979 106 1,050
------------ ------------ ------------ ------------
Total Dividend Reinvestment: 27,338 $ 312,538 19,648 $ 195,082
============ ============ ============ ============
Redemptions:
Class I (209,529) $ (2,272,459) (881,838) $ (8,731,398)
Class II -- -- -- --
------------ ------------ ------------ ------------
Total Redemptions: (209,529) $ (2,272,459) (881,838) $ (8,731,398)
============ ============ ============ ============
Page 71
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by First Trust Dow
Jones at December 31, 2017, 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, 2017.
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 Unrealized appreciation on Unrealized depreciation on
futures contracts* $ 107,305 futures contracts* $ 13,125
* Includes cumulative appreciation (depreciation) on futures contracts as
reported in the Portfolio of Investments. The current day's variation margin is
reported within the Statements of Assets and Liabilities.
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, 2017, 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 $ (307,925)
Net change in unrealized appreciation (depreciation) on futures 88,305
During the year ended December 31, 2017, the notional value of futures contracts
opened and closed were $95,495,609 and $86,209,124, 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, 2017, and for the year then ended are as follows:
CHANGE IN
UNREALIZED
SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND
SECURITY NAME 12/31/2017 12/31/2016 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2017 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust Low
Duration
Opportunities ETF 71 $ 31,308 $ 812,397 $ (840,093) $ 83 $ (27) $ 3,668 $ 3,527
First Trust Preferred
Securities and
Income ETF 59,280 1,229,166 580,850 (706,370) 49,543 33,004 1,186,193 78,210
First Trust Senior
Loan Fund 57,460 2,886,006 547,492 (642,992) (19,460) (7,795) 2,763,251 99,949
First Trust Tactical
High Yield ETF 24,290 1,251,761 176,094 (259,834) 19,181 (7,437) 1,179,765 65,488
----------- ----------- ------------ --------------- ----------- ----------- ------------
$ 5,398,241 $ 2,116,833 $ (2,449,289) $ 49,347 $ 17,745 $ 5,132,877 $ 247,174
=========== =========== ============ =============== =========== =========== ============
Page 72
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
Amounts relating to these investments in First Trust Dorsey Wright at December
31, 2017, and for the year then ended are as follows:
CHANGE IN
UNREALIZED
SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND
SECURITY NAME 12/31/2017 12/31/2016 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2017 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust BICK Index
Fund 3,582 $ -- $ 109,569 $ (16,224) $ 12,694 $ 2,102 $ 108,141 $ 943
First Trust Brazil
AlphaDEX(R) Fund -- 47,954 16,359 (63,880) (2,160) 1,727 -- 370
First Trust Chindia
ETF 2,735 45,532 51,826 (14,803) 21,209 4,542 108,306 1,991
First Trust Developed
Markets ex-US
AlphaDEX(R) Fund 6,245 121,845 226,096 (19,915) 56,751 4,911 389,688 5,280
First Trust Dow Jones
Internet Index Fund 18,466 915,810 963,735 (307,004) 361,959 94,544 2,029,044 --
First Trust Emerging
Markets AlphaDEX(R)
Fund 9,521 120,217 128,191 (43,020) 45,816 14,527 265,731 5,915
First Trust Energy
AlphaDEX(R) Fund -- 1,004,600 185,801 (1,040,911) (84,446) (65,044) -- 2,521
First Trust Germany
AlphaDEX(R) Fund 2,220 49,013 51,979 (14,433) 23,265 3,862 113,686 2,052
First Trust Industrials/
Producer Durables
AlphaDEX(R) Fund 50,529 857,478 938,283 (51,611) 302,162 4,660 2,050,972 8,979
First Trust Large Cap
Growth AlphaDEX(R)
Fund 36,638 976,533 992,397 (62,891) 327,157 9,050 2,242,246 7,341
First Trust Latin
America AlphaDEX(R)
Fund -- 50,247 14,859 (65,510) 317 87 -- 357
First Trust Mid Cap
Core AlphaDEX(R)
Fund 33,948 1,079,192 1,023,994 (133,381) 237,442 24,495 2,231,742 17,306
First Trust Nasdaq
Bank ETF 68,921 -- 1,858,133 (49,502) 217,162 484 2,026,277 17,756
First Trust NASDAQ-100-
Technology Sector
Index Fund 27,895 910,017 966,486 (300,483) 352,146 78,600 2,006,766 14,347
First Trust Small Cap
Growth AlphaDEX(R)
Fund 50,699 1,009,666 996,948 (170,377) 308,456 21,168 2,165,861 2,204
First Trust Switzerland
AlphaDEX(R) Fund 2,061 50,943 53,008 (14,131) 15,620 3,401 108,841 1,297
First Trust Technology
AlphaDEX(R) Fund 37,157 -- 1,932,618 -- (25,721) -- 1,906,897 838
First Trust Utilities
AlphaDEX(R) Fund -- 929,322 947,119 (1,873,681) (29,325) 26,565 -- 24,811
----------- ----------- ------------ --------------- ----------- ----------- ------------
$ 8,168,369 $11,457,401 $ (4,241,757) $ 2,140,504 $ 229,681 $17,754,198 $ 114,308
=========== =========== ============ =============== =========== =========== ============
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 73
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017
During the year ended December 31, 2017, 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, 2017, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 501,952,734 $ 367,003,115
First Trust Multi Income 8,635,458 7,681,961
First Trust Dorsey Wright 14,315,018 4,887,269
Cost of purchases and proceeds from sales of U.S. Government investment
securities, excluding short-term investments, for the year ended December 31,
2017, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 81,947,784 $ 81,802,549
First Trust Multi Income 1,426,954 1,019,569
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 $200 million Credit Agreement (the "BNYM Line of Credit") with BNYM to be a
liquidity backstop during periods of high redemption volume. Prior to February
3, 2017, the BNYM Line of Credit was $135 million. 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, 2017.
10. INDEMNIFICATION
The Trust has a variety of indemnification obligations under contracts with its
service providers. The Trust's maximum exposure under these arrangements is
unknown. However, the Trust has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
11. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST VARIABLE INSURANCE
TRUST:
Opinion on the Financial Statements and Financial Highlights
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, 2017, the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, the financial
highlights for each of the periods presented, and the related notes. In our
opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of each of the portfolios
constituting the First Trust Variable Insurance Trust as of December 31, 2017,
and the results of their operations, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits we are required to
obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2017, by correspondence with
the custodian. We believe that our audits provide a reasonable basis for our
opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 12, 2018
We have served as the auditor of one or more First Trust investment companies
since 2001.
Page 75
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (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 https://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 https://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, 2017, 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 25.45%
First Trust Multi Income Allocation Portfolio 16.34%
First Trust Dorsey Wright Tactical Core Portfolio 0.00%
For the year ended December 31, 2017, 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 $ 15,440,439
First Trust Multi Income Allocation Portfolio 53,628
First Trust Dorsey Wright Tactical Core Portfolio 167,401
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
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (UNAUDITED)
that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
advisor. Inclusion of a security within an index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it considered to
be investment advice.
NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT
BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS
OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE 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.
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CONVERTIBLE SECURITIES RISK. The ETFs in which the First Trust Multi Income
Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio
invest may invest in convertible securities. Convertible securities have
characteristics of both equity and debt securities and, as a result, are exposed
to certain additional risks. The market values of convertible securities tend to
decline as interest rates increase and, conversely, to increase as interest
rates decline.
However, a convertible security's market value also tends to reflect the market
price of the common stock of the issuing company, particularly when the stock
price is greater than the convertible security's conversion price (i.e., the
predetermined price or exchange ratio at which the convertible security can be
converted or exchanged for the underlying common stock). Convertible securities
are also exposed to the risk that an issuer is unable to meet its obligation to
make dividend or principal payments when due as a result of changing financial
or market conditions. Convertible securities generally offer lower interest or
dividend yields than non-convertible debt securities of similar credit quality
because of their potential for capital appreciation.
CREDIT RISK. The Funds are subject to credit risk. Credit risk is the risk that
an issuer of a security will be unable or unwilling to make dividend, interest
and/or principal payments when due and the related risk that the value of a
security may decline because of concerns about the issuer's ability to make such
payments.
CURRENCY RISK. The ETFs in which the First Trust Multi Income Allocation
Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest may
hold investments that are denominated in non-U.S. currencies, or in securities
that provide exposure to such currencies, currency exchange rates or interest
rates denominated in such currencies. Changes in currency exchange rates and the
relative value of non-U.S. currencies will affect the value of the Funds'
investment and the value of your Fund shares. Currency exchange rates can be
very volatile and can change quickly and unpredictably. As a result, the value
of an investment in the Funds may change quickly and without warning and you may
lose money.
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
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FIRST TRUST VARIABLE INSURANCE TRUST
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economic events affecting the issuers occur. In addition, common stock prices
may be particularly sensitive to rising interest rates, as the cost of capital
rises and borrowing costs increase. The equity markets have experienced recent
volatility that may lead to sharp declines in the value of the underlying ETFs
and the Funds.
ETF RISK. An ETF trades like common stock and represents a portfolio of
securities. The risks of owning an ETF generally reflect the risks of owning the
underlying securities, although lack of liquidity in an ETF could result in it
being more volatile. ETFs have management fees and other operating expenses that
increase their costs. In general, as a shareholder in other investment
companies, the Funds bear their ratable share of the underlying fund's expenses,
and are subject to duplicative expenses to the extent a Fund invests in other
ETFs.
FINANCIAL COMPANIES RISK. Financial companies are especially subject to the
adverse effects of economic recession, currency exchange rates, government
regulation, decreases in the availability of capital, volatile interest rates,
portfolio concentrations in geographic markets and in commercial and residential
real estate loans, and competition from new entrants in their fields of
business.
FIXED INCOME SECURITIES RISK. An investment in the Funds involves risk
associated with an investment in fixed income securities including the risk that
certain of the securities in the Funds may not have the benefit of covenants
that would prevent the issuer from engaging in capital restructurings or
borrowing transactions in connection with corporate acquisitions, leveraged
buyouts or restructurings. This limitation could reduce the ability of the
issuer to meet its payment obligations and might result in increased credit
risk. In addition, certain of the securities may be redeemed or prepaid by the
issuer, resulting in lower interest payments by the Funds and reduced
distributions to shareholders.
FLOATING RATE LOAN RISK. The Funds and the ETFs in which the First Trust Multi
Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core
Portfolio invest may invest in floating rate loans, which may include high yield
securities, or "junk" loans. An investment in floating rate loans subjects the
Funds to credit risk, which is heightened for loans in which the Funds invest
because companies that issue such loans tend to be highly leveraged and thus are
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. Each 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
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (UNAUDITED)
be negatively impacted and the Fund's market price may be significantly below
the Fund's net asset value during certain periods In addition, index rebalances
may potentially result in increased trading activity. To the extent buying or
selling activity increases, the Fund can be exposed to increased brokerage costs
and adverse tax consequences and the market price of the Fund can be negatively
affected.
INDEX REBALANCE RISK. Pursuant to the methodology that each 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 ETFs 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.
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.
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.
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (UNAUDITED)
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.
NON-CORRELATION RISK. The Funds' returns may not match the return of an Index
for a number of reasons. For example, the Funds incur operating expenses not
applicable to the Indexes, and may incur costs in buying and selling securities,
especially when rebalancing the Funds' portfolio holdings to reflect changes in
the composition of the Indexes. In addition, the Funds' portfolio holdings may
not exactly replicate the securities included in the Indexes or the ratios
between the securities included in the Indexes.
NON-DIVERSIFICATION RISK. The First Trust Dorsey Wright Tactical Core Portfolio
is classified as "non-diversified" under the 1940 Act. As a result, the First
Trust Dorsey Wright Tactical Core Portfolio is only limited as to the percentage
of its assets that may be invested in the securities of any one issuer by the
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"). The First Trust Dorsey Wright Tactical Core Portfolio may
invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the First Trust Dorsey Wright Tactical Core Portfolio may
be more susceptible to a single adverse economic or regulatory occurrence
affecting one or more of these issuers, experience increased volatility and be
highly invested in certain issuers.
NON-U.S. SECURITIES AND EMERGING MARKETS RISK. The First Trust Multi Income
Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio
invest in securities of non-U.S. issuers. Non-U.S. securities are subject to
higher volatility than securities of domestic issuers due to possible adverse
political, social or economic developments; restrictions on foreign investment
or exchange of securities; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; different legal or accounting standards
and less government supervision and regulation of exchanges in foreign
countries. These risks may be heightened for securities of companies located in,
or with significant operations in, emerging market countries.
Page 81
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (UNAUDITED)
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 82
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (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; 151 None
c/o First Trust Advisors L.P. Limited Partner, Gundersen Real Estate
120 E. Liberty Drive, o Since Trust Limited Partnership (June 1992 to December
Suite 400 Inception 2016); Member, Sportsmed LLC (April 2007
Wheaton, IL 60187 to November 2015)
D.O.B.: 04/51
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 151 Director of ADM
c/o First Trust Advisors L.P. (Futures Commission Merchant) Investor Services,
120 E. Liberty Drive, o Since Trust Inc., ADM
Suite 400 Inception Investor Services
Wheaton, IL 60187 International,
D.O.B.: 11/57 Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 151 Director of Trust
c/o First Trust Advisors L.P. Management Consulting) Company of
120 E. Liberty Drive, o Since Trust Illinois
Suite 400 Inception
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Indefinite Term Managing Director and Chief Operating 151 Director of
c/o First Trust Advisors L.P. Officer (January 2015 to Present), Covenant
120 E. Liberty Drive, o Since Trust Pelita Harapan Educational Foundation Transport, Inc.
Suite 400 Inception (Educational Products and Services); (May 2003 to
Wheaton, IL 60187 President and Chief Executive May 2014)
D.O.B.: 03/54 Officer (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 151 None
and Chairman of the Board Advisors L.P. and First Trust Portfolios
120 E. Liberty Drive, o Since Trust L.P.; Chairman of the Board of Directors,
Suite 400 Inception BondWave LLC (Software Development
Wheaton, IL 60187 Company) and Stonebridge Advisors LLC
D.O.B.: 09/55 (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 83
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (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
(January 2016 to Present), BondWave LLC (Software
Development Company) and Stonebridge Advisors LLC
(Investment Advisor)
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.
Wheaton, IL 60187
D.O.B.: 08/72
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 Counsel, BondWave LLC; Secretary, Stonebridge
Wheaton, IL 60187 Inception Advisors LLC
D.O.B.: 05/60
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
120 E. Liberty Drive, First Trust Portfolios L.P.
Suite 400 o Since Trust
Wheaton, IL 60187 Inception
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
Wheaton, IL 60187 Inception
D.O.B.: 12/66
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
120 E. Liberty Drive, First Trust Portfolios L.P.
Suite 400 o Since Trust
Wheaton, IL 60187 Inception
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 84
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2017 (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.
USE OF WEB ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
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 https://www.ftportfolios.com, or contact us
at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
May 2017
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FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
Energy Income Partners, LLC Stonebridge Advisors LLC
10 Wright Street 10 Westport Road, Suite C101
Westport, CT 06880 Wilton, CT 06897
ADMINISTRATOR, FUND
ACCOUNTANT, & 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, 2016
and $90,750 for the fiscal year ended December 31, 2017.
(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 $275.73 for the fiscal year ended December 31, 2016 and $0 for
the fiscal year ended December 31, 2017.
Audit-Related Fees (Investment Adviser) -- 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, 2016 and $0 for
the fiscal year ended December 31, 2017.
Audit-Related Fees (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 fiscal year ended December 31, 2016 and $0 for the
fiscal year ended December 31, 2017.
Audit-Related Fees (Investment Sub-Advisor) -- 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, 2016 and $0 for
the fiscal year ended December 31, 2017.
(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 $12,175 for the fiscal year ended December 31, 2016 and $12,175 for the
fiscal year ended December 31, 2017.
Tax Fees (Investment Adviser) -- 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 were $0 for the
fiscal year ended December 31, 2016 and $0 for the fiscal year ended December
31, 2017.
Tax Fees (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 were $0 for the fiscal year
ended December 31, 2016 and $0 for the fiscal year ended December 31, 2017.
Tax Fees (Investment Sub-Adviser) -- 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 were $0 for the
fiscal year ended December 31, 2016 and $0 for the fiscal year ended December
31, 2017.
(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 $0 for the fiscal year ended December 31, 2016 and $0 for
the fiscal year ended December 31, 2017.
All Other Fees (Investment Adviser) -- The aggregate fees billed for each
of the last two fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through (c) of
this Item were $0 for the fiscal year ended December 31, 2016 and $0 for the
fiscal year ended December 31, 2017.
All Other Fees (Distributor) -- The aggregate fees billed for each of the
last two fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through (c) of
this Item were $0 for the fiscal year ended December 31, 2016 and $0 for the
fiscal year ended December 31, 2017.
All Other Fees (Investment Sub-Adviser) -- The aggregate fees billed for
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item were $0 for the fiscal year ended December 31, 2016 and $0 for
the fiscal year ended December 31, 2017.
(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, 2016 were $12,175 for the registrant, $13,000 for the
registrant's investment adviser, $32,500 for the registrant's distributor and
$3,000 for the registrant's investment sub-adviser, and for the fiscal year
ended December 31, 2017 were $12,175 for the registrant, $44,000 for the
registrant's investment adviser, $63,400 for the registrant's distributor and
$3,000 for the registrant's investment sub-adviser.
(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. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. 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.
(a)(4) 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 12, 2018
-------------------
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 12, 2018
-------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: February 12, 2018
-------------------
* Print the name and title of each signing officer under his or her signature.