UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22652
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First Trust Variable Insurance Trust
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2018
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JUNE 30, 2018
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL REPORT
JUNE 30, 2018
Shareholder Letter.......................................................... 1
Portfolio Management........................................................ 2
Performance Summary and Portfolio Components
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 5
First Trust Multi Income Allocation Portfolio.......................... 7
First Trust Dorsey Wright Tactical Core Portfolio...................... 9
Understanding Your Fund Expenses............................................ 11
Portfolio of Investments
First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 12
First Trust Multi Income Allocation Portfolio.......................... 38
First Trust Dorsey Wright Tactical Core Portfolio...................... 49
Statements of Assets and Liabilities........................................ 50
Statements of Operations.................................................... 51
Statements of Changes in Net Assets......................................... 52
Financial Highlights........................................................ 55
Notes to Financial Statements............................................... 58
Additional Information...................................................... 71
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
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 www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
each Fund. It includes details about each Fund and presents data and analysis
that provide insight into each Fund's performance.
The statistical information that follows may help you understand each Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of
First Trust and/or 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, and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST VARIABLE INSURANCE TRUST
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2018
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Variable Insurance Trust, which contains detailed information about your
investment for the six-month period ended June 30, 2018. We encourage you to
read this report carefully and discuss it with your financial advisor.
As 2018 began, there was much enthusiasm for the "Tax Cuts and Jobs Act of 2017"
tax reform bill, which President Trump had signed into law on December 22, 2017,
and the potential increase in take-home pay for many Americans, as well as the
reduction in the federal corporate tax rate from 35% to 21% that the new tax
package would bring. Early in the new year, many investors were watching the
Federal Reserve (the "Fed") and its signaled intent to continue raising interest
rates at a gradual pace (it had raised rates three times in 2017). Based on
strong job growth and the economic outlook in the U.S., the Fed did, in fact,
raise interest rates twice this year, on March 21 and June 13. Additionally,
they indicated at their June 2018 meeting that two additional rate hikes are
expected before year-end.
For the entire first quarter of 2018, increased market volatility was the norm
for U.S. markets. The Dow Jones Industrial Average was off to a strong start in
January continuing its very strong performance displayed throughout 2017.
However, February was a different story. Early in the month, the Dow Jones
Industrial Average plunged 567 points and sank into "correction" territory
(defined as a drop of 10% from the index's high) and in just two weeks during
February, was down more than 3,200 points. However, as February came to a close,
the Dow Jones Industrial Average was back on track and up from the lows
experienced earlier in the month.
For the second quarter of 2018, market volatility continued. Increasing trade
tensions have had an impact on markets around the world and could continue to do
so in the future. The talk from President Trump on tariffs and trade agreements
gave many investors pause about the U.S. stock market and its long-standing
economic growth and what the future might hold. The Dow Jones Industrial Average
closed out both April and May slightly down but ended June slightly up. Despite
this volatility, we continue to believe that the combination of low interest
rates, low inflation and strong corporate earnings still point to a positive
economic environment and further growth, though we understand that past
performance can never guarantee future performance.
Globally, markets underperformed moderately in the first half of 2018, but
analysts believe European companies are set up for growing earnings and credit
upswings, which seems to bode well for stock market performance and for
fixed-income securities. We continue to believe that one should invest for the
long term and be prepared for market movements, which can happen at any time.
You can do this by keeping current on your portfolio and investing goals and by
speaking regularly with your investment professional. 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 financial
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 MANAGEMENT
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018
ADVISOR
First Trust Advisors L.P. ("First Trust") is a registered investment advisor
based in Wheaton, IL and is the investment advisor to First Trust/Dow Jones
Dividend & Income Allocation Portfolio (the "Fund"). In this capacity, First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio and certain other services necessary for the management
of the Fund.
PORTFOLIO MANAGEMENT TEAM
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director,
First Trust
David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing
Director, First Trust
Jon C. Erickson, Senior Vice President, First Trust
Roger F. Testin, Senior Vice President, First Trust
Todd Larson, Vice President, First Trust
Chris A. Peterson, Senior Vice President, First Trust
Page 2
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018
ADVISOR
First Trust is a registered investment advisor based in Wheaton, IL and is the
investment advisor to First Trust Multi Income Allocation Portfolio (the
"Fund"). First Trust manages the Fund's fixed income investments, as well as a
portion of the Fund's equity investments.
SUB-ADVISORS
Stonebridge Advisors LLC ("Stonebridge" or a "Sub-Advisor") is a sub-advisor to
the Fund and is a registered investment advisor based in Wilton, CT. Stonebridge
specializes in the management of preferred securities and North American equity
income securities.
Energy Income Partners, LLC ("EIP" or a "Sub-Advisor"), is a sub-advisor to the
Fund and is a registered investment advisor based in Westport, CT. EIP was
founded in 2003 to provide professional asset management services in the area of
energy-related master limited partnerships ("MLPs") and other high-payout
securities such as pipeline companies, power utilities, YieldCos, and energy
infrastructure real estate investment trusts ("REITs").
PORTFOLIO MANAGEMENT TEAMS
FIRST TRUST
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director,
First Trust
David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing
Director, First Trust
Jon C. Erickson, Senior Vice President, First Trust
Roger F. Testin, Senior Vice President, First Trust
William Housey, Senior Vice President, First Trust
Chris A. Peterson, Senior Vice President, First Trust
Todd Larson, Vice President, First Trust
James Snyder, Senior Vice President, First Trust
Jeremiah Charles, Senior Vice President, First Trust
STONEBRIDGE
Scott Fleming, Portfolio Manager, President and Chief Investment Officer of
Stonebridge
Robert Wolf, Senior Portfolio Manager and Senior Vice President of Stonebridge
EIP
James J. Murchie, Portfolio Manager, Founder, Principal and CEO of EIP
Eva Pao, Co-Portfolio Manager, Principal of EIP
John Tysseland, Co-Portfolio Manager, Principal of EIP
Page 3
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018
ADVISOR
First Trust is a registered investment advisor based in Wheaton, IL and is the
investment advisor to First Trust Dorsey Wright Tactical Core Portfolio (the
"Fund"). In this capacity, First Trust is responsible for the selection and
ongoing monitoring of the securities in the Fund's portfolio and certain other
services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director,
First Trust
David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing
Director, First Trust
Jon C. Erickson, Senior Vice President, First Trust
Roger F. Testin, Senior Vice President, First Trust
Todd Larson, Vice President, First Trust
Chris A. Peterson, Senior Vice President, First Trust
Page 4
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2018
1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION SIX MONTH ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN TOTAL RETURN
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 -0.79% 6.69% 8.38% 8.25%
Blended Benchmark (a) -0.01% 6.79% 8.43% 8.49%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) -3.27% -0.83% 3.51% 3.29%
Russell 3000(R) Index (c) 3.22% 14.78% 13.29% 13.64%
Secondary Blended Benchmark (d) -0.03% 6.70% 8.53% 8.60%
Dow Jones Equal Weight U.S. Issued Corporate Bond
Index(SM) (e) -3.56% -1.26% 3.53% 3.33%
Dow Jones U.S. Total Stock Market Index(SM)(f) 3.24% 14.79% 13.21% 13.57%
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1 YEAR SINCE INCEPTION
INCEPTION SIX MONTH ANNUAL AVERAGE TOTAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 -0.60% 6.94% 7.84%
Blended Benchmark (a) -0.01% 6.79% 7.02%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) -3.27% -0.83% 2.66%
Russell 3000(R) Index (c) 3.22% 14.78% 11.28%
Secondary Blended Benchmark (d) -0.03% 6.70% 7.13%
Dow Jones Equal Weight U.S. Issued Corporate Bond
Index(SM) (e) -3.56% -1.26% 2.66%
Dow Jones U.S. Total Stock Market Index(SM)(f) 3.24% 14.79% 11.23%
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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 - June 30, 2018
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
6/30/2018 16,306 16,529 12,208 21,995 16,638 12,239 21,916
Page 5
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
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Vail Resorts, Inc. 0.5%
Exponent, Inc. 0.5
Tractor Supply Co. 0.5
NIKE, Inc., Class B 0.4
Tetra Tech, Inc. 0.4
Valero Energy Corp. 0.4
Automatic Data Processing, Inc. 0.4
Intuit, Inc. 0.4
Phillips 66 0.4
TJX (The) Cos., 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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Goldman Sachs Group (The), Inc. 2.1%
Bank of America Corp. 2.1
Citigroup, Inc. 2.0
JPMorgan Chase & Co. 1.8
Morgan Stanley 1.5
Wells Fargo & Co. 1.2
Anheuser-Busch Inbev Finance, Inc. 0.8
Apple, Inc. 0.8
UnitedHealth Group, Inc. 0.8
HSBC Holdings PLC 0.8
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Total 13.9%
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 3.3%
AA+ 1.9
AA 4.5
AA- 8.8
A+ 16.6
A 23.0
A- 15.0
BBB+ 9.2
BBB 11.4
BBB- 5.8
A-2 (short-term) 0.5
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Total 100.0%
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
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Common Stocks:
Financials 14.4%
Industrials 13.1
Consumer Discretionary 9.1
Information Technology 6.6
Consumer Staples 4.9
Health Care 3.1
Materials 1.7
Real Estate 1.6
Energy 1.3
Utilities 1.1
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Total Common Stocks 56.9
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Corporate Bonds & Notes:
Financials 15.3
Utilities 5.3
Energy 3.7
Information Technology 3.5
Health Care 3.3
Industrials 3.3
Consumer Discretionary 2.4
Consumer Staples 1.6
Telecommunication Services 1.2
Materials 0.8
Real Estate 0.1
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Total Corporate Bonds & Notes 40.5
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Foreign Corporate Bonds & Notes:
Financials 1.1
Energy 0.4
Materials 0.2
Telecommunication Services 0.1
Industrials 0.1
Health Care 0.0*
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Total Foreign Corporate Bonds & Notes 1.9
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U.S. Government Bonds & Notes 0.5
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Commercial Paper:
Utilities 0.2
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Total Commercial Paper 0.2
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Total 100.0%
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* Amount is less than 0.1%.
(1) The credit quality and ratings 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 rating is used. Sub-investment grade ratings are those rated
BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or
higher. The credit ratings shown relate to the creditworthiness of the
issuers of the underlying securities in the Fund, and not to the Fund or
its shares. Credit ratings are subject to change.
Page 6
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED JUNE 30, 2018
1 YEAR SINCE INCEPTION
INCEPTION SIX MONTH ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 -0.97% 1.52% 3.65%
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 -0.76% 1.77% 3.90%
Broad Blended Benchmark (a) 0.36% 5.53% 5.71%
Bloomberg Barclays U.S. Aggregate Bond Index (b) -1.62% -0.40% 1.92%
Russell 3000(R) Index (c) 3.22% 14.78% 11.28%
Multi Asset Class Blended Benchmark (d) 0.83% 3.38% 3.80%
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(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 - June 30, 2018
First Trust Multi Broad Bloomberg Barclays
Income Allocation Blended U.S. Aggregate Russell 3000(R) Multi Asset Class
Portfolio - Class I Benchmark 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
6/30/2018 11,611 12,601 10,826 15,608 11,681
Page 7
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
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FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Senior Loan Fund 13.6%
First Trust Tactical High Yield ETF 7.7
iShares iBoxx $ Investment Grade Corporate
Bond ETF 7.2
First Trust Preferred Securities and
Income ETF 4.4
Enterprise Products Partners, L.P. 1.6
iShares Floating Rate Bond ETF 1.6
First Trust Institutional Preferred
Securities and Income ETF 1.4
Magellan Midstream Partners, L.P. 1.0
TC Pipelines, L.P. 0.8
Spectra Energy Partners, L.P. 0.8
------------------------------------------------------
Total 40.1%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Exchange-Traded Funds 37.7%
------------------------------------------------------
Common Stocks:
Energy 3.8
Information Technology 3.8
Utilities 3.1
Health Care 2.8
Financials 2.7
Industrials 2.6
Consumer Discretionary 1.9
Consumer Staples 1.1
Materials 0.8
Telecommunication Services 0.3
------------------------------------------------------
Total Common Stocks 22.9
------------------------------------------------------
Real Estate Investment Trusts:
Financials 14.2
------------------------------------------------------
Total Real Estate Investment Trusts 14.2
------------------------------------------------------
Master Limited Partnerships:
Energy 9.4
Utilities 1.2
Materials 0.3
------------------------------------------------------
Total Master Limited Partnerships 10.9
------------------------------------------------------
U.S. Government Bonds & Notes 7.9
------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 6.2
------------------------------------------------------
Mortgage-Backed Securities 0.1
------------------------------------------------------
U.S. Treasury Bills 0.1
------------------------------------------------------
Asset-Backed Securities 0.0*
------------------------------------------------------
Total 100.0%
======
* Amount is less than 0.1%.
Page 8
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PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED JUNE 30, 2018
1 YEAR SINCE INCEPTION
INCEPTION SIX MONTH ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
------------------------------------------------------------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 4.46% 14.33% 8.13%
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 4.76% 15.04% 8.41%
Broad Blended Benchmark (a) 1.00% 8.34% 8.30%
Bloomberg Barclays U.S. Aggregate Bond Index (b) -1.62% -0.40% 1.47%
S&P 500(R) Index (c) 2.65% 14.37% 12.91%
------------------------------------------------------------------------------------------------------------------------------------
(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 - June 30, 2018
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
6/30/2018 12,317 12,368 10,394 13,822
Page 9
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2018 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Small Cap Growth AlphaDEX(R)
Fund 11.2%
First Trust Mid Cap Core AlphaDEX(R) Fund 10.3
First Trust Large Cap Growth AlphaDEX(R)
Fund 10.1
First Trust Dow Jones Internet Index Fund 9.8
First Trust Technology AlphaDEX(R) Fund 8.9
First Trust Industrials/Producer Durables
AlphaDEX(R) Fund 8.8
First Trust NASDAQ-100-Technology Sector
Index Fund 8.8
First Trust Nasdaq Bank ETF 8.1
iShares Core U.S. Aggregate Bond ETF 6.0
SPDR Bloomberg Barclays Convertible
Securities ETF 3.5
------------------------------------------------------
Total 85.5%
======
Page 10
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
JUNE 30, 2018 (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 June 30, 2018.
ACTUAL EXPENSES
The first three columns of the table below provide information about actual
account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the third column under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during the
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The next three columns of the table below provide information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the
hypothetical section of the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have
been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
----------------------------------- -----------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL-
ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED
VALUE VALUE 1/1/2018- VALUE VALUE 1/1/2018- EXPENSE
1/1/2018 6/30/2018 6/30/2018 (a) 1/1/2018 6/30/2018 6/30/2018 (a) RATIO (b)
--------- --------- ------------- --------- --------- ------------- ----------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I ....................... $1,000.00 $ 992.10 $ 5.93 $1,000.00 $1,018.84 $ 6.01 1.20%
Class II ...................... $1,000.00 $ 994.00 $ 4.70 $1,000.00 $1,020.08 $ 4.76 0.95%
First Trust Multi Income Allocation
Portfolio (c)
Class I ....................... $1,000.00 $ 990.30 $ 4.10 $1,000.00 $1,020.68 $ 4.16 0.83%
Class II ...................... $1,000.00 $ 992.40 $ 2.87 $1,000.00 $1,021.92 $ 2.91 0.58%
First Trust Dorsey Wright Tactical
Core Portfolio (c)
Class I ....................... $1,000.00 $1,044.60 $ 3.80 $1,000.00 $1,021.08 $ 3.76 0.75%
Class II ...................... $1,000.00 $1,047.60 $ 2.54 $1,000.00 $1,022.32 $ 2.51 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 (January 1,
2018 through June 30, 2018), multiplied by 181/365 (to reflect the
six-month 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.
(c) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
Page 11
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS - 56.3%
AEROSPACE & DEFENSE - 2.4%
42,477 BWX Technologies, Inc........................................................ $ 2,647,167
12,216 General Dynamics Corp........................................................ 2,277,184
38,855 HEICO Corp................................................................... 2,833,695
41,778 Hexcel Corp.................................................................. 2,773,224
10,471 Huntington Ingalls Industries, Inc........................................... 2,270,008
7,730 Northrop Grumman Corp........................................................ 2,378,521
12,502 Raytheon Co.................................................................. 2,415,136
-------------
17,594,935
-------------
AIR FREIGHT & LOGISTICS - 0.8%
42,630 Expeditors International of Washington, Inc.................................. 3,116,253
11,240 FedEx Corp................................................................... 2,552,154
-------------
5,668,407
-------------
AIRLINES - 0.3%
49,233 Delta Air Lines, Inc......................................................... 2,439,003
-------------
AUTO COMPONENTS - 0.7%
117,224 Gentex Corp.................................................................. 2,698,496
14,502 Lear Corp.................................................................... 2,694,617
-------------
5,393,113
-------------
AUTOMOBILES - 0.4%
243,545 Ford Motor Co................................................................ 2,696,043
-------------
BANKS - 3.2%
84,858 BancorpSouth Bank............................................................ 2,796,071
48,631 Banner Corp.................................................................. 2,924,182
101,715 CenterState Bank Corp........................................................ 3,033,141
45,042 Commerce Bancshares, Inc..................................................... 2,914,668
68,229 First Interstate BancSystem, Inc., Class A................................... 2,879,264
37,713 Independent Bank Corp........................................................ 2,956,699
66,663 MB Financial, Inc............................................................ 3,113,162
53,434 US Bancorp................................................................... 2,672,769
-------------
23,289,956
-------------
BUILDING PRODUCTS - 1.0%
31,638 Allegion PLC................................................................. 2,447,516
42,436 AO Smith Corp................................................................ 2,510,089
45,823 Fortune Brands Home & Security, Inc.......................................... 2,460,237
-------------
7,417,842
-------------
CAPITAL MARKETS - 2.6%
4,981 BlackRock, Inc............................................................... 2,485,718
16,682 CME Group, Inc............................................................... 2,734,513
13,532 FactSet Research Systems, Inc................................................ 2,680,689
77,812 Franklin Resources, Inc...................................................... 2,493,875
37,211 Intercontinental Exchange, Inc............................................... 2,736,869
31,298 Nasdaq, Inc.................................................................. 2,856,569
24,991 T Rowe Price Group, Inc...................................................... 2,901,205
-------------
18,889,438
-------------
CHEMICALS - 1.5%
16,969 Air Products & Chemicals, Inc................................................ 2,642,582
25,559 Eastman Chemical Co.......................................................... 2,554,878
25,535 LyondellBasell Industries N.V., Class A...................................... 2,805,020
Page 12 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
CHEMICALS (CONTINUED)
6,717 NewMarket Corp............................................................... $ 2,717,026
-------------
10,719,506
-------------
COMMERCIAL SERVICES & SUPPLIES - 1.2%
15,817 Cintas Corp.................................................................. 2,927,252
52,879 Rollins, Inc................................................................. 2,780,378
55,127 Tetra Tech, Inc.............................................................. 3,224,930
-------------
8,932,560
-------------
COMMUNICATIONS EQUIPMENT - 0.4%
36,664 InterDigital, Inc............................................................ 2,966,118
-------------
CONSTRUCTION MATERIALS - 0.4%
23,635 Vulcan Materials Co.......................................................... 3,050,333
-------------
CONTAINERS & PACKAGING - 0.4%
96,894 Silgan Holdings, Inc......................................................... 2,599,666
-------------
DIVERSIFIED CONSUMER SERVICES - 0.3%
71,502 Service Corp. International.................................................. 2,559,057
-------------
ELECTRIC UTILITIES - 0.8%
16,519 NextEra Energy, Inc.......................................................... 2,759,168
82,347 OGE Energy Corp.............................................................. 2,899,438
-------------
5,658,606
-------------
ELECTRICAL EQUIPMENT - 0.7%
35,521 AMETEK, Inc.................................................................. 2,563,195
33,769 Eaton Corp PLC............................................................... 2,523,895
-------------
5,087,090
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 1.4%
31,331 Amphenol Corp., Class A...................................................... 2,730,497
12,964 Littelfuse, Inc.............................................................. 2,958,125
22,791 SYNNEX Corp.................................................................. 2,199,559
27,012 TE Connectivity, Ltd......................................................... 2,432,701
-------------
10,320,882
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 1.3%
92,318 First Industrial Realty Trust, Inc........................................... 3,077,882
23,873 PS Business Parks, Inc....................................................... 3,067,680
13,466 Public Storage............................................................... 3,054,897
-------------
9,200,459
-------------
FOOD PRODUCTS - 3.0%
59,886 General Mills, Inc........................................................... 2,650,554
78,628 Hormel Foods Corp............................................................ 2,925,748
20,930 Ingredion, Inc............................................................... 2,316,951
19,762 J&J Snack Foods Corp......................................................... 3,013,112
21,914 Lancaster Colony Corp........................................................ 3,033,336
25,365 McCormick & Co., Inc......................................................... 2,944,623
64,665 Mondelez International, Inc., Class A........................................ 2,651,265
22,672 Sanderson Farms, Inc......................................................... 2,383,961
-------------
21,919,550
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.4%
27,559 Danaher Corp................................................................. 2,719,522
-------------
See Notes to Financial Statements Page 13
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES - 0.8%
43,376 CVS Health Corp.............................................................. $ 2,791,246
12,609 UnitedHealth Group, Inc...................................................... 3,093,492
-------------
5,884,738
-------------
HOTELS, RESTAURANTS & LEISURE - 2.4%
55,962 Cheesecake Factory (The), Inc................................................ 3,081,268
16,951 Cracker Barrel Old Country Store, Inc........................................ 2,647,916
61,191 International Speedway Corp., Class A........................................ 2,735,237
46,614 Starbucks Corp............................................................... 2,277,094
46,702 Texas Roadhouse, Inc......................................................... 3,059,448
12,174 Vail Resorts, Inc............................................................ 3,337,989
-------------
17,138,952
-------------
HOUSEHOLD DURABLES - 0.3%
61,553 DR Horton, Inc............................................................... 2,523,673
-------------
HOUSEHOLD PRODUCTS - 1.2%
53,584 Church & Dwight Co., Inc..................................................... 2,848,526
34,039 Procter & Gamble (The) Co.................................................... 2,657,084
20,491 WD-40 Co..................................................................... 2,996,809
-------------
8,502,419
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.3%
47,861 Ormat Technologies, Inc...................................................... 2,545,727
-------------
INDUSTRIAL CONGLOMERATES - 1.1%
12,292 3M Co........................................................................ 2,418,082
25,843 Carlisle Cos., Inc........................................................... 2,799,055
9,616 Roper Technologies, Inc...................................................... 2,653,151
-------------
7,870,288
-------------
INSURANCE - 8.5%
61,666 Aflac, Inc................................................................... 2,652,871
28,464 Allstate (The) Corp.......................................................... 2,597,909
24,045 American Financial Group, Inc................................................ 2,580,750
23,073 American National Insurance Co............................................... 2,759,300
48,840 AMERISAFE, Inc............................................................... 2,820,510
47,011 Argo Group International Holdings, Ltd....................................... 2,733,690
29,521 Assurant, Inc................................................................ 3,055,128
74,543 Assured Guaranty, Ltd........................................................ 2,663,421
106,072 Brown & Brown, Inc........................................................... 2,941,377
36,339 Cincinnati Financial Corp.................................................... 2,429,625
66,711 Employers Holdings, Inc...................................................... 2,681,782
10,510 Everest Re Group, Ltd........................................................ 2,422,345
67,428 Fidelity National Financial, Inc............................................. 2,536,641
45,986 First American Financial Corp................................................ 2,378,396
63,121 Horace Mann Educators Corp................................................... 2,815,197
32,672 Marsh & McLennan Cos., Inc................................................... 2,678,124
125,801 Old Republic International Corp.............................................. 2,504,698
44,302 Principal Financial Group, Inc............................................... 2,345,791
55,581 ProAssurance Corp............................................................ 1,970,346
44,288 Progressive (The) Corp....................................................... 2,619,635
26,059 Prudential Financial, Inc.................................................... 2,436,777
17,520 Reinsurance Group of America, Inc............................................ 2,338,570
32,060 Torchmark Corp............................................................... 2,610,005
19,434 Travelers (The) Cos., Inc.................................................... 2,377,556
-------------
61,950,444
-------------
Page 14 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
IT SERVICES - 3.2%
17,579 Accenture PLC, Class A....................................................... $ 2,875,749
23,781 Automatic Data Processing, Inc............................................... 3,189,983
119,296 Convergys Corp............................................................... 2,915,594
17,587 International Business Machines Corp......................................... 2,456,904
22,311 Jack Henry & Associates, Inc................................................. 2,908,462
15,407 MasterCard, Inc., Class A.................................................... 3,027,784
43,813 Paychex, Inc................................................................. 2,994,618
22,557 Visa, Inc., Class A.......................................................... 2,987,675
-------------
23,356,769
-------------
MACHINERY - 3.2%
16,646 Cummins, Inc................................................................. 2,213,918
59,022 Graco, Inc................................................................... 2,668,975
18,936 IDEX Corp.................................................................... 2,584,385
17,227 Illinois Tool Works, Inc..................................................... 2,386,629
31,558 Ingersoll-Rand PLC........................................................... 2,831,699
248,250 Mueller Water Products, Inc., Class A........................................ 2,909,490
18,288 Snap-on, Inc................................................................. 2,939,247
17,613 Stanley Black & Decker, Inc.................................................. 2,339,183
43,210 Toro (The) Co................................................................ 2,603,402
-------------
23,476,928
-------------
MEDIA - 1.1%
78,973 Comcast Corp., Class A....................................................... 2,591,104
117,173 Interpublic Group of (The) Cos., Inc......................................... 2,746,535
26,866 Walt Disney (The) Co......................................................... 2,815,826
-------------
8,153,465
-------------
METALS & MINING - 0.4%
31,474 Reliance Steel & Aluminum Co................................................. 2,755,234
-------------
MORTGAGE REAL ESTATE INVESTMENT TRUSTS - 0.4%
358,362 MFA Financial, Inc........................................................... 2,716,384
-------------
OIL, GAS & CONSUMABLE FUELS - 1.3%
36,167 Exxon Mobil Corp............................................................. 2,992,096
28,133 Phillips 66.................................................................. 3,159,617
29,087 Valero Energy Corp........................................................... 3,223,712
-------------
9,375,425
-------------
PAPER & FOREST PRODUCTS - 0.4%
34,418 Neenah, Inc.................................................................. 2,920,367
-------------
PERSONAL PRODUCTS - 0.4%
18,025 Estee Lauder (The) Cos., Inc., Class A....................................... 2,571,987
-------------
PHARMACEUTICALS - 0.4%
76,035 Pfizer, Inc.................................................................. 2,758,550
-------------
PROFESSIONAL SERVICES - 0.7%
68,621 Exponent, Inc................................................................ 3,314,394
23,443 ManpowerGroup, Inc........................................................... 2,017,505
-------------
5,331,899
-------------
ROAD & RAIL - 0.8%
24,611 Landstar System, Inc......................................................... 2,687,521
20,072 Union Pacific Corp........................................................... 2,843,801
-------------
5,531,322
-------------
See Notes to Financial Statements Page 15
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.1%
11,450 Broadcom, Inc................................................................ $ 2,778,228
13,280 Lam Research Corp............................................................ 2,295,448
25,974 Texas Instruments, Inc....................................................... 2,863,634
-------------
7,937,310
-------------
SOFTWARE - 0.4%
15,568 Intuit, Inc.................................................................. 3,180,620
-------------
SPECIALTY RETAIL - 2.5%
38,553 Best Buy Co., Inc............................................................ 2,875,283
15,139 Home Depot (The), Inc........................................................ 2,953,619
34,605 Ross Stores, Inc............................................................. 2,932,774
33,087 TJX (The) Cos., Inc.......................................................... 3,149,220
42,818 Tractor Supply Co............................................................ 3,275,149
51,147 Williams-Sonoma, Inc......................................................... 3,139,403
-------------
18,325,448
-------------
TEXTILES, APPAREL & LUXURY GOODS - 1.2%
25,920 Carter's, Inc................................................................ 2,809,469
40,616 NIKE, Inc., Class B.......................................................... 3,236,283
36,408 VF Corp...................................................................... 2,967,980
-------------
9,013,732
-------------
TOBACCO - 0.3%
43,301 Altria Group, Inc............................................................ 2,459,064
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.7%
49,431 Fastenal Co.................................................................. 2,379,114
14,910 Watsco, Inc.................................................................. 2,658,155
-------------
5,037,269
-------------
TOTAL COMMON STOCKS.......................................................... 410,440,100
(Cost $360,497,009) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES - 40.1%
AEROSPACE & DEFENSE - 0.9%
$ 175,000 Boeing (The) Co..................................... 1.88% 06/15/23 164,252
100,000 Boeing (The) Co..................................... 2.60% 10/30/25 94,216
175,000 Boeing (The) Co..................................... 2.25% 06/15/26 159,763
250,000 Boeing (The) Co..................................... 2.80% 03/01/27 235,993
500,000 Boeing (The) Co..................................... 3.25% 03/01/28 488,828
308,000 Boeing (The) Co..................................... 3.38% 06/15/46 279,331
250,000 Boeing (The) Co..................................... 3.65% 03/01/47 237,276
500,000 Boeing (The) Co..................................... 3.63% 03/01/48 469,770
300,000 Boeing Capital Corp................................. 4.70% 10/27/19 307,700
500,000 General Dynamics Corp............................... 3.38% 05/15/23 501,340
500,000 General Dynamics Corp............................... 3.50% 05/15/25 499,910
500,000 General Dynamics Corp............................... 3.75% 05/15/28 505,174
250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 246,097
248,000 Lockheed Martin Corp................................ 4.09% 09/15/52 234,490
250,000 Northrop Grumman Corp............................... 2.08% 10/15/20 244,387
500,000 Northrop Grumman Corp............................... 2.55% 10/15/22 482,095
Page 16 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
AEROSPACE & DEFENSE (CONTINUED)
$ 250,000 Northrop Grumman Corp............................... 2.93% 01/15/25 $ 237,689
500,000 Northrop Grumman Corp............................... 3.25% 01/15/28 470,679
500,000 Northrop Grumman Corp............................... 4.03% 10/15/47 470,743
-------------
6,329,733
-------------
AIR FREIGHT & LOGISTICS - 1.1%
250,000 FedEx Corp.......................................... 2.30% 02/01/20 247,518
300,000 FedEx Corp.......................................... 3.20% 02/01/25 290,543
850,000 FedEx Corp.......................................... 3.30% 03/15/27 807,566
500,000 FedEx Corp.......................................... 3.40% 02/15/28 476,790
250,000 FedEx Corp.......................................... 4.75% 11/15/45 249,915
648,000 FedEx Corp.......................................... 4.55% 04/01/46 631,231
550,000 FedEx Corp.......................................... 4.40% 01/15/47 522,822
500,000 FedEx Corp.......................................... 4.05% 02/15/48 450,980
1,000,000 United Parcel Service, Inc.......................... 2.05% 04/01/21 975,834
500,000 United Parcel Service, Inc.......................... 2.35% 05/16/22 485,375
545,000 United Parcel Service, Inc.......................... 2.45% 10/01/22 528,406
500,000 United Parcel Service, Inc.......................... 2.50% 04/01/23 483,374
250,000 United Parcel Service, Inc.......................... 2.80% 11/15/24 240,276
500,000 United Parcel Service, Inc.......................... 2.40% 11/15/26 456,404
250,000 United Parcel Service, Inc.......................... 3.05% 11/15/27 238,239
500,000 United Parcel Service, Inc.......................... 3.40% 11/15/46 441,793
500,000 United Parcel Service, Inc.,
3 Mo. LIBOR + 0.38% (a).......................... 2.71% 05/16/22 503,192
-------------
8,030,258
-------------
AIRLINES - 0.1%
385,000 Southwest Airlines Co............................... 2.75% 11/06/19 383,731
420,000 Southwest Airlines Co............................... 2.65% 11/05/20 414,548
250,000 Southwest Airlines Co............................... 3.00% 11/15/26 232,255
-------------
1,030,534
-------------
AUTOMOBILES - 0.0%
250,000 Ford Motor Co....................................... 5.29% 12/08/46 232,501
-------------
BANKS - 7.3%
100,000 Bank of America Corp................................ 2.63% 10/19/20 98,803
600,000 Bank of America Corp................................ 2.63% 04/19/21 589,663
500,000 Bank of America Corp. (b)........................... 2.37% 07/21/21 490,293
250,000 Bank of America Corp. (b)........................... 2.33% 10/01/21 244,481
500,000 Bank of America Corp. (b)........................... 2.74% 01/23/22 491,287
250,000 Bank of America Corp................................ 2.50% 10/21/22 239,607
500,000 Bank of America Corp. (b)........................... 2.88% 04/24/23 485,954
500,000 Bank of America Corp. (b)........................... 2.82% 07/21/23 483,738
1,207,000 Bank of America Corp. (b)........................... 3.00% 12/20/23 1,170,956
250,000 Bank of America Corp. (b)........................... 3.55% 03/05/24 247,599
450,000 Bank of America Corp................................ 4.00% 04/01/24 454,289
500,000 Bank of America Corp. (b)........................... 3.09% 10/01/25 476,514
250,000 Bank of America Corp. (b)........................... 3.37% 01/23/26 240,739
400,000 Bank of America Corp................................ 4.45% 03/03/26 401,573
950,000 Bank of America Corp................................ 3.50% 04/19/26 919,834
150,000 Bank of America Corp................................ 3.25% 10/21/27 139,961
250,000 Bank of America Corp................................ 4.18% 11/25/27 243,942
500,000 Bank of America Corp. (b)........................... 3.82% 01/20/28 488,250
500,000 Bank of America Corp. (b)........................... 3.71% 04/24/28 482,753
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Bank of America Corp. (b)........................... 3.59% 07/21/28 $ 477,914
1,091,000 Bank of America Corp. (b)........................... 3.42% 12/20/28 1,028,593
250,000 Bank of America Corp. (b)........................... 3.97% 03/05/29 246,352
250,000 Bank of America Corp. (b)........................... 4.24% 04/24/38 243,309
225,000 Bank of America Corp................................ 5.88% 02/07/42 263,948
250,000 Bank of America Corp. (b)........................... 4.44% 01/20/48 244,658
500,000 Bank of America Corp. (b)........................... 3.95% 01/23/49 451,404
286,000 Bank of America Corp., 3 Mo. LIBOR + 0.38% (a)...... 2.74% 01/23/22 284,345
444,000 Bank of America Corp., 3 Mo. LIBOR + 0.65% (a)...... 2.99% 06/25/22 443,774
1,000,000 Bank of America Corp., 3 Mo. LIBOR + 0.77% (a)...... 3.13% 02/05/26 982,967
250,000 Bank of America Corp., 3 Mo. LIBOR + 0.79% (a)...... 3.11% 03/05/24 249,325
400,000 Bank of America Corp., 3 Mo. LIBOR + 0.87% (a)...... 3.21% 04/01/19 402,347
1,000,000 Bank of America Corp., 3 Mo. LIBOR + 1.16% (a)...... 3.52% 01/20/23 1,016,362
250,000 Bank of America Corp., 3 Mo. LIBOR + 1.18% (a)...... 3.54% 10/21/22 254,700
500,000 Citibank N.A........................................ 1.85% 09/18/19 494,145
500,000 Citibank N.A., 3 Mo. LIBOR + 0.32% (a).............. 2.68% 05/01/20 500,486
300,000 Citigroup, Inc...................................... 2.05% 06/07/19 297,664
500,000 Citigroup, Inc...................................... 2.45% 01/10/20 494,567
250,000 Citigroup, Inc...................................... 2.40% 02/18/20 246,910
600,000 Citigroup, Inc...................................... 2.70% 03/30/21 588,696
350,000 Citigroup, Inc...................................... 2.35% 08/02/21 338,334
250,000 Citigroup, Inc...................................... 2.90% 12/08/21 245,104
775,000 Citigroup, Inc...................................... 4.50% 01/14/22 796,715
500,000 Citigroup, Inc...................................... 2.75% 04/25/22 484,407
500,000 Citigroup, Inc...................................... 2.70% 10/27/22 480,645
500,000 Citigroup, Inc. (b)................................. 2.88% 07/24/23 482,598
250,000 Citigroup, Inc. (b)................................. 4.04% 06/01/24 251,631
450,000 Citigroup, Inc...................................... 4.60% 03/09/26 450,075
300,000 Citigroup, Inc...................................... 3.40% 05/01/26 284,763
250,000 Citigroup, Inc...................................... 3.20% 10/21/26 232,732
300,000 Citigroup, Inc...................................... 4.30% 11/20/26 293,246
350,000 Citigroup, Inc...................................... 4.45% 09/29/27 344,658
500,000 Citigroup, Inc. (b)................................. 3.89% 01/10/28 484,788
1,000,000 Citigroup, Inc. (b)................................. 3.67% 07/24/28 952,493
500,000 Citigroup, Inc...................................... 4.13% 07/25/28 479,276
500,000 Citigroup, Inc. (b)................................. 3.52% 10/27/28 470,688
250,000 Citigroup, Inc. (b)................................. 4.08% 04/23/29 245,582
500,000 Citigroup, Inc. (b)................................. 3.88% 01/24/39 455,761
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 231,797
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 121,252
750,000 Citigroup, Inc...................................... 4.75% 05/18/46 715,881
500,000 Citigroup, Inc. (b)................................. 4.28% 04/24/48 474,789
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 0.79% (a)............ 3.13% 01/10/20 1,007,093
250,000 Citigroup, Inc., 3 Mo. LIBOR + 1.02% (a)............ 3.35% 06/01/24 250,427
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (a)............ 3.39% 12/08/21 1,015,378
500,000 Citigroup, Inc., 3 Mo. LIBOR + 1.10% (a)............ 3.42% 05/17/24 502,838
250,000 Fifth Third Bancorp................................. 3.95% 03/14/28 247,094
600,000 HSBC Bank USA N.A................................... 4.88% 08/24/20 618,582
400,000 JPMorgan Chase & Co................................. 2.20% 10/22/19 396,294
150,000 JPMorgan Chase & Co................................. 2.55% 03/01/21 147,054
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 569,144
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 450,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 $ 438,602
325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 319,386
250,000 JPMorgan Chase & Co. (b)............................ 2.78% 04/25/23 242,489
500,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 480,326
400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 402,940
250,000 JPMorgan Chase & Co. (b)............................ 3.56% 04/23/24 247,820
850,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 814,098
300,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 296,734
250,000 JPMorgan Chase & Co................................. 3.63% 12/01/27 235,507
500,000 JPMorgan Chase & Co. (b)............................ 3.78% 02/01/28 488,357
500,000 JPMorgan Chase & Co. (b)............................ 3.54% 05/01/28 479,233
500,000 JPMorgan Chase & Co. (b)............................ 3.51% 01/23/29 474,296
250,000 JPMorgan Chase & Co. (b)............................ 4.01% 04/23/29 246,964
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 491,429
250,000 JPMorgan Chase & Co. (b)............................ 3.88% 07/24/38 231,353
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 103,614
150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 153,008
500,000 JPMorgan Chase & Co. (b)............................ 4.26% 02/22/48 471,787
500,000 JPMorgan Chase & Co. (b)............................ 4.03% 07/24/48 455,632
250,000 JPMorgan Chase & Co. (b)............................ 3.96% 11/15/48 225,344
500,000 JPMorgan Chase & Co. (b)............................ 3.90% 01/23/49 450,073
1,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.55% (a)....... 2.88% 03/09/21 1,003,496
250,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.73% (a)....... 3.09% 04/23/24 248,904
500,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.85% (a)....... 3.19% 01/10/25 499,930
1,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 1.00% (a)....... 3.35% 01/15/23 1,012,079
250,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 1.23% (a)....... 3.59% 10/24/23 254,685
500,000 JPMorgan Chase Bank N.A. (b)........................ 2.60% 02/01/21 495,695
250,000 JPMorgan Chase Bank N.A. (b)........................ 3.09% 04/26/21 249,480
333,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.29% (a)... 2.65% 02/01/21 333,363
250,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.34% (a)... 2.70% 04/26/21 250,126
500,000 Regions Bank........................................ 2.75% 04/01/21 492,044
250,000 Regions Bank, 3 Mo. LIBOR + 0.38% (a)............... 2.72% 04/01/21 249,793
250,000 Santander Holdings USA, Inc......................... 3.70% 03/28/22 246,534
250,000 Santander Holdings USA, Inc......................... 4.40% 07/13/27 240,189
200,000 Wells Fargo & Co.................................... 2.15% 01/30/20 197,240
100,000 Wells Fargo & Co.................................... 2.55% 12/07/20 98,455
900,000 Wells Fargo & Co.................................... 3.00% 01/22/21 894,428
550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 537,932
300,000 Wells Fargo & Co.................................... 2.10% 07/26/21 288,389
500,000 Wells Fargo & Co.................................... 2.63% 07/22/22 481,866
425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 410,926
550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 510,399
100,000 Wells Fargo & Co.................................... 4.10% 06/03/26 98,088
250,000 Wells Fargo & Co.................................... 3.00% 10/23/26 231,084
200,000 Wells Fargo & Co.................................... 4.30% 07/22/27 197,463
500,000 Wells Fargo & Co. (b)............................... 3.58% 05/22/28 479,601
100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 98,987
275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 252,348
750,000 Wells Fargo & Co.................................... 4.75% 12/07/46 727,426
1,000,000 Wells Fargo & Co., 3 Mo. LIBOR + 0.93% (a).......... 3.29% 02/11/22 1,010,615
1,000,000 Wells Fargo & Co., 3 Mo. LIBOR + 1.11% (a).......... 3.47% 01/24/23 1,015,618
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 250,000 Wells Fargo & Co., 3 Mo. LIBOR + 1.23% (a).......... 3.59% 10/31/23 $ 255,215
200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 231,145
500,000 Wells Fargo Bank N.A., 3 Mo. LIBOR + 0.65% (a)...... 2.96% 12/06/19 503,448
-------------
53,519,804
-------------
BEVERAGES - 1.1%
690,000 Anheuser-Busch Inbev Finance, Inc................... 2.65% 02/01/21 680,910
625,000 Anheuser-Busch Inbev Finance, Inc................... 3.30% 02/01/23 620,427
600,000 Anheuser-Busch Inbev Finance, Inc................... 3.65% 02/01/26 587,943
875,000 Anheuser-Busch Inbev Finance, Inc................... 4.70% 02/01/36 889,452
1,100,000 Anheuser-Busch Inbev Finance, Inc................... 4.90% 02/01/46 1,135,494
200,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 193,279
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.50% 01/12/24 248,766
500,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.00% 04/13/28 499,841
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.38% 04/15/38 243,494
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.60% 04/15/48 247,303
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.75% 04/15/58 245,269
500,000 Anheuser-Busch Inbev Worldwide, Inc., 3 Mo. LIBOR
+ 0.74% (a)...................................... 3.05% 01/12/24 504,817
150,000 Coca-Cola (The) Co.................................. 1.88% 10/27/20 146,664
975,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 973,226
250,000 Constellation Brands, Inc........................... 3.20% 02/15/23 243,515
250,000 Constellation Brands, Inc........................... 3.60% 02/15/28 236,781
250,000 Constellation Brands, Inc........................... 4.10% 02/15/48 223,349
-------------
7,920,530
-------------
BIOTECHNOLOGY - 0.5%
350,000 AbbVie, Inc......................................... 2.50% 05/14/20 345,938
375,000 AbbVie, Inc......................................... 2.90% 11/06/22 364,256
250,000 AbbVie, Inc......................................... 3.60% 05/14/25 242,491
275,000 AbbVie, Inc......................................... 4.40% 11/06/42 262,168
300,000 AbbVie, Inc......................................... 4.70% 05/14/45 297,875
450,000 Amgen, Inc.......................................... 2.70% 05/01/22 437,493
500,000 Amgen, Inc.......................................... 2.65% 05/11/22 484,652
200,000 Amgen, Inc.......................................... 3.63% 05/22/24 199,428
100,000 Amgen, Inc.......................................... 2.60% 08/19/26 90,423
500,000 Amgen, Inc.......................................... 3.20% 11/02/27 469,147
350,000 Amgen, Inc.......................................... 4.40% 05/01/45 334,860
-------------
3,528,731
-------------
BUILDING PRODUCTS - 0.2%
450,000 Masco Corp.......................................... 3.50% 04/01/21 449,701
250,000 Masco Corp.......................................... 3.50% 11/15/27 230,580
250,000 Masco Corp.......................................... 4.50% 05/15/47 219,665
500,000 Owens Corning....................................... 4.30% 07/15/47 413,050
250,000 Owens Corning....................................... 4.40% 01/30/48 209,527
-------------
1,522,523
-------------
CAPITAL MARKETS - 3.6%
500,000 Goldman Sachs Bank USA.............................. 3.20% 06/05/20 501,595
500,000 Goldman Sachs Group (The), Inc...................... 1.95% 07/23/19 495,153
600,000 Goldman Sachs Group (The), Inc...................... 2.55% 10/23/19 596,514
500,000 Goldman Sachs Group (The), Inc...................... 2.30% 12/13/19 494,960
500,000 Goldman Sachs Group (The), Inc...................... 2.60% 04/23/20 495,498
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 700,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 $ 685,008
500,000 Goldman Sachs Group (The), Inc...................... 2.35% 11/15/21 481,230
500,000 Goldman Sachs Group (The), Inc...................... 3.00% 04/26/22 488,712
500,000 Goldman Sachs Group (The), Inc. (b)................. 2.88% 10/31/22 488,340
700,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 696,121
250,000 Goldman Sachs Group (The), Inc. (b)................. 2.91% 06/05/23 241,489
500,000 Goldman Sachs Group (The), Inc. (b)................. 2.91% 07/24/23 482,040
600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 600,872
150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 144,978
500,000 Goldman Sachs Group (The), Inc. (b)................. 3.27% 09/29/25 475,158
600,000 Goldman Sachs Group (The), Inc...................... 4.25% 10/21/25 591,754
550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 533,769
500,000 Goldman Sachs Group (The), Inc...................... 3.50% 11/16/26 471,612
750,000 Goldman Sachs Group (The), Inc...................... 3.85% 01/26/27 721,023
250,000 Goldman Sachs Group (The), Inc. (b)................. 3.69% 06/05/28 237,262
500,000 Goldman Sachs Group (The), Inc. (b)................. 3.81% 04/23/29 476,144
500,000 Goldman Sachs Group (The), Inc. (b)................. 4.22% 05/01/29 493,436
500,000 Goldman Sachs Group (The), Inc. (b)................. 4.02% 10/31/38 456,463
500,000 Goldman Sachs Group (The), Inc. (b)................. 4.41% 04/23/39 480,418
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 467,925
500,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 0.73% (a)...................................... 3.07% 12/27/20 501,814
400,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 0.75% (a)...................................... 3.08% 02/23/23 398,756
700,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 0.80% (a)...................................... 3.13% 12/13/19 704,490
250,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 1.05% (a)...................................... 3.37% 06/05/23 251,849
497,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 1.11% (a)...................................... 3.47% 04/26/22 502,074
500,000 Goldman Sachs Group (The), Inc., 3 Mo. LIBOR
+ 1.17% (a)...................................... 3.49% 05/15/26 494,414
400,000 Morgan Stanley...................................... 2.65% 01/27/20 397,246
1,000,000 Morgan Stanley...................................... 2.50% 04/21/21 977,080
550,000 Morgan Stanley...................................... 5.50% 07/28/21 582,412
500,000 Morgan Stanley...................................... 2.63% 11/17/21 485,635
500,000 Morgan Stanley...................................... 2.75% 05/19/22 484,639
500,000 Morgan Stanley...................................... 3.13% 01/23/23 488,380
300,000 Morgan Stanley...................................... 3.75% 02/25/23 300,531
500,000 Morgan Stanley (b).................................. 3.74% 04/24/24 497,542
450,000 Morgan Stanley...................................... 3.88% 04/29/24 451,146
800,000 Morgan Stanley...................................... 3.88% 01/27/26 788,252
250,000 Morgan Stanley...................................... 4.35% 09/08/26 247,008
250,000 Morgan Stanley...................................... 3.63% 01/20/27 240,318
500,000 Morgan Stanley (b).................................. 3.59% 07/22/28 475,766
500,000 Morgan Stanley (b).................................. 3.77% 01/24/29 482,236
500,000 Morgan Stanley (b).................................. 3.97% 07/22/38 464,797
500,000 Morgan Stanley (b).................................. 4.46% 04/22/39 490,251
350,000 Morgan Stanley...................................... 6.38% 07/24/42 426,559
100,000 Morgan Stanley...................................... 4.30% 01/27/45 94,835
250,000 Morgan Stanley...................................... 4.38% 01/22/47 239,312
500,000 Morgan Stanley, 3 Mo. LIBOR + 0.55% (a)............. 2.90% 02/10/21 501,097
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 100,000 Morgan Stanley, 3 Mo. LIBOR + 0.80% (a)............. 3.16% 02/14/20 $ 100,312
875,000 Morgan Stanley, 3 Mo. LIBOR + 1.18% (a)............. 3.54% 01/20/22 886,734
500,000 Morgan Stanley, 3 Mo. LIBOR + 1.22% (a)............. 3.58% 05/08/24 505,337
500,000 Morgan Stanley, 3 Mo. LIBOR + 1.40% (a)............. 3.76% 10/24/23 511,747
-------------
26,270,043
-------------
CHEMICALS - 0.3%
525,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 550,358
200,000 Dow Chemical (The) Co............................... 3.00% 11/15/22 194,966
75,000 Dow Chemical (The) Co............................... 4.63% 10/01/44 74,049
250,000 EI du Pont de Nemours & Co.......................... 2.20% 05/01/20 246,487
140,000 EI du Pont de Nemours & Co.,
3 Mo. LIBOR + 0.53% (a).......................... 2.89% 05/01/20 140,516
100,000 Westlake Chemical Corp.............................. 3.60% 08/15/26 95,042
250,000 Westlake Chemical Corp.............................. 5.00% 08/15/46 253,539
500,000 Westlake Chemical Corp.............................. 4.38% 11/15/47 462,607
-------------
2,017,564
-------------
COMMUNICATIONS EQUIPMENT - 0.3%
100,000 Cisco Systems, Inc.................................. 2.45% 06/15/20 99,404
800,000 Cisco Systems, Inc.................................. 2.20% 09/20/23 755,439
500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 506,008
100,000 Cisco Systems, Inc.................................. 2.95% 02/28/26 96,185
200,000 Cisco Systems, Inc.................................. 2.50% 09/20/26 185,465
225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 278,909
-------------
1,921,410
-------------
CONSTRUCTION MATERIALS - 0.2%
250,000 CRH America Finance, Inc. (c)....................... 3.40% 05/09/27 235,751
250,000 CRH America Finance, Inc. (c)....................... 3.95% 04/04/28 241,838
250,000 CRH America Finance, Inc. (c)....................... 4.40% 05/09/47 230,352
250,000 CRH America Finance, Inc. (c)....................... 4.50% 04/04/48 235,451
250,000 Vulcan Materials Co................................. 4.50% 06/15/47 227,854
-------------
1,171,246
-------------
CONSUMER FINANCE - 3.1%
250,000 American Express Co................................. 2.20% 10/30/20 244,383
250,000 American Express Co................................. 2.50% 08/01/22 239,967
500,000 American Express Co................................. 3.00% 10/30/24 477,754
450,000 American Express Co................................. 3.63% 12/05/24 443,838
500,000 American Express Co., 3 Mo. LIBOR + 0.65% (a)....... 2.97% 02/27/23 499,326
500,000 American Express Credit Corp........................ 1.70% 10/30/19 492,342
250,000 American Express Credit Corp........................ 2.20% 03/03/20 246,780
150,000 American Express Credit Corp........................ 2.60% 09/14/20 148,173
575,000 American Express Credit Corp........................ 2.25% 05/05/21 558,973
250,000 American Express Credit Corp........................ 2.70% 03/03/22 244,200
500,000 American Express Credit Corp........................ 3.30% 05/03/27 482,361
297,000 American Express Credit Corp.,
3 Mo. LIBOR + 0.55% (a).......................... 2.88% 03/18/19 297,980
250,000 American Express Credit Corp.,
3 Mo. LIBOR + 0.70% (a).......................... 3.02% 03/03/22 251,724
550,000 Capital One Financial Corp.......................... 3.75% 04/24/24 540,158
500,000 Capital One Financial Corp.......................... 3.30% 10/30/24 475,580
250,000 Capital One Financial Corp.......................... 4.25% 04/30/25 249,497
350,000 Capital One Financial Corp.......................... 3.75% 07/28/26 325,773
500,000 Capital One Financial Corp.......................... 3.80% 01/31/28 472,902
500,000 Capital One Financial Corp.,
3 Mo. LIBOR + 0.72% (a).......................... 3.08% 01/30/23 497,416
Page 22 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER FINANCE (CONTINUED)
$ 500,000 Capital One Financial Corp.,
3 Mo. LIBOR + 0.95% (a).......................... 3.28% 03/09/22 $ 502,153
250,000 Capital One N.A..................................... 2.25% 09/13/21 239,792
500,000 Capital One N.A..................................... 2.65% 08/08/22 480,228
1,000,000 Capital One N.A., 3 Mo. LIBOR + 1.15% (a)........... 3.51% 01/30/23 1,008,451
500,000 Caterpillar Financial Services Corp................. 2.00% 11/29/19 494,173
500,000 Caterpillar Financial Services Corp................. 2.10% 01/10/20 494,866
250,000 Caterpillar Financial Services Corp................. 1.85% 09/04/20 243,529
1,039,000 Caterpillar Financial Services Corp................. 1.70% 08/09/21 995,558
250,000 Caterpillar Financial Services Corp................. 2.40% 06/06/22 242,612
1,000,000 Caterpillar Financial Services Corp................. 2.55% 11/29/22 966,333
150,000 Caterpillar Financial Services Corp................. 3.25% 12/01/24 147,607
500,000 Caterpillar Financial Services Corp., 3 Mo. LIBOR
+ 0.13% (a)...................................... 2.45% 11/29/19 500,362
429,000 Caterpillar Financial Services Corp., 3 Mo. LIBOR
+ 0.18% (a)...................................... 2.51% 05/15/20 429,256
300,000 Caterpillar Financial Services Corp., 3 Mo. LIBOR
+ 0.51% (a)...................................... 2.85% 01/10/20 301,467
500,000 Discover Bank....................................... 3.35% 02/06/23 487,761
100,000 Ford Motor Credit Co., LLC.......................... 3.22% 01/09/22 97,910
250,000 Ford Motor Credit Co., LLC.......................... 3.34% 03/28/22 244,865
500,000 Ford Motor Credit Co., LLC.......................... 2.98% 08/03/22 482,061
450,000 Ford Motor Credit Co., LLC.......................... 3.10% 05/04/23 429,024
725,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 729,655
200,000 Ford Motor Credit Co., LLC.......................... 3.81% 01/09/24 194,375
350,000 Ford Motor Credit Co., LLC.......................... 4.13% 08/04/25 341,729
1,000,000 Ford Motor Credit Co., LLC.......................... 3.82% 11/02/27 929,760
250,000 General Motors Financial Co., Inc................... 2.65% 04/13/20 247,097
250,000 General Motors Financial Co., Inc................... 2.45% 11/06/20 244,537
250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 246,922
250,000 General Motors Financial Co., Inc................... 3.50% 11/07/24 238,383
200,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 207,563
100,000 General Motors Financial Co., Inc................... 4.00% 10/06/26 94,968
250,000 General Motors Financial Co., Inc................... 4.35% 01/17/27 242,329
250,000 General Motors Financial Co., Inc................... 3.85% 01/05/28 231,458
750,000 General Motors Financial Co., Inc., 3 Mo. LIBOR
+ 0.99% (a)...................................... 3.33% 01/05/23 752,922
250,000 General Motors Financial Co., Inc., 3 Mo. LIBOR
+ 1.55% (a)...................................... 3.90% 01/14/22 256,289
500,000 John Deere Capital Corp............................. 3.45% 03/13/25 498,782
500,000 John Deere Capital Corp............................. 3.05% 01/06/28 476,236
500,000 Synchrony Financial................................. 3.95% 12/01/27 462,141
-------------
22,372,281
-------------
CONTAINERS & PACKAGING - 0.2%
350,000 International Paper Co.............................. 4.40% 08/15/47 319,285
500,000 Packaging Corp. of America.......................... 3.40% 12/15/27 472,517
250,000 WestRock Co. (c).................................... 3.00% 09/15/24 237,338
250,000 WestRock Co. (c).................................... 3.38% 09/15/27 235,016
-------------
1,264,156
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.2%
250,000 Berkshire Hathaway Finance Corp., 3 Mo. LIBOR
+ 0.32% (a)...................................... 2.66% 01/10/20 250,908
See Notes to Financial Statements Page 23
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
$ 125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 $ 122,407
425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 409,904
350,000 Dell International LLC/EMC Corp. (c)................ 3.48% 06/01/19 350,960
250,000 Dell International LLC/EMC Corp. (c)................ 4.42% 06/15/21 253,825
-------------
1,388,004
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.2%
300,000 AT&T, Inc........................................... 2.45% 06/30/20 295,605
250,000 AT&T, Inc........................................... 3.20% 03/01/22 245,537
250,000 AT&T, Inc........................................... 3.80% 03/01/24 245,488
150,000 AT&T, Inc........................................... 3.90% 03/11/24 148,039
350,000 AT&T, Inc........................................... 3.40% 05/15/25 328,703
650,000 AT&T, Inc........................................... 4.13% 02/17/26 636,347
545,000 AT&T, Inc. (c)...................................... 4.10% 02/15/28 521,806
462,000 AT&T, Inc. (c)...................................... 4.30% 02/15/30 437,063
250,000 AT&T, Inc........................................... 5.25% 03/01/37 246,612
425,000 AT&T, Inc........................................... 4.80% 06/15/44 387,002
250,000 AT&T, Inc........................................... 4.35% 06/15/45 212,567
250,000 AT&T, Inc........................................... 4.75% 05/15/46 224,137
550,000 AT&T, Inc........................................... 5.65% 02/15/47 555,800
250,000 AT&T, Inc........................................... 5.70% 03/01/57 249,678
650,000 Verizon Communications, Inc......................... 3.50% 11/01/24 629,581
522,000 Verizon Communications, Inc......................... 3.38% 02/15/25 500,429
100,000 Verizon Communications, Inc......................... 2.63% 08/15/26 88,913
250,000 Verizon Communications, Inc......................... 4.13% 03/16/27 247,859
231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 213,737
298,000 Verizon Communications, Inc......................... 4.13% 08/15/46 256,638
500,000 Verizon Communications, Inc......................... 4.86% 08/21/46 479,575
250,000 Verizon Communications, Inc......................... 4.52% 09/15/48 228,826
249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 235,294
522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 465,510
100,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 1.00% (a).......................... 3.33% 03/16/22 101,640
200,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 1.10% (a).......................... 3.44% 05/15/25 199,956
-------------
8,382,342
-------------
ELECTRIC UTILITIES - 3.6%
500,000 AEP Texas, Inc...................................... 2.40% 10/01/22 480,674
500,000 AEP Texas, Inc...................................... 3.80% 10/01/47 471,251
750,000 AEP Transmission Co., LLC........................... 3.10% 12/01/26 718,373
250,000 AEP Transmission Co., LLC........................... 4.00% 12/01/46 244,720
500,000 AEP Transmission Co., LLC........................... 3.75% 12/01/47 465,740
250,000 Alabama Power Co.................................... 2.45% 03/30/22 243,233
250,000 Alabama Power Co.................................... 3.70% 12/01/47 232,317
250,000 American Electric Power Co., Inc.................... 2.95% 12/15/22 243,612
500,000 American Electric Power Co., Inc.................... 3.20% 11/13/27 468,227
300,000 Appalachian Power Co................................ 4.40% 05/15/44 304,242
250,000 Baltimore Gas & Electric Co......................... 2.40% 08/15/26 227,789
250,000 Baltimore Gas & Electric Co......................... 3.50% 08/15/46 224,265
250,000 Baltimore Gas & Electric Co......................... 3.75% 08/15/47 234,799
240,000 CenterPoint Energy Houston Electric LLC............. 2.25% 08/01/22 230,010
250,000 CenterPoint Energy Houston Electric LLC............. 2.40% 09/01/26 228,344
500,000 CenterPoint Energy Houston Electric LLC............. 3.00% 02/01/27 474,210
295,000 CenterPoint Energy Houston Electric LLC............. 4.50% 04/01/44 320,284
Page 24 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 250,000 CenterPoint Energy Houston Electric LLC............. 3.95% 03/01/48 $ 246,028
500,000 Cleveland Electric Illuminating (The) Co. (c)....... 3.50% 04/01/28 475,137
300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 301,526
200,000 Commonwealth Edison Co.............................. 2.55% 06/15/26 183,937
250,000 Commonwealth Edison Co.............................. 2.95% 08/15/27 236,778
300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 279,360
400,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 369,717
500,000 Commonwealth Edison Co.............................. 3.75% 08/15/47 469,518
250,000 Commonwealth Edison Co.............................. 4.00% 03/01/48 245,180
100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 96,552
500,000 Duke Energy Carolinas LLC........................... 3.05% 03/15/23 494,443
350,000 Duke Energy Carolinas LLC........................... 6.00% 01/15/38 432,445
250,000 Duke Energy Corp.................................... 1.80% 09/01/21 239,482
300,000 Duke Energy Corp.................................... 3.55% 09/15/21 301,439
500,000 Duke Energy Corp.................................... 2.40% 08/15/22 481,356
250,000 Duke Energy Corp.................................... 3.15% 08/15/27 232,503
450,000 Duke Energy Corp.................................... 3.75% 09/01/46 398,004
500,000 Duke Energy Corp.................................... 3.95% 08/15/47 458,275
262,500 Duke Energy Florida LLC............................. 2.10% 12/15/19 261,017
500,000 Duke Energy Florida LLC............................. 3.20% 01/15/27 481,564
250,000 Duke Energy Florida LLC............................. 3.80% 07/15/28 251,660
250,000 Duke Energy Florida LLC............................. 3.40% 10/01/46 220,194
250,000 Duke Energy Florida LLC............................. 4.20% 07/15/48 252,545
250,000 Duke Energy Progress LLC............................ 3.70% 10/15/46 230,668
250,000 Duke Energy Progress LLC............................ 3.60% 09/15/47 228,192
500,000 Eversource Energy................................... 2.90% 10/01/24 475,259
575,000 Exelon Corp......................................... 5.15% 12/01/20 594,586
200,000 Exelon Corp......................................... 2.45% 04/15/21 194,499
500,000 Exelon Corp......................................... 3.50% 06/01/22 494,663
250,000 Exelon Corp......................................... 4.45% 04/15/46 243,840
211,000 FirstEnergy Corp.................................... 2.85% 07/15/22 204,675
350,000 Florida Power & Light Co............................ 3.25% 06/01/24 347,496
210,000 Florida Power & Light Co............................ 4.05% 06/01/42 212,775
250,000 Florida Power & Light Co............................ 3.95% 03/01/48 245,916
250,000 Florida Power & Light Co............................ 4.13% 06/01/48 253,345
250,000 Indiana Michigan Power Co........................... 3.85% 05/15/28 250,944
100,000 Indiana Michigan Power Co........................... 4.55% 03/15/46 104,017
500,000 Indiana Michigan Power Co........................... 3.75% 07/01/47 469,682
250,000 Kansas City Power & Light Co........................ 4.20% 03/15/48 246,774
410,000 Metropolitan Edison Co. (c)......................... 3.50% 03/15/23 406,241
500,000 Mississippi Power Co., 3 Mo. LIBOR + 0.65% (a)...... 2.99% 03/27/20 500,017
125,000 Monongahela Power Co. (c)........................... 5.40% 12/15/43 148,343
150,000 Ohio Edison Co...................................... 6.88% 07/15/36 198,391
250,000 PECO Energy Co...................................... 3.70% 09/15/47 235,691
100,000 Public Service Electric & Gas Co.................... 1.90% 03/15/21 96,748
195,000 Public Service Electric & Gas Co.................... 2.38% 05/15/23 186,433
550,000 Public Service Electric & Gas Co.................... 2.25% 09/15/26 497,456
250,000 Public Service Electric & Gas Co.................... 3.00% 05/15/27 236,920
275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 270,184
100,000 Public Service Electric & Gas Co.................... 3.80% 03/01/46 96,380
500,000 Public Service Electric & Gas Co.................... 3.60% 12/01/47 461,500
250,000 Public Service Electric & Gas Co.................... 4.05% 05/01/48 251,335
See Notes to Financial Statements Page 25
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 550,000 Southern (The) Co................................... 1.85% 07/01/19 $ 544,664
815,000 Southern (The) Co................................... 2.35% 07/01/21 790,026
250,000 Southern (The) Co................................... 3.25% 07/01/26 235,075
425,000 Southern (The) Co................................... 4.40% 07/01/46 416,563
500,000 Southwestern Electric Power Co...................... 2.75% 10/01/26 459,758
100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 124,045
500,000 Virginia Electric & Power Co........................ 2.75% 03/15/23 485,128
200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 198,671
450,000 Virginia Electric & Power Co........................ 2.95% 11/15/26 422,145
250,000 Virginia Electric & Power Co........................ 3.50% 03/15/27 245,916
475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 484,381
250,000 Virginia Electric & Power Co........................ 4.00% 11/15/46 241,223
250,000 Virginia Electric & Power Co........................ 3.80% 09/15/47 229,010
-------------
26,480,325
-------------
ENERGY EQUIPMENT & SERVICES - 0.1%
250,000 Halliburton Co...................................... 5.00% 11/15/45 267,367
250,000 Patterson-UTI Energy, Inc. (c)...................... 3.95% 02/01/28 234,290
-------------
501,657
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.1%
500,000 American Tower Corp................................. 3.60% 01/15/28 464,200
-------------
FOOD & STAPLES RETAILING - 0.7%
250,000 Walmart, Inc........................................ 3.13% 06/23/21 251,347
1,000,000 Walmart, Inc........................................ 2.35% 12/15/22 966,855
250,000 Walmart, Inc........................................ 3.40% 06/26/23 252,030
325,000 Walmart, Inc........................................ 3.30% 04/22/24 323,813
500,000 Walmart, Inc........................................ 2.65% 12/15/24 480,121
250,000 Walmart, Inc........................................ 3.55% 06/26/25 251,812
250,000 Walmart, Inc........................................ 3.70% 06/26/28 252,413
250,000 Walmart, Inc........................................ 3.95% 06/28/38 251,131
1,000,000 Walmart, Inc........................................ 3.63% 12/15/47 933,394
250,000 Walmart, Inc........................................ 4.05% 06/29/48 252,397
750,000 Walmart, Inc., 3 Mo. LIBOR + 0.04% (a).............. 2.38% 06/23/20 750,435
-------------
4,965,748
-------------
FOOD PRODUCTS - 0.2%
250,000 Campbell Soup Co.................................... 3.95% 03/15/25 241,399
250,000 Campbell Soup Co.................................... 4.15% 03/15/28 238,517
500,000 Tyson Foods, Inc.................................... 3.55% 06/02/27 473,922
500,000 Tyson Foods, Inc.................................... 4.55% 06/02/47 480,711
-------------
1,434,549
-------------
GAS UTILITIES - 0.3%
500,000 CenterPoint Energy Resources Corp................... 3.55% 04/01/23 495,976
500,000 CenterPoint Energy Resources Corp................... 4.00% 04/01/28 493,756
500,000 Southern Co. Gas Capital Corp....................... 2.45% 10/01/23 470,728
500,000 Southern Co. Gas Capital Corp....................... 3.95% 10/01/46 461,684
500,000 Southern Co. Gas Capital Corp....................... 4.40% 05/30/47 496,660
-------------
2,418,804
-------------
Page 26 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
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 $ 246,266
500,000 Abbott Laboratories................................. 3.40% 11/30/23 493,916
500,000 Abbott Laboratories................................. 3.75% 11/30/26 492,339
1,100,000 Abbott Laboratories................................. 4.90% 11/30/46 1,188,816
550,000 Becton Dickinson and Co............................. 3.36% 06/06/24 529,022
800,000 Becton Dickinson and Co............................. 3.70% 06/06/27 758,698
600,000 Becton Dickinson and Co............................. 4.67% 06/06/47 582,113
300,000 Medtronic, Inc...................................... 2.50% 03/15/20 297,992
750,000 Medtronic, Inc...................................... 3.15% 03/15/22 744,379
600,000 Medtronic, Inc...................................... 3.50% 03/15/25 594,237
1,150,000 Medtronic, Inc...................................... 4.63% 03/15/45 1,221,909
-------------
7,149,687
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.6%
250,000 Anthem, Inc......................................... 4.10% 03/01/28 245,041
250,000 Anthem, Inc......................................... 4.55% 03/01/48 239,097
750,000 CVS Health Corp..................................... 3.13% 03/09/20 749,336
600,000 CVS Health Corp..................................... 2.13% 06/01/21 577,177
500,000 CVS Health Corp..................................... 3.70% 03/09/23 497,995
700,000 CVS Health Corp..................................... 4.00% 12/05/23 703,728
500,000 CVS Health Corp..................................... 4.10% 03/25/25 498,075
178,000 CVS Health Corp..................................... 3.88% 07/20/25 172,733
150,000 CVS Health Corp..................................... 2.88% 06/01/26 136,777
500,000 CVS Health Corp..................................... 4.30% 03/25/28 494,175
350,000 CVS Health Corp..................................... 4.78% 03/25/38 345,338
200,000 CVS Health Corp..................................... 5.05% 03/25/48 204,321
750,000 CVS Health Corp., 3 Mo. LIBOR + 0.72% (a)........... 3.05% 03/09/21 754,072
500,000 UnitedHealth Group, Inc............................. 1.95% 10/15/20 487,969
275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 285,516
100,000 UnitedHealth Group, Inc............................. 2.13% 03/15/21 97,488
550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 544,790
500,000 UnitedHealth Group, Inc............................. 2.38% 10/15/22 481,043
100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 100,109
250,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 238,827
500,000 UnitedHealth Group, Inc............................. 3.45% 01/15/27 486,690
500,000 UnitedHealth Group, Inc............................. 3.38% 04/15/27 485,184
500,000 UnitedHealth Group, Inc............................. 2.95% 10/15/27 467,129
150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 198,810
573,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 613,630
500,000 UnitedHealth Group, Inc............................. 4.20% 01/15/47 491,047
500,000 UnitedHealth Group, Inc............................. 4.25% 04/15/47 498,985
250,000 UnitedHealth Group, Inc............................. 3.75% 10/15/47 230,770
-------------
11,325,852
-------------
HOTELS, RESTAURANTS & LEISURE - 0.0%
100,000 McDonald's Corp..................................... 4.88% 12/09/45 105,389
-------------
HOUSEHOLD DURABLES - 0.1%
250,000 DR Horton, Inc...................................... 4.38% 09/15/22 255,717
350,000 Newell Brands, Inc.................................. 4.20% 04/01/26 338,450
-------------
594,167
-------------
See Notes to Financial Statements Page 27
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HOUSEHOLD PRODUCTS - 0.2%
$ 250,000 Procter & Gamble (The) Co........................... 1.70% 11/03/21 $ 240,677
500,000 Procter & Gamble (The) Co........................... 2.15% 08/11/22 482,887
100,000 Procter & Gamble (The) Co........................... 2.70% 02/02/26 95,054
250,000 Procter & Gamble (The) Co........................... 2.45% 11/03/26 231,353
500,000 Procter & Gamble (The) Co........................... 2.85% 08/11/27 474,700
250,000 Procter & Gamble (The) Co........................... 3.50% 10/25/47 229,827
-------------
1,754,498
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS - 0.2%
525,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 521,040
500,000 NextEra Energy Capital Holdings, Inc................ 2.80% 01/15/23 483,854
500,000 NextEra Energy Capital Holdings, Inc................ 3.55% 05/01/27 481,512
250,000 Southern Power Co................................... 4.95% 12/15/46 252,352
-------------
1,738,758
-------------
INDUSTRIAL CONGLOMERATES - 0.3%
250,000 3M Co............................................... 3.13% 09/19/46 215,923
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc.............................................. 2.77% 12/15/22 485,351
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc.............................................. 3.34% 12/15/27 465,821
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc.............................................. 4.08% 12/15/47 447,923
129,000 General Electric Co................................. 6.75% 03/15/32 157,868
425,000 General Electric Co................................. 4.50% 03/11/44 417,616
-------------
2,190,502
-------------
INSURANCE - 1.0%
300,000 AIG Global Funding (c).............................. 2.15% 07/02/20 294,089
400,000 American International Group, Inc................... 3.38% 08/15/20 400,914
200,000 American International Group, Inc................... 4.13% 02/15/24 201,171
100,000 American International Group, Inc................... 3.90% 04/01/26 96,938
300,000 American International Group, Inc................... 6.25% 05/01/36 342,921
490,000 Chubb INA Holdings, Inc............................. 2.30% 11/03/20 481,443
200,000 Chubb INA Holdings, Inc............................. 2.88% 11/03/22 196,626
350,000 Chubb INA Holdings, Inc............................. 3.35% 05/03/26 339,696
600,000 Chubb INA Holdings, Inc............................. 4.35% 11/03/45 615,534
250,000 Lincoln National Corp............................... 3.80% 03/01/28 239,358
250,000 Lincoln National Corp............................... 4.35% 03/01/48 231,660
250,000 Marsh & McLennan Cos., Inc.......................... 4.20% 03/01/48 242,847
100,000 MetLife, Inc........................................ 3.00% 03/01/25 94,991
150,000 MetLife, Inc........................................ 3.60% 11/13/25 148,064
300,000 MetLife, Inc........................................ 4.88% 11/13/43 317,320
170,000 MetLife, Inc........................................ 4.60% 05/13/46 172,673
500,000 Metropolitan Life Global Funding I (c).............. 2.65% 04/08/22 486,833
250,000 Metropolitan Life Global Funding I (c).............. 3.00% 09/19/27 234,855
1,000,000 Metropolitan Life Global Funding I, 3 Mo. LIBOR
+ 0.23% (a) (c).................................. 2.56% 01/08/21 999,409
275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 278,820
500,000 Travelers (The) Cos., Inc........................... 4.00% 05/30/47 477,393
250,000 Travelers (The) Cos., Inc........................... 4.05% 03/07/48 242,882
-------------
7,136,437
-------------
Page 28 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
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 $ 246,884
250,000 IBM Credit LLC...................................... 1.80% 01/20/21 242,342
250,000 IBM Credit LLC...................................... 2.65% 02/05/21 247,723
250,000 IBM Credit LLC...................................... 2.20% 09/08/22 239,325
250,000 IBM Credit LLC, 3 Mo. LIBOR + 0.16% (a)............. 2.52% 02/05/21 250,446
500,000 International Business Machines Corp................ 1.63% 05/15/20 488,661
100,000 International Business Machines Corp................ 3.63% 02/12/24 101,027
600,000 Visa, Inc........................................... 2.20% 12/14/20 590,464
500,000 Visa, Inc........................................... 2.15% 09/15/22 479,546
950,000 Visa, Inc........................................... 2.80% 12/14/22 933,120
550,000 Visa, Inc........................................... 3.15% 12/14/25 532,582
250,000 Visa, Inc........................................... 2.75% 09/15/27 232,601
303,000 Visa, Inc........................................... 4.15% 12/14/35 314,537
450,000 Visa, Inc........................................... 4.30% 12/14/45 468,722
500,000 Visa, Inc........................................... 3.65% 09/15/47 468,485
-------------
5,836,465
-------------
MACHINERY - 0.1%
490,000 Parker-Hannifin Corp................................ 3.25% 03/01/27 473,633
245,000 Parker-Hannifin Corp................................ 4.10% 03/01/47 242,187
-------------
715,820
-------------
MEDIA - 0.9%
610,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.91% 07/23/25 616,914
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.20% 03/15/28 234,502
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.38% 04/01/38 236,862
750,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 6.48% 10/23/45 793,100
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.38% 05/01/47 227,814
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.75% 04/01/48 242,875
250,000 Comcast Corp........................................ 3.55% 05/01/28 239,048
100,000 Comcast Corp........................................ 4.60% 08/15/45 96,571
250,000 Comcast Corp........................................ 3.40% 07/15/46 203,239
500,000 Comcast Corp........................................ 4.00% 08/15/47 444,934
250,000 Comcast Corp........................................ 4.00% 03/01/48 220,797
250,000 Cox Communications, Inc. (c)........................ 3.50% 08/15/27 233,011
250,000 Discovery Communications LLC........................ 2.95% 03/20/23 239,342
250,000 Discovery Communications LLC........................ 3.95% 03/20/28 237,224
250,000 Discovery Communications LLC........................ 5.00% 09/20/37 241,443
275,000 Discovery Communications LLC........................ 5.20% 09/20/47 267,719
150,000 Walt Disney (The) Co................................ 3.00% 02/13/26 142,899
350,000 Walt Disney (The) Co................................ 1.85% 07/30/26 305,946
500,000 Walt Disney (The) Co................................ 2.95% 06/15/27 474,350
475,000 Walt Disney (The) Co................................ 4.13% 06/01/44 459,417
100,000 Warner Media LLC.................................... 2.95% 07/15/26 90,054
200,000 Warner Media LLC.................................... 6.50% 11/15/36 225,219
50,000 Warner Media LLC.................................... 4.85% 07/15/45 45,710
-------------
6,518,990
-------------
See Notes to Financial Statements Page 29
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
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 $ 480,062
500,000 Glencore Funding LLC (c)............................ 3.88% 10/27/27 465,788
-------------
945,850
-------------
MULTI-UTILITIES - 1.0%
200,000 Consolidated Edison Co. of New York, Inc............ 3.80% 05/15/28 200,822
335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 343,561
95,000 Consolidated Edison Co. of New York, Inc............ 4.50% 12/01/45 98,538
185,000 Consolidated Edison Co. of New York, Inc............ 3.85% 06/15/46 173,837
500,000 Consolidated Edison Co. of New York, Inc............ 3.88% 06/15/47 470,606
250,000 Consolidated Edison Co. of New York, Inc............ 4.30% 12/01/56 244,669
250,000 Consolidated Edison, Inc............................ 2.00% 03/15/20 245,504
100,000 Consolidated Edison, Inc............................ 2.00% 05/15/21 96,562
250,000 Dominion Energy, Inc................................ 1.60% 08/15/19 246,210
1,000,000 Dominion Energy, Inc................................ 2.58% 07/01/20 985,808
250,000 Dominion Energy, Inc................................ 2.75% 01/15/22 242,651
495,000 Dominion Energy, Inc................................ 4.70% 12/01/44 500,248
330,000 NiSource, Inc....................................... 2.65% 11/17/22 319,302
500,000 NiSource, Inc. (c).................................. 3.65% 06/15/23 500,050
500,000 NiSource, Inc....................................... 3.49% 05/15/27 479,004
750,000 NiSource, Inc....................................... 4.38% 05/15/47 731,361
500,000 NiSource, Inc....................................... 3.95% 03/30/48 464,336
250,000 Public Service Enterprise Group, Inc................ 1.60% 11/15/19 244,589
250,000 Public Service Enterprise Group, Inc................ 2.00% 11/15/21 237,948
500,000 Public Service Enterprise Group, Inc................ 2.65% 11/15/22 481,835
250,000 Sempra Energy....................................... 4.00% 02/01/48 225,623
-------------
7,533,064
-------------
OIL, GAS & CONSUMABLE FUELS - 3.6%
150,000 Anadarko Petroleum Corp............................. 5.55% 03/15/26 161,004
450,000 Andeavor............................................ 3.80% 04/01/28 425,862
250,000 Andeavor Logistics L.P./Tesoro Logistics Finance
Corp............................................. 4.25% 12/01/27 239,932
250,000 Boardwalk Pipelines L.P............................. 5.95% 06/01/26 268,513
750,000 Boardwalk Pipelines L.P............................. 4.45% 07/15/27 729,600
750,000 Chevron Corp........................................ 2.10% 05/16/21 732,753
550,000 Chevron Corp........................................ 2.57% 05/16/23 530,426
500,000 Chevron Corp........................................ 2.90% 03/03/24 486,739
150,000 Chevron Corp........................................ 3.33% 11/17/25 148,563
1,360,000 Chevron Corp........................................ 2.95% 05/16/26 1,306,123
250,000 Chevron Corp., 3 Mo. LIBOR + 0.21% (a).............. 2.53% 03/03/20 250,645
182,000 Chevron Corp., 3 Mo. LIBOR + 0.53% (a).............. 2.85% 03/03/22 184,058
225,000 ConocoPhillips...................................... 6.50% 02/01/39 288,246
250,000 ConocoPhillips Co................................... 5.95% 03/15/46 312,219
325,000 Devon Energy Corp................................... 3.25% 05/15/22 319,768
250,000 Enable Midstream Partners L.P....................... 4.95% 05/15/28 243,502
185,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 193,129
400,000 Enbridge Energy Partners L.P........................ 7.38% 10/15/45 510,613
400,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 391,196
150,000 Energy Transfer Partners L.P........................ 4.20% 09/15/23 150,100
250,000 Energy Transfer Partners L.P........................ 4.20% 04/15/27 236,001
250,000 Energy Transfer Partners L.P........................ 4.95% 06/15/28 249,709
250,000 Energy Transfer Partners L.P........................ 5.80% 06/15/38 248,159
175,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 180,847
Page 30 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 250,000 Energy Transfer Partners L.P........................ 5.30% 04/15/47 $ 229,995
250,000 Energy Transfer Partners L.P........................ 6.00% 06/15/48 250,839
500,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 490,986
150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 144,196
200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 194,733
825,000 Exxon Mobil Corp.................................... 4.11% 03/01/46 841,786
220,000 Kinder Morgan Energy Partners L.P................... 3.50% 03/01/21 219,531
100,000 Kinder Morgan Energy Partners L.P................... 4.15% 02/01/24 99,643
175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 200,012
800,000 Kinder Morgan, Inc.................................. 3.05% 12/01/19 797,800
500,000 Kinder Morgan, Inc.................................. 3.15% 01/15/23 483,264
715,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 714,285
500,000 Kinder Morgan, Inc.................................. 4.30% 03/01/28 486,693
300,000 Kinder Morgan, Inc.................................. 5.55% 06/01/45 303,036
650,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 605,352
500,000 Kinder Morgan, Inc.................................. 5.20% 03/01/48 485,203
250,000 Marathon Oil Corp................................... 3.85% 06/01/25 246,312
500,000 Marathon Oil Corp................................... 4.40% 07/15/27 502,676
259,000 Marathon Oil Corp................................... 5.20% 06/01/45 274,926
250,000 MPLX L.P............................................ 3.38% 03/15/23 244,750
600,000 MPLX L.P............................................ 4.13% 03/01/27 573,368
500,000 MPLX L.P............................................ 4.00% 03/15/28 476,479
705,000 MPLX L.P............................................ 5.20% 03/01/47 703,099
400,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 394,962
250,000 ONEOK, Inc.......................................... 4.55% 07/15/28 252,692
250,000 ONEOK, Inc.......................................... 5.20% 07/15/48 253,310
250,000 Phillips 66......................................... 4.88% 11/15/44 259,207
300,000 Plains All American Pipeline L.P./PAA Finance Corp.. 4.65% 10/15/25 299,417
500,000 Sabine Pass Liquefaction LLC........................ 5.00% 03/15/27 508,433
250,000 Sabine Pass Liquefaction LLC........................ 4.20% 03/15/28 242,503
350,000 Sunoco Logistics Partners Operations L.P............ 3.90% 07/15/26 328,175
500,000 Sunoco Logistics Partners Operations L.P............ 4.00% 10/01/27 468,239
500,000 Sunoco Logistics Partners Operations L.P............ 5.40% 10/01/47 461,361
500,000 TC PipeLines L.P.................................... 3.90% 05/25/27 470,982
250,000 Texas Eastern Transmission L.P. (c)................. 3.50% 01/15/28 235,869
250,000 Texas Eastern Transmission L.P. (c)................. 4.15% 01/15/48 224,988
250,000 Transcontinental Gas Pipe Line Co., LLC (c)......... 4.00% 03/15/28 243,447
500,000 Transcontinental Gas Pipe Line Co., LLC (c)......... 4.60% 03/15/48 482,801
500,000 Valero Energy Corp.................................. 4.35% 06/01/28 498,781
250,000 Western Gas Partners L.P............................ 5.30% 03/01/48 230,547
300,000 Williams Partners L.P............................... 3.60% 03/15/22 298,790
250,000 Williams Partners L.P............................... 3.90% 01/15/25 244,228
95,000 Williams Partners L.P............................... 4.00% 09/15/25 92,995
250,000 Williams Partners L.P............................... 3.75% 06/15/27 236,498
625,000 Williams Partners L.P............................... 4.90% 01/15/45 599,229
270,000 Williams Partners L.P............................... 5.10% 09/15/45 267,665
500,000 Williams Partners L.P............................... 4.85% 03/01/48 478,185
-------------
26,429,975
-------------
PHARMACEUTICALS - 0.4%
250,000 Bayer US Finance II LLC (c)......................... 3.50% 06/25/21 250,668
250,000 Bayer US Finance II LLC (c)......................... 3.88% 12/15/23 250,315
See Notes to Financial Statements Page 31
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 250,000 Bayer US Finance II LLC (c)......................... 4.25% 12/15/25 $ 251,729
250,000 Bayer US Finance II LLC (c)......................... 4.38% 12/15/28 250,997
250,000 Bayer US Finance II LLC (c)......................... 4.63% 06/25/38 248,644
250,000 Bayer US Finance II LLC (c)......................... 4.88% 06/25/48 251,698
250,000 Bayer US Finance II LLC,
3 Mo. LIBOR + 1.01% (a) (c)...................... 3.35% 12/15/23 250,173
250,000 Johnson & Johnson................................... 3.63% 03/03/37 244,792
250,000 Johnson & Johnson................................... 3.75% 03/03/47 244,107
300,000 Merck & Co., Inc.................................... 2.75% 02/10/25 287,055
250,000 Mylan, Inc. (c)..................................... 4.55% 04/15/28 244,790
250,000 Mylan, Inc. (c)..................................... 5.20% 04/15/48 241,277
-------------
3,016,245
-------------
ROAD & RAIL - 0.5%
250,000 CSX Corp............................................ 3.80% 11/01/46 222,435
200,000 CSX Corp............................................ 4.50% 08/01/54 190,483
250,000 CSX Corp............................................ 4.25% 11/01/66 217,155
250,000 Kansas City Southern................................ 4.70% 05/01/48 243,156
250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 233,668
500,000 Norfolk Southern Corp............................... 4.15% 02/28/48 482,985
250,000 Ryder System, Inc................................... 2.25% 09/01/21 241,624
500,000 Ryder System, Inc................................... 2.80% 03/01/22 487,766
300,000 Union Pacific Corp.................................. 3.75% 03/15/24 303,966
250,000 Union Pacific Corp.................................. 3.00% 04/15/27 236,928
183,000 Union Pacific Corp.................................. 4.15% 01/15/45 176,723
225,000 Union Pacific Corp.................................. 4.05% 03/01/46 213,922
250,000 Union Pacific Corp.................................. 4.10% 09/15/67 220,413
-------------
3,471,224
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.4%
100,000 Intel Corp.......................................... 1.70% 05/19/21 96,601
250,000 Intel Corp.......................................... 2.35% 05/11/22 243,191
100,000 Intel Corp.......................................... 3.10% 07/29/22 99,979
375,000 Intel Corp.......................................... 2.70% 12/15/22 367,476
500,000 Intel Corp.......................................... 2.88% 05/11/24 484,627
100,000 Intel Corp.......................................... 2.60% 05/19/26 93,343
250,000 Intel Corp.......................................... 3.15% 05/11/27 242,432
300,000 Intel Corp.......................................... 4.10% 05/19/46 302,212
500,000 Intel Corp.......................................... 4.10% 05/11/47 499,828
163,000 Intel Corp.......................................... 3.73% 12/08/47 153,970
250,000 Intel Corp., 3 Mo. LIBOR + 0.08% (a)................ 2.44% 05/11/20 250,290
250,000 Intel Corp., 3 Mo. LIBOR + 0.35% (a)................ 2.71% 05/11/22 251,690
-------------
3,085,639
-------------
SOFTWARE - 0.9%
250,000 Microsoft Corp...................................... 1.85% 02/06/20 246,863
150,000 Microsoft Corp...................................... 2.00% 11/03/20 147,685
250,000 Microsoft Corp...................................... 1.55% 08/08/21 239,834
800,000 Microsoft Corp...................................... 2.40% 02/06/22 783,438
150,000 Microsoft Corp...................................... 3.63% 12/15/23 153,269
250,000 Microsoft Corp...................................... 2.88% 02/06/24 244,938
200,000 Microsoft Corp...................................... 3.13% 11/03/25 196,672
100,000 Microsoft Corp...................................... 2.40% 08/08/26 92,605
500,000 Microsoft Corp...................................... 3.30% 02/06/27 492,888
Page 32 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE (CONTINUED)
$ 100,000 Microsoft Corp...................................... 3.45% 08/08/36 $ 95,928
250,000 Microsoft Corp...................................... 4.10% 02/06/37 260,971
275,000 Microsoft Corp...................................... 4.45% 11/03/45 296,781
350,000 Microsoft Corp...................................... 3.70% 08/08/46 341,251
950,000 Microsoft Corp...................................... 4.25% 02/06/47 1,010,248
200,000 Oracle Corp......................................... 1.90% 09/15/21 190,571
100,000 Oracle Corp......................................... 2.50% 05/15/22 97,425
500,000 Oracle Corp......................................... 2.40% 09/15/23 471,994
250,000 Oracle Corp......................................... 3.40% 07/08/24 247,886
350,000 Oracle Corp......................................... 2.65% 07/15/26 323,126
400,000 Oracle Corp......................................... 5.38% 07/15/40 452,135
350,000 Oracle Corp......................................... 4.00% 07/15/46 331,067
-------------
6,717,575
-------------
SPECIALTY RETAIL - 0.6%
500,000 Home Depot (The), Inc............................... 2.00% 04/01/21 488,092
770,000 Home Depot (The), Inc............................... 4.40% 04/01/21 797,936
100,000 Home Depot (The), Inc............................... 3.35% 09/15/25 98,524
550,000 Home Depot (The), Inc............................... 3.00% 04/01/26 526,072
250,000 Home Depot (The), Inc............................... 2.13% 09/15/26 223,227
1,000,000 Home Depot (The), Inc............................... 2.80% 09/14/27 929,867
100,000 Home Depot (The), Inc............................... 4.40% 03/15/45 102,485
500,000 Home Depot (The), Inc............................... 4.25% 04/01/46 504,220
500,000 Home Depot (The), Inc............................... 3.90% 06/15/47 480,151
250,000 Home Depot (The), Inc............................... 3.50% 09/15/56 215,396
-------------
4,365,970
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.9%
450,000 Apple, Inc.......................................... 2.85% 05/06/21 449,104
250,000 Apple, Inc.......................................... 1.55% 08/04/21 239,696
250,000 Apple, Inc.......................................... 2.10% 09/12/22 240,363
250,000 Apple, Inc.......................................... 2.40% 01/13/23 241,360
375,000 Apple, Inc.......................................... 2.40% 05/03/23 361,529
250,000 Apple, Inc.......................................... 3.00% 02/09/24 245,046
500,000 Apple, Inc.......................................... 2.85% 05/11/24 484,469
500,000 Apple, Inc.......................................... 2.75% 01/13/25 478,969
100,000 Apple, Inc.......................................... 2.45% 08/04/26 91,884
250,000 Apple, Inc.......................................... 3.35% 02/09/27 244,395
500,000 Apple, Inc.......................................... 3.20% 05/11/27 482,788
250,000 Apple, Inc.......................................... 2.90% 09/12/27 234,965
500,000 Apple, Inc.......................................... 3.00% 11/13/27 475,692
100,000 Apple, Inc.......................................... 4.45% 05/06/44 104,772
100,000 Apple, Inc.......................................... 4.65% 02/23/46 107,986
600,000 Apple, Inc.......................................... 4.25% 02/09/47 610,048
250,000 Apple, Inc.......................................... 3.75% 09/12/47 234,911
250,000 Apple, Inc.......................................... 3.75% 11/13/47 235,408
250,000 Apple, Inc., 3 Mo. LIBOR + 0.20% (a)................ 2.56% 02/07/20 250,746
110,000 Apple, Inc., 3 Mo. LIBOR + 0.50% (a)................ 2.87% 02/09/22 111,389
500,000 Hewlett Packard Enterprise Co. (c).................. 2.10% 10/04/19 493,857
100,000 Hewlett Packard Enterprise Co....................... 3.60% 10/15/20 100,528
-------------
6,519,905
-------------
See Notes to Financial Statements Page 33
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
TOBACCO - 0.1%
$ 250,000 BAT Capital Corp. (c)............................... 3.22% 08/15/24 $ 237,132
250,000 BAT Capital Corp. (c)............................... 3.56% 08/15/27 233,045
250,000 BAT Capital Corp. (c)............................... 4.39% 08/15/37 235,276
250,000 BAT Capital Corp. (c)............................... 4.54% 08/15/47 234,355
-------------
939,808
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.1%
250,000 Air Lease Corp...................................... 2.75% 01/15/23 238,383
250,000 Air Lease Corp...................................... 3.25% 03/01/25 232,295
-------------
470,678
-------------
WATER UTILITIES - 0.0%
250,000 American Water Capital Corp......................... 3.75% 09/01/47 231,413
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................. 291,960,854
(Cost $301,480,854) -------------
FOREIGN CORPORATE BONDS AND NOTES - 1.9%
BANKS - 0.8%
250,000 Barclays PLC, 3 Mo. LIBOR + 1.38% (a)............... 3.71% 05/16/24 248,133
475,000 HSBC Holdings PLC................................... 2.65% 01/05/22 460,138
200,000 HSBC Holdings PLC (b)............................... 3.26% 03/13/23 196,006
500,000 HSBC Holdings PLC (b)............................... 3.95% 05/18/24 498,538
625,000 HSBC Holdings PLC................................... 3.90% 05/25/26 611,760
350,000 HSBC Holdings PLC................................... 4.38% 11/23/26 344,645
200,000 HSBC Holdings PLC (b)............................... 4.04% 03/13/28 194,370
500,000 HSBC Holdings PLC (b)............................... 4.58% 06/19/29 505,619
238,000 HSBC Holdings PLC, 3 Mo. LIBOR + 0.60% (a).......... 2.93% 05/18/21 238,412
500,000 HSBC Holdings PLC, 3 Mo. LIBOR + 1.00% (a).......... 3.33% 05/18/24 498,898
700,000 HSBC Holdings PLC, 3 Mo. LIBOR + 1.66% (a).......... 3.99% 05/25/21 722,299
500,000 HSBC Holdings PLC, 3 Mo. LIBOR + 2.24% (a).......... 4.56% 03/08/21 523,055
250,000 Mizuho Financial Group, Inc.,
3 Mo. LIBOR + 0.79% (a).......................... 3.11% 03/05/23 250,136
250,000 Royal Bank of Scotland Group PLC (b)................ 3.50% 05/15/23 242,393
-------------
5,534,402
-------------
CAPITAL MARKETS - 0.2%
500,000 Credit Suisse Group AG (c).......................... 3.57% 01/09/23 490,271
500,000 Credit Suisse Group AG (b) (c)...................... 3.87% 01/12/29 471,084
250,000 UBS Group Funding Switzerland AG, 3 Mo. LIBOR
+ 1.22% (a) (c).................................. 3.55% 05/23/23 253,150
-------------
1,214,505
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.1%
444,000 GE Capital International Funding Co. Unlimited Co... 4.42% 11/15/35 430,909
250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 242,725
250,000 Shell International Finance, B.V.................... 3.75% 09/12/46 232,977
-------------
906,611
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.0%
250,000 TELUS Corp.......................................... 4.60% 11/16/48 245,421
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.0%
250,000 Medtronic Global Holdings SCA....................... 3.35% 04/01/27 243,840
-------------
Page 34 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
METALS & MINING - 0.2%
$ 250,000 Anglo American Capital PLC (c)...................... 3.63% 09/11/24 $ 236,961
250,000 Anglo American Capital PLC (c)...................... 4.00% 09/11/27 233,107
250,000 Anglo American Capital PLC (c)...................... 4.50% 03/15/28 241,760
330,000 BHP Billiton Finance USA, Ltd....................... 5.00% 09/30/43 371,093
350,000 Vale Overseas, Ltd.................................. 6.25% 08/10/26 379,925
-------------
1,462,846
-------------
OIL, GAS & CONSUMABLE FUELS - 0.4%
100,000 BP Capital Markets PLC.............................. 3.12% 05/04/26 95,656
500,000 Canadian Natural Resources, Ltd..................... 2.95% 01/15/23 482,908
100,000 Canadian Natural Resources, Ltd..................... 3.80% 04/15/24 99,240
500,000 Canadian Natural Resources, Ltd..................... 3.85% 06/01/27 488,740
500,000 Canadian Natural Resources, Ltd..................... 4.95% 06/01/47 518,051
100,000 Cenovus Energy, Inc................................. 5.40% 06/15/47 98,253
250,000 Enbridge, Inc....................................... 2.90% 07/15/22 243,049
250,000 Enbridge, Inc....................................... 4.25% 12/01/26 248,167
250,000 Enbridge, Inc....................................... 3.70% 07/15/27 237,350
250,000 Enbridge, Inc....................................... 5.50% 12/01/46 267,860
200,000 Petroleos Mexicanos................................. 5.38% 03/13/22 205,600
240,000 TransCanada PipeLines, Ltd.......................... 4.25% 05/15/28 241,226
-------------
3,226,100
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.1%
250,000 AerCap Ireland Capital DAC/AerCap Global Aviation
Trust............................................ 3.50% 01/15/25 234,859
250,000 AerCap Ireland Capital DAC/AerCap Global Aviation
Trust............................................ 3.88% 01/23/28 230,723
-------------
465,582
-------------
WIRELESS TELECOMMUNICATION SERVICES - 0.1%
250,000 Vodafone Group PLC.................................. 3.75% 01/16/24 248,171
250,000 Vodafone Group PLC.................................. 4.13% 05/30/25 249,420
250,000 Vodafone Group PLC.................................. 4.38% 05/30/28 247,520
25,000 Vodafone Group PLC, 3 Mo. LIBOR + 0.99% (a)......... 3.29% 01/16/24 24,903
-------------
770,014
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 14,069,321
(Cost $14,259,401) -------------
U.S. GOVERNMENT BONDS AND NOTES - 0.5%
942,000 U.S. Treasury Bond.................................. 3.00% 02/15/48 945,367
400,000 U.S. Treasury Note (d).............................. 1.38% 09/30/19 394,844
550,000 U.S. Treasury Note.................................. 2.50% 05/31/20 549,796
275,000 U.S. Treasury Note.................................. 2.63% 05/15/21 275,048
275,000 U.S. Treasury Note.................................. 2.63% 06/15/21 275,059
765,000 U.S. Treasury Note.................................. 2.75% 05/31/23 766,046
200,000 U.S. Treasury Note.................................. 2.88% 05/15/28 200,426
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 3,406,586
(Cost $3,390,929) -------------
See Notes to Financial Statements Page 35
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
COMMERCIAL PAPER - 0.2%
ELECTRIC UTILITIES - 0.0%
$ 275,000 Commonwealth Edison Co.............................. 2.20% 07/02/18 $ 274,949
-------------
MULTI-UTILITIES - 0.2%
1,300,000 Consolidated Edison, Inc............................ 2.15% 07/02/18 1,299,765
-------------
TOTAL COMMERCIAL PAPER....................................................... 1,574,714
(Cost $1,574,906) -------------
TOTAL INVESTMENTS - 99.0%.................................................... 721,451,575
(Cost $681,203,099) (e)
NET OTHER ASSETS AND LIABILITIES - 1.0%...................................... 7,472,965
-------------
NET ASSETS - 100.0%.......................................................... $ 728,924,540
=============
FUTURES CONTRACTS (see Note 2E - Futures Contracts in the Notes to Financial
Statements):
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
--------------------------------------- ------------ ------------ ------------ ------------- ---------------
U.S. Treasury 10-Year Notes Short 15 Sep 2018 $ (1,802,812) $ 10,899
U.S. Treasury 5-Year Notes Short 30 Sep 2018 (3,408,516) 21,805
U.S. Treasury CME Ultra Long Term Bonds Short 4 Sep 2018 (638,250) 1,656
U.S. Treasury Ultra 10-Year Notes Short 99 Sep 2018 (12,695,204) 64,234
------------- ---------------
Total Futures Contracts $ (18,544,782) $ 98,594
============= ===============
-----------------------------
(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 June 30, 2018. 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 "Advisor").
Although market instability can result in periods of increased overall
market illiquidity, liquidity for each security is determined based on
security specific factors and assumptions, which require subjective
judgment. At June 30, 2018, securities noted as such amounted to
$14,724,902 or 2.0% of net assets.
(d) All or a portion of this security is segregated as collateral for open
futures contracts.
(e) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of June 30, 2018, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $59,962,134 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $19,615,064. The net unrealized appreciation
was $40,347,070. The amounts presented are inclusive of derivative
contracts.
LIBOR London Interbank Offered Rate
Page 36 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2018
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2018 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*.................................... $410,440,100 $410,440,100 $ -- $ --
Corporate Bonds and Notes*........................ 291,960,854 -- 291,960,854 --
Foreign Corporate Bonds and Notes*................ 14,069,321 -- 14,069,321 --
U.S. Government Bonds and Notes................... 3,406,586 -- 3,406,586 --
Commercial Paper*................................. 1,574,714 -- 1,574,714 --
------------ ------------ ------------ ------------
Total Investments................................. 721,451,575 410,440,100 311,011,475 --
Futures**......................................... 98,594 98,594 -- --
------------ ------------ ------------ ------------
Total............................................. $721,550,169 $410,538,694 $311,011,475 $ --
============ ============ ============ ============
* 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 June 30, 2018.
See Notes to Financial Statements Page 37
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 36.6%
CAPITAL MARKETS -- 36.6%
15,470 First Trust Institutional Preferred Securities and Income ETF (a)............ $ 293,930
46,740 First Trust Preferred Securities and Income ETF (a).......................... 890,864
58,180 First Trust Senior Loan Fund (a)............................................. 2,779,259
33,260 First Trust Tactical High Yield ETF (a)...................................... 1,566,213
235 iShares 20+ Year Treasury Bond ETF........................................... 28,604
1,100 iShares 3-7 Year Treasury Bond ETF........................................... 132,000
430 iShares 7-10 Year Treasury Bond ETF.......................................... 44,079
6,212 iShares Floating Rate Bond ETF............................................... 316,812
12,878 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 1,475,433
1,400 iShares MBS ETF.............................................................. 145,852
1 Vanguard Mortgage-Backed Securities ETF...................................... 52
-------------
TOTAL EXCHANGE-TRADED FUNDS.................................................. 7,673,098
(Cost $7,840,740) -------------
COMMON STOCKS -- 22.3%
AEROSPACE & DEFENSE -- 0.6%
305 General Dynamics Corp........................................................ 56,855
343 Raytheon Co.................................................................. 66,261
-------------
123,116
-------------
BANKS -- 1.6%
1,004 JPMorgan Chase & Co.......................................................... 104,617
429 M&T Bank Corp................................................................ 72,994
1,350 U.S. Bancorp................................................................. 67,527
1,419 Webster Financial Corp....................................................... 90,390
-------------
335,528
-------------
BEVERAGES -- 0.4%
518 Diageo PLC, ADR.............................................................. 74,597
-------------
BIOTECHNOLOGY -- 0.3%
633 AbbVie, Inc.................................................................. 58,647
-------------
CAPITAL MARKETS -- 0.4%
151 BlackRock, Inc............................................................... 75,355
-------------
CHEMICALS -- 0.8%
393 Ecolab, Inc.................................................................. 55,150
375 International Flavors & Fragrances, Inc...................................... 46,485
540 LyondellBasell Industries N.V., Class A...................................... 59,319
-------------
160,954
-------------
COMMUNICATIONS EQUIPMENT -- 0.4%
2,078 Cisco Systems, Inc........................................................... 89,416
-------------
CONSUMER FINANCE -- 0.4%
834 Capital One Financial Corp................................................... 76,645
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.3%
1,246 Verizon Communications, Inc.................................................. 62,686
-------------
ELECTRIC UTILITIES -- 2.1%
580 Alliant Energy Corp.......................................................... 24,546
493 American Electric Power Co., Inc............................................. 34,140
304 Duke Energy Corp............................................................. 24,040
957 Emera, Inc. (CAD)............................................................ 31,156
Page 38 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
255 Eversource Energy............................................................ $ 14,946
953 Exelon Corp.................................................................. 40,598
1,121 Fortis, Inc. (CAD)........................................................... 35,830
932 Hydro One Ltd. (CAD) (b)..................................................... 14,207
409 NextEra Energy, Inc.......................................................... 68,315
2,617 OGE Energy Corp.............................................................. 92,145
532 PPL Corp..................................................................... 15,189
749 Southern (The) Co............................................................ 34,686
-------------
429,798
-------------
ELECTRICAL EQUIPMENT -- 0.3%
819 Eaton Corp. PLC.............................................................. 61,212
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.3%
749 TE Connectivity Ltd.......................................................... 67,455
-------------
FOOD & STAPLES RETAILING -- 0.7%
1,223 Sysco Corp................................................................... 83,519
848 Walmart, Inc................................................................. 72,631
-------------
156,150
-------------
GAS UTILITIES -- 0.3%
179 Atmos Energy Corp............................................................ 16,135
376 New Jersey Resources Corp.................................................... 16,826
666 UGI Corp..................................................................... 34,679
-------------
67,640
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 0.8%
1,341 Abbott Laboratories.......................................................... 81,788
876 STERIS PLC................................................................... 91,989
-------------
173,777
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.7%
449 Aetna, Inc................................................................... 82,391
912 CVS Health Corp.............................................................. 58,687
-------------
141,078
-------------
HOTELS, RESTAURANTS & LEISURE -- 0.7%
1,260 Carnival Corp................................................................ 72,211
458 McDonald's Corp.............................................................. 71,764
-------------
143,975
-------------
INDUSTRIAL CONGLOMERATES -- 0.7%
451 Honeywell International, Inc................................................. 64,967
1,146 Siemens AG, ADR.............................................................. 75,504
-------------
140,471
-------------
INSURANCE -- 0.3%
1,759 Fidelity National Financial, Inc............................................. 66,174
-------------
INTERNET & DIRECT MARKETING RETAIL -- 0.3%
606 Expedia Group, Inc........................................................... 72,835
-------------
IT SERVICES -- 0.9%
664 Accenture PLC, Class A....................................................... 108,624
828 Fidelity National Information Services, Inc.................................. 87,793
-------------
196,417
-------------
See Notes to Financial Statements Page 39
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 0.3%
393 Parker-Hannifin Corp......................................................... $ 61,249
-------------
MULTI-UTILITIES -- 0.7%
1,078 National Grid PLC, ADR....................................................... 60,206
966 Public Service Enterprise Group, Inc......................................... 52,299
135 Sempra Energy................................................................ 15,675
240 WEC Energy Group, Inc........................................................ 15,516
-------------
143,696
-------------
OIL, GAS & CONSUMABLE FUELS -- 3.7%
531 Chevron Corp................................................................. 67,134
1,089 ConocoPhillips............................................................... 75,816
2,793 Enbridge Income Fund Holdings, Inc. (CAD).................................... 68,495
942 Enbridge, Inc................................................................ 33,620
813 Exxon Mobil Corp............................................................. 67,259
1,744 Inter Pipeline Ltd. (CAD).................................................... 32,687
6,957 Kinder Morgan, Inc........................................................... 122,930
1,208 ONEOK, Inc................................................................... 84,355
1,166 TOTAL S.A., ADR.............................................................. 70,613
3,419 TransCanada Corp............................................................. 147,701
-------------
770,610
-------------
PHARMACEUTICALS -- 0.9%
767 Eli Lilly & Co............................................................... 65,448
1,207 Merck & Co., Inc............................................................. 73,265
802 Novartis AG, ADR............................................................. 60,583
-------------
199,296
-------------
ROAD & RAIL -- 0.4%
567 Union Pacific Corp........................................................... 80,333
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7%
301 Broadcom, Inc................................................................ 73,035
1,661 Intel Corp................................................................... 82,568
-------------
155,603
-------------
SOFTWARE -- 0.7%
964 Microsoft Corp............................................................... 95,060
1,405 Oracle Corp.................................................................. 61,904
-------------
156,964
-------------
SPECIALTY RETAIL -- 0.4%
450 Home Depot (The), Inc........................................................ 87,795
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5%
512 Apple, Inc................................................................... 94,776
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
1,006 NIKE, Inc., Class B.......................................................... 80,158
-------------
TRADING COMPANIES & DISTRIBUTORS -- 0.3%
795 MSC Industrial Direct Co., Inc., Class A..................................... 67,456
-------------
TOTAL COMMON STOCKS.......................................................... 4,671,862
(Cost $4,134,351) -------------
Page 40 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS -- 13.8%
DIVERSIFIED REITS -- 2.2%
2,554 Liberty Property Trust....................................................... $ 113,219
876 PS Business Parks, Inc....................................................... 112,566
4,158 STORE Capital Corp........................................................... 113,929
3,854 Washington Real Estate Investment Trust...................................... 116,892
-------------
456,606
-------------
HEALTH CARE REITS -- 1.1%
1,512 National Health Investors, Inc............................................... 111,404
6,852 Physicians Realty Trust...................................................... 109,221
-------------
220,625
-------------
HOTEL & RESORT REITS -- 1.8%
3,976 Hospitality Properties Trust................................................. 113,753
5,847 Host Hotels & Resorts, Inc................................................... 123,196
5,397 Xenia Hotels & Resorts, Inc.................................................. 131,471
-------------
368,420
-------------
INDUSTRIAL REITS -- 1.6%
4,028 Duke Realty Corp............................................................. 116,933
1,747 Prologis, Inc................................................................ 114,760
4,138 STAG Industrial, Inc......................................................... 112,678
-------------
344,371
-------------
OFFICE REITS -- 1.6%
4,022 Corporate Office Properties Trust............................................ 116,598
2,270 Highwoods Properties, Inc.................................................... 115,157
1,133 SL Green Realty Corp......................................................... 113,901
-------------
345,656
-------------
RESIDENTIAL REITS -- 1.7%
2,757 Apartment Investment & Management Co., Class A............................... 116,621
678 AvalonBay Communities, Inc................................................... 116,541
1,217 Mid-America Apartment Communities, Inc....................................... 122,515
-------------
355,677
-------------
RETAIL REITS -- 1.1%
2,753 National Retail Properties, Inc.............................................. 121,022
653 Simon Property Group, Inc.................................................... 111,134
-------------
232,156
-------------
SPECIALIZED REITS -- 2.7%
780 American Tower Corp.......................................................... 112,453
1,954 CyrusOne, Inc................................................................ 114,036
992 Digital Realty Trust, Inc.................................................... 110,687
1,798 EPR Properties............................................................... 116,492
1,181 Extra Space Storage, Inc..................................................... 117,876
-------------
571,544
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 2,895,055
(Cost $2,695,928) -------------
See Notes to Financial Statements Page 41
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS -- 10.6%
CHEMICALS -- 0.3%
2,492 Westlake Chemical Partners, L.P.............................................. $ 61,054
-------------
GAS UTILITIES -- 0.6%
2,347 AmeriGas Partners, L.P....................................................... 99,090
998 Suburban Propane Partners, L.P............................................... 23,443
-------------
122,533
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.6%
2,567 NextEra Energy Partners, L.P................................................. 119,802
-------------
OIL, GAS & CONSUMABLE FUELS -- 9.1%
1,535 Alliance Resource Partners, L.P.............................................. 28,167
2,531 BP Midstream Partners, L.P................................................... 53,126
778 Buckeye Partners, L.P........................................................ 27,347
12,801 Enbridge Energy Partners, L.P................................................ 139,915
1,417 Energy Transfer Equity, L.P.................................................. 24,443
1,265 Energy Transfer Partners, L.P................................................ 24,086
11,985 Enterprise Products Partners, L.P............................................ 331,625
2,491 EQT Midstream Partners, L.P.................................................. 128,511
5,306 Holly Energy Partners, L.P................................................... 149,947
2,963 Magellan Midstream Partners, L.P............................................. 204,684
222 MPLX, L.P.................................................................... 7,579
2,863 Phillips 66 Partners, L.P.................................................... 146,185
647 Plains All American Pipeline, L.P............................................ 15,295
6,078 Shell Midstream Partners, L.P................................................ 134,810
4,753 Spectra Energy Partners, L.P................................................. 168,351
6,666 TC PipeLines, L.P............................................................ 172,983
421 TransMontaigne Partners, L.P................................................. 15,510
807 Valero Energy Partners, L.P.................................................. 30,722
228 Western Gas Equity Partners, L.P............................................. 8,151
153 Western Gas Partners, L.P.................................................... 7,404
2,327 Williams Partners, L.P....................................................... 94,453
-------------
1,913,294
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................ 2,216,683
(Cost $2,304,965) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES -- 7.6%
$ 35,004 U.S. Treasury Inflation Indexed Bond (c)............ 2.50% 01/15/29 41,175
22,858 U.S. Treasury Inflation Indexed Bond (c)............ 3.88% 04/15/29 30,102
7,198 U.S. Treasury Inflation Indexed Bond (c)............ 3.38% 04/15/32 9,621
23,181 U.S. Treasury Inflation Indexed Bond (c)............ 2.13% 02/15/40 29,182
34,089 U.S. Treasury Inflation Indexed Bond (c)............ 2.13% 02/15/41 43,224
31,929 U.S. Treasury Inflation Indexed Bond (c)............ 0.75% 02/15/42 31,226
31,163 U.S. Treasury Inflation Indexed Bond (c)............ 0.63% 02/15/43 29,542
30,957 U.S. Treasury Inflation Indexed Bond (c)............ 1.38% 02/15/44 34,610
30,106 U.S. Treasury Inflation Indexed Bond (c)............ 0.75% 02/15/45 29,253
26,432 U.S. Treasury Inflation Indexed Bond (c)............ 1.00% 02/15/46 27,264
24,907 U.S. Treasury Inflation Indexed Bond (c)............ 0.88% 02/15/47 24,944
Page 42 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES (CONTINUED)
$ 9,143 U.S. Treasury Inflation Indexed Bond (c)............ 1.00% 02/15/48 $ 9,463
60,832 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 04/15/19 60,490
16,426 U.S. Treasury Inflation Indexed Note (c)............ 1.88% 07/15/19 16,696
23,633 U.S. Treasury Inflation Indexed Note (c)............ 1.38% 01/15/20 23,906
59,905 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 04/15/20 59,285
40,204 U.S. Treasury Inflation Indexed Note (c)............ 1.25% 07/15/20 40,870
47,182 U.S. Treasury Inflation Indexed Note (c)............ 1.13% 01/15/21 47,807
56,020 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 04/15/21 55,173
43,348 U.S. Treasury Inflation Indexed Note (c)............ 0.63% 07/15/21 43,523
53,017 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 01/15/22 52,127
54,595 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 04/15/22 53,489
54,468 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 07/15/22 53,579
54,266 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 01/15/23 53,066
19,162 U.S. Treasury Inflation Indexed Note (c)............ 0.63% 04/15/23 19,134
53,824 U.S. Treasury Inflation Indexed Note (c)............ 0.38% 07/15/23 53,355
48,314 U.S. Treasury Inflation Indexed Note (c)............ 0.63% 01/15/24 48,270
55,073 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 07/15/24 53,557
52,884 U.S. Treasury Inflation Indexed Note (c)............ 0.25% 01/15/25 51,458
44,522 U.S. Treasury Inflation Indexed Note (c)............ 2.38% 01/15/25 49,386
58,101 U.S. Treasury Inflation Indexed Note (c)............ 0.38% 07/15/25 57,100
59,041 U.S. Treasury Inflation Indexed Note (c)............ 0.63% 01/15/26 58,751
29,661 U.S. Treasury Inflation Indexed Note (c)............ 2.00% 01/15/26 32,516
48,075 U.S. Treasury Inflation Indexed Note (c)............ 0.13% 07/15/26 46,081
49,779 U.S. Treasury Inflation Indexed Note (c)............ 0.38% 01/15/27 48,430
25,466 U.S. Treasury Inflation Indexed Note (c)............ 2.38% 01/15/27 28,979
48,133 U.S. Treasury Inflation Indexed Note (c)............ 0.38% 07/15/27 46,851
38,593 U.S. Treasury Inflation Indexed Note (c)............ 0.50% 01/15/28 37,776
55,006 U.S. Treasury Inflation Indexed Note (c)............ 1.75% 01/15/28 60,142
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 1,591,403
(Cost $1,613,035) -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 6.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.4%
Fannie Mae REMICS
18 Series 1988-30, Class D.......................... 9.50% 12/25/18 18
70 Series 1989-69, Class G.......................... 7.60% 10/25/19 70
288 Series 1989-82, Class G.......................... 8.40% 11/25/19 296
1,513 Series 1990-109, Class J......................... 7.00% 09/25/20 1,552
659 Series 1992-24, Class Z.......................... 6.50% 04/25/22 687
10 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 10
1,840 Series 1993-1, Class KA.......................... 7.90% 01/25/23 1,982
1,273 Series 1993-62, Class E.......................... 7.00% 04/25/23 1,361
437 Series 1993-119, Class H......................... 6.50% 07/25/23 461
2,999 Series 1993-178, Class PK........................ 6.50% 09/25/23 3,180
2,819 Series 1995-24, Class G.......................... 6.50% 04/25/23 2,959
1,894 Series 1999-56, Class Z.......................... 7.00% 12/18/29 2,064
35,140 Series 2002-9, Class MS, IO
1 Mo. LIBOR x -1 + 8.10% (d).................. 6.01% 03/25/32 6,340
1,570 Series 2002-67, Class PE......................... 5.50% 11/25/32 1,698
See Notes to Financial Statements Page 43
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Fannie Mae REMICS (Continued)
$ 4,678 Series 2002-90, Class A1......................... 6.50% 06/25/42 $ 5,248
3,679 Series 2003-14, Class AQ......................... 3.50% 03/25/33 3,687
5,557 Series 2003-41, Class OA......................... 4.00% 05/25/33 5,610
7 Series 2003-92, Class HP......................... 4.50% 09/25/18 7
11,495 Series 2004-10, Class ZB......................... 6.00% 02/25/34 13,195
431 Series 2004-76, Class CL......................... 4.00% 10/25/19 431
2,282 Series 2004-92, Class S, IO,
1 Mo. LIBOR x -1 + 6.70% (d).................. 4.61% 08/25/34 54
70 Series 2005-46, Class LW......................... 5.00% 06/25/20 70
5,429 Series 2005-68, Class BC......................... 5.25% 06/25/35 5,511
901 Series 2005-70, Class KJ......................... 5.50% 09/25/34 902
17,398 Series 2005-79, Class NF,
1 Mo. LIBOR + 0.41% (e)....................... 2.50% 09/25/35 17,463
4 Series 2005-120, Class NF,
1 Mo. LIBOR + 0.10% (e)....................... 2.19% 01/25/21 4
70,220 Series 2007-10, Class Z.......................... 6.00% 02/25/37 77,525
134,938 Series 2009-78, Class VI, IO..................... 6.00% 02/25/39 2,554
67,526 Series 2009-86, Class IP, IO..................... 5.50% 10/25/39 12,674
81 Series 2011-38, Class AH......................... 2.75% 05/25/20 80
2,692 Series 2012-35, Class PL......................... 2.00% 11/25/41 2,574
961 Series 2013-14, Class QE......................... 1.75% 03/25/43 885
51,683 Series 2013-31, Class NT......................... 3.00% 04/25/43 50,671
Fannie Mae REMIC Trust
14,844 Series 2007-W8, Class 1A5 (f).................... 6.39% 09/25/37 15,707
Fannie Mae Trust
5,424 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 6,150
FHLMC - GNMA
352 Series 1993-5, Class HA.......................... 7.50% 02/25/23 374
848 Series 1994-27, Class D.......................... 7.00% 03/25/24 911
Freddie Mac REMICS
196 Series 1988-23, Class F.......................... 9.60% 04/15/20 198
345 Series 1989-84, Class F.......................... 9.20% 10/15/20 356
1,091 Series 1991-1074, Class I........................ 6.75% 05/15/21 1,106
1,300 Series 1991-1078, Class GZ....................... 6.50% 05/15/21 1,326
533 Series 1992-1250, Class J........................ 7.00% 05/15/22 545
17,413 Series 1992-1401, Class Q,
1 Mo. LIBOR + 0.60% (e)....................... 2.67% 10/15/22 17,576
27,715 Series 1993-1487, Class P, IO,
1 Mo. LIBOR x -1 + 9.50% (d).................. 7.43% 03/15/23 2,923
4,907 Series 1994-1673, Class FB,
10 Yr. U.S. Treasury Yield Curve - 0.50% (e).. 2.51% 02/15/24 4,906
561 Series 1996-1807, Class G........................ 9.00% 10/15/20 585
70 Series 1996-1847, Class LL....................... 7.50% 04/15/26 77
14,498 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 1,813
3,621 Series 1999-2130, Class KB....................... 6.38% 03/15/29 3,941
54,040 Series 1999-2174, Class PN....................... 6.00% 07/15/29 57,889
10,047 Series 2001-2277, Class B........................ 7.50% 01/15/31 11,542
260 Series 2003-2559, Class PB....................... 5.50% 08/15/30 263
56,000 Series 2003-2676, Class LL....................... 5.50% 09/15/33 61,210
23,340 Series 2004-2768, Class PW....................... 4.25% 03/15/34 24,257
6,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 6,510
Page 44 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Freddie Mac REMICS (Continued)
$ 217 Series 2004-2780, Class JA....................... 4.50% 04/15/19 $ 217
404 Series 2005-2922, Class QE....................... 5.00% 05/15/34 407
17,972 Series 2005-2958, Class QJ....................... 4.00% 04/15/20 17,981
36,204 Series 2006-3114, Class GI, IO,
1 Mo. LIBOR x -1 + 6.60% (d).................. 4.53% 02/15/36 5,797
47,029 Series 2006-3199, Class DS, IO,
1 Mo. LIBOR x -1 + 7.15% (d).................. 5.08% 08/15/36 7,895
18,225 Series 2006-3237, Class CB....................... 5.50% 07/15/36 18,957
14,847 Series 2010-3758, Class M........................ 4.50% 10/15/38 15,237
6,746 Series 2010-3775, Class KZ....................... 4.00% 08/15/25 6,705
198 Series 2011-3824, Class FA,
1 Mo. LIBOR + 0.15% (e)....................... 2.22% 03/15/26 198
1,924 Series 2012-3994, Class AE....................... 1.63% 02/15/22 1,891
20,424 Series 2013-4178, Class ZN....................... 3.50% 03/15/43 19,780
1,806 Series 2013-4253, Class TD....................... 2.00% 07/15/40 1,801
Freddie Mac Strips
18,409 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 2,262
Government National Mortgage Association
13,001 Series 1999-30, Class S, IO,
1 Mo. LIBOR x -1 + 8.60% (d).................. 6.51% 08/16/29 167
36,319 Series 2002-92, Class PB......................... 5.50% 12/20/32 39,675
8,872 Series 2006-16, Class OP, PO..................... (g) 03/20/36 7,932
55,000 Series 2007-35, Class NE......................... 6.00% 06/16/37 63,506
6,996 Series 2009-29, Class TA......................... 4.50% 03/16/39 7,181
647 Series 2009-81, Class PA......................... 5.50% 02/16/38 660
5,014 Series 2009-102, Class MA........................ 4.00% 06/16/39 5,073
2,134 Series 2010-121, Class PQ........................ 3.00% 02/20/39 2,133
28,119 Series 2011-136, Class GB........................ 2.50% 05/20/40 27,445
28,731 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 6,071
-------------
700,959
-------------
PASS-THROUGH SECURITIES -- 2.7%
Federal Home Loan Mortgage Corporation
17,337 Pool A47829...................................... 4.00% 08/01/35 17,748
8,235 Pool C01252...................................... 6.50% 11/01/31 9,174
60,932 Pool G01731...................................... 6.50% 12/01/29 67,878
34,792 Pool G06358...................................... 4.00% 04/01/41 35,787
3,797 Pool O20138...................................... 5.00% 11/01/30 4,038
21,874 Pool U90316...................................... 4.00% 10/01/42 22,505
Federal National Mortgage Association
363 Pool 745121...................................... 5.50% 12/01/18 363
18,911 Pool 890383...................................... 4.00% 01/01/42 19,432
25,458 Pool AA9393...................................... 4.50% 07/01/39 26,786
31,268 Pool AD0659...................................... 6.00% 02/01/23 32,446
16,619 Pool AE0050...................................... 5.50% 12/01/22 17,211
29,296 Pool AL0791...................................... 4.00% 02/01/41 30,141
25,613 Pool AS9194...................................... 4.50% 12/01/44 26,834
51,760 Pool AU4289...................................... 4.00% 09/01/43 53,144
7,711 Pool MA0561...................................... 4.00% 11/01/40 7,923
37,325 Pool MA1028...................................... 4.00% 04/01/42 38,352
See Notes to Financial Statements Page 45
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association
$ 11,587 Pool 3428........................................ 5.00% 08/20/33 $ 12,533
17,722 Pool 3500........................................ 5.50% 01/20/34 19,363
8,909 Pool 3711........................................ 5.50% 05/20/35 9,735
28,832 Pool 667422...................................... 5.00% 10/15/39 30,901
11,943 Pool 706201...................................... 5.50% 04/20/39 12,770
16,947 Pool 736558...................................... 5.00% 02/15/40 18,067
28,865 Pool 759248...................................... 4.00% 02/15/41 29,940
20,826 Pool MA3525...................................... 5.50% 03/20/46 22,667
-------------
565,738
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 1,266,697
(Cost $1,288,345) -------------
MORTGAGE-BACKED SECURITIES -- 0.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
Credit Suisse First Boston Mortgage Securities Corp.
444 Series 2004-4, Class 1A3......................... 5.75% 08/25/34 445
2,942 Series 2004-6, Class 2A1......................... 4.75% 09/25/19 2,927
MASTR Alternative Loan Trust
2,307 Series 2004-10, Class 2A1........................ 5.50% 10/25/19 2,340
597 Series 2005-1, Class 5A1......................... 5.50% 01/25/20 609
MASTR Asset Securitization Trust
4,666 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 4,782
RAAC Trust
1,027 Series 2005-SP1, Class 2A1....................... 5.25% 09/25/34 1,036
Structured Asset Mortgage Investments Trust
8,426 Series 1999-1, Class 2A (h)...................... 6.58% 06/25/29 8,408
Structured Asset Securities Corp. Mortgage
Pass-Through Certificates
474 Series 2004-21XS, Class 2A6A (f)................. 5.24% 12/25/34 473
WAMU Mortgage Pass-Through Certificates
151 Series 2002-S8, Class 2A7........................ 5.25% 01/25/33 151
Wells Fargo Mortgage Backed-Securities Trust
1,189 Series 2006-17, Class A4......................... 5.50% 11/25/21 1,195
-------------
TOTAL MORTGAGE-BACKED SECURITIES............................................. 22,366
(Cost $22,262) -------------
ASSET-BACKED SECURITIES -- 0.0%
AFC Home Equity Loan Trust
430 Series 1997-4, Class 1A2,
1 Mo. LIBOR + 0.71% (e)....................... 2.67% 12/22/27 417
-------------
TOTAL ASSET-BACKED SECURITIES................................................ 417
(Cost $411) -------------
Page 46 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. TREASURY BILLS -- 0.1%
$ 26,000 U.S. Treasury Bill.................................. (g) 11/08/18 $ 25,815
-------------
TOTAL U.S. TREASURY BILLS.................................................... 25,815
(Cost $25,810) -------------
TOTAL INVESTMENTS -- 97.2%................................................... 20,363,396
(Cost $19,925,847) (i)
NET OTHER ASSETS AND LIABILITIES -- 2.8%..................................... 580,685
-------------
NET ASSETS -- 100.0%......................................................... $ 20,944,081
=============
-----------------------------
(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. 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) 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.
(d) Inverse floating rate security.
(e) Floating or variable rate security.
(f) 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.
(g) Zero coupon security.
(h) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(i) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of June 30, 2018, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $1,026,573 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $589,024. The net unrealized appreciation was
$437,549.
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 47
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2018 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2018
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2018 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 7,673,098 $ 7,673,098 $ -- $ --
Common Stocks*.................................... 4,671,862 4,671,862 -- --
Real Estate Investment Trusts*.................... 2,895,055 2,895,055 -- --
Master Limited Partnerships*...................... 2,216,683 2,216,683 -- --
U.S. Government Bonds and Notes................... 1,591,403 -- 1,591,403 --
U.S. Government Agency Mortgage-Backed
Securities..................................... 1,266,697 -- 1,266,697 --
Mortgage-Backed Securities........................ 22,366 -- 22,366 --
Asset-Backed Securities........................... 417 -- 417 --
U.S. Treasury Bills............................... 25,815 -- 25,815 --
------------ ------------ ------------ ------------
Total Investments................................. $ 20,363,396 $ 17,456,698 $ 2,906,698 $ --
============ ============ ============ ============
* 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 June 30, 2018.
Page 48 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2018 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS - 98.5%
CAPITAL MARKETS - 98.5%
4,784 First Trust BICK Index Fund (a).............................................. $ 129,933
3,725 First Trust Chindia ETF (a).................................................. 143,562
8,363 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 500,526
21,415 First Trust Dow Jones Internet Index Fund (a) (b)............................ 2,947,775
12,852 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 332,353
3,007 First Trust Germany AlphaDEX(R) Fund (a)..................................... 138,502
67,636 First Trust Industrials/Producer Durables AlphaDEX(R) Fund (a)............... 2,644,568
46,220 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 3,049,133
45,332 First Trust Mid Cap Core AlphaDEX(R) Fund (a)................................ 3,102,975
85,902 First Trust Nasdaq Bank ETF (a).............................................. 2,447,777
34,283 First Trust NASDAQ-100-Technology Sector Index Fund (a)...................... 2,641,848
69,118 First Trust Small Cap Growth AlphaDEX(R) Fund (a)............................ 3,354,297
2,840 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 142,483
47,521 First Trust Technology AlphaDEX(R) Fund (a).................................. 2,674,007
17,037 iShares Core U.S. Aggregate Bond ETF......................................... 1,811,374
20,610 SPDR Blackstone/GSO Senior Loan ETF.......................................... 968,052
20,119 SPDR Bloomberg Barclays Convertible Securities ETF........................... 1,066,709
17,996 SPDR Citi International Government Inflation-Protected Bond ETF.............. 976,103
22,703 SPDR Wells Fargo Preferred Stock ETF......................................... 986,899
-------------
TOTAL INVESTMENTS - 98.5%.................................................... 30,058,876
(Cost $26,842,521) (c)
NET OTHER ASSETS AND LIABILITIES - 1.5%...................................... 468,521
-------------
NET ASSETS - 100.0%.......................................................... $ 30,527,397
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of June 30, 2018, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $3,344,150 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $127,795. The net unrealized appreciation was
$3,216,355.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2018
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2018 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 30,058,876 $ 30,058,876 $ -- $ --
============ ============ ============ ============
* 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 June 30, 2018.
See Notes to Financial Statements Page 49
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2018 (UNAUDITED)
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
ASSETS:
Investments, at value - Unaffiliated.................................... $ 721,451,575 $ 14,833,130 $ 5,809,137
Investments, at value - Affiliated...................................... -- 5,530,266 24,249,739
Cash and cash equivalents............................................... 4,592,400 476,878 1,018,681
Foreign currency, at value.............................................. -- 139 --
Receivables:
Interest............................................................. 2,676,308 11,642 --
Investment securities sold........................................... 1,754,585 38,171 961,996
Dividends............................................................ 427,097 19,302 --
Fund shares sold..................................................... 399,849 104,854 50,567
Variation margin..................................................... 953 -- --
From investment advisor.............................................. -- 14,277 7,473
Reclaim.............................................................. -- 1,638 --
Prepaid expenses........................................................ 23,052 62 68
--------------- --------------- ---------------
Total Assets......................................................... 731,325,819 21,030,359 32,097,661
--------------- --------------- ---------------
LIABILITIES:
Payables:
Investment securities purchased...................................... 1,504,303 11,036 1,520,601
Investment advisory fees............................................. 358,518 -- --
12b-1 service fees (Class I)......................................... 151,301 4,262 6,032
Administrative service fees.......................................... 121,048 3,428 4,842
Licensing fees....................................................... 118,001 -- 6,790
Accounting and administration fees................................... 61,728 9,039 4,461
Custodian fees....................................................... 28,145 8,244 448
Printing fees........................................................ 18,974 943 41
Audit and tax fees................................................... 17,801 31,393 15,168
Transfer agent fees.................................................. 12,209 4,456 9,463
Commitment fees...................................................... 3,652 1,610 --
Fund shares redeemed................................................. 2,358 8,894 778
Financial reporting fees............................................. 771 -- 918
Trustees' fees and expenses.......................................... 371 -- --
Legal fees........................................................... -- -- 442
Other liabilities....................................................... 2,099 2,973 280
--------------- --------------- ---------------
Total Liabilities.................................................... 2,401,279 86,278 1,570,264
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 728,924,540 $ 20,944,081 $ 30,527,397
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... $ 665,969,978 $ 20,537,594 $ 27,160,900
Accumulated net investment income (loss)................................ 560,925 31,620 29,060
Accumulated net realized gain (loss) on investments, futures and foreign
currency transactions................................................ 22,046,567 (62,682) 121,082
Net unrealized appreciation (depreciation) on investments, futures and
foreign currency translation......................................... 40,347,070 437,549 3,216,355
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 728,924,540 $ 20,944,081 $ 30,527,397
=============== =============== ===============
Investments, at cost - Unaffiliated..................................... $ 681,203,099 $ 14,273,496 $ 5,862,858
=============== =============== ===============
Investments, at cost - Affiliated....................................... $ -- $ 5,652,351 $ 20,979,663
=============== =============== ===============
Foreign currency, at cost............................................... $ -- $ 139 $ --
=============== =============== ===============
CLASS I SHARES:
NET ASSETS.............................................................. $ 728,878,490 $ 20,836,574 $ 30,431,702
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 13.50 $ 10.67 $ 11.90
=============== =============== ===============
Number of Shares outstanding............................................ 53,982,287 1,953,650 2,557,070
=============== =============== ===============
CLASS II SHARES:
NET ASSETS.............................................................. $ 46,050 $ 107,507 $ 95,695
=============== =============== ===============
NET ASSET VALUE, per share.............................................. $ 13.53 $ 10.67 $ 11.91
=============== =============== ===============
Number of Shares outstanding............................................ 3,403 10,080 8,038
=============== =============== ===============
Page 50 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 (UNAUDITED)
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
INVESTMENT INCOME:
Interest................................................................ $ 5,195,965 $ 53,592 $ 3,516
Dividends - Unaffiliated................................................ 4,629,241 156,413 58,734
Dividends - Affiliated.................................................. -- 128,926 61,744
Foreign withholding tax on dividend income.............................. -- (2,814) --
--------------- --------------- ---------------
Total investment income.............................................. 9,825,206 336,117 123,994
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees................................................ 2,183,327 60,969 44,539
12b-1 distribution and service fees (Class I)........................... 909,564 25,254 31,728
Administrative service fees............................................. 727,764 20,215 25,311
Accounting and administration fees...................................... 220,357 13,374 26,033
Licensing fees.......................................................... 116,884 -- 12,726
Custodian fees.......................................................... 86,032 12,507 3,851
Transfer agent fees..................................................... 47,100 27,012 25,780
Printing fees........................................................... 35,446 2,986 5,201
Legal fees.............................................................. 24,705 749 173
Commitment fees......................................................... 21,468 8,186 --
Audit and tax fees...................................................... 14,434 25,691 12,126
Trustees' fees and expenses............................................. 8,340 7,733 7,363
Financial reporting fees................................................ 4,625 -- 4,587
Other................................................................... 9,276 5,335 229
--------------- --------------- ---------------
Total expenses....................................................... 4,409,322 210,011 199,647
Fees waived and expenses reimbursed by the investment advisor........ (42,199) (125,821) (104,891)
--------------- --------------- ---------------
Net expenses............................................................ 4,367,123 84,190 94,756
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)............................................ 5,458,083 251,927 29,238
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated........................................... 21,724,364 30,383 (202,063)
Investments - Affiliated............................................. -- 2,629 342,343
Futures.............................................................. 745,772 -- --
Foreign currency transactions........................................ -- (71) --
--------------- --------------- ---------------
Net realized gain (loss)................................................ 22,470,136 32,941 140,280
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated........................................... (33,490,249) (358,115) (63,104)
Investments - Affiliated............................................. -- (130,602) 891,960
Futures.............................................................. 4,414 -- --
Foreign currency translation......................................... -- (2) --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation).................... (33,485,835) (488,719) 828,856
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................. (11,015,699) (455,778) 969,136
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS...................................................... $ (5,557,616) $ (203,851) $ 998,374
=============== =============== ===============
See Notes to Financial Statements Page 51
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND
& INCOME ALLOCATION PORTFOLIO
--------------------------------
SIX MONTHS
ENDED YEAR
6/30/2018 ENDED
(UNAUDITED) 12/31/2017
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 5,458,083 $ 8,696,917
Net realized gain (loss)............................................................. 22,470,136 30,010,337
Net change in unrealized appreciation (depreciation)................................. (33,485,835) 44,222,793
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... (5,557,616) 82,930,047
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (5,056,956) (8,735,680)
Class II............................................................................. (374) (1,899)
-------------- --------------
(5,057,330) (8,737,579)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (1,491,428) (33,516,612)
Class II............................................................................. (95) (8,008)
-------------- --------------
(1,491,523) (33,524,620)
-------------- --------------
Total distributions to shareholders.................................................. (6,548,853) (42,262,199)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 39,218,101 163,541,447
Proceeds from shares reinvested...................................................... 6,548,732 42,261,441
Cost of shares redeemed ............................................................. (42,258,365) (52,916,753)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 3,508,468 152,886,135
-------------- --------------
Total increase (decrease) in net assets.............................................. (8,598,001) 193,553,983
NET ASSETS:
Beginning of period.................................................................. 737,522,541 543,968,558
-------------- --------------
End of period........................................................................ $ 728,924,540 $ 737,522,541
============== ==============
Accumulated net investment income (loss) at end of period............................ $ 560,925 $ 160,172
============== ==============
Page 52 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME
ALLOCATION PORTFOLIO
--------------------------------
SIX MONTHS
ENDED YEAR
6/30/2018 ENDED
(UNAUDITED) 12/31/2017
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 251,927 $ 436,344
Net realized gain (loss)............................................................. 32,941 360,846
Net change in unrealized appreciation (depreciation)................................. (488,719) 336,663
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... (203,851) 1,133,853
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (219,032) (458,181)
Class II............................................................................. (1,275) (4,071)
-------------- --------------
(220,307) (462,252)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. -- (53,156)
Class II............................................................................. -- (472)
-------------- --------------
-- (53,628)
-------------- --------------
Total distributions to shareholders.................................................. (220,307) (515,880)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 3,636,973 5,744,312
Proceeds from shares reinvested...................................................... 219,032 512,743
Cost of shares redeemed.............................................................. (2,730,103) (4,753,751)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 1,125,902 1,503,304
-------------- --------------
Total increase (decrease) in net assets.............................................. 701,744 2,121,277
NET ASSETS:
Beginning of period.................................................................. 20,242,337 18,121,060
-------------- --------------
End of period........................................................................ $ 20,944,081 $ 20,242,337
============== ==============
Accumulated net investment income (loss) at end of period............................ $ 31,620 $ --
============== ==============
See Notes to Financial Statements Page 53
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT
TACTICAL CORE PORTFOLIO
--------------------------------
SIX MONTHS
ENDED YEAR
6/30/2018 ENDED
(UNAUDITED) 12/31/2017
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 29,238 $ 119,964
Net realized gain (loss)............................................................. 140,280 237,287
Net change in unrealized appreciation (depreciation)................................. 828,856 2,196,600
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 998,374 2,553,851
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class I.............................................................................. (12,038) (107,556)
Class II............................................................................. (154) (444)
-------------- --------------
(12,192) (108,000)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class I.............................................................................. (35,131) (204,003)
Class II............................................................................. (115) (535)
-------------- --------------
(35,246) (204,538)
-------------- --------------
Total distributions to shareholders.................................................. (47,438) (312,538)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 9,178,417 11,844,556
Proceeds from shares reinvested...................................................... 47,438 312,538
Cost of shares redeemed.............................................................. (2,185,335) (2,272,459)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 7,040,520 9,884,635
-------------- --------------
Total increase (decrease) in net assets.............................................. 7,991,456 12,125,948
NET ASSETS:
Beginning of period.................................................................. 22,535,941 10,409,993
-------------- --------------
End of period........................................................................ $ 30,527,397 $ 22,535,941
============== ==============
Accumulated net investment income (loss) at end of period............................ $ 29,060 $ 12,014
============== ==============
Page 54 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
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
6/30/2018 -------------------------------------------------------------------
(UNAUDITED) 2017 2016 2015 2014 2013
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period..... $ 13.73 $ 12.85 $ 11.94 $ 12.41 $ 11.37 $ 10.31
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.10 0.18 0.14 0.16 0.15 0.14
Net realized and unrealized gain (loss).. (0.21) 1.54 1.25 (a) (0.15) 0.99 1.17
--------- --------- --------- --------- --------- ---------
Total from investment operations......... (0.11) 1.72 1.39 0.01 1.14 1.31
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.09) (0.18) (0.13) (0.27) (0.10) (0.09)
Net realized gain........................ (0.03) (0.66) (0.35) (0.21) -- (0.16)
--------- --------- --------- --------- --------- ---------
Total from distributions................. (0.12) (0.84) (0.48) (0.48) (0.10) (0.25)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period........... $ 13.50 $ 13.73 $ 12.85 $ 11.94 $ 12.41 $ 11.37
========= ========= ========= ========= ========= =========
TOTAL RETURN (b) (c)..................... (0.79)% 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)..... $ 728,878 $ 737,320 $ 543,951 $ 243,244 $ 195,128 $ 106,079
Ratio of total expenses to average net
assets................................ 1.21% (d) 1.23% 1.29% 1.34% 1.43% 1.65%
Ratio of net expenses to average net
assets................................ 1.20% (d) 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income (loss)
to average net assets................. 1.50% (d) 1.35% 1.29% 1.35% 1.40% 1.27%
Portfolio turnover rate.................. 42% 71% 96% 81% 65% 73%
CLASS II SHARES
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2018 --------------------------------------- ENDED
(UNAUDITED) 2017 2016 2015 12/31/2014 (e)
----------- ----------- ----------- ----------- -------------
Net asset value, beginning of period..... $ 13.75 $ 12.87 $ 11.95 $ 12.43 $ 11.63
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.12 (f) 0.14 0.19 0.17 0.14
Net realized and unrealized gain (loss).. (0.20) 1.61 1.24 (a) (0.14) 0.77
--------- --------- --------- --------- ---------
Total from investment operations....... (0.08) 1.75 1.43 0.03 0.91
--------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.11) (0.21) (0.16) (0.30) (0.11)
Net realized gain........................ (0.03) (0.66) (0.35) (0.21) --
--------- --------- --------- --------- ---------
Total from distributions................. (0.14) (0.87) (0.51) (0.51) (0.11)
--------- --------- --------- --------- ---------
Net asset value, end of period........... $ 13.53 $ 13.75 $ 12.87 $ 11.95 $ 12.43
========= ========= ========= ========= =========
TOTAL RETURN (b) (c)..................... (0.60)% 13.75% 12.07% (a) 0.25% 7.82%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 46 $ 202 $ 17 $ 16 $ 11
Ratio of total expenses to average net
assets................................ 0.95% (d) 1.00% 1.04% 1.09% 1.21% (d)
Ratio of net expenses to average net
assets................................ 0.94% (d) 0.95% 0.95% 0.95% 0.95% (d)
Ratio of net investment income (loss)
to average net assets................. 1.75% (d) 1.88% 1.53% 1.64% 1.69% (d)
Portfolio turnover rate.................. 42% 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) Annualized.
(e) The Fund's Class II shares were seeded on April 30, 2014, and commenced
operations on May 1, 2014.
(f) Based on average shares outstanding.
See Notes to Financial Statements Page 55
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2018 --------------------------------------- ENDED
(UNAUDITED) 2017 2016 2015 12/31/2014 (a)
----------- ----------- ----------- ----------- -------------
Net asset value, beginning of period..... $ 10.89 $ 10.54 $ 9.86 $ 10.39 $ 10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.13 0.24 0.20 0.19 0.07
Net realized and unrealized gain (loss).. (0.24) 0.39 0.71 (0.53) (b) 0.39
--------- --------- --------- --------- ---------
Total from investment operations......... (0.11) 0.63 0.91 (0.34) 0.46
--------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.11) (0.25) (0.23) (0.19) (0.07)
Net realized gain........................ -- (0.03) -- -- --
--------- --------- --------- --------- ---------
Total from distributions................. (0.11) (0.28) (0.23) (0.19) (0.07)
--------- --------- --------- --------- ---------
Net asset value, end of period........... $ 10.67 $ 10.89 $ 10.54 $ 9.86 $ 10.39
========= ========= ========= ========= =========
TOTAL RETURN (c) (d)..................... (0.97)% 6.04% 9.27% (3.24)%(b) 4.57%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 20,837 $ 20,083 $ 17,965 $ 12,257 $ 6,894
Ratio of total expenses to average net
assets (e)............................ 2.07% (f) 2.17% 2.22% 2.60% 6.00% (f)
Ratio of net expenses to average net
assets (e)............................ 0.83% (f) 0.83% 0.83% 0.90% 1.20% (f)
Ratio of net investment income (loss)
to average net assets................. 2.48% (f) 2.24% 2.10% 2.17% 2.35% (f)
Portfolio turnover rate.................. 20% 46% 46% 93% 15%
CLASS II SHARES
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2018 --------------------------------------- ENDED
(UNAUDITED) 2017 2016 2015 12/31/2014 (a)
----------- ----------- ----------- ----------- -------------
Net asset value, beginning of period..... $ 10.88 $ 10.54 $ 9.86 $ 10.39 $ 10.00
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.15 0.27 0.20 0.24 0.04
Net realized and unrealized gain (loss).. (0.23) 0.38 0.74 (0.55) (b) 0.43
--------- --------- --------- --------- ---------
Total from investment operations......... (0.08) 0.65 0.94 (0.31) 0.47
--------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.13) (0.28) (0.26) (0.22) (0.08)
Net realized gain........................ -- (0.03) -- -- --
--------- --------- --------- --------- ---------
Total from distributions................. (0.13) (0.31) (0.26) (0.22) (0.08)
--------- --------- --------- --------- ---------
Net asset value, end of period........... $ 10.67 $ 10.88 $ 10.54 $ 9.86 $ 10.39
========= ========= ========= ========= =========
TOTAL RETURN (c) (d)..................... (0.76)% 6.22% 9.53% (3.01)%(b) 4.74%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 107 $ 159 $ 156 $ 100 $ 105
Ratio of total expenses to average net
assets (e)............................ 1.79% (f) 1.92% 1.99% 2.31% 14.44% (f)
Ratio of net expenses to average net
assets (e)............................ 0.58% (f) 0.58% 0.58% 0.67% 0.95% (f)
Ratio of net investment income (loss)
to average net assets................. 2.59% (f) 2.49% 2.34% 2.32% 0.54% (f)
Portfolio turnover rate.................. 20% 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) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(f) Annualized.
Page 56 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
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2018 ------------------------- ENDED
(UNAUDITED) 2017 2016 12/31/2015 (a)
----------- ----------- ----------- -------------
Net asset value, beginning of period..... $ 11.41 $ 9.85 $ 9.94 $ 10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.01 0.06 0.09 0.01
Net realized and unrealized gain (loss).. 0.49 1.66 0.01 (0.07)
--------- --------- --------- ---------
Total from investment operations......... 0.50 1.72 0.10 (0.06)
--------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.00) (b) (0.06) (0.09) --
Net realized gain........................ (0.01) (0.10) (0.10) --
--------- --------- --------- ---------
Total from distributions................. (0.01) (0.16) (0.19) --
--------- --------- --------- ---------
Net asset value, end of period........... $ 11.90 $ 11.41 $ 9.85 $ 9.94
========= ========= ========= =========
TOTAL RETURN (c) (d)..................... 4.46% 17.50% 0.95% (0.60)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 30,432 $ 22,477 $ 10,360 $ 5,440
Ratio of total expenses to average net
assets (e)............................ 1.47% (f) 1.85% 2.13% 11.71% (f)
Ratio of net expenses to average net
assets (e)............................ 0.75% (f) 0.75% 0.83% 0.79% (f)
Ratio of net investment income (loss)
to average net assets................. 0.23% (f) 0.76% 0.98% 1.54% (f)
Portfolio turnover rate.................. 25% 31% 265% --%
CLASS II SHARES
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD
6/30/2018 ------------------------- ENDED
(UNAUDITED) 2017 2016 12/31/2015 (a)
----------- ----------- ----------- -------------
Net asset value, beginning of period..... $ 11.40 $ 9.83 $ 9.95 $ 10.00
--------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.02 0.10 0.11 0.01
Net realized and unrealized gain (loss).. 0.52 1.66 (0.02) (0.06)
--------- --------- --------- ---------
Total from investment operations......... 0.54 1.76 0.09 (0.05)
--------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.02) (0.09) (0.11) --
Net realized gain........................ (0.01) (0.10) (0.10) --
--------- --------- --------- ---------
Total from distributions................. (0.03) (0.19) (0.21) --
--------- --------- --------- ---------
Net asset value, end of period........... $ 11.91 $ 11.40 $ 9.83 $ 9.95
========= ========= ========= =========
TOTAL RETURN (c) (d)..................... 4.76% 17.94% 0.88% (0.50)%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 96 $ 59 $ 50 $ 50
Ratio of total expenses to average net
assets (e)............................ 37.92% (f) 46.41% 57.64% 37.40% (f)
Ratio of net expenses to average net
assets (e)............................ 0.50% (f) 0.50% 0.57% 0.51% (f)
Ratio of net investment income (loss)
to average net assets................. 0.54% (f) 0.93% 1.13% 0.86% (f)
Portfolio turnover rate.................. 25% 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) Amount is less than $0.01.
(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) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(f) Annualized.
See Notes to Financial Statements Page 57
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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 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 IndexSM. First Trust Advisors L.P. ("First Trust" or the "Advisor")
reserves the right to over-weight, under-weight or exclude certain securities
from the portfolio 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 debt
portfolio. Investment-grade debt securities are those long-term debt securities
rated "BBB-" or higher by Standard & Poor's Financial Services LLC or Fitch
Ratings, Inc. or "Baa3" or higher by Moody's Investors Service, Inc., and those
short-term debt securities rated "A3" or higher by Standard & Poor's Financial
Services LLC, "F3" or higher by Fitch Ratings, Inc. or "Prime 3" 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 debt will be invested in: investment-grade debt
securities included in the Dow Jones Equal Weight U.S. Issued Corporate Bond
IndexSM (the "Bond Index") and other investment-grade debt securities of issuers
whose securities are included in the Bond Index; and investment-grade debt
securities of issuers included in the Dow Jones Composite IndexSM. 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 debt securities and U.S.
government bonds in lieu of investing directly in such securities.
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.
Page 58
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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
(including investment borrowings) in ETFs and cash and cash equivalents that
comprise the Dorsey Wright Tactical Tilt Moderate Core Index. It is expected
that a majority of the ETFs in which the Fund invests will be advised by First
Trust.
Each Fund offers two classes of shares: Class I and Class II. Each class
represents an interest in the same portfolio of investments but with a different
combination of service (12b-1) fees, eligibility requirements and other
features.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification 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 the 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 59
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
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 borrower/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 a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
12) other relevant factors.
Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of June 30, 2018, 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
daily 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 are not known until after the REITs' fiscal
year end. A Fund records the character of distributions received from the REITs
during the year based on estimates available. The characterization of
distributions received by a Fund may be subsequently revised based on
information received from the REITs after their tax reporting periods conclude.
C. CASH AND CASH EQUIVALENTS
Normally, the Funds invest substantially all of their assets to meet their
investment objectives. The Funds may invest the remainder of their assets in
securities with maturities of less than one year or cash equivalents, or they
may hold cash. The investment in such instruments is not a principal investment
strategy of First Trust Dow Jones or First Trust Multi Income. The percentage of
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
each Fund's net assets invested in such holdings varies and depends on several
factors, including market conditions. For temporary defensive purposes and
during periods of high cash inflows or outflows, the Funds may depart from their
principal investment strategies and invest part or all of their assets in these
securities, or they may hold cash.
D. 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
included 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 included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations 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.
E. 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
contracts 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.
F. 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.
G. 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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
H. 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
federal 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 time in the future.
The tax character of distributions paid by each Fund during the fiscal 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 --
As of December 31, 2017, the component of distributable earnings on a tax basis
for each Fund were as follows:
Undistributed Accumulated Capital Net Unrealized
Ordinary 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
I. 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, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each 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 June
30, 2018, 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.
The Funds intend to utilize provisions of the federal income tax laws, which
allow them to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Funds are 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 --
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
J. 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.
K. NEW ACCOUNTING PRONOUNCEMENT
On March 30, 2017, the FASB issued Accounting Standards Update (ASU) 2017-08
"Premium Amortization on Purchased Callable Debt Securities," which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. ASU 2017-08 is effective for public
business entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. Earlier adoption is permitted for all
entities, including adoption in an interim period. If an entity early adopts the
ASU in an interim period, any adjustments must be reflected as of the beginning
of the fiscal year that includes that interim period. Management is still
assessing the impact of the adoption of ASU 2017-08 on the financial statements
but does not expect it to have a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
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.
In addition First Trust Multi Income and First Trust Dorsey Wright incur their
respective pro rata share of fees and expenses attributable to each Fund's
investments in other investment companies ("acquired fund fees and expenses").
The total of net expenses and acquired fund fees and expenses represents each
Fund's total net annual operating expenses.
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
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 nondiscretionary
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
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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.
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, 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, 2020. 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 the Fund's average daily net assets per year at least until May
1, 2020. For 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 Caps. However,
total net annual fund expenses may be higher or lower than the Expense Caps.
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 six months ended June 30, 2018, and the expenses borne and fees waived
by First Trust subject to recovery from the applicable Fund at June 30, 2018,
are included in the table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY
----------------------------------------------------------------------
SIX MONTHS YEAR YEAR SIX MONTHS
ENDED ENDED ENDED ENDED
FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30,
WAIVED REIMBURSED 2015 2016 2017 2018 TOTAL
------------ ------------ ------------ ------------ ------------ ------------ ----------
First Trust Dow Jones $ 42,199 $ -- $ 186,546 $ 338,513 $ 203,355 $ 42,199 $ 770,613
First Trust Multi Income 60,969 27,254 87,165 152,851 189,257 88,223 517,496
First Trust Dorsey Wright 44,539 60,352 48,180 157,770 199,184 104,891 510,025
During the six months ended June 30, 2018, First Trust did not recover any fees
that were previously waived or reimbursed.
First Trust has 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, 2020. During
the six months ended June 30, 2018, First Trust reimbursed First Trust Multi
Income $37,598 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.
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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated 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:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2018 DECEMBER 31, 2017
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 2,866,446 $ 39,205,916 12,209,439 $163,359,896
Class II 902 12,185 12,731 181,551
------------ ------------ ------------ ------------
Total Sales 2,867,348 $ 39,218,101 12,222,170 $163,541,447
============ ============ ============ ============
Dividend Reinvestment:
Class I 481,499 $ 6,548,384 3,094,656 $ 42,252,292
Class II 25 348 667 9,149
------------ ------------ ------------ ------------
Total Dividend Reinvestment 481,524 $ 6,548,732 3,095,323 $ 42,261,441
============ ============ ============ ============
Redemptions:
Class I (3,076,758) $(42,093,784) (3,937,247) $(52,916,444)
Class II (12,244) (164,581) (22) (309)
------------ ------------ ------------ ------------
Total Redemptions (3,089,002) $(42,258,365) (3,937,269) $(52,916,753)
============ ============ ============ ============
Capital transactions for First Trust Multi Income were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2018 DECEMBER 31, 2017
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 340,153 $ 3,636,973 529,437 $ 5,744,312
Class II -- -- -- --
------------ ------------ ------------ ------------
Total Sales 340,153 $ 3,636,973 529,437 $ 5,744,312
============ ============ ============ ============
Dividend Reinvestment:
Class I 20,586 $ 219,032 47,398 $ 511,337
Class II -- -- 130 1,406
------------ ------------ ------------ ------------
Total Dividend Reinvestment 20,586 $ 219,032 47,528 $ 512,743
============ ============ ============ ============
Redemptions:
Class I (251,886) $ (2,681,989) (437,125) $ (4,750,415)
Class II (4,509) (48,114) (305) (3,336)
------------ ------------ ------------ ------------
Total Redemptions (256,395) $ (2,730,103) (437,430) $ (4,753,751)
============ ============ ============ ============
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
Capital transactions for First Trust Dorsey Wright were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2018 DECEMBER 31, 2017
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 768,279 $ 9,144,403 1,099,884 $ 11,844,556
Class II 2,825 34,014 -- --
------------ ------------ ------------ ------------
Total Sales 771,104 $ 9,178,417 1,099,884 $ 11,844,556
============ ============ ============ ============
Dividend Reinvestment:
Class I 3,860 $ 47,170 27,252 $ 311,559
Class II 22 268 86 979
------------ ------------ ------------ ------------
Total Dividend Reinvestment 3,882 $ 47,438 27,338 $ 312,538
============ ============ ============ ============
Redemptions:
Class I (184,680) $ (2,185,322) (209,529) $ (2,272,459)
Class II (1) (13) -- --
------------ ------------ ------------ ------------
Total Redemptions (184,681) $ (2,185,335) (209,529) $ (2,272,459)
============ ============ ============ ============
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities, excluding
U.S. Government securities and short-term investments, for the six months ended
June 30, 2018, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 267,443,772 $ 261,005,335
First Trust Multi Income 5,043,644 3,518,586
First Trust Dorsey Wright 13,372,730 6,248,521
Cost of purchases and proceeds from sales of U.S. Government investment
securities, excluding short-term investments, for the six months ended June 30,
2018, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 40,332,949 $ 40,336,828
First Trust Multi Income 232,338 589,231
First Trust Dorsey Wright -- --
6. DERIVATIVE TRANSACTIONS
The following table presents the type of derivatives held by First Trust Dow
Jones at June 30, 2018, the primary underlying risk exposure and the location of
these instruments as presented on the Statements of Assets and Liabilities.
First Trust Multi Income and First Trust Dorsey Wright did not hold any
derivative instruments as of June 30, 2018.
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 Unrealized depreciation
on futures contracts* $ 98,594 on futures contracts* $ --
* 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended June 30, 2018, on derivative 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 EXPOSURE
Net realized gain (loss) on futures $ 745,772
Net change in unrealized appreciation (depreciation) on futures 4,414
During the six months ended June 30, 2018, the amount of notional values of
futures contracts opened and closed were $43,369,709 and $49,480,202,
respectively.
First Trust Dow Jones does not have the right to offset financial assets and
liabilities related to futures contracts on the Statements of Assets and
Liabilities.
7. 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 June 30,
2018, and for the period then ended are:
CHANGE IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 6/30/2018 12/31/2017 PURCHASES SALES (DEPRECIATION) (LOSS) 6/30/2018 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust
Institutional
Preferred
Securities and
Income ETF 15,470 $ -- $ 325,529 $ (13,993) $ (17,199) $ (407) $ 293,930 $ 7,976
First Trust Low
Duration
Opportunities ETF -- 3,668 380,931 (384,518) 7 (88) -- 478
First Trust Preferred
Securities
and Income ETF 46,740 1,186,193 75,854 (325,963) (57,604) 12,384 890,864 25,239
First Trust Senior
Loan Fund 58,180 2,763,251 270,473 (235,069) (14,175) (5,221) 2,779,259 54,253
First Trust Tactical
High Yield ETF 33,260 1,179,765 498,747 (66,628) (41,632) (4,039) 1,566,213 40,980
----------- ----------- ------------ --------------- ----------- ----------- ------------
$ 5,132,877 $ 1,551,534 $ (1,026,171) $ (130,603) $ 2,629 $ 5,530,266 $ 128,926
=========== =========== ============ =============== =========== =========== ============
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
Amounts relating to these investments in First Trust Dorsey Wright at June 30,
2018, and for the period then ended are:
CHANGE IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 6/30/2018 12/31/2017 PURCHASES SALES (DEPRECIATION) (LOSS) 6/30/2018 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust BICK Index
Fund 4,784 $ 108,141 $ 38,727 $ (2,953) $ (14,573) $ 591 $ 129,933 $ 667
First Trust Chindia
ETF 3,725 108,306 42,575 (3,005) (5,447) 1,133 143,562 992
First Trust Developed
Markets ex-US
AlphaDEX(R) Fund 8,363 389,688 142,995 (10,556) (24,773) 3,172 500,526 4,379
First Trust Dow Jones
Internet Index Fund 21,415 2,029,044 729,315 (346,845) 397,710 138,551 2,947,775 --
First Trust Emerging
Markets AlphaDEX(R)
Fund 12,852 265,731 101,487 (7,295) (30,307) 2,737 332,353 3,824
First Trust Germany
AlphaDEX(R) Fund 3,007 113,686 42,311 (3,108) (15,357) 970 138,502 1,967
First Trust
Industrials/Producer
Durables AlphaDEX(R)
Fund 67,636 2,050,972 738,671 (54,914) (102,324) 12,163 2,644,568 8,755
First Trust Large Cap
Growth AlphaDEX(R)
Fund 46,220 2,242,246 781,574 (155,226) 140,789 39,750 3,049,133 3,756
First Trust Mid Cap
Core AlphaDEX(R)
Fund 45,332 2,231,742 827,195 (59,573) 88,879 14,732 3,102,975 9,383
First Trust Nasdaq
Bank ETF 85,902 2,026,277 670,663 (166,933) (114,607) 32,377 2,447,777 13,592
First Trust NASDAQ-100-
Technology Sector
Index Fund 34,283 2,006,766 690,933 (202,921) 71,852 75,218 2,641,848 8,397
First Trust Small Cap
Growth AlphaDEX(R)
Fund 69,118 2,165,861 902,609 (56,991) 332,629 10,189 3,354,297 1,432
First Trust Switzerland
AlphaDEX(R) Fund 2,840 108,841 43,830 (2,933) (8,003) 748 142,483 2,718
First Trust Technology
AlphaDEX(R) Fund 47,521 1,906,897 688,030 (106,424) 175,492 10,012 2,674,007 1,882
----------- ----------- ------------ --------------- ----------- ----------- ------------
$17,754,198 $ 6,440,915 $ (1,179,677) $ 891,960 $ 342,343 $24,249,739 $ 61,744
=========== =========== ============ =============== =========== =========== ============
8. 12B-1 SERVICE PLAN
The Trust has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act, which provides that Class I shares of each of the Funds will be subject to
an annual service fee.
First Trust Portfolios L.P. ("FTP"), an affiliate of First Trust, serves as the
selling agent and distributor of shares of the Funds. FTP uses the service fee
to compensate each Participating Insurance Company for providing account
services to Contract 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.
During the six months ended June 30, 2018, 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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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. A commitment fee of
0.15% of the daily amount of the excess of the commitment amount over the
outstanding principal balance of the loans will be charged by BNYM, which First
Trust will allocate amongst the funds that have access to the BNYM Line of
Credit. These fees are reflected in the Statements of Operations in the
"Commitment fees" line item. To the extent that either fund accesses the BNYM
Line of Credit, there would also be an interest fee charged. Neither First Trust
Dow Jones or First Trust Multi Income drew on the BNYM Line of Credit during the
six months ended June 30, 2018.
10. INDEMNIFICATION
The Trust, on behalf of the Funds, 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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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (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 at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at 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 at
www.ftportfolios.com; (3) on the SEC's website at www.sec.gov; and (4) for
review and copying at the SEC's Public Reference Room ("PRR") in Washington, DC.
Information regarding the operation of the PRR may be obtained by calling (800)
SEC-0330.
LICENSING INFORMATION
Standard & Poor's and S&P are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P") and Dow Jones is a registered trademark of Dow
Jones Trademark Holdings LLC ("Dow Jones"). The trademarks have been licensed to
S&P Dow Jones Indices LLC and have been sublicensed for use for certain purposes
by First Trust Advisors L.P. ("First Trust"). The DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE are products of S&P Dow Jones Indices LLC and has
been licensed for use by First Trust. The First Trust/Dow Jones Dividend &
Income Allocation Portfolio is not sponsored, endorsed, sold or promoted by S&P
Dow Jones Indices LLC, Dow Jones, S&P, or any of their respective affiliates
(collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor its
affiliates make any representation or warranty, express or implied, to the
owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or
any member of the public regarding the advisability of investing in securities
generally or in the First Trust/Dow Jones Dividend & Income Allocation Portfolio
particularly or the ability of the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE
BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES
COMPOSITE AVERAGE to track general market performance. S&P Dow Jones Indices
only relationship to First Trust with respect to the DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE is the licensing of the Index and certain
trademarks, service marks and/or trade names of S&P Dow Jones Indices. The DOW
JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL
STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE is determined, composed
and calculated by S&P Dow Jones Indices without regard to First Trust or the
First Trust/Dow Jones Dividend & Income Allocation Portfolio. S&P Dow Jones
Indices has no obligation to take the needs of First Trust or the owners of the
First Trust/Dow Jones Dividend & Income Allocation Portfolio into consideration
in determining, composing or calculating the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE. Neither S&P Dow Jones Indices nor its affiliates are
responsible for and have not participated in the determination of the prices,
and amount of the First Trust/Dow Jones Dividend & Income Allocation Portfolio
or the timing of the issuance or sale of the First Trust/Dow Jones Dividend &
Income Allocation Portfolio or in the determination or calculation of the
equation by which the First Trust/Dow Jones Dividend & Income Allocation
Portfolio is to be managed. S&P Dow Jones Indices has no obligation or liability
in connection with the administration, marketing or trading of the First
Trust/Dow Jones Dividend & Income Allocation Portfolio. There is no assurance
that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
advisor. Inclusion of a security within an index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it considered to
be investment advice.
NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT
BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS
OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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.
BANK LOAN RISKS. Certain of the Funds invest in bank loans. An investment in
bank loans subjects the Fund to credit risk, which is heightened for bank loans
in which the Fund invests 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. Senior floating loans, in which the Fund
may invest, are usually rated below investment grade but may also be unrated. As
a result, the risks associated with these senior floating loans are similar to
the risks of high yield fixed income instruments. An economic downturn would
generally lead to a higher non-payment rate, and a senior floating rate loan may
lose significant market value before a default occurs. Moreover, any specific
collateral used to secure a senior floating rate loan may decline in value or
become illiquid, which would adversely affect the senior floating rate 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 senior
floating rate loan may have uncertain settlement time periods. Senior floating
rate loans are subject to a number of risks elsewhere in this report, including
liquidity risk and the risk of investing in below grade fixed income
instruments.
CALL RISK. If an issuer calls higher-yielding debt instruments held by the
Funds, performance could be adversely impacted.
CONVERTIBLE SECURITIES RISK. Certain of the ETFs in which certain of the Funds
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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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 EXCHANGE RATE RISK. Certain of the ETFs in which certain of the Funds
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.
CYBER SECURITY RISK. As the use of Internet technology has become more prevalent
in the course of business, the Funds have become more susceptible to potential
operational risks through breaches in cybersecurity. A breach in cybersecurity
refers to both intentional and unintentional events that may cause the Fund to
lose proprietary information, suffer data corruption or lose operational
capacity. Such events could cause the Fund to incur regulatory penalties,
reputational damage, additional compliance costs associated with corrective
measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund's digital information systems through "hacking" or malicious
software coding, but may also result from outside attacks such as
denial-of-service attacks through efforts to make network services unavailable
to intended users. In addition, cyber security breaches of the Fund's
third-party service providers, such as its administrator, transfer agent,
custodian, or sub-advisor, as applicable, or issuers in which the Fund invests,
can also subject the Fund to many of the same risks associated with direct cyber
security breaches. The Fund has established risk management systems designed to
reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly
control the cybersecurity systems of issuers or third-party service providers.
DEPOSITORY RECEIPTS RISK. Certain of the Funds 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. Certain of 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. Certain of the Funds invest in energy
infrastructure companies. These companies principally include publicly-traded
MLPs and limited liability companies taxed as partnerships, MLP affiliates 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. Certain of the Funds 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
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
when political or economic events affecting the issuers occur. In addition,
common stock prices may be particularly sensitive to rising interest rates, as
the cost of capital rises and borrowing costs increase. The equity markets have
experienced recent volatility that may lead to sharp declines in the value of
the underlying ETFs and the Funds.
EXCHANGE-TRADED FUND ("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.
EXTENSION RISK. Extension risk is the risk that, when interest rates rise,
certain obligations will be paid off by the issuer (or obligor) more slowly than
anticipated, causing the value of these securities to fall. Rising interest
rates tend to extend the duration of securities, making them more sensitive to
changes in interest rates. The value of longer-term securities generally changes
more in response to changes in interest rates than shorter-term securities. As a
result, in a period of rising interest rates, securities may exhibit additional
volatility and may lose value.
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. Certain of the ETFs in which certain of the Funds
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. Certain of the Funds 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. Certain of the Funds 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 certain of the Funds
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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
INDEX REBALANCE RISK. Pursuant to the methodology that First Trust Dorsey Wright
Tactical Core Portfolio'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 Funds may be subject to the risks of investing 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.
MANAGEMENT RISK. Certain of 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. Certain of the Funds invest in Master Limited Partnerships ("MLP'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. On March 15, 2018, the Federal
Energy Regulatory Commission ("FERC") changed its long-standing tax allowance
policy which no longer permits MLPs to include in their cost of service an
income tax allowance. This has had a negative impact on the performance of some
MLPs affected by this decision. This policy change and any similar policy
changes in the future could adversely impact an MLP's business, financial
condition, results of operations and cash flows and ability to pay cash
distributions or dividends.
MORTGAGE SECURITIES RISK. Certain of the ETFs in which certain of the Funds
invest may hold 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. 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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
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 certain of the Funds invest
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. Certain of the Funds invest in
securities of non-U.S. issuers. Non-U.S. securities are subject to higher
volatility than securities of domestic issuers due to possible adverse
political, social or economic developments; restrictions on foreign investment
or exchange of securities; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; different legal or accounting standards
and less government supervision and regulation of exchanges in foreign
countries. These risks may be heightened for securities of companies located in,
or with significant operations in, emerging market countries.
PREFERRED SECURITIES RISK. The Funds and certain of the ETFs in which certain of
the Funds invest, 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. Certain of the Funds invest in Real Estate Investment Trusts
("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. Certain of 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.
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
SMALLER COMPANY RISK. Certain of the Funds and certain of the ETFs in which
certain of the Funds invest, 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. Certain of the Funds invest in Treasury Inflation Protected
Securities ("TIPs"). TIPS are inflation-indexed fixed-income securities issued
by the U.S. Department of Treasury and are subject to the same risks as other
fixed income investments. In a falling inflationary environment, both interest
payments and the value of the TIPS will decline.
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT
AND INVESTMENT SUB-ADVISORY AGREEMENTS
The Board of Trustees (the "Board") of First Trust Variable Insurance Trust (the
"Trust"), including the Independent Trustees, unanimously approved the
continuation of the Investment Management Agreement (the "Advisory Agreement")
with First Trust Advisors L.P. ("First Trust" or the "Advisor") on behalf of
each of First Trust/Dow Jones Dividend & Income Allocation Portfolio, First
Trust Multi Income Allocation Portfolio and First Trust Dorsey Wright Tactical
Core Portfolio (each a "Fund" and together the "Funds"); the Investment
Sub-Advisory Agreement (the "Stonebridge Sub-Advisory Agreement") among the
Trust, on behalf of First Trust Multi Income Allocation Portfolio, the Advisor
and Stonebridge Advisors LLC ("Stonebridge"); and the Investment Sub-Advisory
Agreement (the "Energy Income Partners Sub-Advisory Agreement") among the Trust,
on behalf of First Trust Multi Income Allocation Portfolio, the Advisor and
Energy Income Partners, LLC ("Energy Income Partners") for a one-year period
ending June 30, 2019 at a meeting held on June 11, 2018. The Stonebridge
Sub-Advisory Agreement and the Energy Income Partners Sub-Advisory Agreement are
collectively referred to as the "Sub-Advisory Agreements." Stonebridge and
Energy Income Partners are individually referred to as a "Sub-Advisor" and are
collectively referred to as the "Sub-Advisors." The Sub-Advisory Agreements
together with the Advisory Agreement are referred to as the "Agreements." The
Board determined that the continuation of the Advisory Agreement is in the best
interests of each Fund and the continuation of the Sub-Advisory Agreements is in
the best interests of First Trust Multi Income Allocation Portfolio in light of
the nature, extent and quality of the services provided and such other matters
as the Board considered to be relevant in the exercise of its reasonable
business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 23, 2018 and June 11, 2018, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor and each of the Sub-Advisors responding to requests for information from
counsel to the Independent Trustees that, among other things, outlined the
services provided by the Advisor to the Funds and by the Sub-Advisors to First
Trust Multi Income Allocation Portfolio (including the relevant personnel
responsible for these services and their experience); the advisory fee rate
payable by each Fund and the sub-advisory fee rates for First Trust Multi Income
Allocation Portfolio as compared to fees charged to a peer group of funds
provided by Management Practice, Inc. ("MPI"), an independent source (the "Peer
Group"), and as compared to fees charged to other clients of the Advisor and the
Sub-Advisor; expenses of each Fund as compared to expense ratios of the funds in
the Fund's Peer Group; performance information for each Fund; the nature of
expenses incurred in providing services to the Funds and the potential for
economies of scale, if any; financial data on the Advisor and each Sub-Advisor;
any fall out benefits to the Advisor and its affiliate, First Trust Portfolios
L.P. ("FTP"), and the Sub-Advisors; and information on the Advisor's and each
Sub-Advisor's compliance program. The Board reviewed initial materials with the
Advisor at a special meeting held on April 23, 2018, prior to which the
Independent Trustees and their counsel met separately to discuss the information
provided by the Advisor and each of the Sub-Advisors. Following the April
meeting, independent legal counsel on behalf of the Independent Trustees
requested certain clarifications and supplements to the materials provided, and
the information provided in response to those requests was considered at an
executive session of the Independent Trustees and independent legal counsel held
prior to the June 11, 2018 meeting, as well as at the meeting held that day. The
Board applied its business judgment to determine whether the arrangements
between the Trust and the Advisor continue to be reasonable business
arrangements from the Funds' perspective. Similarly, the Board applied its
business judgment to determine whether the arrangements among the Trust, the
Advisor and each of the Sub-Advisors continue to be reasonable business
arrangements from the perspective of First Trust Multi Income Allocation
Portfolio. The Board determined that, given the totality of the information
provided with respect to the Agreements, the Board had received sufficient
information to renew the Agreements. The Board considered that shareholders
chose to invest or remain invested in the Funds knowing that the Advisor manages
the Funds and knowing that the Sub-Advisors serve as such for First Trust Multi
Income Allocation Portfolio and knowing the advisory fee.
In reviewing the Agreements, the Board considered the nature, extent and quality
of the services provided by the Advisor and each Sub-Advisor under the
Agreements. With respect to the Advisory Agreement, the Board considered that
the Advisor is responsible for the overall management and administration of the
Trust and the Funds and reviewed all of the services provided by the Advisor to
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FIRST TRUST VARIABLE INSURANCE TRUST
JUNE 30, 2018 (UNAUDITED)
the Funds, including oversight of the Sub-Advisors for First Trust Multi Income
Allocation Portfolio, as well as the background and experience of the persons
responsible for such services. The Board noted that the Advisor oversees the
Sub-Advisors' management of First Trust Multi Income Allocation Portfolio's
investments, including portfolio risk monitoring and performance review. In
reviewing the services provided, the Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust program
for monitoring the Advisor's, the Sub-Advisors' and the Funds' compliance with
the 1940 Act, as well as each Fund's compliance with its investment objective,
policies and restrictions. The Board also considered a report from the Advisor
with respect to its risk management functions related to the operation of the
Funds. Finally, as part of the Board's consideration of the Advisor's services,
the Advisor, in its written materials and at the April 23, 2018 meeting,
described to the Board the scope of its ongoing investment in additional
infrastructure and personnel to maintain and improve the quality of services
provided to the Funds and the other funds in the First Trust Fund Complex. With
respect to the Sub-Advisory Agreements for First Trust Multi Income Allocation
Portfolio, the Board considered the services that each Sub-Advisor provides to
the Fund, noting that Energy Income Partners is responsible for the day-to-day
management of a portion of the Fund's investments and that Stonebridge serves in
a non-discretionary capacity for a portion of the Fund's investments. The Board
noted the background and experience of each Sub-Advisor's portfolio management
team and the Board's prior meetings with members of each portfolio management
team. The Board also received a presentation from representatives of Energy
Income Partners at the June 11, 2018 meeting. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services provided to the Funds by the Advisor and to
First Trust Multi Income Allocation Portfolio by the Sub-Advisors under the
Agreements have been and are expected to remain satisfactory and that the
Advisor and, for First Trust Multi Income Allocation Portfolio, the
Sub-Advisors, have managed the Funds consistent with each Fund's respective
investment objectives, policies and restrictions.
The Board considered the advisory fee rate payable by each Fund under the
Advisory Agreement and, for First Trust Multi Income Allocation Portfolio,
considered the sub-advisory fees paid under the Sub-Advisory Agreements for the
services provided, noting that the sub-advisory fees are paid by the Advisor
from its advisory fee. The Board considered that the Advisor agreed to extend
the current expense caps for Class I and Class II shares of each Fund at least
until May 1, 2020. The Board noted that expenses borne or advisory fees waived
by First Trust are subject to reimbursement by the applicable Fund for up to
three years from the date the expense was incurred or advisory fee was waived,
but no reimbursement payment would be made by the Fund if it would result in the
Fund exceeding an expense ratio equal to the expense cap. The Board also noted
that the Advisor had extended through May 1, 2019 its agreement to reduce the
advisory fee payable by First Trust Multi Income Allocation Portfolio in the
amount of 0.37% of the Fund's average daily net assets. The Board received and
reviewed information for each Fund showing the advisory fee rates and expense
ratios of the peer funds in the Peer Group, as well as advisory and unitary fee
rates charged by the Advisor and the Sub-Advisors to other fund and non-fund
clients, as applicable. With respect to each Fund's Peer Group, the Board noted
its prior discussions with the Advisor and MPI regarding the assembly of each
Fund's Peer Group. Based on the information provided, the Board noted that the
advisory fee payable by First Trust/Dow Jones Dividend & Income Allocation
Portfolio was equal to the median advisory fee of the peer funds in the Fund's
Peer Group, that the advisory fee payable by First Trust Multi Income Allocation
Portfolio was below the median advisory fee of the peer funds in the Fund's Peer
Group and that the advisory fee payable by First Trust Dorsey Wright Tactical
Core Portfolio was above the median advisory fee of the peer funds in the Fund's
Peer Group. The Board also noted that with respect to the total (net) expense
ratio of each Fund's Class I shares, the net expense ratio of First Trust Multi
Income Allocation Portfolio was below the median expense net ratio of the peer
funds in the Fund's Peer Group and the net expense ratio of each of First
Trust/Dow Jones Dividend & Income Allocation Portfolio and First Trust Dorsey
Wright Tactical Core Portfolio was above the median net expense ratio of the
peer funds in the Fund's Peer Group. With respect to fees charged to other
clients, the Board considered differences between the Funds and other clients
that limited their comparability. In considering the advisory fee rates overall,
the Board also considered the Advisor's statement that it seeks to meet investor
needs through innovative and value-added investment solutions and the Advisor's
description of its long-term commitment to each Fund.
The Board considered performance information for the Funds. The Board noted the
process it has established for monitoring the Funds' performance and portfolio
risk on an ongoing basis, which includes quarterly performance reporting from
the Advisor for the Funds and the Sub-Advisors for First Trust Multi Income
Allocation Portfolio. The Board determined that this process continues to be
effective for reviewing the Funds' performance. The Board received and reviewed
information comparing each Fund's performance for periods ended December 31,
2017 to the performance of the peer funds in the Fund's Peer Group and to that
of benchmark indexes, including one or more blended benchmarks. Based on the
information provided, the Board noted that First Trust/Dow Jones Dividend &
Income Allocation Portfolio (Class I shares) outperformed the Peer Group average
for the three-year period ended December 31, 2017 but underperformed the Peer
Group average for the one- and five-year periods ended December 31, 2017. The
Board noted that First Trust Multi Income Allocation Portfolio (Class I shares)
underperformed the Peer Group average for the one- and three-year periods ended
December 31, 2017. The Board noted that First Trust Dorsey Wright Tactical Core
Portfolio (Class I shares) outperformed the Peer Group average for the one-year
period ended December 31, 2017.
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JUNE 30, 2018 (UNAUDITED)
On the basis of all the information provided on the fees, expenses and
performance of the Funds and the ongoing oversight by the Board, the Board
concluded that the advisory fee for each Fund and the sub-advisory fees for
First Trust Multi Income Allocation Portfolio continue to be reasonable and
appropriate in light of the nature, extent and quality of the services provided
by the Advisor to each Fund under the Advisory Agreement and provided to First
Trust Multi Income Allocation Portfolio by the Sub-Advisors under the
Sub-Advisory Agreements.
The Board considered information and discussed with the Advisor whether there
were any economies of scale in connection with providing advisory services to
each Fund and noted the Advisor's statement that it believes its expenses will
likely increase over the next twelve months as the Advisor continues to make
investments in infrastructure and personnel. The Board considered the revenues
and allocated costs (including the allocation methodology) of the Advisor in
serving as investment advisor to each Fund for the twelve months ended December
31, 2017 and the estimated profitability level for each Fund calculated by the
Advisor based on such data, as well as complex-wide and product-line
profitability data for the same period. The Board noted the inherent limitations
in the profitability analysis and concluded that, based on the information
provided, the Advisor's profitability level for each Fund was not unreasonable.
The Board considered that the Advisor had identified as a fall out benefit to
the Advisor and FTP their exposure to investors and brokers who, absent their
exposure to the Funds, may have had no dealings with the Advisor or FTP. The
Board also considered the majority ownership interest of an affiliate of the
Advisor in Stonebridge and the investment by an affiliate of the Advisor in
Energy Income Partners and potential fall-out benefits to the Advisor from such
interests. The Board noted that FTP is compensated for services provided to the
Funds through Rule 12b 1 distribution and service fees payable by Class I
shares, and that the Advisor receives compensation from the Funds for providing
fund reporting services pursuant to a separate Fund Reporting Services
Agreement. The Board also noted that the Advisor does not utilize soft dollars
in connection with its management of the Funds' portfolios. The Board concluded
that the character and amount of potential fall-out benefits to the Advisor were
not unreasonable.
With respect to the Stonebridge Sub-Advisory Agreement, the Board considered
Stonebridge's expenses in providing sub-advisory services to the Fund and noted
Stonebridge's hiring of additional personnel in recent years and commitment to
add additional resources if assets increase. The Board did not review the
profitability of Stonebridge with respect to the Fund. The Board noted that the
Advisor pays Stonebridge from its advisory fee, and its understanding that the
First Trust Multi Income Allocation Portfolio's sub-advisory fee rate was the
product of an arm's length negotiation. The Board concluded that the
profitability analysis for the Advisor was more relevant. The Board considered
fall-out benefits that may be realized by Stonebridge from its relationship with
First Trust Multi Income Allocation Portfolio, including potential fall-out
benefits to Stonebridge from the ownership interest of an affiliate of the
Advisor in Stonebridge. The Board noted that Stonebridge does not provide trade
execution services on behalf of First Trust Multi Income Allocation Portfolio.
The Board concluded that the character and amount of potential fall-out benefits
to Stonebridge were not unreasonable.
With respect to the Energy Income Partners Sub-Advisory Agreement, the Board
considered that Energy Income Partners' investment services expenses are
primarily fixed, and that Energy Income Partners has made recent investments in
additional personnel and infrastructure and expects its expenses to increase
over the next twelve months as it continues to make investments in additional
personnel. The Board did not review the profitability of Energy Income Partners
with respect to the Fund. The Board noted that the Advisor pays Energy Income
Partners from its advisory fee, and its understanding that the First Trust Multi
Income Allocation Portfolio's sub-advisory fee rate was the product of an arm's
length negotiation. The Board concluded that the profitability analysis for the
Advisor was more relevant. The Board considered fall-out benefits that may be
realized by Energy Income Partners from its relationship with First Trust Multi
Income Allocation Portfolio, including the potential fall-out benefits to Energy
Income Partners from the ownership interest of an affiliate of the Advisor in
Energy Income Partners. The Board noted that Energy Income Partners does not
provide trade execution services on behalf of First Trust Multi Income
Allocation Portfolio. The Board concluded that the character and amount of
potential fall-out benefits to Energy Income Partners were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of the applicable Funds. No single
factor was determinative in the Board's analysis.
Page 79
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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
240 Greenwich Street Boston, MA 02110
New York, NY 10286
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Variable Insurance Trust
-------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: August 23, 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: August 23, 2018
-------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 23, 2018
-------------------
* Print the name and title of each signing officer under his or her signature.