UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22652
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First Trust Variable Insurance Trust
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2019
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2019
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TABLE OF CONTENTS
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FIRST TRUST VARIABLE INSURANCE TRUST
ANNUAL REPORT
DECEMBER 31, 2019
Shareholder Letter........................................................... 1
Portfolio Commentary and Performance Summary
First Trust/Dow Jones Dividend & Income Allocation Portfolio............ 2
First Trust Multi Income Allocation Portfolio........................... 7
First Trust Dorsey Wright Tactical Core Portfolio....................... 13
Understanding Your Fund Expenses............................................. 16
Portfolio of Investments
First Trust/Dow Jones Dividend & Income Allocation Portfolio............ 17
First Trust Multi Income Allocation Portfolio........................... 44
First Trust Dorsey Wright Tactical Core Portfolio....................... 54
Statements of Assets and Liabilities......................................... 55
Statements of Operations..................................................... 56
Statements of Changes in Net Assets.......................................... 57
Financial Highlights......................................................... 60
Notes to Financial Statements................................................ 64
Report of Independent Registered Public Accounting Firm...................... 78
Additional Information....................................................... 79
Board of Trustees and Officers............................................... 86
Privacy Policy............................................................... 88
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor"), Energy Income Partners, LLC ("EIP" or a
"Sub-Advisor"), and/or Stonebridge Advisors LLC ("Stonebridge" or a
"Sub-Advisor") and their respective 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 its 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
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 web page at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance.
By reading the portfolio commentary by each Fund's portfolio management team,
you may obtain an understanding of how the market environment affected each
Fund's performance. The statistical information that follows may help you
understand each Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor 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
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
DECEMBER 31, 2019
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the First Trust
Variable Insurance Trust (the "Funds"), which contains detailed information
about the Funds for the twelve months ended December 31, 2019, including a
market overview and a performance analysis.
A significant event for the markets in the past year was the decision by the
Federal Reserve (the "Fed") to reverse course with respect to monetary policy.
For those who may not follow the Fed closely, after holding its federal funds
target rate (upper bound) at an artificially low 0.25% for seven years (December
2008-December 2015) to help stimulate U.S. economic activity, it spent the
better part of the next four years (December 2015-July 2019) increasing its
benchmark lending rate in an effort to normalize it. Over that period, the Fed
increased the rate from 0.25% to 2.50%. To lend some perspective, the average
federal funds target rate (upper bound) was 2.95% for the 30-year period ended
December 31, 2019, so the Fed came close to achieving its goal of normalizing
it, according to data from Bloomberg. From the end of July 2019 through the end
of December, however, the Fed initiated three rate cuts that dropped it from
2.50% to 1.75%.
So why did the Fed reverse course on monetary policy? We believe, as well as
others in the financial media, that the Fed's reversal on monetary policy has to
do with the trade tariffs. The Trump Administration first began implementing new
trade tariffs on imported goods back in March 2018. While the original tariffs
targeted just imported steel and aluminum, the use of tariffs quickly escalated
to other goods and services. The lion's share of the tariff conflict today is
between the U.S. and China, the two largest economies in the world. In our
opinion, it is believed that President Donald J. Trump is utilizing tariffs as
leverage to try and negotiate more favorable trade agreements between the U.S.
and its major trading partners. One of the by-products of the escalation in the
use of tariffs by all parties involved has been a slowdown in global economic
growth, particularly in the U.S. The annualized U.S. real gross domestic product
growth rate in the second quarter of 2018 (when new tariffs were introduced) was
3.5%. As of the second and third quarters of 2019, that annualized growth rate
was down to 2.0% and 2.1%, respectively, according to data from the Bureau of
Economic Analysis. For many months, President Trump has publicly challenged the
Fed to lower rates aggressively to help offset the tempering of economic growth.
President Trump has noted that the Fed has room to lower rates due to the
extremely low-to-negative rate levels found in many countries abroad as well as
the lack of any significant inflationary pressure in the current climate. While
the Fed has delivered some rate cuts in recent months, we believe that President
Trump will continue to bang the drum for even more rate cuts.
Investors continue to flock to income-oriented investment products, such as
open-end bond mutual funds and exchange-traded bond funds ("ETFs"). Net inflows
to taxable bond funds and ETFs totaled an estimated $413.9 billion for the
12-month period ended December 31, 2019, according to Morningstar. The current
climate featuring low interest rates, low bond yields and low inflation, if
sustained, could make closed-end funds an attractive alternative to other
income-oriented products moving forward, in our opinion.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds 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.
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is a registered investment advisor
based in Wheaton, IL and is the investment advisor to the 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, Senior Vice President, First Trust
Chris A. Peterson, Senior Vice President, First Trust
Eric Maisel, Senior Vice President, First Trust
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2019, the First Trust/Dow Jones Dividend &
Income Allocation Portfolio (the "Fund") Class I Shares returned 20.77% versus
22.80% for the Blended Benchmark: 50% Russell 3000(R) Index and 50% Bloomberg
Barclays U.S Corporate Investment-Grade Index. As of December 31, 2019, the
total investments for the Fund were allocated as follows: Equities, 57.4% and
Fixed Income, 42.6%.
EQUITIES COMMENTARY
U.S. equities ended 2019 near all-time highs. The Russell 3000(R) Index returned
31.02% during 2019, ending above 30% for just the third time this century.
During the first quarter of 2019, a dovish Federal Reserve (the "Fed"), along
with receding trade threats, helped to revitalize U.S. equity markets after a
rocky fourth quarter of 2018. Modest inflation and soft international economic
data motivated the Fed to signal an incrementally more dovish policy stance at
the March Federal Open Market Committee ("FOMC") meeting, with the most recent
Fed "Dot Plot" indicating that the majority of FOMC members did not expect
further rate hikes during 2019. Lower risk of the Fed overtightening, along with
diminished threats of U.S.-China trade war, helped fuel the Russell 3000(R)
Index to return 14.0% during the first quarter of 2019. U.S. equities had a more
volatile second quarter, particularly during the month of May. Volatility and
Value were the two worst performing factors as the Bloomberg U.S. Pure Factor
Index's returned -1.55% for Volatility and -1.42% for Value for the second
quarter. The Financial Services sector was the top performing sector during the
second quarter, as the possibility of future Fed cuts lifted odds of prolonging
the business cycle, buoying banks as the Russell 3000(R) Financial Services
Index returned 7.0%. The Technology sector also had strong returns during the
quarter, with the Russell 3000(R) Technology Index returning 4.0%. For the third
quarter, volatility in stocks remained elevated as trade tensions intensified
and then moderated later in the quarter while U.S. manufacturing data weakened.
Large size and Dividends were positive factors as the Bloomberg U.S. Pure Factor
Index's returned 0.7% and 0.2%, respectively, for the third quarter. Treasury
yields fell providing a tailwind to interest rate sensitive utility and real
estate stocks, which were top performers for the third quarter. The Russell
3000(R) Utilities Index returned 8.5% while the Dow Jones Equity REIT Index
returned 7.7%. The Russell 3000(R) Consumer Staples Index returned 5.7% for the
third quarter as investors bid them higher in search of relative safety.
Trade progress bolstered U.S. equities in the fourth quarter of 2019. The rally
was spurred after China and the U.S. announced they had reached a "Phase One"
trade agreement, and the United States-Canada-Mexico Trade Agreement was signed
by the parties and subsequently ratified in the U.S. House of Representatives.
The respite from trade tensions, combined with a hold in Fed policy and steady
economic growth, drove markets higher, as the Russell 3000(R) Index had a 9.1%
total return for the fourth quarter.
The equity portion of the Fund has a quarterly rebalance in early January,
April, July and October. The selection process is focused on identifying stocks
exhibiting dividend strength, capital strength and price stability. This process
resulted in overweight positions in Producer Durables, Financial Services, and
Materials & Processing stocks, while Technology, Health Care, Utilities,
Consumer Discretionary, Energy and Consumer Staples were underweight.
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
Of the nine Russell Global Sectors, five had a positive total attribution effect
(allocation effect combined with selection effect) and four had a negative total
attribution effect. The Health Care, Energy and Utilities sectors had a positive
allocation effect while Technology had a negative allocation effect. Two sectors
had a positive selection effect: Materials & Processing and Producer Durables.
Four sectors had a negative selection effect: Financial Services, Technology,
Consumer Staples and Consumer Discretionary. The equity portion of the Fund
benefited from a positive allocation effect but was hindered by a negative
selection effect.
The Health Care sector was the largest overall contributor to relative
performance. The equity portion of the Fund was underweight the underperforming
sector in the benchmark, which led to a positive allocation effect. Some of the
positions in the Fund included Chemed Corp, Quest Diagnostics, and UnitedHealth
Group Incorporated, among a few others.
The Technology sector was the biggest detractor from relative performance. The
equity portion of the Fund was underweight the best performing sector in the
Russell 3000(R) benchmark, which led to a negative allocation effect and had a
negative selection effect.
Relative to the benchmark, the equity portion of the Fund also outperformed in
the Producer Durables, Energy, and Materials & Processing sectors. The Fund was
overweight the Producer Durables sector resulting in a positive allocation
effect and had a positive selection effect. In the Energy sector, the Fund was
underweight the worst performing sector in the benchmark, which led to a
positive allocation effect. In the Materials & Processing sector, the Fund was
overweight the sector resulting in a slightly negative allocation effect,
however the Fund's positions in the sector outperformed the benchmark's
positions resulting in a positive selection effect.
The equity portion of the Fund's top five contributors to performance were
Reliance Steel & Aluminum Co., CDW Corporation, Tetra Tech, Inc., HEICO
Corporation and Cintas Corporation. The top five detractors from performance
were Cabot Oil & Gas Corporation, The 3M Company, The Kraft Heinz Company,
Franklin Resources Inc. and Walgreens Boots Alliance, Inc.
Heading into 2020, we believe the overall state of the economy remains strong
from employment and wages, to corporate earnings, to gross domestic product
growth and industrial production. While equity markets rallied in 2019, they
continue to display opportunities and a positive outlook as the Fed remains
accommodative, in our opinion.
FIXED-INCOME COMMENTARY
The investment-grade corporate bond market experienced a major rally during
2019, as credit spreads retraced their 2018 sell-off. Spreads tightened
dramatically as the market became more constructive on corporate earnings, cash
flow, and the rating stability of BBB-rated credits. Macro concerns were also
alleviated as hope for a "Phase One" trade deal between the U.S. and China
increased, and as signs emerged that global economic growth is stabilizing.
Additionally, the Fed contributed to the improved market backdrop as it shifted
from predicting two short-term interest rate hikes to the reality of cutting
short-term rates three times over the course of 2019.
For the 12-month period ended December 31, 2019, corporate bonds outperformed
Treasuries. As measured by the Bloomberg Barclays U.S. Corporate
Investment-Grade Index, spreads tightened by 60 basis points ("bps") to 153 bps
at year end. Investment-grade corporate bonds had a positive total return for
the period as the narrowing in credit spreads, along with the move lower in
Treasury rates, added to the carry provided by corporate bonds.
It is interesting to note that investment-grade corporate credit spreads ended
2019 exactly where they began 2018. But from a broader perspective this
coincidence makes intuitive sense. The sell-off in 2018 was the result of the
very fears whose alleviation in 2019 led to a sharp recovery. Fear that global
central bank policy normalization would go too far in tightening financial
conditions dissipated as both the European Central Bank and the Fed reversed
course. Similarly, the late-2018 fear that a large chunk of the BBB-rated
segment of investment grade was in imminent danger of being downgraded to high
yield dissipated as financial conditions loosened and many of the individual
credits in question successfully reduced leverage. And finally, fear that the
positive supply/demand technical in investment grade could reverse was
Page 3
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
alleviated by the combination of lower interest rates renewing the reach for
yield, cheaper currency hedging costs for overseas buyers (arising from lower
U.S. short-term interest rates), the tailwind of U.S. Treasuries rallying, and
the supportive asset-allocation impact of needing more and more fixed income to
keep portfolio weightings in balance as equity prices kept rising.
The fixed-income portion of the Fund seeks to provide income along with
preservation of capital. To accomplish this, the selection process is primarily
value oriented, strongly emphasizes downside protection and focuses on free cash
flow, leverage, interest coverage and revenue growth rates. This process
resulted in overweight positions in Electric, Banking, and Transportation bonds,
while Consumer Non-Cyclical, Real Estate Investment Trusts ("REITs"), and
Communications were the largest underweights.
Given the significant rally in spreads, the bond portion of the Fund's higher
quality mandate resulted in the total return for the bond portion of the Fund
modestly underperforming the Bloomberg Barclays U.S. Corporate Investment-Grade
Index. Yield curve changes reduced relative performance. Treasury yields
decreased during the year as the Fed reversed course and lowered short-term
interest rates. The portfolio maintained a moderate duration underweight early
in the year, with the underweight primarily at the front-end of the curve. Among
credit quality and maturity cohorts, overweights in single-A and double-A
credits, along with active bets in the 10- and 30-year maturity buckets, added
the most to relative return.
Among the 18 fixed-income industry groups, allocations to Banking, Electric, and
Energy added the most to relative returns. Allocations to Consumer Non-Cyclical,
REITs, and Communications, by contrast, reduced relative returns. Overall, the
allocation effect modestly detracted from relative performance. Within these
industries, credit selection in Consumer Non-Cyclical, Electric, and
Communications had the greatest positive impacts, while credit selection within
Consumer Cyclical, Technology, and Insurance reduced relative returns. Overall,
credit selection within these industries had a net positive impact on relative
performance.
Issuer allocation contributed to relative performance, with overweights to
Citigroup Inc., The Bank of America Corporation, and JPMorgan Chase & Co. having
the greatest positive impact on relative returns. Security selection also
contributed to relative return, with selection among bonds by Vodafone Group
Plc, Consolidated Edison, Inc., and IBM contributing the most to relative
return.
As we begin 2020, we have a near-term positive outlook for credit spreads. We
anticipate modestly higher interest rates and a steeper yield curve. We expect
the Fed to be on hold during 2020 against a backdrop of modestly higher
inflation and continued economic growth. We have a positive outlook for U.S.
investment grade fundamentals as continued economic growth supports
profitability and cash flow. Additionally, we anticipate that the supply/demand
picture for U.S. investment grade should remain supportive in 2020. Nonetheless,
given the 2019 rally in spreads, valuations are full, the recovery is another
year further along, and the upcoming November 2020 U.S. Presidential election
season could result in heightened market volatility, in our opinion.
Accordingly, our focus for the portfolio will be on our process and on issuers
and sectors with credit profiles well suited to weather the upcoming challenges.
Page 4
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
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RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019
1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS I 5/1/12 20.77% 7.82% 8.63%
Blended Benchmark (a) 22.80% 8.08% 9.15%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 14.53% 4.60% 4.58%
Russell 3000(R) Index (c) 31.02% 11.24% 13.53%
Secondary Blended Benchmark (d) 23.52% 8.24% 9.32%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 15.95% 4.79% 4.79%
Dow Jones U.S. Total Stock Market Index(SM) (f) 30.90% 11.18% 13.44%
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1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE TOTAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION
PORTFOLIO - CLASS II 5/1/14 21.02% 8.09% 8.54%
Blended Benchmark (a) 22.80% 8.08% 8.29%
Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 14.53% 4.60% 4.56%
Russell 3000(R) Index (c) 31.02% 11.24% 11.75%
Secondary Blended Benchmark (d) 23.52% 8.24% 8.49%
Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 15.95% 4.79% 4.81%
Dow Jones U.S. Total Stock Market Index(SM) (f) 30.90% 11.18% 11.67%
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(a) The Blended Benchmark returns are a 50/50 split between the Russell
3000(R) Index and the Bloomberg Barclays U.S. Corporate Investment-Grade
Index returns.
(b) Bloomberg Barclays U.S. Corporate Investment-Grade Index measures the
performance of investment grade U.S. corporate bonds. The index includes
all publicly issued, dollar-denominated corporate bonds with a minimum of
$250 million par outstanding that are investment grade-rated (Baa3/BBB- or
higher). The index excludes bonds having less than one year to final
maturity as well as floating rate bonds, non-registered private
placements, structured notes, hybrids, and convertible securities.
(Bloomberg). (The index reflects no deduction for fees, expenses or
taxes).
(c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. This index represents approximately
98% of the investable U.S. equity market. (Bloomberg). (The index reflects
no deduction for fees, expenses or taxes).
(d) The Secondary Blended Benchmark return is a 50/50 split between the Dow
Jones U.S. Total Stock Market Index(SM) and the Dow Jones Equal Weight
U.S. Issued Corporate Bond Index(SM) returns.
(e) The Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) measures
the return of readily tradable, high-grade U.S. corporate bonds. The index
includes an equally weighted basket of 96 recently issued investment-grade
corporate bonds with laddered maturities. (The index reflects no deduction
for fees, expenses or taxes).
(f) The Dow Jones U.S. Total Stock Market Index(SM) measures all U.S. equity
securities that have readily available prices. (The index reflects no
deduction for fees, expenses or taxes).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
May 1, 2012 - December 31, 2019
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
12/31/2018 15,628 15,936 12,304 20,191 16,042 12,350 20,101
6/30/2019 17,828 18,231 13,516 23,969 18,424 13,690 23,860
12/31/2019 18,873 19,569 14,092 26,455 19,815 14,320 26,313
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
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FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
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% OF TOTAL
TOP EQUITY HOLDINGS INVESTMENTS
------------------------------------------------------
Humana, Inc. 0.5%
UnitedHealth Group, Inc. 0.5
Altria Group, Inc. 0.4
Reliance Steel & Aluminum Co. 0.4
Allegion PLC 0.4
Franklin Electric Co., Inc. 0.4
Wolverine World Wide, Inc. 0.4
Huntington Ingalls Industries, Inc. 0.4
Commerce Bancshares, Inc. 0.4
Zions Bancorp N.A. 0.4
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Total 4.2%
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% OF TOTAL
TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS
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Bank of America Corp. 1.8%
U.S. Government 1.8
Citigroup, Inc. 1.5
JPMorgan Chase & Co. 1.4
Goldman Sachs Group (The), Inc. 1.2
AbbVie, Inc. 1.2
Morgan Stanley 1.0
UnitedHealth Group, Inc. 0.9
Duke Energy Corp. 0.9
Wells Fargo & Co. 0.8
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Total 12.5%
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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY(1) INVESTMENTS
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AAA 5.8%
AA+ 1.6
AA 6.3
AA- 8.4
A+ 14.0
A 18.7
A- 17.6
BBB+ 9.5
BBB 11.7
BBB- 5.1
A-1 (short-term) 1.1
A-2 (short-term) 0.2
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Total 100.0%
======
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% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Common Stocks:
Financials 17.7%
Industrials 13.9
Information Technology 6.9
Consumer Discretionary 5.3
Health Care 4.8
Consumer Staples 3.1
Materials 2.4
Communication Services 1.2
Energy 1.1
Real Estate 1.0
------------------------------------------------------
Total Common Stocks 57.4
------------------------------------------------------
Corporate Bonds & Notes:
Financials 10.6
Utilities 5.4
Health Care 5.0
Energy 3.4
Communication Services 2.9
Industrials 2.8
Information Technology 2.8
Consumer Staples 2.4
Consumer Discretionary 1.0
Materials 0.3
Real Estate 0.1
------------------------------------------------------
Total Corporate Bonds & Notes 36.7
------------------------------------------------------
Foreign Corporate Bonds & Notes:
Financials 2.1
Energy 0.5
Health Care 0.4
Communication Services 0.3
Materials 0.1
Industrials 0.1
Consumer Staples 0.1
------------------------------------------------------
Total Foreign Corporate Bonds & Notes 3.6
------------------------------------------------------
U.S. Government Bonds & Notes 1.7
------------------------------------------------------
Commercial Paper:
Utilities 0.5
Energy 0.1
------------------------------------------------------
Total Commercial Paper 0.6
------------------------------------------------------
Total 100.0%
======
(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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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
ADVISOR
First Trust is a registered investment advisor based in Wheaton, IL and is the
investment advisor to the 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 TEAM
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, Senior 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
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
For the year ended December 31, 2019, the First Trust Multi Income Allocation
Portfolio (the "Fund") Class I Shares returned 16.38% versus 17.47% for the
Broad Blended Benchmark (60% Bloomberg Barclays U.S. Aggregate Bond Index and
40% Russell 3000(R) Index) and 15.61% for the Multi Asset Class Blended
Benchmark (15% Russell 3000(R) Index; 8% ICE BofAML Fixed Rate Preferred
Securities Index; 15% Alerian MLP Index; 15% S&P U.S. REIT Index; 8% ICE BofAML
U.S. High Yield Index; 15% S&P/LSTA Leveraged Loan Index; 8% Bloomberg Barclays
U.S. Corporate Investment-Grade Index; 8% ICE BofAML U.S. MBS Index; and 8% ICE
BofAML U.S. Inflation-Linked Treasury Index).
The Fund invests in nine asset classes which are: dividend-paying stocks,
preferred stocks, energy infrastructure companies and master limited
partnerships ("MLPs"), real estate investment trusts ("REITs"), high yield or
"junk" bonds, floating-rate loans, corporate bonds, mortgage-backed securities
("MBS") and Treasury Inflation Protected Securities ("TIPS"). The weight
assigned to each asset class is determined on a quarterly basis. As of December
31, 2019, the dividend-paying securities were the highest-weighted asset class,
Page 7
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
while the preferred stocks asset class was the lowest-weighted asset class. As
of December 31, 2019, the Fund held approximately 2.6% in cash. The following
asset classes had the most positive impact on the overall Fund performance for
the year: dividend-paying stocks and REITs, while the following asset classes
had the smallest impact on the overall Fund performance: MBS and TIPS.
Dividend-paying stocks returned 29.01% (Gross of Fees) for the year ended
December 31, 2019 and represented 16.8% of the portfolio as of December 31,
2019. After a sell-off to end 2018, equities roared back to start 2019 and
largely maintained their momentum to the upside throughout the year. For the
year, U.S. equities, as measured by the Russell 3000(R), returned 31.02%. Stocks
were boosted by expectations of an uptick in global economic activity along with
receding Brexit and trade war concerns, though at times these caused market
volatility. From a factor viewpoint, the first eight months of the year were
dominated by momentum and low volatility names while the final four months saw a
rotation to value. Dividend paying stocks lagged over the year which was a
headwind for the sleeve relative to the broader equity market. In breaking down
portfolio performance by sector, Health Care and Industrials were the top two
sectors in the portfolio, both due to stock selection. While strong stock
selection drove Health Care and Industrials performance, an overweight in both
sectors offset some of the outperformance as the sectors lagged the overall
market. Stock selection in Information Technology and Communication Services
stocks was the biggest drag on performance over the 12-month period ended
December 31, 2019. The portfolio's holdings in these sectors failed to keep up
in these growth focused areas of the market.
Preferred securities returned 17.29% (Gross of Fees) for the year ended December
31, 2019 and represented 8.1% of the portfolio as of December 31, 2019. The
performance of preferred securities had a positive impact on the overall
performance of the Fund. It was a strong period for the preferred and hybrid
securities market with all parts of the market experiencing positive performance
as interest rates trended lower and central banks established a more dovish
stance. Security selection and an overweight to variable rate preferred
securities and contingent convertible capital securities (CoCos) were the
largest contributors to positive performance within the Fund's preferred
securities allocation. Investments in newly issued preferred and hybrid
securities also added to performance.
The energy infrastructure companies and MLPs returned 22.98% (Gross of Fees) for
the year ended December 31, 2019 and represented 13.8% of the portfolio as of
December 31, 2019. The performance of the equity securities of energy
infrastructure companies outperformed the overall performance of the Fund.
Positions in utilities and pipeline C-Corporations ("C-Corps") led performance
among the energy infrastructure companies and MLPs.
REITs returned 25.84% (Gross of Fees) for the year ended December 31, 2019 and
represented 9.8% of the portfolio as of December 31, 2019. The REIT sleeve beat
the S&P USA REIT Index's 24.45% return for 2019. After outperforming the S&P
500(R) for the majority of the year, REIT returns plateaued as interest rates
stabilized in November and December. The sector slightly lagged the broader
market for the year. During 2020, their performance will likely hinge on easy
monetary policy and a continued low-interest rate environment. Industrial REITs
provided the portfolio with a 42.2% average return and was the best performing
sub-industry for the period. The returns were driven by the rise in e-commerce
and subsequent increase in demand for warehouses and distributions centers.
However, the e-commerce revolution has put pressure on Retail REITs which were
among the largest drags on the sleeve's performance. Specialized REITs also
boosted the sleeve's performance with an average return of 30.2%. Data-centers
American Tower Corporation (AMT) and CyrusOne, Inc. (CONE) led the group as they
capitalize on the secular shift to the cloud. The best performing equities by
contribution to return were Prologis, Inc.; CyrusOne, Inc.; and American Tower
Corporation. The worst performing equities by contribution to return were Simon
Property Group, Inc.; VEREIT, Inc.; and Welltower Inc.
High-yield bonds returned 15.07% (Gross of Fees) for the year ended December 31,
2019 and represented 9.0% of the portfolio as of December 31, 2019. High-yield
bond spreads over U.S. Treasuries were rangebound for the first 11 months of the
year but ended 2019 at T+360 basis points ("bps"), a narrowing of 174 bps, well
below the historic average (the long-term average spread over U.S. Treasuries is
T+565 bps, December 1997 - December 2019). Within the high yield bond market
higher quality bonds rated B and above outperformed lower quality CCC bonds for
most of the year. However, this relationship flipped in December 2019 where
lower quality CCC rated bonds returned 5.09% compared to higher quality B and BB
bonds that returned 2.36% and 1.37% respectively as investors reached for yield
Page 8
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
in higher risk assets. The high-yield bond default rate within the JP Morgan
High-Yield Bond Universe increased to 2.63% from 1.81% entering the year. This
remains below the long-term average default rate of 3.11% (March 1999 - December
2019). We believe the low default rate is reflective of the sound financial
condition of most companies in the high-yield market and the supporting backdrop
of a healthy macroeconomic environment.
Floating-rate loans returned 9.86% (Gross of Fees) for the year ended December
31, 2019 and represented 14.0% of the portfolio as of December 31, 2019. Senior
loan spreads over 3-month London Inter-Bank Offered Rate ("LIBOR") entered the
year at their widest levels since June 2016 but narrowed 90 bps during the year
to L+461 bps. The benchmark rate for senior loan coupon, 3-month LIBOR, fell 90
bps to 1.91% due to the Fed's three policy interest rate cuts during the year.
The Fed's rate cuts contributed to persistent outflows from retail investors in
the senior loan market. For the 12-month period ended December 31, 2019 outflows
totaled approximately $37 billion, the highest year of outflows on record.
Despite these historic outflows we believe senior loans remain relatively
attractive given their current yields, the low corporate default rate and
secured position in the capital structure. The current senior loan
yield-to-maturity ("YTM") is 6.13%, 9 bps higher than the high-yield bond YTM of
6.04%, a relationship that has existed for an unprecedented seven consecutive
months. In fact, the last time senior loans yielded more than high-yield bonds
in consecutive months was August and September of 2007.
Corporate bonds returned 14.56% (Gross of Fees) and represented 8.9% of the
portfolio as of December 31, 2019. Both Treasury benchmark yields and credit
spreads rallied in 2019, making for a great year on both an excess and total
return basis. Results were aided by the December 2018 sell-off that gave
investors a great starting point. As measured by the Bloomberg Barclays U.S.
Corporate Investment-Grade Index, spreads narrowed 60 bps to 93 bps at year end
- completely retracing the widening from 2018. A look at fund flows helps to
explain the spread tightening as more than $200 billion flowed into high grade
bond funds. That compares to a slight outflow in 2018. Demand for U.S. corporate
bonds has been firm from both domestic and foreign investors. We expect yields
will remain low in international markets and thus will continue to be a positive
factor contributing to demand for U.S. credit.
The MBS asset class returned 6.29% (Gross of Fees) for the year ended December
31, 2019 and represented 9.8% of the portfolio as of December 31, 2019. The MBS
sleeve benefitted by allocating a portion of invested capital to U.S. Treasury
securities, which helped performance as Agency MBS spreads widened for most of
2019. However, its structurally shorter and more defensive duration versus the
Mortgage index offset this positive impact as interest rates rallied strongly
over the year, with the sleeve mildly underperforming the benchmark. Overall,
the Fund continues to manage its duration more in line with the benchmark, with
a focus on strategic MBS basis positioning, liquidity as well as maintaining
exposure to U.S. Treasury securities.
TIPS returned 8.61% (Gross of Fees) and represented 9.8% of the portfolio as of
December 31, 2019. Portfolio performance was broadly in line with the benchmark,
although the slight duration underweight early in the year resulted in a
moderate lag in total return. Owing to a dimmer outlook for growth and inflation
expectations, falling yields was thematic of the Treasury market in 2019. The
Fed also cut rates by 75 bps, characterizing the move as a "mid-cycle
adjustment". Real and nominal yields declined steadily during the year with real
yields declining more; particularly in the front-end where 5-year real yields
fell 19 bps more than nominals. As a result, TIPS outperformed nominal Treasury
bonds in 2019 with the ICE BofA US Inflation-Linked Treasury Index returning
8.8% compared to 7.0% for the ICE BofA US Treasury Index. Consumer Price
Inflation, which determines the inflation accrual in TIPS securities, increased
at a 2.3% rate in 2019, up from a 1.9% increase during 2018. While the Fed
targets an inflation rate of 2% in core Personal Consumption Expenditures, its
preferred inflation gauge, aside from a handful of months, it has consistently
undershot this target since the end of the financial crisis.
INVESTMENT CLIMATE
After devoting the last three-and-a-half years to tightening monetary policy,
the Fed cut the federal funds target rate (upper bound) three times in the
second half of 2019, taking the rate down from 2.50% to 1.75%. Brian Wesbury,
Chief Economist at First Trust Advisors L.P., has been steadfast in his
opposition to these Fed rate reductions. Wesbury believes the Fed has
Page 9
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
been basing its monetary policy of late on concerns over trade negotiations,
Brexit and turbulence in the financial system, as opposed to the economic data.
Prior to these recent rate cuts, the Fed had characterized its approach to
monetary policy as data dependent.
The combination of low interest rates, low inflation, strong job growth,
regulatory reform and a more favorable U.S. corporate tax structure following
the passage of the Tax Cuts and Jobs Act of 2017 makes the current climate an
attractive one for investors, in our opinion. Minus tax reform, which took
effect in 2018, and regulatory reform, which has been driven by the Trump
Administration since it took power in 2017, investors have been prospering in a
low rate/low inflation/strong job growth climate for the better part of the last
decade. Very little has changed in that regard. One thing that has created some
uncertainty in the markets is the extent of the potential fallout from the
implementation and escalation of trade tariffs by the Trump Administration. That
effort is now 21 months old and counting. The mid-December announcement that the
U.S. and China had struck a "Phase One" deal is encouraging.
The yield on the benchmark 10-Year Treasury Note (T-Note) closed trading on
December 31, 2019, at 1.92%, down 77 bps from its 2.69% close a year earlier,
according to Bloomberg. The yield stood 48 bps below its 2.40% average for the
10-year period ended December 31, 2019. For those investors still concerned
about the prospects for an inverted yield curve, the spread between the 2-Year
T-Note and the 10-Year T-Note closed 2019 at 35 bps (1.57% vs. 1.92%), according
to data from Bloomberg. For comparative purposes, the average spread was 117 bps
(3.33% vs. 4.50%) for the 30-year period ended December 31, 2019. The yield
curve, while not inverted, remains flat. We will monitor this scenario moving
forward. Moody's Investors Service expects the number of defaults in the high
yield corporate bond market to rise in 2020 but remain below the historical
average. Moody's reported that its global speculative-grade default rate stood
at 3.0% in December 2019, according to its most recent release. It sees the rate
rising to 3.3% by the end of December 2020. Moody's puts the historical average
default rate at 4.1% since 1983. The fact that Moody's expects the
speculative-grade default rate to remain below its historical average in 2020
this deep into an economic expansion should be construed as a positive sign by
investors, in our opinion.
Page 10
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019
1 YEAR 5 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 16.38% 4.51% 4.79%
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 16.57% 4.75% 5.04%
Broad Blended Benchmark (a) 17.47% 6.47% 6.75%
Bloomberg Barclays U.S. Aggregate Bond Index (b) 8.72% 3.05% 3.21%
Russell 3000(R) Index (c) 31.02% 11.24% 11.75%
Multi Asset Class Blended Benchmark (d) 15.61% 4.37% 4.62%
-------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays
U.S. Aggregate Bond Index (60%) and the Russell 3000(R) Index (40%).
(b) The Bloomberg Barclays U.S. Aggregate Bond Index represents the U.S.
investment grade fixed rate bond market, with index components for
government and corporate securities, mortgage pass-through securities, and
asset-backed securities. Bonds included in the index are U.S. dollar
denominated; have a fixed rate coupon; carry an investment-grade rating;
have at least one year to final maturity; and meet certain criteria for
minimum amount of outstanding par value. (The index reflects no deduction
for fees, expenses or taxes).
(c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as
determined by market capitalization. This index represents approximately
98% of the investable U.S. equity market. (Bloomberg). (The index reflects
no deduction for fees, expenses or taxes).
(d) The Multi Asset Class Blended Benchmark is weighted to include nine
indexes: Russell 3000(R) Index (15%), ICE BofAML Fixed Rate Preferred
Securities Index (8%), Alerian MLP Index (15%), S&P U.S. REIT Index (15%),
ICE BofAML U.S. High Yield Index (8%), S&P/LSTA Leveraged Loan Index
(15%), Bloomberg Barclays U.S. Corporate Investment-Grade Index (8%), ICE
BofAML U.S. MBS Index (8%), and ICE BofAML U.S. Inflation-Linked Treasury
Index (8%).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
May 1, 2014 - December 31, 2019
First Trust Multi
Income Allocation Broad Blended Bloomberg Barclays U.S. Russell 3000(R) Multi Asset Class
Portfolio - Class I Benchmark Aggregate Bond Index Index Blended Benchmark
5/1/2014 $10,000 $10,000 $10,000 $10,000 $10,000
6/30/2014 10,320 10,245 10,096 10,470 10,334
12/31/2014 10,457 10,582 10,294 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
12/31/2018 11,205 12,328 11,006 14,328 11,173
6/30/2019 12,447 13,712 11,678 17,009 12,535
12/31/2019 13,041 14,483 11,964 18,773 12,916
Page 11
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust Senior Loan Fund 14.0%
First Trust Tactical High Yield ETF 9.0
iShares iBoxx $ Investment Grade Corporate
Bond ETF 8.0
First Trust Preferred Securities and
Income ETF 6.0
iShares MBS ETF 4.2
First Trust Institutional Preferred
Securities and Income ETF 2.0
Enterprise Products Partners, L.P. 1.8
Invesco Bulletshares 2020 Corporate
Bond ETF 1.2
Magellan Midstream Partners, L.P. 1.0
TC Energy Corp. 1.0
------------------------------------------------------
Total 48.2%
======
------------------------------------------------------
% OF TOTAL
SECTOR ALLOCATION INVESTMENTS
------------------------------------------------------
Exchange-Traded Funds 45.3%
------------------------------------------------------
Common Stocks:
Energy 4.0
Information Technology 3.6
Utilities 3.2
Health Care 3.2
Industrials 2.2
Financials 2.0
Consumer Discretionary 1.7
Consumer Staples 1.4
Communication Services 0.8
Materials 0.5
------------------------------------------------------
Total Common Stocks 22.6
------------------------------------------------------
U.S. Government Bonds & Notes 10.0
------------------------------------------------------
Real Estate Investment Trusts:
Financials 9.8
------------------------------------------------------
Total Real Estate Investment Trusts 9.8
------------------------------------------------------
Master Limited Partnerships:
Energy 7.0
Utilities 0.5
Materials 0.3
------------------------------------------------------
Total Master Limited Partnerships 7.8
------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 4.4
------------------------------------------------------
Mortgage-Backed Securities 0.1
------------------------------------------------------
Asset-Backed Securities 0.0*
------------------------------------------------------
Total 100.0%
======
* Amount is less than 0.1%.
Page 12
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is a registered investment advisor
based in Wheaton, IL and is the investment advisor to the 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, Senior Vice President, First Trust
Chris A. Peterson, Senior Vice President, First Trust
Eric Maisel, Senior Vice President, First Trust
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
For the year ended December 31, 2019, the First Trust Dorsey Wright Tactical
Core Portfolio (the "Fund") Class I Shares returned 20.87% versus 22.18% for the
Broad Blended Benchmark: 60% S&P 500(R) Index and 40% Bloomberg Barclays U.S.
Aggregate Bond Index.
The Fund seeks to provide total return. The Fund seeks to achieve its investment
objective by investing, under normal market conditions, at least 80% of its net
assets (including any investment borrowings) in exchange-traded funds ("ETFs")
and cash and cash equivalents that comprise the Dorsey Wright Tactical Tilt
Moderate Core Index (the "Index"). It is expected that a majority of the ETFs in
which the Fund invests will be advised by First Trust.
The Index is owned and was developed by Dorsey, Wright & Associates (the "Index
Provider"). The Index is constructed pursuant to the Index Provider's
proprietary methodology, which takes into account the performance of four
distinct asset classes relative to one another. The Index is designed to
strategically allocate its investments among (i) domestic equity securities;
(ii) international equity securities; (iii) fixed income securities; and (iv)
cash and cash equivalents. The Index will gain exposure to the first three asset
classes by investing in ETFs that invest in such assets. The Index Provider has
retained Nasdaq, Inc. ("Nasdaq") to calculate and maintain the Index.
The Index will utilize the Dynamic Asset Level Investing ("DALI") asset
allocation process developed by the Index Provider in order to allocate assets
over the four asset classes. The asset class allocations are determined using a
relative strength methodology that is based upon each asset class's market
performance and characteristics that offer the greatest potential to outperform
the other asset classes at a given time. Relative strength is a momentum
technique that relies on unbiased, unemotional and objective data, rather than
biased forecasting and subjective research. Relative strength is a way of
recording historic performance patterns, and the Index Provider uses relative
strength signals as a trend indicator for current momentum trends of each asset
class against the others.
PERFORMANCE REVIEW
The Fund began 2019 with the following allocations to the four asset classes:
domestic equity securities (70.5%), international equity securities (5.1%),
fixed income securities (22.8%), and cash equivalents (1.6%). Throughout 2019,
the DALI asset allocation to the four asset classes remained largely the same.
At the end of 2019, the Fund had the following allocations: domestic equity
securities (74.2%), international equity securities (4.9%), fixed income
securities (19.1%), and cash equivalents (1.8%). The Fund's largest contributing
holdings contributing to performance in 2019 were the First Trust NASDAQ-100
Technology Sector Index Fund and First Trust Technology AlphaDEX(R) Fund. The
Fund's largest detracting holdings were the First Trust Latin America
AlphaDEX(R) Fund and the SPDR(R) Portfolio Long Term Treasury ETF.
Page 13
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PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------
RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019
1 YEAR SINCE INCEPTION
INCEPTION ANNUAL AVERAGE ANNUAL
DATE TOTAL RETURN TOTAL RETURN
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 20.87% 6.71%
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 21.29% 6.97%
Broad Blended Benchmark (a) 22.18% 9.52%
Bloomberg Barclays U.S. Aggregate Bond Index (b) 8.72% 3.38%
S&P 500(R) Index (c) 31.49% 13.46%
-------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays
U.S. Aggregate Bond Index (40%) and the S&P 500(R) Index (60%).
(b) The Bloomberg Barclays U.S. Aggregate Bond Index represents the U.S.
investment grade fixed rate bond market, with index components for
government and corporate securities, mortgage pass-through securities, and
asset-backed securities. Bonds included in the index are U.S. dollar
denominated; have a fixed rate coupon; carry an investment-grade rating;
have at least one year to final maturity; and meet certain criteria for
minimum amount of outstanding par value. (The index reflects no deduction
for fees, expenses or taxes).
(c) The S&P 500(R) Index is an unmanaged index of 500 stocks used to measure
large-cap U.S. stock market performance. (The index reflects no deduction
for fees, expenses or taxes).
The returns for the Fund do not reflect the deduction of expenses associated
with variable products, such as mortality and expense risk charges, separate
account charges, and sales charges or the effect of taxes. These expenses would
reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
October 30, 2015 - December 31, 2019
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
6/30/18 12,317 12,368 10,394 13,822
12/31/18 10,838 11,957 10,567 12,875
6/30/19 12,632 13,588 11,213 15,262
12/31/19 13,112 14,610 11,488 16,929
Page 14
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
ANNUAL REPORT
DECEMBER 31, 2019 (UNAUDITED)
------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
------------------------------------------------------
First Trust NASDAQ-100-Technology Sector
Index Fund 10.6%
First Trust Mid Cap Growth AlphaDEX(R) Fund 10.5
First Trust Large Cap Growth AlphaDEX(R)
Fund 10.5
First Trust Technology AlphaDEX(R) Fund 9.8
First Trust Small Cap Growth AlphaDEX(R)
Fund 9.5
First Trust Dow Jones Internet Index Fund 8.6
First Trust Utilities AlphaDEX(R) Fund 8.3
First Trust Financials AlphaDEX(R) Fund 7.7
iShares Core U.S. Aggregate Bond ETF 5.9
SPDR Portfolio Intermediate Term Corporate
Bond ETF 3.5
------------------------------------------------------
Total 84.9%
======
Page 15
FIRST TRUST VARIABLE INSURANCE TRUST
UNDERSTANDING YOUR FUND EXPENSES
DECEMBER 31, 2019 (UNAUDITED)
As a shareholder of First Trust/Dow Jones Dividend & Income Allocation
Portfolio, First Trust Multi Income Allocation Portfolio or First Trust Dorsey
Wright Tactical Core Portfolio (each a "Fund" and collectively, the "Funds"),
you incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees; distribution and/or service (12b-1) fees, if any; and
other Fund expenses. This Example is intended to help you understand your
ongoing costs (in U.S. dollars) of investing in the Funds and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended December 31, 2019.
ACTUAL EXPENSES
The first three columns of the table below provide information about actual
account values and actual expenses. You may use the information in these
columns, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the third column under the heading entitled "Expenses
Paid During Period" to estimate the expenses you paid on your account during the
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The next three columns of the table below provide information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing cost of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or contingent deferred sales charges. Therefore, the
hypothetical section of the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have
been higher.
HYPOTHETICAL
ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES)
------------------------------------------ ------------------------------------------------------
EXPENSES EXPENSES
BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL-
ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED
VALUE VALUE 7/1/2019- VALUE VALUE 7/1/2019- EXPENSE
7/1/2019 12/31/2019 12/31/2019 (a) 7/1/2019 12/31/2019 12/31/2019 (a) RATIO (b)
-------------- ---------- -------------- -------------- ---------- -------------- ----------
First Trust/Dow Jones Dividend &
Income Allocation Portfolio
Class I..................... $1,000.00 $1,058.60 $ 6.23 $1,000.00 $1,019.16 $ 6.11 1.20%
Class II.................... $1,000.00 $1,059.90 $ 4.93 $1,000.00 $1,020.42 $ 4.84 0.95%
First Trust Multi Income Allocation
Portfolio (c)
Class I..................... $1,000.00 $1,047.70 $ 4.28 $1,000.00 $1,021.02 $ 4.23 0.83%
Class II.................... $1,000.00 $1,048.30 $ 2.99 $1,000.00 $1,022.28 $ 2.96 0.58%
First Trust Dorsey Wright Tactical
Core Portfolio (c)
Class I..................... $1,000.00 $1,038.00 $ 4.01 $1,000.00 $1,021.27 $ 3.97 0.78%
Class II.................... $1,000.00 $1,039.50 $ 2.72 $1,000.00 $1,022.53 $ 2.70 0.53%
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (July 1,
2019 through December 31, 2019), multiplied by 184/365 (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 16
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS - 56.9%
AEROSPACE & DEFENSE - 1.4%
19,024 General Dynamics Corp........................................................ $ 3,354,882
27,838 HEICO Corp................................................................... 3,177,708
42,328 Hexcel Corp.................................................................. 3,103,066
16,413 Huntington Ingalls Industries, Inc........................................... 4,117,693
-------------
13,753,349
-------------
AIR FREIGHT & LOGISTICS - 1.1%
41,003 CH Robinson Worldwide, Inc................................................... 3,206,435
46,795 Expeditors International of Washington, Inc.................................. 3,650,946
54,554 Forward Air Corp............................................................. 3,816,052
-------------
10,673,433
-------------
AIRLINES - 0.7%
60,352 Delta Air Lines, Inc......................................................... 3,529,385
64,364 Southwest Airlines Co........................................................ 3,474,369
-------------
7,003,754
-------------
AUTO COMPONENTS - 0.8%
126,252 Gentex Corp.................................................................. 3,658,783
29,485 Lear Corp.................................................................... 4,045,342
-------------
7,704,125
-------------
BANKS - 4.8%
171,670 Associated Banc-Corp......................................................... 3,783,607
40,455 Bank of Hawaii Corp.......................................................... 3,849,698
100,081 Cathay General Bancorp....................................................... 3,808,082
60,180 Commerce Bancshares, Inc..................................................... 4,088,629
39,259 Cullen/Frost Bankers, Inc.................................................... 3,838,745
166,573 CVB Financial Corp........................................................... 3,594,645
214,588 First Horizon National Corp.................................................. 3,553,577
92,370 First Merchants Corp......................................................... 3,841,668
77,701 Heartland Financial USA, Inc................................................. 3,864,848
64,282 Popular, Inc................................................................. 3,776,568
62,819 US Bancorp................................................................... 3,724,539
78,085 Zions Bancorp N.A............................................................ 4,054,173
-------------
45,778,779
-------------
BEVERAGES - 0.4%
25,356 PepsiCo, Inc................................................................. 3,465,404
-------------
BIOTECHNOLOGY - 0.4%
54,849 Gilead Sciences, Inc......................................................... 3,564,088
-------------
BUILDING PRODUCTS - 0.8%
33,538 Allegion PLC................................................................. 4,176,823
72,863 AO Smith Corp................................................................ 3,471,193
-------------
7,648,016
-------------
CAPITAL MARKETS - 5.4%
7,800 BlackRock, Inc............................................................... 3,921,060
83,106 Charles Schwab (The) Corp.................................................... 3,952,521
63,286 Cohen & Steers, Inc.......................................................... 3,971,829
77,373 Eaton Vance Corp............................................................. 3,612,545
43,400 Evercore, Inc., Class A...................................................... 3,244,584
14,308 FactSet Research Systems, Inc................................................ 3,838,836
See Notes to Financial Statements Page 17
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
CAPITAL MARKETS (CONTINUED)
120,454 Franklin Resources, Inc...................................................... $ 3,129,395
77,081 Houlihan Lokey, Inc.......................................................... 3,766,949
37,676 Intercontinental Exchange, Inc............................................... 3,486,914
37,251 Northern Trust Corp.......................................................... 3,957,546
42,158 Raymond James Financial, Inc................................................. 3,771,455
58,666 SEI Investments Co........................................................... 3,841,450
30,427 T Rowe Price Group, Inc...................................................... 3,707,226
74,439 TD Ameritrade Holding Corp................................................... 3,699,618
-------------
51,901,928
-------------
CHEMICALS - 1.1%
15,670 Air Products & Chemicals, Inc................................................ 3,682,293
28,426 Celanese Corp................................................................ 3,499,809
38,854 LyondellBasell Industries N.V., Class A...................................... 3,670,926
-------------
10,853,028
-------------
COMMERCIAL SERVICES & SUPPLIES - 1.4%
12,966 Cintas Corp.................................................................. 3,488,891
102,035 Rollins, Inc................................................................. 3,383,480
40,068 Tetra Tech, Inc.............................................................. 3,452,259
17,816 UniFirst Corp................................................................ 3,598,476
-------------
13,923,106
-------------
COMMUNICATIONS EQUIPMENT - 0.7%
70,358 Cisco Systems, Inc........................................................... 3,374,370
140,459 Juniper Networks, Inc........................................................ 3,459,505
-------------
6,833,875
-------------
CONTAINERS & PACKAGING - 0.8%
32,766 Packaging Corp. of America................................................... 3,669,464
59,720 Sonoco Products Co........................................................... 3,685,919
-------------
7,355,383
-------------
DIVERSIFIED CONSUMER SERVICES - 0.3%
5,241 Graham Holdings Co., Class B................................................. 3,348,947
-------------
ELECTRICAL EQUIPMENT - 0.8%
37,859 AMETEK, Inc.................................................................. 3,776,056
41,808 Eaton Corp PLC............................................................... 3,960,054
-------------
7,736,110
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 1.6%
36,025 Amphenol Corp., Class A...................................................... 3,898,986
28,208 CDW Corp..................................................................... 4,029,230
53,780 Dolby Laboratories, Inc., Class A............................................ 3,700,064
37,306 TE Connectivity, Ltd......................................................... 3,575,407
-------------
15,203,687
-------------
ENTERTAINMENT - 0.4%
26,675 Walt Disney (The) Co......................................................... 3,858,005
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 1.0%
19,107 PS Business Parks, Inc....................................................... 3,150,171
14,173 Public Storage............................................................... 3,018,282
Page 18 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
253,007 Sunstone Hotel Investors, Inc................................................ $ 3,521,858
-------------
9,690,311
-------------
FOOD PRODUCTS - 1.5%
79,496 Hormel Foods Corp............................................................ 3,586,065
18,107 J&J Snack Foods Corp......................................................... 3,336,577
25,074 Lancaster Colony Corp........................................................ 4,014,347
62,841 Mondelez International, Inc., Class A........................................ 3,461,282
-------------
14,398,271
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.0%
4,461 Atrion Corp.................................................................. 3,352,441
39,743 Baxter International, Inc.................................................... 3,323,310
16,071 Stryker Corp................................................................. 3,373,946
-------------
10,049,697
-------------
HEALTH CARE PROVIDERS & SERVICES - 1.7%
8,325 Chemed Corp.................................................................. 3,656,840
13,597 Humana, Inc.................................................................. 4,983,572
32,479 Quest Diagnostics, Inc....................................................... 3,468,432
15,997 UnitedHealth Group, Inc...................................................... 4,702,798
-------------
16,811,642
-------------
HOTELS, RESTAURANTS & LEISURE - 1.5%
79,532 Carnival Corp................................................................ 4,042,612
83,408 Cheesecake Factory (The), Inc................................................ 3,241,235
29,407 Darden Restaurants, Inc...................................................... 3,205,657
66,191 Texas Roadhouse, Inc......................................................... 3,727,877
-------------
14,217,381
-------------
HOUSEHOLD DURABLES - 0.4%
65,952 DR Horton, Inc............................................................... 3,478,968
-------------
HOUSEHOLD PRODUCTS - 0.4%
18,941 WD-40 Co..................................................................... 3,677,206
-------------
INDUSTRIAL CONGLOMERATES - 0.7%
20,545 Honeywell International, Inc................................................. 3,636,465
9,749 Roper Technologies, Inc...................................................... 3,453,388
-------------
7,089,853
-------------
INSURANCE - 7.1%
66,444 Aflac, Inc................................................................... 3,514,888
31,986 Allstate (The) Corp.......................................................... 3,596,826
32,235 American Financial Group, Inc................................................ 3,534,568
28,096 American National Insurance Co............................................... 3,306,337
52,586 AMERISAFE, Inc............................................................... 3,472,254
96,403 Brown & Brown, Inc........................................................... 3,805,990
29,795 Cincinnati Financial Corp.................................................... 3,132,944
70,585 CNA Financial Corp........................................................... 3,162,914
79,769 Employers Holdings, Inc...................................................... 3,330,356
78,280 Fidelity National Financial, Inc............................................. 3,549,998
58,911 First American Financial Corp................................................ 3,435,689
36,300 Globe Life, Inc.............................................................. 3,820,575
57,357 Hartford Financial Services Group (The), Inc................................. 3,485,585
See Notes to Financial Statements Page 19
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
INSURANCE (CONTINUED)
33,649 Kinsale Capital Group, Inc................................................... $ 3,420,757
147,490 Old Republic International Corp.............................................. 3,299,351
60,837 Principal Financial Group, Inc............................................... 3,346,035
21,744 Reinsurance Group of America, Inc............................................ 3,545,577
46,234 Selective Insurance Group, Inc............................................... 3,013,994
23,380 Travelers (The) Cos., Inc.................................................... 3,201,891
48,127 WR Berkley Corp.............................................................. 3,325,576
-------------
68,302,105
-------------
IT SERVICES - 2.6%
18,074 Accenture PLC, Class A....................................................... 3,805,842
21,535 Automatic Data Processing, Inc............................................... 3,671,718
23,816 Jack Henry & Associates, Inc................................................. 3,469,277
12,799 Mastercard, Inc., Class A.................................................... 3,821,653
44,995 MAXIMUS, Inc................................................................. 3,347,178
42,000 Paychex, Inc................................................................. 3,572,520
20,212 Visa, Inc., Class A.......................................................... 3,797,835
-------------
25,486,023
-------------
LIFE SCIENCES TOOLS & SERVICES - 0.4%
45,365 Agilent Technologies, Inc.................................................... 3,870,088
-------------
MACHINERY - 4.0%
21,371 Cummins, Inc................................................................. 3,824,554
72,711 Franklin Electric Co., Inc................................................... 4,167,795
75,506 Graco, Inc................................................................... 3,926,312
21,213 IDEX Corp.................................................................... 3,648,636
22,214 Illinois Tool Works, Inc..................................................... 3,990,301
28,214 Ingersoll-Rand PLC........................................................... 3,750,205
40,068 Lincoln Electric Holdings, Inc............................................... 3,875,778
49,655 PACCAR, Inc.................................................................. 3,927,710
22,206 Snap-on, Inc................................................................. 3,761,696
47,426 Toro (The) Co................................................................ 3,778,429
-------------
38,651,416
-------------
MEDIA - 0.8%
161,240 Interpublic Group of (The) Cos., Inc......................................... 3,724,644
44,397 Omnicom Group, Inc........................................................... 3,597,045
-------------
7,321,689
-------------
METALS & MINING - 0.4%
34,884 Reliance Steel & Aluminum Co................................................. 4,177,708
-------------
MULTILINE RETAIL - 0.3%
21,874 Dollar General Corp.......................................................... 3,411,907
-------------
OIL, GAS & CONSUMABLE FUELS - 1.1%
197,856 Cabot Oil & Gas Corp......................................................... 3,444,673
49,232 Exxon Mobil Corp............................................................. 3,435,409
33,948 Phillips 66.................................................................. 3,782,147
-------------
10,662,229
-------------
PERSONAL PRODUCTS - 0.4%
49,683 Inter Parfums, Inc........................................................... 3,612,451
-------------
Page 20 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
PHARMACEUTICALS - 1.2%
26,868 Johnson & Johnson............................................................ $ 3,919,235
96,753 Pfizer, Inc.................................................................. 3,790,782
27,902 Zoetis, Inc.................................................................. 3,692,830
-------------
11,402,847
-------------
PROFESSIONAL SERVICES - 0.8%
49,733 Exponent, Inc................................................................ 3,432,074
62,456 Robert Half International, Inc............................................... 3,944,097
-------------
7,376,171
-------------
ROAD & RAIL - 1.2%
30,877 Landstar System, Inc......................................................... 3,515,964
19,348 Norfolk Southern Corp........................................................ 3,756,027
21,460 Union Pacific Corp........................................................... 3,879,754
-------------
11,151,745
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.2%
67,462 Intel Corp................................................................... 4,037,601
60,030 Maxim Integrated Products, Inc............................................... 3,692,445
26,898 Texas Instruments, Inc....................................................... 3,450,744
-------------
11,180,790
-------------
SOFTWARE - 0.8%
13,071 Intuit, Inc.................................................................. 3,423,687
25,005 Microsoft Corp............................................................... 3,943,289
-------------
7,366,976
-------------
SPECIALTY RETAIL - 1.1%
31,648 Ross Stores, Inc............................................................. 3,684,460
62,367 TJX (The) Cos., Inc.......................................................... 3,808,129
38,438 Tractor Supply Co............................................................ 3,591,647
-------------
11,084,236
-------------
TEXTILES, APPAREL & LUXURY GOODS - 0.8%
35,880 Columbia Sportswear Co....................................................... 3,594,817
123,012 Wolverine World Wide, Inc.................................................... 4,150,425
-------------
7,745,242
-------------
THRIFTS & MORTGAGE FINANCE - 0.4%
212,102 Northwest Bancshares, Inc.................................................... 3,527,256
-------------
TOBACCO - 0.4%
84,998 Altria Group, Inc............................................................ 4,242,250
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.8%
47,930 MSC Industrial Direct Co., Inc., Class A..................................... 3,761,067
20,548 Watsco, Inc.................................................................. 3,701,722
-------------
7,462,789
-------------
TOTAL COMMON STOCKS.......................................................... 548,054,264
(Cost $466,470,479) -------------
See Notes to Financial Statements Page 21
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES - 36.4%
AEROSPACE & DEFENSE - 0.5%
$ 250,000 L3Harris Technologies, Inc.......................... 2.90% 12/15/29 $ 254,504
250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 268,412
248,000 Lockheed Martin Corp................................ 4.09% 09/15/52 291,444
250,000 Northrop Grumman Corp............................... 2.08% 10/15/20 250,310
500,000 Northrop Grumman Corp............................... 2.55% 10/15/22 507,745
250,000 Northrop Grumman Corp............................... 2.93% 01/15/25 257,963
500,000 Northrop Grumman Corp............................... 3.25% 01/15/28 522,277
500,000 Northrop Grumman Corp............................... 4.03% 10/15/47 559,408
750,000 United Technologies Corp............................ 3.35% 08/16/21 768,192
250,000 United Technologies Corp............................ 3.65% 08/16/23 263,759
250,000 United Technologies Corp............................ 3.95% 08/16/25 272,839
500,000 United Technologies Corp............................ 4.63% 11/16/48 627,504
-------------
4,844,357
-------------
AIR FREIGHT & LOGISTICS - 1.0%
850,000 FedEx Corp.......................................... 3.30% 03/15/27 879,706
500,000 FedEx Corp.......................................... 4.20% 10/17/28 545,639
648,000 FedEx Corp.......................................... 4.55% 04/01/46 667,612
550,000 FedEx Corp.......................................... 4.40% 01/15/47 553,441
500,000 FedEx Corp.......................................... 4.95% 10/17/48 547,447
1,000,000 United Parcel Service, Inc.......................... 2.05% 04/01/21 1,002,918
500,000 United Parcel Service, Inc.......................... 2.35% 05/16/22 505,757
545,000 United Parcel Service, Inc.......................... 2.45% 10/01/22 553,921
500,000 United Parcel Service, Inc.......................... 2.50% 04/01/23 509,503
250,000 United Parcel Service, Inc.......................... 2.20% 09/01/24 251,592
250,000 United Parcel Service, Inc.......................... 2.80% 11/15/24 259,105
500,000 United Parcel Service, Inc.......................... 2.40% 11/15/26 505,938
250,000 United Parcel Service, Inc.......................... 3.05% 11/15/27 263,205
500,000 United Parcel Service, Inc.......................... 3.40% 03/15/29 537,598
250,000 United Parcel Service, Inc.......................... 2.50% 09/01/29 249,760
500,000 United Parcel Service, Inc.......................... 3.40% 11/15/46 500,178
500,000 United Parcel Service, Inc.......................... 4.25% 03/15/49 586,555
250,000 United Parcel Service, Inc.......................... 3.40% 09/01/49 254,021
-------------
9,173,896
-------------
AIRLINES - 0.1%
500,000 Delta Air Lines, Inc................................ 2.90% 10/28/24 501,258
500,000 Delta Air Lines, Inc................................ 3.75% 10/28/29 500,130
250,000 Southwest Airlines Co............................... 3.00% 11/15/26 256,265
-------------
1,257,653
-------------
AUTOMOBILES - 0.1%
500,000 American Honda Finance Corp......................... 1.95% 05/20/22 501,989
250,000 General Motors Co................................... 5.00% 10/01/28 272,604
-------------
774,593
-------------
BANKS - 6.1%
600,000 Bank of America Corp................................ 2.63% 04/19/21 605,643
500,000 Bank of America Corp. (a)........................... 2.37% 07/21/21 501,074
250,000 Bank of America Corp. (a)........................... 2.33% 10/01/21 250,741
500,000 Bank of America Corp. (a)........................... 2.74% 01/23/22 503,722
250,000 Bank of America Corp................................ 2.50% 10/21/22 252,489
Page 22 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Bank of America Corp. (a)........................... 2.88% 04/24/23 $ 508,633
500,000 Bank of America Corp. (a)........................... 2.82% 07/21/23 508,228
1,207,000 Bank of America Corp. (a)........................... 3.00% 12/20/23 1,235,771
250,000 Bank of America Corp. (a)........................... 3.55% 03/05/24 259,588
450,000 Bank of America Corp................................ 4.00% 04/01/24 482,280
500,000 Bank of America Corp. (a)........................... 3.86% 07/23/24 526,454
500,000 Bank of America Corp. (a)........................... 3.46% 03/15/25 522,419
500,000 Bank of America Corp. (a)........................... 3.09% 10/01/25 516,388
500,000 Bank of America Corp. (a)........................... 2.46% 10/22/25 503,686
250,000 Bank of America Corp. (a)........................... 3.37% 01/23/26 261,676
400,000 Bank of America Corp................................ 4.45% 03/03/26 439,658
950,000 Bank of America Corp................................ 3.50% 04/19/26 1,011,174
500,000 Bank of America Corp. (a)........................... 3.56% 04/23/27 528,915
150,000 Bank of America Corp................................ 3.25% 10/21/27 156,488
250,000 Bank of America Corp................................ 4.18% 11/25/27 271,316
500,000 Bank of America Corp. (a)........................... 3.82% 01/20/28 537,251
500,000 Bank of America Corp. (a)........................... 3.71% 04/24/28 535,039
500,000 Bank of America Corp. (a)........................... 3.59% 07/21/28 530,443
1,091,000 Bank of America Corp. (a)........................... 3.42% 12/20/28 1,146,626
250,000 Bank of America Corp. (a)........................... 3.97% 03/05/29 272,654
500,000 Bank of America Corp. (a)........................... 4.27% 07/23/29 556,180
500,000 Bank of America Corp. (a)........................... 3.97% 02/07/30 549,356
500,000 Bank of America Corp. (a)........................... 3.19% 07/23/30 517,930
500,000 Bank of America Corp. (a)........................... 2.88% 10/22/30 505,036
250,000 Bank of America Corp. (a)........................... 4.24% 04/24/38 288,667
500,000 Bank of America Corp. (a)........................... 4.08% 04/23/40 568,168
225,000 Bank of America Corp................................ 5.88% 02/07/42 320,182
250,000 Bank of America Corp. (a)........................... 4.44% 01/20/48 305,395
500,000 Bank of America Corp. (a)........................... 3.95% 01/23/49 568,834
500,000 Bank of America Corp. (a)........................... 4.33% 03/15/50 603,685
500,000 CIT Bank N.A. (a)................................... 2.97% 09/27/25 499,687
250,000 Citibank N.A........................................ 3.40% 07/23/21 255,429
500,000 Citibank N.A. (a)................................... 3.17% 02/19/22 506,418
500,000 Citibank N.A. (a)................................... 2.84% 05/20/22 506,168
600,000 Citigroup, Inc...................................... 2.70% 03/30/21 605,778
350,000 Citigroup, Inc...................................... 2.35% 08/02/21 352,250
250,000 Citigroup, Inc...................................... 2.90% 12/08/21 254,184
775,000 Citigroup, Inc...................................... 4.50% 01/14/22 812,823
500,000 Citigroup, Inc...................................... 2.75% 04/25/22 508,165
500,000 Citigroup, Inc...................................... 2.70% 10/27/22 508,496
1,000,000 Citigroup, Inc. (a)................................. 2.31% 11/04/22 1,003,383
500,000 Citigroup, Inc. (a)................................. 2.88% 07/24/23 508,691
250,000 Citigroup, Inc. (a)................................. 4.04% 06/01/24 264,608
500,000 Citigroup, Inc. (a)................................. 3.35% 04/24/25 520,736
450,000 Citigroup, Inc...................................... 4.60% 03/09/26 495,894
300,000 Citigroup, Inc...................................... 3.40% 05/01/26 315,453
250,000 Citigroup, Inc...................................... 3.20% 10/21/26 259,612
300,000 Citigroup, Inc...................................... 4.30% 11/20/26 326,949
350,000 Citigroup, Inc...................................... 4.45% 09/29/27 385,942
500,000 Citigroup, Inc. (a)................................. 3.89% 01/10/28 539,255
See Notes to Financial Statements Page 23
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 1,000,000 Citigroup, Inc. (a)................................. 3.67% 07/24/28 $ 1,066,954
500,000 Citigroup, Inc...................................... 4.13% 07/25/28 546,090
500,000 Citigroup, Inc. (a)................................. 3.52% 10/27/28 526,863
250,000 Citigroup, Inc. (a)................................. 4.08% 04/23/29 273,874
500,000 Citigroup, Inc. (a)................................. 3.98% 03/20/30 547,832
1,000,000 Citigroup, Inc. (a)................................. 2.98% 11/05/30 1,016,851
500,000 Citigroup, Inc. (a)................................. 3.88% 01/24/39 548,791
200,000 Citigroup, Inc...................................... 5.88% 01/30/42 281,984
100,000 Citigroup, Inc...................................... 6.68% 09/13/43 146,184
750,000 Citigroup, Inc...................................... 4.75% 05/18/46 898,464
500,000 Citigroup, Inc. (a)................................. 4.28% 04/24/48 595,410
500,000 Citigroup, Inc...................................... 4.65% 07/23/48 626,327
500,000 Fifth Third Bancorp................................. 2.38% 01/28/25 501,229
250,000 Huntington National Bank (The)...................... 3.55% 10/06/23 262,442
550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 569,359
450,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 453,076
325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 335,615
500,000 JPMorgan Chase & Co. (a)............................ 3.21% 04/01/23 512,139
250,000 JPMorgan Chase & Co. (a)............................ 2.78% 04/25/23 254,058
500,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 509,402
400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 427,212
250,000 JPMorgan Chase & Co. (a)............................ 3.56% 04/23/24 260,648
250,000 JPMorgan Chase & Co. (a)............................ 3.80% 07/23/24 263,644
500,000 JPMorgan Chase & Co. (a)............................ 2.30% 10/15/25 499,774
850,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 895,434
300,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 328,933
250,000 JPMorgan Chase & Co................................. 3.63% 12/01/27 264,335
500,000 JPMorgan Chase & Co. (a)............................ 3.78% 02/01/28 539,596
500,000 JPMorgan Chase & Co. (a)............................ 3.54% 05/01/28 531,674
500,000 JPMorgan Chase & Co. (a)............................ 3.51% 01/23/29 531,869
250,000 JPMorgan Chase & Co. (a)............................ 4.01% 04/23/29 274,814
500,000 JPMorgan Chase & Co. (a)............................ 4.20% 07/23/29 558,571
500,000 JPMorgan Chase & Co. (a)............................ 3.70% 05/06/30 539,121
500,000 JPMorgan Chase & Co. (a)............................ 2.74% 10/15/30 500,714
400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 580,374
250,000 JPMorgan Chase & Co. (a)............................ 3.88% 07/24/38 277,164
100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 128,043
150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 191,199
500,000 JPMorgan Chase & Co. (a)............................ 4.26% 02/22/48 591,808
500,000 JPMorgan Chase & Co. (a)............................ 4.03% 07/24/48 572,381
750,000 JPMorgan Chase & Co. (a)............................ 3.96% 11/15/48 851,177
500,000 JPMorgan Chase & Co. (a)............................ 3.90% 01/23/49 563,637
500,000 JPMorgan Chase Bank N.A. (a)........................ 2.60% 02/01/21 500,272
250,000 JPMorgan Chase Bank N.A. (a)........................ 3.09% 04/26/21 250,873
500,000 MUFG Union Bank N.A................................. 2.10% 12/09/22 501,611
500,000 PNC Financial Services Group (The), Inc............. 2.60% 07/23/26 506,823
500,000 Regions Bank........................................ 2.75% 04/01/21 504,270
500,000 Regions Financial Corp.............................. 3.80% 08/14/23 529,646
550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 554,083
300,000 Wells Fargo & Co.................................... 2.10% 07/26/21 300,519
Page 24 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Wells Fargo & Co.................................... 2.63% 07/22/22 $ 507,634
425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 445,691
500,000 Wells Fargo & Co. (a)............................... 2.41% 10/30/25 500,811
550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 566,231
100,000 Wells Fargo & Co.................................... 4.10% 06/03/26 107,923
250,000 Wells Fargo & Co.................................... 3.00% 10/23/26 256,446
200,000 Wells Fargo & Co.................................... 4.30% 07/22/27 219,356
500,000 Wells Fargo & Co. (a)............................... 3.58% 05/22/28 531,931
500,000 Wells Fargo & Co. (a)............................... 2.88% 10/30/30 504,119
100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 122,502
275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 314,156
750,000 Wells Fargo & Co.................................... 4.75% 12/07/46 901,988
250,000 Wells Fargo Bank N.A. (a)........................... 3.33% 07/23/21 251,981
1,000,000 Wells Fargo Bank N.A................................ 3.63% 10/22/21 1,029,476
500,000 Wells Fargo Bank N.A. (a)........................... 2.08% 09/09/22 500,899
200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 266,731
500,000 Zions Bancorp N.A................................... 3.25% 10/29/29 491,621
-------------
58,894,369
-------------
BEVERAGES - 0.8%
875,000 Anheuser-Busch Cos., LLC/Anheuser-Busch InBev
Worldwide, Inc................................... 4.70% 02/01/36 1,015,469
1,100,000 Anheuser-Busch Cos., LLC/Anheuser-Busch InBev
Worldwide, Inc................................... 4.90% 02/01/46 1,306,756
562,000 Anheuser-Busch Inbev Finance, Inc................... 3.30% 02/01/23 582,592
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.50% 01/12/24 263,622
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.15% 01/23/25 272,633
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.75% 01/23/29 290,016
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 01/23/31 298,190
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.38% 04/15/38 281,290
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.60% 04/15/48 286,572
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 5.55% 01/23/49 325,298
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.75% 04/15/58 292,897
250,000 Anheuser-Busch Inbev Worldwide, Inc................. 5.80% 01/23/59 341,936
975,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 1,023,302
500,000 Coca-Cola (The) Co.................................. 1.75% 09/06/24 496,909
500,000 PepsiCo, Inc........................................ 3.38% 07/29/49 525,972
-------------
7,603,454
-------------
BIOTECHNOLOGY - 1.4%
250,000 AbbVie, Inc......................................... 3.38% 11/14/21 256,531
2,000,000 AbbVie, Inc. (b).................................... 2.15% 11/19/21 2,003,815
375,000 AbbVie, Inc......................................... 2.90% 11/06/22 382,961
2,000,000 AbbVie, Inc. (b).................................... 2.30% 11/21/22 2,011,506
250,000 AbbVie, Inc......................................... 3.75% 11/14/23 263,313
1,000,000 AbbVie, Inc. (b).................................... 2.60% 11/21/24 1,009,224
250,000 AbbVie, Inc......................................... 3.60% 05/14/25 264,316
1,000,000 AbbVie, Inc. (b).................................... 2.95% 11/21/26 1,019,710
250,000 AbbVie, Inc......................................... 4.25% 11/14/28 276,753
1,000,000 AbbVie, Inc. (b).................................... 3.20% 11/21/29 1,018,615
500,000 AbbVie, Inc. (b).................................... 4.05% 11/21/39 527,309
See Notes to Financial Statements Page 25
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
BIOTECHNOLOGY (CONTINUED)
$ 275,000 AbbVie, Inc......................................... 4.40% 11/06/42 $ 296,190
300,000 AbbVie, Inc......................................... 4.70% 05/14/45 335,802
250,000 AbbVie, Inc......................................... 4.88% 11/14/48 289,304
1,000,000 AbbVie, Inc. (b).................................... 4.25% 11/21/49 1,066,370
450,000 Amgen, Inc.......................................... 2.70% 05/01/22 456,214
500,000 Amgen, Inc.......................................... 2.65% 05/11/22 507,646
200,000 Amgen, Inc.......................................... 3.63% 05/22/24 211,464
100,000 Amgen, Inc.......................................... 2.60% 08/19/26 101,393
500,000 Amgen, Inc.......................................... 3.20% 11/02/27 527,405
350,000 Amgen, Inc.......................................... 4.40% 05/01/45 392,806
-------------
13,218,647
-------------
BUILDING PRODUCTS - 0.0%
250,000 Owens Corning....................................... 3.95% 08/15/29 260,745
250,000 Owens Corning....................................... 4.30% 07/15/47 237,759
-------------
498,504
-------------
CAPITAL MARKETS - 2.2%
700,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 706,271
500,000 Goldman Sachs Group (The), Inc...................... 2.35% 11/15/21 502,060
500,000 Goldman Sachs Group (The), Inc...................... 3.00% 04/26/22 506,406
500,000 Goldman Sachs Group (The), Inc. (a)................. 2.88% 10/31/22 507,203
700,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 729,502
250,000 Goldman Sachs Group (The), Inc. (a)................. 2.91% 06/05/23 254,234
500,000 Goldman Sachs Group (The), Inc. (a)................. 2.91% 07/24/23 509,257
500,000 Goldman Sachs Group (The), Inc...................... 3.63% 02/20/24 525,190
600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 639,775
150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 157,569
500,000 Goldman Sachs Group (The), Inc. (a)................. 3.27% 09/29/25 517,992
600,000 Goldman Sachs Group (The), Inc...................... 4.25% 10/21/25 652,246
550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 582,615
500,000 Goldman Sachs Group (The), Inc...................... 3.50% 11/16/26 526,614
750,000 Goldman Sachs Group (The), Inc...................... 3.85% 01/26/27 798,995
250,000 Goldman Sachs Group (The), Inc. (a)................. 3.69% 06/05/28 266,204
500,000 Goldman Sachs Group (The), Inc. (a)................. 3.81% 04/23/29 536,861
500,000 Goldman Sachs Group (The), Inc. (a)................. 4.22% 05/01/29 551,719
500,000 Goldman Sachs Group (The), Inc. (a)................. 4.02% 10/31/38 544,409
500,000 Goldman Sachs Group (The), Inc. (a)................. 4.41% 04/23/39 570,767
400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 560,157
1,000,000 Morgan Stanley...................................... 2.50% 04/21/21 1,007,827
550,000 Morgan Stanley...................................... 5.50% 07/28/21 579,526
500,000 Morgan Stanley...................................... 2.63% 11/17/21 506,146
500,000 Morgan Stanley...................................... 2.75% 05/19/22 509,397
500,000 Morgan Stanley...................................... 3.13% 01/23/23 514,350
300,000 Morgan Stanley...................................... 3.75% 02/25/23 314,350
500,000 Morgan Stanley (a).................................. 3.74% 04/24/24 522,701
450,000 Morgan Stanley...................................... 3.88% 04/29/24 478,681
250,000 Morgan Stanley (a).................................. 2.72% 07/22/25 253,323
800,000 Morgan Stanley...................................... 3.88% 01/27/26 859,927
250,000 Morgan Stanley...................................... 4.35% 09/08/26 273,678
250,000 Morgan Stanley...................................... 3.63% 01/20/27 266,428
Page 26 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CAPITAL MARKETS (CONTINUED)
$ 500,000 Morgan Stanley (a).................................. 3.59% 07/22/28 $ 532,062
500,000 Morgan Stanley (a).................................. 3.77% 01/24/29 538,640
500,000 Morgan Stanley (a).................................. 4.43% 01/23/30 565,965
500,000 Morgan Stanley (a).................................. 3.97% 07/22/38 556,329
500,000 Morgan Stanley (a).................................. 4.46% 04/22/39 590,366
350,000 Morgan Stanley...................................... 6.38% 07/24/42 516,740
100,000 Morgan Stanley...................................... 4.30% 01/27/45 117,812
250,000 Morgan Stanley...................................... 4.38% 01/22/47 300,275
-------------
20,950,569
-------------
CHEMICALS - 0.1%
250,000 Dow Chemical (The) Co............................... 3.15% 05/15/24 259,453
250,000 Dow Chemical (The) Co............................... 4.80% 05/15/49 290,404
500,000 LYB International Finance III, LLC.................. 4.20% 10/15/49 524,101
-------------
1,073,958
-------------
COMMERCIAL SERVICES & SUPPLIES - 0.0%
250,000 Republic Services, Inc.............................. 2.50% 08/15/24 253,133
-------------
COMMUNICATIONS EQUIPMENT - 0.2%
800,000 Cisco Systems, Inc.................................. 2.20% 09/20/23 810,597
500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 534,913
200,000 Cisco Systems, Inc.................................. 2.50% 09/20/26 204,072
225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 315,774
-------------
1,865,356
-------------
CONSUMER FINANCE - 1.3%
250,000 American Express Co................................. 3.00% 02/22/21 253,047
250,000 American Express Co................................. 2.50% 08/01/22 253,066
250,000 American Express Co................................. 3.70% 08/03/23 263,004
250,000 American Express Co................................. 3.40% 02/22/24 261,686
500,000 American Express Co................................. 2.50% 07/30/24 506,171
500,000 American Express Co................................. 3.00% 10/30/24 517,297
450,000 American Express Co................................. 3.63% 12/05/24 476,072
250,000 American Express Co................................. 4.20% 11/06/25 275,831
575,000 American Express Credit Corp........................ 2.25% 05/05/21 577,903
250,000 American Express Credit Corp........................ 2.70% 03/03/22 254,274
250,000 Capital One Financial Corp.......................... 4.25% 04/30/25 272,404
500,000 Capital One Financial Corp.......................... 3.80% 01/31/28 538,177
500,000 Capital One N.A..................................... 2.65% 08/08/22 507,703
1,039,000 Caterpillar Financial Services Corp................. 1.70% 08/09/21 1,037,776
1,000,000 Caterpillar Financial Services Corp................. 2.55% 11/29/22 1,019,540
500,000 Caterpillar Financial Services Corp................. 2.15% 11/08/24 502,382
500,000 Discover Bank....................................... 3.35% 02/06/23 515,962
500,000 Discover Bank....................................... 2.45% 09/12/24 499,436
250,000 Discover Bank....................................... 4.65% 09/13/28 282,051
500,000 Ford Motor Credit Co., LLC.......................... 2.98% 08/03/22 500,938
250,000 Ford Motor Credit Co., LLC.......................... 3.35% 11/01/22 252,713
250,000 Ford Motor Credit Co., LLC.......................... 4.54% 08/01/26 256,182
250,000 General Motors Financial Co., Inc................... 2.45% 11/06/20 250,637
250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 253,513
500,000 General Motors Financial Co., Inc................... 4.20% 11/06/21 518,533
See Notes to Financial Statements Page 27
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER FINANCE (CONTINUED)
$ 250,000 General Motors Financial Co., Inc................... 3.55% 07/08/22 $ 257,441
250,000 General Motors Financial Co., Inc................... 5.10% 01/17/24 271,569
250,000 General Motors Financial Co., Inc................... 3.50% 11/07/24 257,772
200,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 221,969
100,000 General Motors Financial Co., Inc................... 4.00% 10/06/26 104,940
250,000 General Motors Financial Co., Inc................... 4.35% 01/17/27 263,036
250,000 General Motors Financial Co., Inc................... 3.85% 01/05/28 255,312
-------------
12,478,337
-------------
CONTAINERS & PACKAGING - 0.1%
350,000 International Paper Co.............................. 4.40% 08/15/47 375,505
250,000 Packaging Corp. of America.......................... 3.00% 12/15/29 251,809
250,000 WRKCo, Inc.......................................... 3.00% 09/15/24 255,292
250,000 WRKCo, Inc.......................................... 3.38% 09/15/27 256,217
250,000 WRKCo, Inc.......................................... 4.20% 06/01/32 274,521
-------------
1,413,344
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.4%
250,000 Berkshire Hathaway Finance Corp..................... 4.20% 08/15/48 296,434
500,000 Berkshire Hathaway Finance Corp..................... 4.25% 01/15/49 594,122
125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 128,253
425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 448,295
500,000 Dell International LLC/EMC Corp. (b)................ 4.42% 06/15/21 514,675
250,000 Dell International LLC/EMC Corp. (b)................ 4.00% 07/15/24 262,096
500,000 Dell International LLC/EMC Corp. (b)................ 4.90% 10/01/26 551,021
250,000 Dell International LLC/EMC Corp. (b)................ 5.30% 10/01/29 282,132
250,000 Dell International LLC/EMC Corp. (b)................ 8.35% 07/15/46 344,942
-------------
3,421,970
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 1.2%
250,000 AT&T, Inc........................................... 3.20% 03/01/22 256,013
250,000 AT&T, Inc........................................... 3.80% 03/01/24 265,497
150,000 AT&T, Inc........................................... 3.90% 03/11/24 159,658
350,000 AT&T, Inc........................................... 3.40% 05/15/25 366,821
650,000 AT&T, Inc........................................... 4.13% 02/17/26 705,076
545,000 AT&T, Inc........................................... 4.10% 02/15/28 593,522
500,000 AT&T, Inc........................................... 4.35% 03/01/29 556,713
462,000 AT&T, Inc........................................... 4.30% 02/15/30 513,809
250,000 AT&T, Inc........................................... 5.25% 03/01/37 299,129
500,000 AT&T, Inc........................................... 4.85% 03/01/39 577,775
425,000 AT&T, Inc........................................... 4.80% 06/15/44 485,688
250,000 AT&T, Inc........................................... 4.35% 06/15/45 270,365
250,000 AT&T, Inc........................................... 4.75% 05/15/46 283,397
550,000 AT&T, Inc........................................... 5.65% 02/15/47 701,813
250,000 AT&T, Inc........................................... 4.50% 03/09/48 276,652
250,000 AT&T, Inc........................................... 5.70% 03/01/57 323,303
200,000 Level 3 Financing, Inc. (b)......................... 3.40% 03/01/27 201,776
250,000 Level 3 Financing, Inc. (b)......................... 3.88% 11/15/29 252,338
250,000 Verizon Communications, Inc......................... 2.63% 08/15/26 254,107
250,000 Verizon Communications, Inc......................... 4.13% 03/16/27 277,787
250,000 Verizon Communications, Inc......................... 3.88% 02/08/29 276,008
1,119,000 Verizon Communications, Inc......................... 4.02% 12/03/29 1,248,411
Page 28 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED)
$ 231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 $ 262,024
298,000 Verizon Communications, Inc......................... 4.13% 08/15/46 337,368
750,000 Verizon Communications, Inc......................... 4.86% 08/21/46 932,401
250,000 Verizon Communications, Inc......................... 4.52% 09/15/48 300,450
249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 321,683
522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 645,954
-------------
11,945,538
-------------
ELECTRIC UTILITIES - 3.4%
500,000 AEP Texas, Inc...................................... 2.40% 10/01/22 504,829
750,000 AEP Transmission Co., LLC........................... 3.10% 12/01/26 777,888
250,000 AEP Transmission Co., LLC........................... 4.00% 12/01/46 278,746
500,000 AEP Transmission Co., LLC........................... 3.75% 12/01/47 539,061
500,000 AEP Transmission Co., LLC........................... 4.25% 09/15/48 575,261
250,000 AEP Transmission Co., LLC........................... 3.15% 09/15/49 242,588
250,000 Alabama Power Co.................................... 3.70% 12/01/47 264,539
500,000 Alabama Power Co.................................... 3.45% 10/01/49 514,430
750,000 American Electric Power Co., Inc.................... 2.95% 12/15/22 764,745
300,000 Appalachian Power Co................................ 4.40% 05/15/44 339,543
250,000 Appalachian Power Co................................ 4.50% 03/01/49 289,959
500,000 Atlantic City Electric Co........................... 4.00% 10/15/28 558,339
250,000 Baltimore Gas & Electric Co......................... 2.40% 08/15/26 248,425
250,000 Baltimore Gas & Electric Co......................... 3.50% 08/15/46 255,028
250,000 Baltimore Gas & Electric Co......................... 3.75% 08/15/47 267,328
250,000 Baltimore Gas & Electric Co......................... 3.20% 09/15/49 245,730
500,000 Cleveland Electric Illuminating (The) Co. (b)....... 3.50% 04/01/28 521,245
300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 306,960
250,000 Commonwealth Edison Co.............................. 2.95% 08/15/27 259,285
250,000 Commonwealth Edison Co.............................. 3.70% 08/15/28 273,738
300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 319,879
400,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 425,544
500,000 Commonwealth Edison Co.............................. 3.75% 08/15/47 541,091
500,000 Commonwealth Edison Co.............................. 4.00% 03/01/49 567,077
100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 101,596
500,000 Duke Energy Carolinas LLC........................... 3.05% 03/15/23 515,682
250,000 Duke Energy Carolinas LLC........................... 2.45% 08/15/29 248,638
250,000 Duke Energy Carolinas LLC........................... 3.20% 08/15/49 249,882
250,000 Duke Energy Corp.................................... 1.80% 09/01/21 249,865
300,000 Duke Energy Corp.................................... 3.55% 09/15/21 306,574
500,000 Duke Energy Corp.................................... 2.40% 08/15/22 505,248
250,000 Duke Energy Corp.................................... 3.15% 08/15/27 257,867
500,000 Duke Energy Corp.................................... 3.40% 06/15/29 523,686
950,000 Duke Energy Corp.................................... 3.75% 09/01/46 984,373
500,000 Duke Energy Corp.................................... 3.95% 08/15/47 530,510
500,000 Duke Energy Corp.................................... 4.20% 06/15/49 555,262
500,000 Duke Energy Florida LLC............................. 3.20% 01/15/27 523,299
250,000 Duke Energy Florida LLC............................. 3.80% 07/15/28 274,087
1,000,000 Duke Energy Florida LLC............................. 2.50% 12/01/29 998,656
250,000 Duke Energy Florida LLC............................. 3.40% 10/01/46 255,165
250,000 Duke Energy Florida LLC............................. 4.20% 07/15/48 290,326
See Notes to Financial Statements Page 29
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
$ 500,000 Duke Energy Progress LLC............................ 3.45% 03/15/29 $ 536,409
250,000 Duke Energy Progress LLC............................ 3.60% 09/15/47 262,686
575,000 Exelon Corp......................................... 5.15% 12/01/20 586,643
200,000 Exelon Corp......................................... 2.45% 04/15/21 200,955
210,000 Florida Power & Light Co............................ 4.05% 06/01/42 239,279
250,000 Florida Power & Light Co............................ 3.95% 03/01/48 285,735
500,000 Georgia Power Co.................................... 2.20% 09/15/24 500,620
250,000 Indiana Michigan Power Co........................... 3.85% 05/15/28 273,379
500,000 Indiana Michigan Power Co........................... 3.75% 07/01/47 524,809
250,000 Indiana Michigan Power Co........................... 4.25% 08/15/48 286,583
500,000 Jersey Central Power & Light Co. (b)................ 4.30% 01/15/26 544,874
410,000 Metropolitan Edison Co. (b)......................... 3.50% 03/15/23 423,954
500,000 Metropolitan Edison Co. (b)......................... 4.30% 01/15/29 557,954
500,000 Oncor Electric Delivery Co., LLC.................... 2.75% 06/01/24 506,541
250,000 PECO Energy Co...................................... 3.70% 09/15/47 274,504
500,000 PECO Energy Co...................................... 3.90% 03/01/48 564,572
250,000 PECO Energy Co...................................... 3.00% 09/15/49 240,979
500,000 Public Service Electric & Gas Co.................... 3.25% 09/01/23 521,118
550,000 Public Service Electric & Gas Co.................... 2.25% 09/15/26 545,716
250,000 Public Service Electric & Gas Co.................... 3.00% 05/15/27 258,898
500,000 Public Service Electric & Gas Co.................... 3.65% 09/01/28 545,833
250,000 Public Service Electric & Gas Co.................... 3.20% 05/15/29 263,988
275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 305,712
500,000 Public Service Electric & Gas Co.................... 3.60% 12/01/47 543,009
250,000 Public Service Electric & Gas Co.................... 4.05% 05/01/48 288,040
250,000 Public Service Electric & Gas Co.................... 3.85% 05/01/49 282,066
500,000 Public Service Electric & Gas Co.................... 3.20% 08/01/49 506,711
500,000 Southwestern Electric Power Co...................... 2.75% 10/01/26 501,051
500,000 Virginia Electric & Power Co........................ 2.75% 03/15/23 509,493
200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 209,743
450,000 Virginia Electric & Power Co........................ 2.95% 11/15/26 466,832
250,000 Virginia Electric & Power Co........................ 3.50% 03/15/27 267,663
500,000 Virginia Electric & Power Co........................ 2.88% 07/15/29 513,418
475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 552,631
250,000 Virginia Electric & Power Co........................ 4.00% 11/15/46 276,339
250,000 Virginia Electric & Power Co........................ 3.80% 09/15/47 271,051
500,000 Virginia Electric & Power Co........................ 4.60% 12/01/48 613,921
-------------
32,305,683
-------------
ELECTRICAL EQUIPMENT - 0.1%
250,000 Rockwell Automation, Inc............................ 3.50% 03/01/29 269,050
250,000 Rockwell Automation, Inc............................ 4.20% 03/01/49 292,496
-------------
561,546
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS - 0.0%
250,000 Corning, Inc........................................ 3.90% 11/15/49 254,774
-------------
ENERGY EQUIPMENT & SERVICES - 0.0%
500,000 National Oilwell Varco, Inc......................... 3.60% 12/01/29 502,542
-------------
ENTERTAINMENT - 0.3%
150,000 TWDC Enterprises 18 Corp............................ 3.00% 02/13/26 158,088
350,000 TWDC Enterprises 18 Corp............................ 1.85% 07/30/26 344,273
Page 30 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ENTERTAINMENT (CONTINUED)
$ 500,000 TWDC Enterprises 18 Corp............................ 2.95% 06/15/27 $ 528,001
475,000 TWDC Enterprises 18 Corp............................ 4.13% 06/01/44 561,660
250,000 Walt Disney (The) Co................................ 1.65% 09/01/22 249,483
500,000 Walt Disney (The) Co................................ 1.75% 08/30/24 496,537
250,000 Walt Disney (The) Co................................ 2.00% 09/01/29 242,942
250,000 Walt Disney (The) Co................................ 2.75% 09/01/49 236,710
-------------
2,817,694
-------------
EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.1%
500,000 Duke Realty L.P..................................... 2.88% 11/15/29 502,054
250,000 Simon Property Group L.P............................ 2.00% 09/13/24 248,968
-------------
751,022
-------------
FOOD & STAPLES RETAILING - 0.8%
250,000 Walmart, Inc........................................ 3.13% 06/23/21 255,410
1,000,000 Walmart, Inc........................................ 2.35% 12/15/22 1,018,094
250,000 Walmart, Inc........................................ 3.40% 06/26/23 263,027
325,000 Walmart, Inc........................................ 3.30% 04/22/24 342,018
500,000 Walmart, Inc........................................ 2.85% 07/08/24 519,097
500,000 Walmart, Inc........................................ 2.65% 12/15/24 516,667
1,000,000 Walmart, Inc........................................ 3.55% 06/26/25 1,075,031
500,000 Walmart, Inc........................................ 3.05% 07/08/26 527,842
250,000 Walmart, Inc........................................ 3.70% 06/26/28 275,665
500,000 Walmart, Inc........................................ 3.25% 07/08/29 537,113
500,000 Walmart, Inc........................................ 2.38% 09/24/29 501,228
250,000 Walmart, Inc........................................ 3.95% 06/28/38 290,052
1,000,000 Walmart, Inc........................................ 3.63% 12/15/47 1,114,745
250,000 Walmart, Inc........................................ 4.05% 06/29/48 296,755
500,000 Walmart, Inc........................................ 2.95% 09/24/49 499,643
-------------
8,032,387
-------------
FOOD PRODUCTS - 0.4%
500,000 Conagra Brands, Inc................................. 3.80% 10/22/21 516,116
500,000 Conagra Brands, Inc................................. 4.30% 05/01/24 538,828
500,000 Conagra Brands, Inc................................. 4.60% 11/01/25 552,813
500,000 Conagra Brands, Inc................................. 4.85% 11/01/28 574,129
500,000 Conagra Brands, Inc................................. 5.40% 11/01/48 611,669
250,000 Hershey (The) Co.................................... 2.05% 11/15/24 250,778
250,000 Hershey (The) Co.................................... 2.45% 11/15/29 251,782
250,000 Kraft Heinz Foods Co. (b)........................... 4.88% 10/01/49 264,294
250,000 Nestle Holdings, Inc. (b)........................... 3.10% 09/24/21 255,670
-------------
3,816,079
-------------
GAS UTILITIES - 0.2%
1,000,000 CenterPoint Energy Resources Corp................... 3.55% 04/01/23 1,035,931
500,000 Southern Co. Gas Capital Corp....................... 4.40% 05/30/47 554,282
-------------
1,590,213
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.6%
350,000 Abbott Laboratories................................. 3.40% 11/30/23 368,198
282,000 Abbott Laboratories................................. 3.75% 11/30/26 308,365
1,100,000 Abbott Laboratories................................. 4.90% 11/30/46 1,447,694
550,000 Becton Dickinson and Co............................. 3.36% 06/06/24 573,200
See Notes to Financial Statements Page 31
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED)
$ 522,000 Becton Dickinson and Co............................. 3.70% 06/06/27 $ 555,969
800,000 Becton Dickinson and Co............................. 4.67% 06/06/47 955,159
250,000 Boston Scientific Corp.............................. 3.45% 03/01/24 261,747
250,000 Boston Scientific Corp.............................. 3.75% 03/01/26 268,185
250,000 Boston Scientific Corp.............................. 4.00% 03/01/29 276,904
250,000 Boston Scientific Corp.............................. 4.55% 03/01/39 294,624
250,000 Boston Scientific Corp.............................. 4.70% 03/01/49 304,672
295,000 Medtronic, Inc...................................... 3.15% 03/15/22 303,506
267,000 Medtronic, Inc...................................... 3.50% 03/15/25 286,398
-------------
6,204,621
-------------
HEALTH CARE PROVIDERS & SERVICES - 2.2%
250,000 Anthem, Inc......................................... 2.38% 01/15/25 250,001
250,000 Anthem, Inc......................................... 2.88% 09/15/29 249,580
250,000 Anthem, Inc......................................... 4.55% 03/01/48 283,388
750,000 Anthem, Inc......................................... 3.70% 09/15/49 752,210
500,000 CIGNA Corp.......................................... 3.40% 09/17/21 512,042
500,000 CIGNA Corp.......................................... 3.75% 07/15/23 524,822
500,000 CIGNA Corp.......................................... 4.13% 11/15/25 543,314
500,000 CIGNA Corp.......................................... 4.80% 08/15/38 585,045
399,000 CVS Health Corp..................................... 3.35% 03/09/21 405,728
1,100,000 CVS Health Corp..................................... 2.13% 06/01/21 1,102,160
500,000 CVS Health Corp..................................... 3.70% 03/09/23 521,473
700,000 CVS Health Corp..................................... 4.00% 12/05/23 741,243
250,000 CVS Health Corp..................................... 2.63% 08/15/24 252,401
500,000 CVS Health Corp..................................... 4.10% 03/25/25 537,164
178,000 CVS Health Corp..................................... 3.88% 07/20/25 189,730
150,000 CVS Health Corp..................................... 2.88% 06/01/26 152,324
250,000 CVS Health Corp..................................... 3.00% 08/15/26 255,435
500,000 CVS Health Corp..................................... 4.30% 03/25/28 546,666
250,000 CVS Health Corp..................................... 3.25% 08/15/29 254,597
350,000 CVS Health Corp..................................... 4.78% 03/25/38 398,542
1,000,000 CVS Health Corp..................................... 5.05% 03/25/48 1,186,917
250,000 HCA, Inc............................................ 4.13% 06/15/29 265,779
250,000 HCA, Inc............................................ 5.13% 06/15/39 276,410
250,000 HCA, Inc............................................ 5.25% 06/15/49 280,341
500,000 Laboratory Corp. of America Holdings................ 2.30% 12/01/24 498,640
500,000 Laboratory Corp. of America Holdings................ 2.95% 12/01/29 502,482
275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 282,081
550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 561,208
500,000 UnitedHealth Group, Inc............................. 2.38% 10/15/22 506,425
250,000 UnitedHealth Group, Inc............................. 3.50% 02/15/24 264,095
500,000 UnitedHealth Group, Inc............................. 2.38% 08/15/24 506,966
100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 108,107
250,000 UnitedHealth Group, Inc............................. 3.70% 12/15/25 270,797
250,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 262,079
500,000 UnitedHealth Group, Inc............................. 3.45% 01/15/27 536,577
500,000 UnitedHealth Group, Inc............................. 3.38% 04/15/27 534,231
500,000 UnitedHealth Group, Inc............................. 2.95% 10/15/27 520,598
250,000 UnitedHealth Group, Inc............................. 3.88% 12/15/28 277,041
Page 32 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES (CONTINUED)
$ 500,000 UnitedHealth Group, Inc............................. 2.88% 08/15/29 $ 515,292
150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 222,629
250,000 UnitedHealth Group, Inc............................. 3.50% 08/15/39 263,100
573,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 706,569
500,000 UnitedHealth Group, Inc............................. 4.20% 01/15/47 574,942
500,000 UnitedHealth Group, Inc............................. 4.25% 04/15/47 579,771
250,000 UnitedHealth Group, Inc............................. 3.75% 10/15/47 269,518
250,000 UnitedHealth Group, Inc............................. 4.45% 12/15/48 299,460
250,000 UnitedHealth Group, Inc............................. 3.70% 08/15/49 269,452
250,000 UnitedHealth Group, Inc............................. 3.88% 08/15/59 270,854
250,000 Unum Group.......................................... 4.50% 12/15/49 245,147
-------------
20,915,373
-------------
HOTELS, RESTAURANTS & LEISURE - 0.1%
500,000 Las Vegas Sands Corp................................ 2.90% 06/25/25 505,943
500,000 Marriott International (MD), Inc.................... 2.13% 10/03/22 501,295
-------------
1,007,238
-------------
HOUSEHOLD DURABLES - 0.0%
500,000 DR Horton, Inc...................................... 2.50% 10/15/24 500,917
-------------
HOUSEHOLD PRODUCTS - 0.1%
250,000 Procter & Gamble (The) Co........................... 1.70% 11/03/21 250,926
500,000 Procter & Gamble (The) Co........................... 2.15% 08/11/22 505,934
-------------
756,860
-------------
INDEPENDENT POWER & RENEWABLE ELECTRICITY
PRODUCERS - 0.3%
500,000 NextEra Energy Capital Holdings, Inc................ 2.80% 01/15/23 511,449
500,000 NextEra Energy Capital Holdings, Inc................ 3.15% 04/01/24 518,864
500,000 NextEra Energy Capital Holdings, Inc................ 3.55% 05/01/27 531,682
500,000 NextEra Energy Capital Holdings, Inc................ 3.50% 04/01/29 532,732
500,000 NextEra Energy Capital Holdings, Inc................ 2.75% 11/01/29 503,721
-------------
2,598,448
-------------
INDUSTRIAL CONGLOMERATES - 0.1%
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc.............................................. 2.77% 12/15/22 510,341
500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor,
Inc.............................................. 4.08% 12/15/47 513,604
-------------
1,023,945
-------------
INSURANCE - 0.6%
200,000 American International Group, Inc................... 4.13% 02/15/24 214,912
100,000 American International Group, Inc................... 3.90% 04/01/26 107,495
250,000 American International Group, Inc................... 4.25% 03/15/29 278,537
300,000 American International Group, Inc................... 6.25% 05/01/36 401,506
500,000 Aon Corp............................................ 2.20% 11/15/22 502,701
500,000 Aon Corp............................................ 3.75% 05/02/29 535,492
250,000 CNA Financial Corp.................................. 3.90% 05/01/29 269,436
250,000 Hartford Financial Services Group (The), Inc........ 2.80% 08/19/29 253,443
250,000 Hartford Financial Services Group (The), Inc........ 3.60% 08/19/49 257,747
750,000 Marsh & McLennan Cos., Inc.......................... 4.38% 03/15/29 855,780
250,000 Marsh & McLennan Cos., Inc.......................... 4.90% 03/15/49 317,963
300,000 MetLife, Inc........................................ 4.88% 11/13/43 372,528
275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 325,206
See Notes to Financial Statements Page 33
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 500,000 Travelers (The) Cos., Inc........................... 4.00% 05/30/47 $ 567,622
500,000 Travelers (The) Cos., Inc........................... 4.10% 03/04/49 576,830
-------------
5,837,198
-------------
IT SERVICES - 0.9%
500,000 Fiserv, Inc......................................... 2.75% 07/01/24 509,359
500,000 Fiserv, Inc......................................... 3.20% 07/01/26 518,563
500,000 Fiserv, Inc......................................... 3.50% 07/01/29 526,578
500,000 Fiserv, Inc......................................... 4.40% 07/01/49 570,080
500,000 International Business Machines Corp................ 2.85% 05/13/22 511,474
500,000 International Business Machines Corp................ 3.00% 05/15/24 519,188
500,000 International Business Machines Corp................ 3.30% 05/15/26 528,239
500,000 International Business Machines Corp................ 3.50% 05/15/29 538,429
500,000 International Business Machines Corp................ 4.15% 05/15/39 565,055
500,000 International Business Machines Corp................ 4.25% 05/15/49 573,138
500,000 Visa, Inc........................................... 2.15% 09/15/22 505,857
950,000 Visa, Inc........................................... 2.80% 12/14/22 978,165
303,000 Visa, Inc........................................... 4.15% 12/14/35 357,922
450,000 Visa, Inc........................................... 4.30% 12/14/45 553,963
500,000 Visa, Inc........................................... 3.65% 09/15/47 561,055
-------------
8,317,065
-------------
LEISURE PRODUCTS - 0.1%
500,000 Hasbro, Inc......................................... 2.60% 11/19/22 503,411
250,000 Hasbro, Inc......................................... 3.00% 11/19/24 251,565
-------------
754,976
-------------
MACHINERY - 0.1%
250,000 Caterpillar, Inc.................................... 2.60% 09/19/29 252,827
250,000 Caterpillar, Inc.................................... 3.25% 09/19/49 251,742
250,000 Wabtec Corp......................................... 4.40% 03/15/24 265,614
-------------
770,183
-------------
MEDIA - 1.2%
610,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.91% 07/23/25 672,208
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.05% 03/30/29 283,893
750,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 6.48% 10/23/45 931,131
250,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.38% 05/01/47 280,936
500,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 5.75% 04/01/48 584,873
500,000 Charter Communications Operating LLC/Charter
Communications Operating Capital................. 4.80% 03/01/50 528,145
600,000 Comcast Corp........................................ 3.45% 10/01/21 617,788
575,000 Comcast Corp........................................ 3.70% 04/15/24 613,662
550,000 Comcast Corp........................................ 3.95% 10/15/25 600,718
250,000 Comcast Corp........................................ 3.55% 05/01/28 269,288
350,000 Comcast Corp........................................ 4.15% 10/15/28 394,536
250,000 Comcast Corp........................................ 2.65% 02/01/30 251,395
Page 34 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA (CONTINUED)
$ 500,000 Comcast Corp........................................ 3.25% 11/01/39 $ 509,027
250,000 Comcast Corp........................................ 3.40% 07/15/46 254,181
500,000 Comcast Corp........................................ 4.00% 08/15/47 552,176
250,000 Comcast Corp........................................ 4.00% 03/01/48 277,973
400,000 Comcast Corp........................................ 4.70% 10/15/48 494,617
500,000 Comcast Corp........................................ 3.45% 02/01/50 514,027
250,000 Comcast Corp........................................ 4.95% 10/15/58 326,285
500,000 Discovery Communications LLC........................ 4.13% 05/15/29 540,881
500,000 Discovery Communications LLC........................ 5.30% 05/15/49 593,659
500,000 Fox Corp. (b)....................................... 3.67% 01/25/22 516,515
500,000 Fox Corp. (b)....................................... 4.03% 01/25/24 533,143
250,000 Fox Corp. (b)....................................... 4.71% 01/25/29 285,315
250,000 Fox Corp. (b)....................................... 5.48% 01/25/39 306,409
250,000 Fox Corp. (b)....................................... 5.58% 01/25/49 318,928
-------------
12,051,709
-------------
MULTI-UTILITIES - 1.5%
250,000 Cameron LNG LLC (b)................................. 2.90% 07/15/31 250,946
250,000 Cameron LNG LLC (b)................................. 3.30% 01/15/35 252,937
500,000 Cameron LNG LLC (b)................................. 3.70% 01/15/39 511,950
650,000 CenterPoint Energy, Inc............................. 3.60% 11/01/21 667,207
600,000 CenterPoint Energy, Inc............................. 3.85% 02/01/24 633,332
750,000 CenterPoint Energy, Inc............................. 2.50% 09/01/24 751,886
250,000 CenterPoint Energy, Inc............................. 2.95% 03/01/30 247,032
200,000 Consolidated Edison Co. of New York, Inc............ 3.80% 05/15/28 217,988
335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 389,837
500,000 Consolidated Edison Co. of New York, Inc............ 3.88% 06/15/47 543,043
500,000 Consolidated Edison Co. of New York, Inc............ 4.13% 05/15/49 569,058
250,000 Consolidated Edison Co. of New York, Inc............ 4.30% 12/01/56 282,800
1,000,000 Consolidated Edison Co. of New York, Inc............ 3.70% 11/15/59 1,036,634
500,000 Dominion Energy Gas Holdings LLC.................... 2.50% 11/15/24 502,906
500,000 Dominion Energy Gas Holdings LLC.................... 3.00% 11/15/29 499,375
500,000 Dominion Energy Gas Holdings LLC.................... 3.90% 11/15/49 501,593
250,000 Dominion Energy, Inc................................ 2.75% 01/15/22 253,693
495,000 Dominion Energy, Inc................................ 4.70% 12/01/44 575,410
500,000 DTE Energy Co....................................... 2.25% 11/01/22 500,303
500,000 DTE Energy Co....................................... 2.95% 03/01/30 496,230
910,000 NiSource, Inc....................................... 2.65% 11/17/22 921,707
750,000 NiSource, Inc....................................... 3.65% 06/15/23 781,746
250,000 NiSource, Inc....................................... 3.49% 05/15/27 263,221
500,000 NiSource, Inc....................................... 2.95% 09/01/29 499,377
667,000 NiSource, Inc....................................... 4.38% 05/15/47 741,109
250,000 NiSource, Inc....................................... 3.95% 03/30/48 264,080
500,000 Public Service Enterprise Group, Inc................ 2.65% 11/15/22 507,845
500,000 Public Service Enterprise Group, Inc................ 2.88% 06/15/24 511,682
-------------
14,174,927
-------------
OIL, GAS & CONSUMABLE FUELS - 3.4%
1,000,000 BP Capital Markets America, Inc..................... 3.80% 09/21/25 1,083,073
500,000 BP Capital Markets America, Inc..................... 3.41% 02/11/26 533,152
100,000 BP Capital Markets America, Inc..................... 3.12% 05/04/26 104,580
See Notes to Financial Statements Page 35
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 500,000 BP Capital Markets America, Inc..................... 3.94% 09/21/28 $ 553,102
750,000 BP Capital Markets America, Inc..................... 4.23% 11/06/28 848,970
750,000 Chevron Corp........................................ 2.10% 05/16/21 754,913
550,000 Chevron Corp........................................ 2.57% 05/16/23 561,425
500,000 Chevron Corp........................................ 2.90% 03/03/24 518,603
150,000 Chevron Corp........................................ 3.33% 11/17/25 160,442
1,360,000 Chevron Corp........................................ 2.95% 05/16/26 1,422,636
225,000 ConocoPhillips...................................... 6.50% 02/01/39 328,355
250,000 Diamondback Energy, Inc............................. 3.50% 12/01/29 254,863
250,000 Enable Midstream Partners L.P....................... 4.95% 05/15/28 253,451
250,000 Enable Midstream Partners L.P....................... 4.15% 09/15/29 237,915
400,000 Energy Transfer Operating L.P....................... 3.60% 02/01/23 409,965
150,000 Energy Transfer Operating L.P....................... 4.20% 09/15/23 157,608
500,000 Energy Transfer Operating L.P....................... 4.50% 04/15/24 532,638
250,000 Energy Transfer Operating L.P....................... 4.20% 04/15/27 262,053
250,000 Energy Transfer Operating L.P....................... 4.95% 06/15/28 274,177
250,000 Energy Transfer Operating L.P....................... 5.25% 04/15/29 281,153
250,000 Energy Transfer Operating L.P....................... 5.80% 06/15/38 283,551
250,000 Energy Transfer Operating L.P....................... 5.30% 04/15/47 267,314
250,000 Energy Transfer Operating L.P....................... 6.00% 06/15/48 292,134
250,000 Energy Transfer Operating L.P....................... 6.25% 04/15/49 302,123
500,000 Enterprise Products Operating LLC................... 4.15% 10/16/28 553,911
500,000 Enterprise Products Operating LLC................... 3.13% 07/31/29 515,541
500,000 Enterprise Products Operating LLC................... 4.80% 02/01/49 588,251
500,000 Enterprise Products Operating LLC................... 4.20% 01/31/50 539,047
500,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 503,061
250,000 Exxon Mobil Corp.................................... 1.90% 08/16/22 251,476
250,000 Exxon Mobil Corp.................................... 2.02% 08/16/24 251,068
150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 155,180
200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 209,990
250,000 Exxon Mobil Corp.................................... 2.28% 08/16/26 251,913
250,000 Exxon Mobil Corp.................................... 2.44% 08/16/29 252,750
250,000 Exxon Mobil Corp.................................... 3.00% 08/16/39 251,212
250,000 Exxon Mobil Corp.................................... 3.10% 08/16/49 250,329
175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 232,156
500,000 Kinder Morgan, Inc.................................. 3.15% 01/15/23 511,658
715,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 776,323
650,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 730,518
500,000 Kinder Morgan, Inc.................................. 5.20% 03/01/48 581,483
250,000 Midwest Connector Capital Co., LLC (b).............. 3.63% 04/01/22 256,053
250,000 Midwest Connector Capital Co., LLC (b).............. 3.90% 04/01/24 262,621
500,000 MPLX L.P............................................ 4.00% 03/15/28 518,326
500,000 MPLX L.P............................................ 4.80% 02/15/29 549,240
500,000 MPLX L.P............................................ 5.20% 03/01/47 541,408
250,000 Occidental Petroleum Corp........................... 4.85% 03/15/21 257,576
252,000 Occidental Petroleum Corp........................... 2.60% 08/13/21 253,945
1,000,000 Occidental Petroleum Corp........................... 2.70% 08/15/22 1,010,776
500,000 Occidental Petroleum Corp........................... 2.90% 08/15/24 508,707
250,000 Occidental Petroleum Corp........................... 3.20% 08/15/26 253,223
250,000 Occidental Petroleum Corp........................... 3.50% 08/15/29 255,421
Page 36 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
OIL, GAS & CONSUMABLE FUELS (CONTINUED)
$ 250,000 Occidental Petroleum Corp........................... 4.30% 08/15/39 $ 255,341
250,000 Occidental Petroleum Corp........................... 4.40% 08/15/49 258,569
400,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 411,800
250,000 ONEOK, Inc.......................................... 2.75% 09/01/24 252,645
250,000 ONEOK, Inc.......................................... 4.55% 07/15/28 275,252
250,000 ONEOK, Inc.......................................... 4.35% 03/15/29 271,019
250,000 ONEOK, Inc.......................................... 3.40% 09/01/29 254,544
250,000 ONEOK, Inc.......................................... 5.20% 07/15/48 284,145
250,000 ONEOK, Inc.......................................... 4.45% 09/01/49 260,391
300,000 Plains All American Pipeline L.P./PAA Finance
Corp............................................. 4.65% 10/15/25 321,683
250,000 Plains All American Pipeline L.P./PAA Finance
Corp............................................. 3.55% 12/15/29 247,136
500,000 Sabine Pass Liquefaction LLC........................ 5.00% 03/15/27 550,805
250,000 Sabine Pass Liquefaction LLC........................ 4.20% 03/15/28 265,222
350,000 Sunoco Logistics Partners Operations L.P............ 3.90% 07/15/26 363,896
500,000 Sunoco Logistics Partners Operations L.P............ 4.00% 10/01/27 517,758
500,000 Sunoco Logistics Partners Operations L.P............ 5.40% 10/01/47 544,481
500,000 TC PipeLines L.P.................................... 3.90% 05/25/27 523,258
250,000 Transcontinental Gas Pipe Line Co., LLC............. 4.00% 03/15/28 266,211
500,000 Valero Energy Corp.................................. 4.35% 06/01/28 551,382
500,000 Valero Energy Corp.................................. 4.00% 04/01/29 539,884
300,000 Williams (The) Cos., Inc............................ 3.60% 03/15/22 308,564
250,000 Williams (The) Cos., Inc............................ 3.90% 01/15/25 263,443
250,000 Williams (The) Cos., Inc............................ 3.75% 06/15/27 260,979
625,000 Williams (The) Cos., Inc............................ 4.90% 01/15/45 675,868
270,000 Williams (The) Cos., Inc............................ 5.10% 09/15/45 301,525
500,000 Williams (The) Cos., Inc............................ 4.85% 03/01/48 548,253
-------------
32,325,413
-------------
PHARMACEUTICALS - 0.8%
145,000 Bristol-Myers Squibb Co. (b)........................ 2.55% 05/14/21 146,478
500,000 Bristol-Myers Squibb Co. (b)........................ 2.60% 05/16/22 508,493
500,000 Bristol-Myers Squibb Co. (b)........................ 2.90% 07/26/24 516,624
500,000 Bristol-Myers Squibb Co. (b)........................ 3.20% 06/15/26 525,713
500,000 Bristol-Myers Squibb Co. (b)........................ 3.40% 07/26/29 535,562
500,000 Bristol-Myers Squibb Co. (b)........................ 4.13% 06/15/39 578,181
500,000 Merck & Co., Inc.................................... 2.90% 03/07/24 520,473
300,000 Merck & Co., Inc.................................... 2.75% 02/10/25 311,472
500,000 Merck & Co., Inc.................................... 3.40% 03/07/29 542,133
500,000 Merck & Co., Inc.................................... 3.90% 03/07/39 573,025
500,000 Merck & Co., Inc.................................... 4.00% 03/07/49 587,345
250,000 Pfizer, Inc......................................... 3.00% 09/15/21 255,364
250,000 Pfizer, Inc......................................... 2.80% 03/11/22 255,353
250,000 Pfizer, Inc......................................... 3.45% 03/15/29 269,639
250,000 Pfizer, Inc......................................... 4.10% 09/15/38 286,375
250,000 Pfizer, Inc......................................... 3.90% 03/15/39 282,551
500,000 Pfizer, Inc......................................... 4.20% 09/15/48 587,526
250,000 Pfizer, Inc......................................... 4.00% 03/15/49 288,232
-------------
7,570,539
-------------
PROFESSIONAL SERVICES - 0.0%
500,000 Equifax, Inc........................................ 2.60% 12/01/24 503,484
-------------
See Notes to Financial Statements Page 37
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
ROAD & RAIL - 0.8%
$ 500,000 CSX Corp............................................ 4.25% 03/15/29 $ 563,698
250,000 CSX Corp............................................ 2.40% 02/15/30 245,161
250,000 CSX Corp............................................ 3.80% 11/01/46 262,304
250,000 CSX Corp............................................ 3.35% 09/15/49 247,740
200,000 CSX Corp............................................ 4.50% 08/01/54 230,931
250,000 CSX Corp............................................ 4.25% 11/01/66 267,930
250,000 Kansas City Southern................................ 4.20% 11/15/69 256,962
250,000 Norfolk Southern Corp............................... 3.65% 08/01/25 267,770
250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 258,014
500,000 Norfolk Southern Corp............................... 3.80% 08/01/28 549,986
750,000 Norfolk Southern Corp............................... 4.15% 02/28/48 849,245
500,000 Norfolk Southern Corp............................... 4.10% 05/15/49 553,482
250,000 Ryder System, Inc................................... 3.50% 06/01/21 255,165
250,000 Ryder System, Inc................................... 2.25% 09/01/21 250,656
500,000 Ryder System, Inc................................... 2.80% 03/01/22 506,408
500,000 Ryder System, Inc................................... 3.65% 03/18/24 524,218
500,000 Ryder System, Inc................................... 2.50% 09/01/24 502,900
300,000 Union Pacific Corp.................................. 3.75% 03/15/24 318,482
250,000 Union Pacific Corp.................................. 3.00% 04/15/27 262,636
183,000 Union Pacific Corp.................................. 4.15% 01/15/45 201,130
225,000 Union Pacific Corp.................................. 4.05% 03/01/46 245,684
250,000 Union Pacific Corp.................................. 4.10% 09/15/67 254,183
-------------
7,874,685
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.3%
1,000,000 Broadcom, Inc. (b).................................. 3.13% 04/15/21 1,012,388
100,000 Intel Corp.......................................... 3.10% 07/29/22 103,231
375,000 Intel Corp.......................................... 2.70% 12/15/22 384,529
500,000 Intel Corp.......................................... 2.88% 05/11/24 519,687
100,000 Intel Corp.......................................... 2.60% 05/19/26 102,619
300,000 Intel Corp.......................................... 4.10% 05/19/46 346,874
500,000 Intel Corp.......................................... 4.10% 05/11/47 581,932
-------------
3,051,260
-------------
SOFTWARE - 0.7%
800,000 Microsoft Corp...................................... 2.40% 02/06/22 811,547
150,000 Microsoft Corp...................................... 3.63% 12/15/23 159,780
250,000 Microsoft Corp...................................... 2.88% 02/06/24 259,569
200,000 Microsoft Corp...................................... 3.13% 11/03/25 211,579
100,000 Microsoft Corp...................................... 2.40% 08/08/26 101,264
500,000 Microsoft Corp...................................... 3.30% 02/06/27 534,880
250,000 Microsoft Corp...................................... 4.10% 02/06/37 296,175
275,000 Microsoft Corp...................................... 4.45% 11/03/45 344,832
350,000 Microsoft Corp...................................... 3.70% 08/08/46 396,346
950,000 Microsoft Corp...................................... 4.25% 02/06/47 1,167,294
200,000 Oracle Corp......................................... 1.90% 09/15/21 200,470
100,000 Oracle Corp......................................... 2.50% 05/15/22 101,343
500,000 Oracle Corp......................................... 2.40% 09/15/23 508,659
250,000 Oracle Corp......................................... 3.40% 07/08/24 264,079
350,000 Oracle Corp......................................... 2.65% 07/15/26 358,324
400,000 Oracle Corp......................................... 5.38% 07/15/40 520,779
Page 38 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
SOFTWARE (CONTINUED)
$ 350,000 Oracle Corp......................................... 4.00% 07/15/46 $ 390,226
-------------
6,627,146
-------------
SPECIALTY RETAIL - 0.7%
200,000 Home Depot (The), Inc............................... 2.00% 04/01/21 200,529
770,000 Home Depot (The), Inc............................... 4.40% 04/01/21 791,342
500,000 Home Depot (The), Inc............................... 3.25% 03/01/22 516,900
550,000 Home Depot (The), Inc............................... 3.00% 04/01/26 576,128
1,000,000 Home Depot (The), Inc............................... 2.80% 09/14/27 1,041,116
500,000 Home Depot (The), Inc............................... 3.90% 12/06/28 561,981
500,000 Home Depot (The), Inc............................... 4.25% 04/01/46 590,499
500,000 Home Depot (The), Inc............................... 3.90% 06/15/47 566,745
500,000 Home Depot (The), Inc............................... 4.50% 12/06/48 618,520
250,000 Home Depot (The), Inc............................... 3.50% 09/15/56 260,840
500,000 Lowe's Cos., Inc.................................... 3.65% 04/05/29 535,214
500,000 Lowe's Cos., Inc.................................... 4.55% 04/05/49 591,296
-------------
6,851,110
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.7%
450,000 Apple, Inc.......................................... 2.85% 05/06/21 457,053
250,000 Apple, Inc.......................................... 1.55% 08/04/21 249,126
500,000 Apple, Inc.......................................... 1.70% 09/11/22 499,844
250,000 Apple, Inc.......................................... 2.40% 01/13/23 254,304
375,000 Apple, Inc.......................................... 2.40% 05/03/23 381,637
250,000 Apple, Inc.......................................... 3.00% 02/09/24 259,793
500,000 Apple, Inc.......................................... 2.85% 05/11/24 517,536
500,000 Apple, Inc.......................................... 1.80% 09/11/24 497,235
500,000 Apple, Inc.......................................... 2.75% 01/13/25 517,002
100,000 Apple, Inc.......................................... 2.45% 08/04/26 101,508
250,000 Apple, Inc.......................................... 3.35% 02/09/27 266,509
500,000 Apple, Inc.......................................... 3.20% 05/11/27 528,042
250,000 Apple, Inc.......................................... 2.90% 09/12/27 260,503
500,000 Apple, Inc.......................................... 3.00% 11/13/27 525,002
600,000 Apple, Inc.......................................... 4.25% 02/09/47 719,453
250,000 Apple, Inc.......................................... 3.75% 09/12/47 278,918
250,000 Apple, Inc.......................................... 3.75% 11/13/47 278,081
500,000 Hewlett Packard Enterprise Co....................... 3.50% 10/05/21 512,715
-------------
7,104,261
-------------
TOBACCO - 0.3%
250,000 Altria Group, Inc................................... 3.49% 02/14/22 257,386
250,000 Altria Group, Inc................................... 3.80% 02/14/24 263,429
250,000 Altria Group, Inc................................... 4.80% 02/14/29 278,890
250,000 Altria Group, Inc................................... 5.95% 02/14/49 303,550
250,000 BAT Capital Corp.................................... 3.22% 08/15/24 255,883
250,000 BAT Capital Corp.................................... 2.79% 09/06/24 251,493
250,000 BAT Capital Corp.................................... 3.22% 09/06/26 252,285
250,000 BAT Capital Corp.................................... 3.56% 08/15/27 255,479
250,000 BAT Capital Corp.................................... 4.39% 08/15/37 253,606
250,000 BAT Capital Corp.................................... 4.76% 09/06/49 259,520
-------------
2,631,521
-------------
See Notes to Financial Statements Page 39
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
WATER UTILITIES - 0.1%
$ 250,000 American Water Capital Corp......................... 3.45% 06/01/29 $ 264,687
250,000 American Water Capital Corp......................... 4.15% 06/01/49 283,656
-------------
548,343
-------------
WIRELESS TELECOMMUNICATION SERVICES - 0.0%
250,000 American Tower Corp................................. 2.75% 01/15/27 250,125
250,000 American Tower Corp................................. 3.70% 10/15/49 250,285
-------------
500,410
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................. 350,801,250
(Cost $329,580,120) -------------
FOREIGN CORPORATE BONDS AND NOTES - 3.6%
BANKS - 1.5%
500,000 Australia & New Zealand Banking Group (New York, NY)
Ltd.............................................. 2.05% 11/21/22 501,988
400,000 Banco Santander S.A................................. 2.71% 06/27/24 405,952
400,000 Banco Santander S.A................................. 3.31% 06/27/29 412,758
500,000 Bank of Montreal.................................... 2.90% 03/26/22 509,952
1,000,000 Bank of Montreal.................................... 2.05% 11/01/22 1,004,510
500,000 Bank of Montreal.................................... 3.30% 02/05/24 521,520
500,000 Bank of Nova Scotia (The)........................... 2.00% 11/15/22 501,016
500,000 Bank of Nova Scotia (The)........................... 2.70% 08/03/26 509,374
250,000 BPCE S.A. (b)....................................... 2.70% 10/01/29 248,497
250,000 Cooperatieve Rabobank U.A. (b)...................... 3.88% 09/26/23 264,509
500,000 Cooperatieve Rabobank U.A. (b)...................... 2.63% 07/22/24 506,266
475,000 HSBC Holdings PLC................................... 2.65% 01/05/22 480,390
200,000 HSBC Holdings PLC (a)............................... 3.26% 03/13/23 204,659
500,000 HSBC Holdings PLC (a)............................... 3.95% 05/18/24 526,338
200,000 HSBC Holdings PLC (a)............................... 3.80% 03/11/25 210,071
1,000,000 HSBC Holdings PLC (a)............................... 2.63% 11/07/25 1,004,670
625,000 HSBC Holdings PLC................................... 3.90% 05/25/26 667,231
350,000 HSBC Holdings PLC................................... 4.38% 11/23/26 378,855
200,000 HSBC Holdings PLC (a)............................... 4.04% 03/13/28 214,154
500,000 HSBC Holdings PLC (a)............................... 4.58% 06/19/29 559,537
250,000 HSBC Holdings PLC (a)............................... 3.97% 05/22/30 269,804
1,000,000 Royal Bank of Canada................................ 2.80% 04/29/22 1,020,920
500,000 Royal Bank of Canada................................ 3.70% 10/05/23 528,931
1,000,000 Royal Bank of Canada................................ 2.25% 11/01/24 1,004,931
500,000 Skandinaviska Enskilda Banken A.B. (b).............. 2.20% 12/12/22 501,317
500,000 Sumitomo Mitsui Financial Group, Inc................ 2.70% 07/16/24 507,512
200,000 Sumitomo Mitsui Financial Group, Inc................ 2.45% 09/27/24 200,645
500,000 Sumitomo Mitsui Financial Group, Inc................ 3.04% 07/16/29 510,870
250,000 Sumitomo Mitsui Financial Group, Inc................ 2.72% 09/27/29 249,926
-------------
14,427,103
-------------
CAPITAL MARKETS - 0.2%
500,000 Credit Suisse (New York, NY) A.G.................... 2.10% 11/12/21 502,503
500,000 Credit Suisse Group AG (b).......................... 3.57% 01/09/23 513,985
500,000 Credit Suisse Group AG (a) (b)...................... 3.87% 01/12/29 533,211
-------------
1,549,699
-------------
Page 40 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
COMMERCIAL SERVICES & SUPPLIES - 0.1%
$ 500,000 Waste Connections, Inc.............................. 3.50% 05/01/29 $ 530,232
-------------
DIVERSIFIED FINANCIAL SERVICES - 0.5%
500,000 Banque Federative du Credit Mutuel S.A. (b)......... 2.13% 11/21/22 500,913
250,000 Credit Agricole (London) S.A. (b)................... 2.38% 01/22/25 249,939
444,000 GE Capital International Funding Co. Unlimited Co... 4.42% 11/15/35 475,756
500,000 LeasePlan Corp. N.V. (b)............................ 2.88% 10/24/24 500,388
500,000 Shell International Finance, B.V.................... 3.50% 11/13/23 527,213
500,000 Shell International Finance, B.V.................... 2.00% 11/07/24 499,027
500,000 Shell International Finance, B.V.................... 2.38% 11/07/29 496,599
250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 285,336
250,000 Shell International Finance, B.V.................... 3.75% 09/12/46 275,361
1,000,000 Shell International Finance, B.V.................... 3.13% 11/07/49 990,649
-------------
4,801,181
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1%
500,000 British Telecommunications PLC (b).................. 3.25% 11/08/29 500,678
250,000 Telefonica Emisiones S.A............................ 5.52% 03/01/49 314,117
-------------
814,795
-------------
FOOD PRODUCTS - 0.0%
500,000 Mondelez International Holdings Netherlands,
B.V. (b)......................................... 2.13% 09/19/22 500,435
-------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1%
250,000 DH Europe Finance II Sarl........................... 2.05% 11/15/22 250,447
250,000 DH Europe Finance II Sarl........................... 2.20% 11/15/24 250,620
250,000 DH Europe Finance II Sarl........................... 2.60% 11/15/29 249,633
250,000 DH Europe Finance II Sarl........................... 3.25% 11/15/39 253,062
250,000 DH Europe Finance II Sarl........................... 3.40% 11/15/49 255,911
-------------
1,259,673
-------------
METALS & MINING - 0.1%
250,000 Anglo American Capital PLC (b)...................... 3.63% 09/11/24 259,529
250,000 Anglo American Capital PLC (b)...................... 4.00% 09/11/27 262,212
250,000 Anglo American Capital PLC (b)...................... 4.50% 03/15/28 268,167
330,000 BHP Billiton Finance USA, Ltd....................... 5.00% 09/30/43 423,175
-------------
1,213,083
-------------
OIL, GAS & CONSUMABLE FUELS - 0.5%
500,000 Canadian Natural Resources, Ltd..................... 3.85% 06/01/27 532,966
250,000 Enbridge, Inc....................................... 3.13% 11/15/29 253,632
500,000 Eni S.p.A. (b)...................................... 4.75% 09/12/28 566,568
500,000 Total Capital International S.A..................... 2.43% 01/10/25 506,693
250,000 Total Capital International S.A..................... 2.83% 01/10/30 257,321
500,000 Total Capital International S.A..................... 3.46% 07/12/49 527,544
500,000 Total Capital S.A................................... 3.88% 10/11/28 560,462
500,000 TransCanada PipeLines, Ltd.......................... 4.25% 05/15/28 555,840
500,000 TransCanada PipeLines, Ltd.......................... 5.10% 03/15/49 611,150
-------------
4,372,176
-------------
PHARMACEUTICALS - 0.2%
500,000 GlaxoSmithKline Capital PLC......................... 2.88% 06/01/22 511,068
500,000 Takeda Pharmaceutical Co. Ltd....................... 4.00% 11/26/21 517,301
250,000 Takeda Pharmaceutical Co. Ltd....................... 4.40% 11/26/23 268,636
See Notes to Financial Statements Page 41
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 250,000 Takeda Pharmaceutical Co. Ltd....................... 5.00% 11/26/28 $ 291,492
-------------
1,588,497
-------------
PROFESSIONAL SERVICES - 0.0%
250,000 IHS Markit Ltd...................................... 4.25% 05/01/29 269,718
-------------
TOBACCO - 0.1%
500,000 Imperial Brands Finance PLC (b)..................... 3.13% 07/26/24 505,528
250,000 Imperial Brands Finance PLC (b)..................... 3.50% 07/26/26 251,819
-------------
757,347
-------------
WIRELESS TELECOMMUNICATION SERVICES - 0.2%
250,000 Rogers Communications, Inc.......................... 3.70% 11/15/49 253,507
250,000 Vodafone Group PLC.................................. 4.38% 05/30/28 277,416
500,000 Vodafone Group PLC.................................. 4.88% 06/19/49 582,260
500,000 Vodafone Group PLC.................................. 4.25% 09/17/50 524,175
500,000 Vodafone Group PLC.................................. 5.13% 06/19/59 590,571
-------------
2,227,929
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 34,311,868
(Cost $32,808,177) -------------
U.S. GOVERNMENT BONDS AND NOTES - 1.8%
800,000 U.S. Treasury Note (c).............................. 2.88% 10/31/20 808,031
20,000 U.S. Treasury Note.................................. 1.50% 10/31/21 19,976
310,000 U.S. Treasury Note.................................. 1.50% 11/30/21 309,631
3,575,000 U.S. Treasury Note.................................. 1.50% 08/15/22 3,567,808
4,225,000 U.S. Treasury Note.................................. 1.50% 09/15/22 4,215,923
115,000 U.S. Treasury Note.................................. 1.38% 10/15/22 114,317
1,050,000 U.S. Treasury Note.................................. 1.63% 12/15/22 1,051,107
359,000 U.S. Treasury Note.................................. 1.50% 10/31/24 356,069
3,135,000 U.S. Treasury Note.................................. 1.75% 11/15/29 3,090,608
3,410,000 U.S. Treasury Note.................................. 2.25% 08/15/49 3,318,423
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 16,851,893
(Cost $16,935,266) -------------
ANNUALIZED
YIELD ON
PRINCIPAL DATE OF STATED
VALUE DESCRIPTION PURCHASE MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
COMMERCIAL PAPER - 0.6%
ELECTRIC UTILITIES - 0.5%
250,000 Alliant Energy Corp................................. 2.00% 01/02/20 249,976
4,500,000 Florida Power & Light Co............................ 1.48% 01/02/20 4,499,606
-------------
4,749,582
-------------
OIL, GAS & CONSUMABLE FUELS - 0.1%
550,000 Kinder Morgan (DE), Inc............................. 1.45% 01/02/20 549,919
-------------
TOTAL COMMERCIAL PAPER....................................................... 5,299,501
(Cost $5,299,779) -------------
Page 42 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
DESCRIPTION VALUE
----------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS - 99.3%.................................................... $ 955,318,776
(Cost $851,093,821) (d)
NET OTHER ASSETS AND LIABILITIES - 0.7%...................................... 7,209,420
-------------
NET ASSETS - 100.0%.......................................................... $ 962,528,196
=============
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 Ultra 10-Year Notes Short 86 Mar 2020 $ (12,100,469) $ 149,827
-----------------------------
(a) Fixed-to-floating or fixed-to-variable rate security. The interest rate
shown reflects the fixed rate in effect at December 31, 2019. At a
predetermined date, the fixed rate will change to a floating rate or a
variable rate.
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P. (the "Advisor").
Although market instability can result in periods of increased overall
market illiquidity, liquidity for each security is determined based on
security specific factors and assumptions, which require subjective
judgment. At December 31, 2019, securities noted as such amounted to
$27,885,737 or 2.9% of net assets.
(c) All or a portion of this security is segregated as collateral for open
futures contracts.
(d) Aggregate cost for federal income tax purposes was $851,488,574. As of
December 31, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$110,958,126 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$6,978,097. The net unrealized appreciation was $103,980,029. The amounts
presented are inclusive of derivative contracts.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2019 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Common Stocks*.................................... $548,054,264 $548,054,264 $ -- $ --
Corporate Bonds and Notes*........................ 350,801,250 -- 350,801,250 --
Foreign Corporate Bonds and Notes*................ 34,311,868 -- 34,311,868 --
U.S. Government Bonds and Notes................... 16,851,893 -- 16,851,893 --
Commercial Paper*................................. 5,299,501 -- 5,299,501 --
------------ ------------ ------------ ------------
Total Investments................................. 955,318,776 548,054,264 407,264,512 --
Futures Contracts**............................... 149,827 149,827 -- --
------------ ------------ ------------ ------------
Total............................................. $955,468,603 $548,204,091 $407,264,512 $ --
============ ============ ============ ============
* 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.
See Notes to Financial Statements Page 43
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS -- 44.2%
CAPITAL MARKETS -- 44.2%
30,550 First Trust Institutional Preferred Securities and Income ETF (a)............ $ 612,833
500 First Trust Long Duration Opportunities ETF (a).............................. 13,550
2,000 First Trust Low Duration Opportunities ETF (a)............................... 103,600
91,140 First Trust Preferred Securities and Income ETF (a).......................... 1,829,180
89,010 First Trust Senior Loan Fund (a)............................................. 4,265,359
56,320 First Trust Tactical High Yield ETF (a)...................................... 2,747,853
16,552 Invesco Bulletshares 2020 Corporate Bond ETF................................. 352,392
175 iShares 20+ Year Treasury Bond ETF........................................... 23,709
550 iShares 3-7 Year Treasury Bond ETF........................................... 69,163
525 iShares 7-10 Year Treasury Bond ETF.......................................... 57,865
18,908 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 2,419,468
11,750 iShares MBS ETF.............................................................. 1,269,705
1 Vanguard Mortgage-Backed Securities ETF...................................... 53
-------------
TOTAL EXCHANGE-TRADED FUNDS.................................................. 13,764,730
(Cost $13,351,587) -------------
COMMON STOCKS -- 22.1%
AEROSPACE & DEFENSE -- 0.7%
290 Lockheed Martin Corp......................................................... 112,920
398 Raytheon Co.................................................................. 87,457
-------------
200,377
-------------
AIR FREIGHT & LOGISTICS -- 0.3%
776 United Parcel Service, Inc., Class B......................................... 90,839
-------------
BANKS -- 1.4%
1,151 JPMorgan Chase & Co.......................................................... 160,449
521 M&T Bank Corp................................................................ 88,440
1,585 U.S. Bancorp................................................................. 93,975
1,851 Webster Financial Corp....................................................... 98,769
-------------
441,633
-------------
BEVERAGES -- 0.3%
737 PepsiCo, Inc................................................................. 100,726
-------------
BIOTECHNOLOGY -- 0.2%
721 AbbVie, Inc.................................................................. 63,837
-------------
CAPITAL MARKETS -- 0.2%
150 BlackRock, Inc............................................................... 75,405
-------------
CHEMICALS -- 0.5%
415 Ecolab, Inc.................................................................. 80,091
726 LyondellBasell Industries N.V., Class A...................................... 68,592
-------------
148,683
-------------
COMMUNICATIONS EQUIPMENT -- 0.3%
2,157 Cisco Systems, Inc........................................................... 103,450
-------------
CONSUMER FINANCE -- 0.3%
1,005 Capital One Financial Corp................................................... 103,424
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
2,000 Verizon Communications, Inc.................................................. 122,800
-------------
Page 44 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES -- 2.2%
380 Alliant Energy Corp.......................................................... $ 20,794
437 American Electric Power Co., Inc............................................. 41,301
456 Emera, Inc. (CAD)............................................................ 19,591
480 Eversource Energy............................................................ 40,834
1,797 Exelon Corp.................................................................. 81,925
1,422 Fortis, Inc. (CAD)........................................................... 59,002
572 NextEra Energy, Inc.......................................................... 138,515
3,125 OGE Energy Corp.............................................................. 138,969
1,952 PPL Corp..................................................................... 70,038
947 Xcel Energy, Inc............................................................. 60,125
-------------
671,094
-------------
ELECTRICAL EQUIPMENT -- 0.3%
1,043 Eaton Corp. PLC.............................................................. 98,793
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.7%
786 CDW Corp..................................................................... 112,272
1,140 TE Connectivity Ltd.......................................................... 109,258
-------------
221,530
-------------
FOOD & STAPLES RETAILING -- 0.8%
1,417 Sysco Corp................................................................... 121,210
1,011 Walmart, Inc................................................................. 120,147
-------------
241,357
-------------
GAS UTILITIES -- 0.1%
180 Atmos Energy Corp............................................................ 20,135
453 New Jersey Resources Corp.................................................... 20,190
-------------
40,325
-------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 1.1%
1,360 Abbott Laboratories.......................................................... 118,130
1,970 Koninklijke Philips N.V...................................................... 96,136
896 STERIS PLC................................................................... 136,568
-------------
350,834
-------------
HEALTH CARE PROVIDERS & SERVICES -- 0.6%
1,376 CVS Health Corp.............................................................. 102,223
313 UnitedHealth Group, Inc...................................................... 92,016
-------------
194,239
-------------
INDUSTRIAL CONGLOMERATES -- 0.3%
489 Honeywell International, Inc................................................. 86,553
-------------
INTERNET & DIRECT MARKETING RETAIL -- 0.2%
437 Expedia Group, Inc........................................................... 47,257
-------------
IT SERVICES -- 0.9%
676 Accenture PLC, Class A....................................................... 142,345
940 Fidelity National Information Services, Inc.................................. 130,745
-------------
273,090
-------------
MACHINERY -- 0.7%
861 Ingersoll-Rand PLC........................................................... 114,444
432 Parker-Hannifin Corp......................................................... 88,914
-------------
203,358
-------------
See Notes to Financial Statements Page 45
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
MEDIA -- 0.3%
2,399 Viacomcbs, Inc., Class B..................................................... $ 100,686
-------------
MULTILINE RETAIL -- 0.4%
1,022 Target Corp.................................................................. 131,031
-------------
MULTI-UTILITIES -- 0.9%
548 ATCO Ltd., Class I (CAD)..................................................... 21,003
3,562 Public Service Enterprise Group, Inc......................................... 210,336
139 Sempra Energy................................................................ 21,056
215 WEC Energy Group, Inc........................................................ 19,830
-------------
272,225
-------------
OIL, GAS & CONSUMABLE FUELS -- 3.9%
581 Chevron Corp................................................................. 70,016
1,170 ConocoPhillips............................................................... 76,085
3,495 Enbridge, Inc................................................................ 138,996
5,849 Equitrans Midstream Corp..................................................... 78,143
9,944 Kinder Morgan, Inc........................................................... 210,515
1,112 ONEOK, Inc................................................................... 84,145
5,540 TC Energy Corp............................................................... 295,338
1,301 TOTAL S.A., ADR.............................................................. 71,945
8,524 Williams (The) Cos., Inc..................................................... 202,189
-------------
1,227,372
-------------
PERSONAL PRODUCTS -- 0.3%
1,592 Unilever PLC, ADR............................................................ 91,015
-------------
PHARMACEUTICALS -- 1.2%
1,981 Bristol-Myers Squibb Co...................................................... 127,160
874 Eli Lilly & Co............................................................... 114,870
1,368 Merck & Co., Inc............................................................. 124,420
-------------
366,450
-------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5%
292 Broadcom, Inc................................................................ 92,278
431 KLA Corp..................................................................... 76,791
-------------
169,069
-------------
SOFTWARE -- 0.5%
966 Microsoft Corp............................................................... 152,338
-------------
SPECIALTY RETAIL -- 0.7%
499 Home Depot (The), Inc........................................................ 108,971
1,761 TJX (The) Cos., Inc.......................................................... 107,527
-------------
216,498
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5%
539 Apple, Inc................................................................... 158,277
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 0.4%
1,145 NIKE, Inc., Class B.......................................................... 116,000
-------------
TOTAL COMMON STOCKS.......................................................... 6,880,565
(Cost $5,598,635) -------------
Page 46 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT BONDS AND NOTES -- 9.8%
$ 52,736 U.S. Treasury Inflation Indexed Bond (b)............ 2.50% 01/15/29 $ 63,579
26,610 U.S. Treasury Inflation Indexed Bond (b)............ 3.88% 04/15/29 35,441
13,193 U.S. Treasury Inflation Indexed Bond (b)............ 3.38% 04/15/32 18,121
36,907 U.S. Treasury Inflation Indexed Bond (b)............ 2.13% 02/15/40 48,272
58,518 U.S. Treasury Inflation Indexed Bond (b)............ 2.13% 02/15/41 77,130
56,713 U.S. Treasury Inflation Indexed Bond (b)............ 0.75% 02/15/42 58,950
53,276 U.S. Treasury Inflation Indexed Bond (b)............ 0.63% 02/15/43 53,924
52,777 U.S. Treasury Inflation Indexed Bond (b)............ 1.38% 02/15/44 62,290
52,781 U.S. Treasury Inflation Indexed Bond (b)............ 0.75% 02/15/45 54,785
45,613 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/46 50,206
43,706 U.S. Treasury Inflation Indexed Bond (b)............ 0.88% 02/15/47 46,879
41,740 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/48 46,231
32,724 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/49 36,398
79,050 U.S. Treasury Inflation Indexed Note (b)............ 1.13% 01/15/21 79,791
109,660 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 04/15/21 109,447
89,055 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 07/15/21 90,065
98,799 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 01/15/22 98,762
98,404 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 04/15/22 98,275
97,352 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/22 97,776
94,761 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 01/15/23 94,769
102,561 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 04/15/23 104,169
95,095 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/23 96,428
95,947 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 01/15/24 98,000
68,359 U.S. Treasury Inflation Indexed Note (b)............ 0.50% 04/15/24 69,481
92,334 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/24 92,906
39,116 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 10/15/24 39,351
130,373 U.S. Treasury Inflation Indexed Note (b)............ 0.25% 01/15/25 131,565
44,367 U.S. Treasury Inflation Indexed Note (b)............ 2.38% 01/15/25 49,459
95,490 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/25 97,462
115,878 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 01/15/26 119,464
38,247 U.S. Treasury Inflation Indexed Note (b)............ 2.00% 01/15/26 42,526
81,588 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/26 81,872
102,267 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 01/15/27 103,936
28,710 U.S. Treasury Inflation Indexed Note (b)............ 2.38% 01/15/27 33,148
82,052 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/27 83,726
119,970 U.S. Treasury Inflation Indexed Note (b)............ 0.50% 01/15/28 123,116
62,644 U.S. Treasury Inflation Indexed Note (b)............ 1.75% 01/15/28 70,398
89,187 U.S. Treasury Inflation Indexed Note (b)............ 0.75% 07/15/28 93,863
103,949 U.S. Treasury Inflation Indexed Note (b)............ 0.88% 01/15/29 110,427
83,497 U.S. Treasury Inflation Indexed Note (b)............ 0.25% 07/15/29 84,344
-------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 3,046,732
(Cost $2,954,356) -------------
See Notes to Financial Statements Page 47
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
REAL ESTATE INVESTMENT TRUSTS -- 9.6%
DIVERSIFIED REITS -- 1.1%
705 PS Business Parks, Inc....................................................... $ 116,233
2,940 STORE Capital Corp........................................................... 109,486
12,248 VEREIT, Inc.................................................................. 113,172
-------------
338,891
-------------
HEALTH CARE REITS -- 1.6%
5,949 Medical Properties Trust, Inc................................................ 125,583
2,789 Omega Healthcare Investors, Inc.............................................. 118,114
6,567 Physicians Realty Trust...................................................... 124,379
1,475 Welltower, Inc............................................................... 120,626
-------------
488,702
-------------
HOTEL & RESORT REITS -- 0.4%
6,831 Host Hotels & Resorts, Inc................................................... 126,715
-------------
INDUSTRIAL REITS -- 1.2%
3,432 Duke Realty Corp............................................................. 118,988
1,302 Prologis, Inc................................................................ 116,060
3,954 STAG Industrial, Inc......................................................... 124,828
-------------
359,876
-------------
OFFICE REITS -- 0.8%
758 Alexandria Real Estate Equities, Inc......................................... 122,478
2,594 Highwoods Properties, Inc.................................................... 126,872
-------------
249,350
-------------
RESIDENTIAL REITS -- 1.1%
1,050 Camden Property Trust........................................................ 111,405
393 Essex Property Trust, Inc.................................................... 118,238
897 Mid-America Apartment Communities, Inc....................................... 118,278
-------------
347,921
-------------
RETAIL REITS -- 1.5%
2,207 National Retail Properties, Inc.............................................. 118,339
1,520 Realty Income Corp........................................................... 111,917
8,624 Retail Properties of America, Inc., Class A.................................. 115,562
808 Simon Property Group, Inc.................................................... 120,360
-------------
466,178
-------------
SPECIALIZED REITS -- 1.9%
547 American Tower Corp.......................................................... 125,712
991 Digital Realty Trust, Inc.................................................... 118,662
1,595 EPR Properties............................................................... 112,671
212 Equinix, Inc................................................................. 123,744
2,802 Gaming and Leisure Properties, Inc........................................... 120,626
-------------
601,415
-------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 2,979,048
(Cost $2,657,367) -------------
Page 48 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
UNITS DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
MASTER LIMITED PARTNERSHIPS -- 7.6%
CHEMICALS -- 0.3%
3,527 Westlake Chemical Partners, L.P.............................................. $ 93,183
-------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.5%
3,103 NextEra Energy Partners, L.P................................................. 163,373
-------------
OIL, GAS & CONSUMABLE FUELS -- 6.8%
3,609 Alliance Resource Partners, L.P.............................................. 39,050
2,807 BP Midstream Partners, L.P................................................... 43,817
17,875 Energy Transfer, L.P......................................................... 229,336
18,908 Enterprise Products Partners, L.P............................................ 532,449
6,290 Holly Energy Partners, L.P................................................... 139,324
4,930 Magellan Midstream Partners, L.P............................................. 309,949
2,467 MPLX, L.P.................................................................... 62,810
3,728 Phillips 66 Partners, L.P.................................................... 229,794
9,983 Plains All American Pipeline, L.P............................................ 183,587
5,011 Shell Midstream Partners, L.P................................................ 101,272
5,896 TC PipeLines, L.P............................................................ 249,401
-------------
2,120,789
-------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................ 2,377,345
(Cost $2,171,708) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.5%
Fannie Mae REMICS
$ 203 Series 1990-109, Class J......................... 7.00% 09/25/20 204
228 Series 1992-24, Class Z.......................... 6.50% 04/25/22 234
5 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 6
923 Series 1993-1, Class KA.......................... 7.90% 01/25/23 979
719 Series 1993-62, Class E.......................... 7.00% 04/25/23 760
232 Series 1993-119, Class H......................... 6.50% 07/25/23 245
1,766 Series 1993-178, Class PK........................ 6.50% 09/25/23 1,874
1,571 Series 1995-24, Class G.......................... 6.50% 04/25/23 1,642
1,383 Series 1999-56, Class Z.......................... 7.00% 12/18/29 1,536
27,205 Series 2002-9, Class MS, IO, 1 Mo. LIBOR (x) -1 +
8.10% (c)..................................... 6.31% 03/25/32 5,317
1,200 Series 2002-67, Class PE......................... 5.50% 11/25/32 1,343
3,912 Series 2002-90, Class A1......................... 6.50% 06/25/42 4,478
2,595 Series 2003-14, Class AQ......................... 3.50% 03/25/33 2,665
3,997 Series 2003-41, Class OA......................... 4.00% 05/25/33 4,121
36,351 Series 2004-10, Class ZB......................... 6.00% 02/25/34 40,792
1 Series 2005-46, Class LW......................... 5.00% 06/25/20 1
5,669 Series 2005-68, Class BC......................... 5.25% 06/25/35 5,677
13,317 Series 2005-79, Class NF, 1 Mo. LIBOR +
0.41% (d)..................................... 2.20% 09/25/35 13,301
27,055 Series 2007-10, Class Z.......................... 6.00% 02/25/37 30,387
51,348 Series 2009-86, Class IP, IO..................... 5.50% 10/25/39 9,070
51,000 Series 2010-45, Class EB......................... 5.00% 05/25/40 61,527
2,015 Series 2012-35, Class PL......................... 2.00% 11/25/41 2,000
735 Series 2013-14, Class QE......................... 1.75% 03/25/43 717
84,053 Series 2013-31, Class NT......................... 3.00% 04/25/43 84,825
See Notes to Financial Statements Page 49
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Fannie Mae REMIC Trust
$ 11,445 Series 2007-W8, Class 1A5 (e).................... 6.38% 09/25/37 $ 13,145
Fannie Mae Trust
4,053 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 4,719
FHLMC - GNMA
179 Series 1993-5, Class HA.......................... 7.50% 02/25/23 187
511 Series 1994-27, Class D.......................... 7.00% 03/25/24 547
Freddie Mac REMICS
263 Series 1992-1250, Class J........................ 7.00% 05/15/22 273
8,208 Series 1992-1401, Class Q, 1 Mo. LIBOR +
0.60% (d)..................................... 2.34% 10/15/22 8,247
14,301 Series 1993-1487, Class P, IO, 1 Mo. LIBOR (x)
-1 + 9.50% (c)................................ 7.76% 03/15/23 1,227
2,810 Series 1994-1673, Class FB, 10 Yr. U.S. Treasury
Yield Curve - 0.50% (d)....................... 1.27% 02/15/24 2,810
58 Series 1996-1807, Class G........................ 9.00% 10/15/20 59
49 Series 1996-1847, Class LL....................... 7.50% 04/15/26 55
10,138 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 1,170
2,631 Series 1999-2130, Class KB....................... 6.38% 03/15/29 2,929
36,940 Series 1999-2174, Class PN....................... 6.00% 07/15/29 40,538
9,270 Series 2001-2277, Class B........................ 7.50% 01/15/31 11,035
36 Series 2003-2559, Class PB....................... 5.50% 08/15/30 36
26,725 Series 2003-2647, Class LS, 1 Mo. LIBOR (x)
-2.50 + 14.00% (c)............................ 9.77% 07/15/33 32,195
42,000 Series 2003-2676, Class LL....................... 5.50% 09/15/33 46,347
23,340 Series 2004-2768, Class PW....................... 4.25% 03/15/34 25,101
5,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 5,591
26,554 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x)
-1 + 6.60% (c)................................ 4.86% 02/15/36 4,396
34,939 Series 2006-3199, Class DS, IO, 1 Mo. LIBOR (x)
-1 + 7.15% (c)................................ 5.41% 08/15/36 6,490
27,928 Series 2006-3237, Class CB....................... 5.50% 07/15/36 28,927
11,000 Series 2010-3626, Class ME....................... 5.00% 01/15/40 12,562
6,175 Series 2010-3758, Class M........................ 4.50% 10/15/38 6,249
7,162 Series 2010-3775, Class KZ....................... 4.00% 08/15/25 7,495
3,276 Series 2012-3994, Class AE....................... 1.63% 02/15/22 3,269
21,523 Series 2013-4178, Class ZN....................... 3.50% 03/15/43 21,659
373 Series 2013-4253, Class TD....................... 2.00% 07/15/40 373
Freddie Mac Strips
9,809 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 805
Government National Mortgage Association
28,368 Series 2002-92, Class PB......................... 5.50% 12/20/32 30,524
6,918 Series 2006-16, Class OP, PO..................... (f) 03/20/36 6,270
55,000 Series 2007-35, Class NE......................... 6.00% 06/16/37 63,827
4,559 Series 2009-29, Class TA......................... 4.50% 03/16/39 4,719
49,000 Series 2009-61, Class QE......................... 5.50% 08/20/39 58,526
120 Series 2009-81, Class PA......................... 5.50% 02/16/38 120
1,427 Series 2009-102, Class MA........................ 4.00% 06/16/39 1,438
502 Series 2010-121, Class PQ........................ 3.00% 02/20/39 503
20,632 Series 2010-164, Class LE........................ 3.00% 10/20/38 20,648
19,584 Series 2011-136, Class GB........................ 2.50% 05/20/40 19,664
Page 50 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 21,582 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 $ 3,565
-------------
771,941
-------------
PASS-THROUGH SECURITIES -- 1.8%
Federal Home Loan Mortgage Corporation
14,674 Pool A47829...................................... 4.00% 08/01/35 15,354
6,131 Pool C01252...................................... 6.50% 11/01/31 6,847
44,258 Pool G01731...................................... 6.50% 12/01/29 49,228
27,345 Pool G06358...................................... 4.00% 04/01/41 29,359
2,451 Pool O20138...................................... 5.00% 11/01/30 2,641
16,866 Pool U90316...................................... 4.00% 10/01/42 17,970
Federal National Mortgage Association
15,369 Pool 890383...................................... 4.00% 01/01/42 16,484
20,282 Pool AA9393...................................... 4.50% 07/01/39 22,021
13,738 Pool AD0659...................................... 6.00% 02/01/23 14,157
7,312 Pool AE0050...................................... 5.50% 12/01/22 7,512
23,246 Pool AL0791...................................... 4.00% 02/01/41 24,948
39,904 Pool AU4289...................................... 4.00% 09/01/43 42,695
6,097 Pool MA0561...................................... 4.00% 11/01/40 6,542
28,234 Pool MA1028...................................... 4.00% 04/01/42 30,237
Government National Mortgage Association
8,909 Pool 3428........................................ 5.00% 08/20/33 9,831
19,025 Pool 3500........................................ 5.50% 01/20/34 21,421
6,820 Pool 3711........................................ 5.50% 05/20/35 7,645
24,619 Pool 667422...................................... 5.00% 10/15/39 27,420
10,119 Pool 706201...................................... 5.50% 04/20/39 11,039
12,480 Pool 736558...................................... 5.00% 02/15/40 13,895
23,350 Pool 759248...................................... 4.00% 02/15/41 25,359
87,034 Pool 769055...................................... 3.75% 07/15/41 91,311
47,280 Pool 770005...................................... 4.00% 11/15/33 50,612
14,634 Pool MA3525...................................... 5.50% 03/20/46 16,323
-------------
560,851
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 1,332,792
(Cost $1,308,614) -------------
MORTGAGE-BACKED SECURITIES -- 0.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0%
Credit Suisse First Boston Mortgage Securities Corp.
299 Series 2004-6, Class 2A1......................... 4.75% 09/25/19 0
MASTR Alternative Loan Trust
686 Series 2004-10, Class 2A1........................ 5.50% 01/25/20 684
30 Series 2005-1, Class 5A1......................... 5.50% 01/25/20 30
MASTR Asset Securitization Trust
4,666 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 4,801
Structured Asset Mortgage Investments Trust
6,568 Series 1999-1, Class 2A (g)...................... 6.16% 06/25/29 6,386
-------------
TOTAL MORTGAGE-BACKED SECURITIES............................................. 11,901
(Cost $12,270) -------------
See Notes to Financial Statements Page 51
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
----------- ---------------------------------------------------- --------- ------------ -------------
ASSET-BACKED SECURITIES -- 0.0%
ASSET-BACKED SECURITIES -- 0.0%
California Republic Auto Receivables Trust
$ 5,583 Series 2016-1, Class A4.......................... 2.24% 10/15/21 $ 5,584
-------------
TOTAL ASSET-BACKED SECURITIES................................................ 5,584
(Cost $5,555) -------------
TOTAL INVESTMENTS -- 97.6%................................................... 30,398,697
(Cost $28,060,092) (h)
NET OTHER ASSETS AND LIABILITIES -- 2.4%..................................... 763,127
-------------
NET ASSETS -- 100.0%......................................................... $ 31,161,824
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) 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.
(c) Inverse floating rate security.
(d) Floating or variable rate security.
(e) 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.
(f) Zero coupon security.
(g) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(h) Aggregate cost for federal income tax purposes is $28,206,375. As of
December 31, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$2,452,016 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$259,694. The net unrealized appreciation was $2,192,322.
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
Page 52 See Notes to Financial Statements
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 2019
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2019 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 13,764,730 $ 13,764,730 $ -- $ --
Common Stocks*.................................... 6,880,565 6,880,565 -- --
U.S. Government Bonds and Notes................... 3,046,732 -- 3,046,732 --
Real Estate Investment Trusts*.................... 2,979,048 2,979,048 -- --
Master Limited Partnerships*...................... 2,377,345 2,377,345 -- --
U.S. Government Agency Mortgage-Backed
Securities..................................... 1,332,792 -- 1,332,792 --
Mortgage-Backed Securities........................ 11,901 -- 11,901 --
Asset-Backed Securities........................... 5,584 -- 5,584 --
------------ ------------ ------------ ------------
Total Investments................................. $ 30,398,697 $ 26,001,688 $ 4,397,009 $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 53
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2019
SHARES DESCRIPTION VALUE
----------- ----------------------------------------------------------------------------- -------------
EXCHANGE-TRADED FUNDS - 98.1%
CAPITAL MARKETS - 98.1%
8,495 First Trust BICK Index Fund (a).............................................. $ 248,903
15,578 First Trust Brazil AlphaDEX(R) Fund (a)...................................... 269,032
10,839 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 603,136
30,872 First Trust Dow Jones Internet Index Fund (a) (b)............................ 4,294,913
23,150 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 614,401
115,181 First Trust Financials AlphaDEX(R) Fund (a).................................. 3,859,715
5,618 First Trust Germany AlphaDEX(R) Fund (a)..................................... 248,597
71,763 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 5,232,958
11,229 First Trust Latin America AlphaDEX(R) Fund (a)............................... 255,572
109,456 First Trust Mid Cap Growth AlphaDEX(R) Fund (a).............................. 5,239,659
52,750 First Trust NASDAQ-100-Technology Sector Index Fund (a)...................... 5,280,275
101,876 First Trust Small Cap Growth AlphaDEX(R) Fund (a)............................ 4,754,553
4,935 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 266,547
67,682 First Trust Technology AlphaDEX(R) Fund (a).................................. 4,911,683
142,781 First Trust Utilities AlphaDEX(R) Fund (a)................................... 4,170,633
26,440 iShares Core U.S. Aggregate Bond ETF......................................... 2,971,063
15,449 SPDR Bloomberg Barclays High Yield Bond ETF.................................. 1,692,283
33,959 SPDR Nuveen Bloomberg Barclays Municipal Bond ETF............................ 1,717,646
48,995 SPDR Portfolio Intermediate Term Corporate Bond ETF.......................... 1,730,013
54,041 SPDR Portfolio Long-Term Corporate Bond ETF.................................. 1,627,175
-------------
TOTAL INVESTMENTS - 98.1%.................................................... 49,988,757
(Cost $44,189,638) (c) -------------
NET OTHER ASSETS AND LIABILITIES - 1.9%...................................... 963,878
-------------
NET ASSETS - 100.0%.......................................................... $ 50,952,635
=============
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) Aggregate cost for federal income tax purposes was $44,196,471. As of
December 31, 2019, the aggregate gross unrealized appreciation for all
investments in which there was an excess of value over tax cost was
$5,816,087 and the aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost over value was
$23,801. The net unrealized appreciation was $5,792,286.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of December 31,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
12/31/2019 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Exchange-Traded Funds*............................ $ 49,988,757 $ 49,988,757 $ -- $ --
============ ============ ============ ============
* See Portfolio of Investments for industry breakout.
Page 54 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2019
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.................................... $ 955,318,776 $ 20,826,322 $ 9,738,180
Investments, at value - Affiliated...................................... -- 9,572,375 40,250,577
--------------- --------------- ---------------
Total investments, at value............................................. 955,318,776 30,398,697 49,988,757
Cash.................................................................... 4,359,289 809,668 1,045,590
Foreign currency, at value.............................................. -- 145 --
Receivables:
Interest............................................................. 3,290,210 13,859 --
Dividends............................................................ 864,727 20,797 --
Investment securities sold........................................... 501,175 -- --
Fund shares sold..................................................... 432,642 22,861 --
Variation margin..................................................... 14,781 -- --
From investment advisor.............................................. -- 6,671 5,071
Reclaim.............................................................. -- 2,573 --
Prepaid expenses........................................................ 9,186 263 415
--------------- --------------- ---------------
Total Assets......................................................... 964,790,786 31,275,534 51,039,833
--------------- --------------- ---------------
LIABILITIES:
Payables:
Investment securities purchased...................................... 697,947 12,051 --
Investment advisory fees............................................. 487,175 -- --
Fund shares redeemed................................................. 345,226 700 3,759
12b-1 distribution and service fees.................................. 202,353 6,470 10,676
Administrative service fees.......................................... 162,006 5,201 8,559
Administrative fees.................................................. 93,665 10,099 9,049
Licensing fees....................................................... 76,648 -- 12,481
Shareholder reporting fees........................................... 74,169 6,782 6,477
Custodian fees....................................................... 69,262 4,589 1,945
Audit and tax fees................................................... 28,826 51,705 23,629
Transfer agent fees.................................................. 15,178 13,872 9,145
Legal fees........................................................... 4,530 108 398
Commitment fees...................................................... 4,096 1,729 --
Financial reporting fees............................................. 771 -- 771
Trustees' fees and expenses.......................................... (30) 38 8
Other liabilities....................................................... 768 366 301
--------------- --------------- ---------------
Total Liabilities.................................................... 2,262,590 113,710 87,198
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 962,528,196 $ 31,161,824 $ 50,952,635
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... $ 827,754,159 $ 28,551,903 $ 45,528,822
Accumulated distributable earnings (loss)............................... 134,774,037 2,609,921 5,423,813
--------------- --------------- ---------------
NET ASSETS.............................................................. $ 962,528,196 $ 31,161,824 $ 50,952,635
=============== =============== ===============
Investments, at cost - Unaffiliated..................................... $ 851,093,821 $ 18,702,335 $ 9,326,123
=============== =============== ===============
Investments, at cost - Affiliated....................................... $ -- $ 9,357,757 $ 34,863,515
=============== =============== ===============
Total Investments, at cost.............................................. $ 851,093,821 $ 28,060,092 $ 44,189,638
=============== =============== ===============
Foreign currency, at cost............................................... $ -- $ 145 $ --
=============== =============== ===============
CLASS I SHARES:
NET ASSETS.............................................................. $ 961,210,130 $ 31,011,709 $ 50,843,466
=============== =============== ===============
NET ASSET VALUE, PER SHARE.............................................. $ 14.68 $ 11.55 $ 12.37
=============== =============== ===============
Number of Shares outstanding......................................... 65,494,030 2,685,791 4,110,070
=============== =============== ===============
CLASS II SHARES:
NET ASSETS.............................................................. $ 1,318,066 $ 150,115 $ 109,169
=============== =============== ===============
NET ASSET VALUE, PER SHARE.............................................. $ 14.71 $ 11.54 $ 12.37
=============== =============== ===============
Number of Shares outstanding......................................... 89,617 13,003 8,826
=============== =============== ===============
See Notes to Financial Statements Page 55
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2019
FIRST TRUST/DOW
JONES DIVIDEND FIRST TRUST FIRST TRUST
& INCOME MULTI INCOME DORSEY WRIGHT
ALLOCATION ALLOCATION TACTICAL CORE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------
INVESTMENT INCOME:
Interest................................................................ $ 12,998,920 $ 113,281 $ 14,555
Dividends - Unaffiliated................................................ 12,128,644 370,273 333,818
Dividends - Affiliated.................................................. -- 438,603 330,022
Foreign withholding tax on dividend income.............................. -- (4,885) --
--------------- --------------- ---------------
Total investment income.............................................. 25,127,564 917,272 678,395
--------------- --------------- ---------------
EXPENSES:
Investment advisory fees................................................ 5,284,013 169,591 170,791
12b-1 distribution and/or service fees:
Class I.............................................................. 2,200,992 70,284 121,736
Administrative service fees............................................. 1,761,259 56,307 97,481
Administrative fees..................................................... 530,955 27,621 52,498
Licensing fees.......................................................... 292,736 -- 48,797
Custodian fees.......................................................... 177,422 17,405 7,862
Shareholder reporting fees.............................................. 129,310 20,927 21,708
Transfer agent fees..................................................... 85,993 54,855 54,175
Commitment fees......................................................... 49,083 20,049 --
Legal fees.............................................................. 42,073 1,018 2,039
Audit and tax fees...................................................... 29,207 52,203 24,127
Trustees' fees and expenses............................................. 17,229 16,246 16,244
Financial reporting fees................................................ 9,250 -- 9,250
Other................................................................... 19,097 2,870 767
--------------- --------------- ---------------
Total expenses....................................................... 10,628,619 509,376 627,475
Fees waived and expenses reimbursed by the investment advisor........ (75,487) (275,154) (251,423)
--------------- --------------- ---------------
Net expenses......................................................... 10,553,132 234,222 376,052
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS)............................................ 14,574,432 683,050 302,343
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated........................................... 31,732,605 404,764 (84,148)
Investments - Affiliated............................................. -- (9,833) (295,600)
Futures.............................................................. (1,817,823) -- --
Foreign currency transactions........................................ -- (6) --
--------------- --------------- ---------------
Net realized gain (loss)................................................ 29,914,782 394,925 (379,748)
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated........................................... 116,334,073 2,404,377 584,616
Investments - Affiliated............................................. -- 654,866 7,975,695
Futures.............................................................. 566,382 -- --
Foreign currency translation......................................... -- 14 --
--------------- --------------- ---------------
Net change in unrealized appreciation (depreciation).................... 116,900,455 3,059,257 8,560,311
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 146,815,237 3,454,182 8,180,563
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS...................................................... $ 161,389,669 $ 4,137,232 $ 8,482,906
=============== =============== ===============
Page 56 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND
& INCOME ALLOCATION PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2019 12/31/2018
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 14,574,432 $ 11,802,416
Net realized gain (loss)............................................................. 29,914,782 33,480,402
Net change in unrealized appreciation (depreciation)................................. 116,900,455 (86,358,578)
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 161,389,669 (41,075,760)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS:
Class I Shares....................................................................... (47,089,053) (13,489,067)
Class II Shares...................................................................... (21,664) (1,119)
-------------- --------------
Total distributions to shareholders from investment operations....................... (47,110,717) (13,490,186)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 113,480,580 142,387,501
Proceeds from shares reinvested...................................................... 47,110,027 13,489,949
Cost of shares redeemed ............................................................. (80,001,939) (71,173,469)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 80,588,668 84,703,981
-------------- --------------
Total increase (decrease) in net assets.............................................. 194,867,620 30,138,035
NET ASSETS:
Beginning of period.................................................................. 767,660,576 737,522,541
-------------- --------------
End of period........................................................................ $ 962,528,196 $ 767,660,576
============== ==============
See Notes to Financial Statements Page 57
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME
ALLOCATION PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2019 12/31/2018
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 683,050 $ 495,965
Net realized gain (loss)............................................................. 394,925 36,443
Net change in unrealized appreciation (depreciation)................................. 3,059,257 (1,646,906)
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 4,137,232 (1,114,498)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS:
Class I Shares....................................................................... (720,385) (516,531)
Class II Shares...................................................................... (4,110) (2,977)
-------------- --------------
Total distributions to shareholders from investment operations....................... (724,495) (519,508)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 5,725,807 10,062,438
Proceeds from shares reinvested...................................................... 721,392 516,827
Cost of shares redeemed ............................................................. (3,291,316) (4,594,392)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 3,155,883 5,984,873
-------------- --------------
Total increase (decrease) in net assets.............................................. 6,568,620 4,350,867
NET ASSETS:
Beginning of period.................................................................. 24,593,204 20,242,337
-------------- --------------
End of period........................................................................ $ 31,161,824 $ 24,593,204
============== ==============
Page 58 See Notes to Financial Statements
FIRST TRUST VARIABLE INSURANCE TRUST
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT
TACTICAL CORE PORTFOLIO
--------------------------------
YEAR YEAR
ENDED ENDED
12/31/2019 12/31/2018
-------------- --------------
OPERATIONS:
Net investment income (loss)......................................................... $ 302,343 $ 149,095
Net realized gain (loss)............................................................. (379,748) 730,920
Net change in unrealized appreciation (depreciation)................................. 8,560,311 (5,148,691)
-------------- --------------
Net increase (decrease) in net assets resulting from operations...................... 8,482,906 (4,268,676)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS:
Class I Shares....................................................................... (1,047,809) (155,085)
Class II Shares...................................................................... (2,466) (618)
-------------- --------------
Total distributions to shareholders from investment operations....................... (1,050,275) (155,703)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from shares sold............................................................ 11,969,513 24,115,334
Proceeds from shares reinvested...................................................... 1,050,275 155,703
Cost of shares redeemed ............................................................. (7,861,271) (4,021,112)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions............ 5,158,517 20,249,925
-------------- --------------
Total increase (decrease) in net assets.............................................. 12,591,148 15,825,546
NET ASSETS:
Beginning of period.................................................................. 38,361,487 22,535,941
-------------- --------------
End of period........................................................................ $ 50,952,635 $ 38,361,487
============== ==============
See Notes to Financial Statements Page 59
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 12.82 $ 13.73 $ 12.85 $ 11.94 $ 12.41
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.23 0.21 0.18 0.14 0.16
Net realized and unrealized gain (loss).... 2.39 (0.88) 1.54 1.25 (a) (0.15)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 2.62 (0.67) 1.72 1.39 0.01
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.22) (0.21) (0.18) (0.13) (0.27)
Net realized gain.......................... (0.54) (0.03) (0.66) (0.35) (0.21)
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.76) (0.24) (0.84) (0.48) (0.48)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 14.68 $ 12.82 $ 13.73 $ 12.85 $ 11.94
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 20.77% (4.92)% 13.47% 11.74% (a) 0.09%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 961,210 $ 767,616 $ 737,320 $ 543,951 $ 243,244
Ratio of total expenses to average net
assets.................................. 1.21% 1.22% 1.23% 1.29% 1.34%
Ratio of net expenses to average net
assets.................................. 1.20% 1.20% 1.20% 1.20% 1.20%
Ratio of net investment income (loss)
to average net assets.................... 1.65% 1.56% 1.35% 1.29% 1.35%
Portfolio turnover rate.................... 89% 76% 71% 96% 81%
-----------------------------
(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.
Page 60 See Notes to Financial Statements
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS II SHARES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 12.85 $ 13.75 $ 12.87 $ 11.95 $ 12.43
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.28 (a) 0.25 (a) 0.14 0.19 0.17
Net realized and unrealized gain (loss).... 2.38 (0.88) 1.61 1.24 (b) (0.14)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 2.66 (0.63) 1.75 1.43 0.03
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.26) (0.24) (0.21) (0.16) (0.30)
Net realized gain.......................... (0.54) (0.03) (0.66) (0.35) (0.21)
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.80) (0.27) (0.87) (0.51) (0.51)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 14.71 $ 12.85 $ 13.75 $ 12.87 $ 11.95
========== ========== ========== ========== ==========
TOTAL RETURN (c) (d)....................... 21.02% (4.60)% 13.75% 12.07% (b) 0.25%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 1,318 $ 44 $ 202 $ 17 $ 16
Ratio of total expenses to average net
assets.................................. 0.97% 0.97% 1.00% 1.04% 1.09%
Ratio of net expenses to average net
assets.................................. 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss)
to average net assets.................... 2.00% 1.79% 1.88% 1.53% 1.64%
Portfolio turnover rate.................... 89% 76% 71% 96% 81%
-----------------------------
(a) Based on average shares outstanding.
(b) First Trust/Dow Jones Dividend & Income Allocation Portfolio received a
reimbursement from the Advisor in the amount of $1,000 in connection with
a trade error, which represents less than $0.01 per share. Since the
Advisor reimbursed the Fund, there was no effect on the total return.
(c) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions if any. Total return is not
annualized for periods of less than one year. The returns for the Fund do
not reflect the deduction of expenses associated with variable products,
such as mortality and expense risk charges, separate account charges, and
sales charges or the effect of taxes. These expenses would reduce the
overall returns above.
(d) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
See Notes to Financial Statements Page 61
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.17 $ 10.89 $ 10.54 $ 9.86 $ 10.39
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.26 0.23 0.24 0.20 0.19
Net realized and unrealized gain (loss).... 1.40 (0.71) 0.39 0.71 (0.53) (a)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 1.66 (0.48) 0.63 0.91 (0.34)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.27) (0.24) (0.25) (0.23) (0.19)
Net realized gain.......................... (0.01) -- (0.03) -- --
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.28) (0.24) (0.28) (0.23) (0.19)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 11.55 $ 10.17 $ 10.89 $ 10.54 $ 9.86
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 16.38% (4.44)% 6.04% 9.27% (3.24)% (a)
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 31,012 $ 24,451 $ 20,083 $ 17,965 $ 12,257
Ratio of total expenses to average net
assets (d).............................. 1.80% 2.09% 2.17% 2.22% 2.60%
Ratio of net expenses to average net
assets (d).............................. 0.83% 0.83% 0.83% 0.83% 0.90%
Ratio of net investment income (loss)
to average net assets................... 2.42% 2.29% 2.24% 2.10% 2.17%
Portfolio turnover rate.................... 30% 40% 46% 46% 93%
CLASS II SHARES
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.17 $ 10.88 $ 10.54 $ 9.86 $ 10.39
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.30 0.26 0.27 0.20 0.24
Net realized and unrealized gain (loss).... 1.38 (0.70) 0.38 0.74 (0.55) (a)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 1.68 (0.44) 0.65 0.94 (0.31)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.30) (0.27) (0.28) (0.26) (0.22)
Net realized gain.......................... (0.01) -- (0.03) -- --
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.31) (0.27) (0.31) (0.26) (0.22)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 11.54 $ 10.17 $ 10.88 $ 10.54 $ 9.86
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 16.57% (4.11)% 6.22% 9.53% (3.01)% (a)
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 150 $ 142 $ 159 $ 156 $ 100
Ratio of total expenses to average net
assets (d).............................. 1.56% 1.83% 1.92% 1.99% 2.31%
Ratio of net expenses to average net
assets (d).............................. 0.58% 0.58% 0.58% 0.58% 0.67%
Ratio of net investment income (loss)
to average net assets................... 2.66% 2.49% 2.49% 2.34% 2.32%
Portfolio turnover rate.................... 30% 40% 46% 46% 93%
-----------------------------
(a) 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.
(b) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions if any. Total return is not
annualized for periods of less than one year. The returns for the Fund do
not reflect the deduction of expenses associated with variable products,
such as mortality and expense risk charges, separate account charges, and
sales charges or the effect of taxes. These expenses would reduce the
overall returns above.
(c) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) The Fund 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.
Page 62 See Notes to Financial Statements
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES
YEAR ENDED DECEMBER 31, PERIOD
--------------------------------------------------------------- ENDED
2019 2018 2017 2016 12/31/2015 (a)
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.45 $ 11.41 $ 9.85 $ 9.94 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.08 0.04 0.06 0.09 0.01
Net realized and unrealized gain (loss).... 2.10 (0.95) 1.66 0.01 (0.07)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 2.18 (0.91) 1.72 0.10 (0.06)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.08) (0.03) (0.06) (0.09) --
Net realized gain.......................... (0.18) (0.02) (0.10) (0.10) --
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.26) (0.05) (0.16) (0.19) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 12.37 $ 10.45 $ 11.41 $ 9.85 $ 9.94
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 20.87% (8.00)% 17.50% 0.95% (0.60)%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 50,843 $ 38,277 $ 22,477 $ 10,360 $ 5,440
Ratio of total expenses to average net
assets (d).............................. 1.23% 1.40% 1.85% 2.13% 11.71% (e)
Ratio of net expenses to average net
assets (d).............................. 0.77% 0.74% 0.75% 0.83% 0.79% (e)
Ratio of net investment income (loss)
to average net assets................... 0.62% 0.48% 0.76% 0.98% 1.54% (e)
Portfolio turnover rate.................... 34% 70% 31% 265% --%
CLASS II SHARES
YEAR ENDED DECEMBER 31, PERIOD
--------------------------------------------------------------- ENDED
2019 2018 2017 2016 12/31/2015 (a)
------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period....... $ 10.44 $ 11.40 $ 9.83 $ 9.95 $ 10.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............... 0.10 0.07 0.10 0.11 0.01
Net realized and unrealized gain (loss).... 2.12 (0.95) 1.66 (0.02) (0.06)
---------- ---------- ---------- ---------- ----------
Total from investment operations........... 2.22 (0.88) 1.76 0.09 (0.05)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income...................... (0.11) (0.06) (0.09) (0.11) --
Net realized gain.......................... (0.18) (0.02) (0.10) (0.10) --
---------- ---------- ---------- ---------- ----------
Total from distributions................... (0.29) (0.08) (0.19) (0.21) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period............. $ 12.37 $ 10.44 $ 11.40 $ 9.83 $ 9.95
========== ========== ========== ========== ==========
TOTAL RETURN (b) (c)....................... 21.29% (7.77)% 17.94% 0.88% (0.50)%
========== ========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)....... $ 109 $ 84 $ 59 $ 50 $ 50
Ratio of total expenses to average net
assets (d).............................. 26.37% 32.62% 46.41% 57.64% 37.40% (e)
Ratio of net expenses to average net
assets (d).............................. 0.52% 0.49% 0.50% 0.57% 0.51% (e)
Ratio of net investment income (loss)
to average net assets................... 0.87% 0.73% 0.93% 1.13% 0.86% (e)
Portfolio turnover rate.................... 34% 70% 31% 265% --%
-----------------------------
(a) The Fund's Class I and Class II shares were seeded on October 29, 2015,
and commenced operations on October 30, 2015.
(b) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions if any. Total return is not
annualized for periods of less than one year. The returns for the Fund do
not reflect the deduction of expenses associated with variable products,
such as mortality and expense risk charges, separate account charges, and
sales charges or the effect of taxes. These expenses would reduce the
overall returns above.
(c) Total returns would have been lower if certain fees had not been waived
and expenses reimbursed by the investment advisor.
(d) 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.
(e) Annualized.
See Notes to Financial Statements Page 63
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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. Under normal market conditions, at the time of purchase
at least 80% of the Fund's net assets (including investment borrowings) will be
invested in securities of issuers included in a Dow Jones index. The equity
portion of the portfolio will be derived from a quantitative process that seeks
to provide total return through investing generally in dividend-paying stocks
included in the Dow Jones U.S. Total Stock Market Index(SM). First Trust
Advisors L.P. ("First Trust" or the "Advisor") reserves the right to
over-weight, under-weight or exclude certain securities from the 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 "A-3" or higher by Standard & Poor's Financial
Services LLC, "F3" or higher by Fitch Ratings, Inc. or "Prime 3" or higher by
Moody's Investor 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
Index(SM) (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 Average. The Fund
may also invest in U.S. government and agency securities, including
mortgage-backed securities. The Fund may, at certain times, also hold
exchange-traded funds ("ETFs") that invest in investment-grade corporate 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 64
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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 ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Funds in the preparation of the
financial statements. The preparation of 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 65
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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 price;
securities whose trading has been formally suspended; a security whose market or
fair value price is not available from a pre-established pricing source; a
security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities.
Fair valuation of a debt security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of the 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;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
Page 66
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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 or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of December 31, 2019, 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 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.
On July 27, 2017, the Financial Conduct Authority ("FCA") announced that it will
no longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021 (the "FCA Announcement").
Furthermore, in the United States, efforts to identify a set of alternative U.S.
dollar reference interest rates include proposals by the Alternative References
Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New
York. On August 24, 2017, the Federal Reserve Board requested public comment on
a proposal by the Federal Reserve Bank of New York, in cooperation with the
Office of Financial Research, to produce three new reference rates intended to
serve as alternatives to LIBOR. These alternative rates are based on overnight
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
repurchase agreement transactions secured by U.S. Treasury Securities. On
December 12, 2017, following consideration of public comments, the Federal
Reserve Board concluded that the public would benefit if the Federal Reserve
Bank of New York published the three proposed reference rates as alternatives to
LIBOR (the "Federal Reserve Board Notice").
At this time, it is not possible to predict the effect of the FCA Announcement,
the Federal Reserve Board Notice, or other regulatory changes or announcements,
any establishment of alternative reference rates of any other reforms to LIBOR
that may be enacted in the United Kingdom, the United States or elsewhere. As
such, the potential effect of any such event on each Fund cannot yet be
determined.
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
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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.
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. Permanent differences
incurred during the tax year ended December 31, 2019, have been reclassified at
year end to reflect the following:
Accumulated Accumulated
Net Investment Net Realized
Income (Loss) Gain (Loss) Paid-in Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ -- $ -- $ --
First Trust Multi Income 6,804 (6,343) (461)
First Trust Dorsey Wright (4,915) 4,915 --
Accumulated distributable earnings (loss) on the Statement of Assets and
Liabilities consists of accumulated net investment income (loss), accumulated
net realized gain (loss), and unrealized appreciation (depreciation). Net assets
were not affected by this reclassification.
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2019, was as follows:
Distributions paid Distributions paid Distributions paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ 23,840,429 $ 23,270,288 $ --
First Trust Multi Income 708,084 16,411 --
First Trust Dorsey Wright 312,825 737,450 --
The tax character of distributions paid by each Fund during the fiscal year
ended December 31, 2018, was as follows:
Distributions paid Distributions paid Distributions paid
from Ordinary from Capital from Return
Income Gains of Capital
------------------ ------------------ ------------------
First Trust Dow Jones $ 12,292,691 $ 1,197,495 $ --
First Trust Multi Income 519,508 -- --
First Trust Dorsey Wright 120,457 35,246 --
As of December 31, 2019, the components of distributable earnings on a tax basis
for each Fund were as follows:
Undistributed Accumulated Net Unrealized
Ordinary Capital and Other Appreciation
Income Gain (Loss) (Depreciation)
------------------ ------------------ ------------------
First Trust Dow Jones $ 6,749,956 $ 24,044,052 $ 103,980,029
First Trust Multi Income 29,081 388,504 2,192,336
First Trust Dorsey Wright 5,137 (373,610) 5,792,286
Page 69
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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 2016, 2017,
2018 and 2019 remain open to federal and state audit for First Trust Dow Jones,
First Trust Multi Income and First Trust Dorsey Wright. As of December 31, 2019,
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, 2019, the
Funds have the following non-expiring capital loss carryforwards that may be
carried forward indefinitely.
Capital
Loss Available
---------------
First Trust Dow Jones $ --
First Trust Multi Income --
First Trust Dorsey Wright 373,610
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. ASU 2017-08 was adopted for these
financial statements and did not have a material impact.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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
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 (i) the Expense Cap in place
for the most recent fiscal year for which such expense limitation was in place,
(ii) the Expense Cap in place at the time the fees were waived, or (iii) the
current Expense Cap. These amounts, if any, are included in "Expenses previously
waived or reimbursed" on the Statements of Operations.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
The advisory fee waivers and expense reimbursements for the year ended December
31, 2019, and the expenses borne and fees waived by First Trust subject to
recovery from the applicable Fund at December 31, 2019, are included in the
table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY
----------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31,
WAIVED REIMBURSED 2017 2018 2019 TOTAL
------------ ------------ ------------ ------------ ------------ -------------
First Trust Dow Jones $ 75,487 $ -- $ 203,355 $ 186,633 $ 75,487 $ 465,475
First Trust Multi Income 169,591 981 189,257 192,140 170,572 551,969
First Trust Dorsey Wright 170,791 80,632 199,184 230,266 251,423 680,873
During the year ended December 31, 2019, First Trust did not recover any fees
that were previously waived or reimbursed.
For First Trust Multi Income, First Trust agreed to waive and/or reimburse the
acquired fund fees and expenses of the shares of investment companies held by
First Trust Multi Income up to 0.37% of the Fund's average daily net assets
through May 1, 2020. During the year ended December 31, 2019, First Trust
reimbursed First Trust Multi Income $104,582 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.
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,
a defined-outcome fund or 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
4. CAPITAL SHARE TRANSACTIONS
Capital transaction for First Trust Dow Jones were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2019 DECEMBER 31, 2018
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 7,957,769 $112,219,129 10,329,682 $142,354,467
Class II 86,654 1,261,451 2,415 33,034
------------ ------------ ------------ ------------
Total Sales 8,044,423 $113,480,580 10,332,097 $142,387,501
============ ============ ============ ============
Dividend Reinvestment:
Class I 3,366,237 $ 47,089,053 1,031,910 $ 13,489,067
Class II 1,463 20,974 68 882
------------ ------------ ------------ ------------
Total Dividend Reinvestment 3,367,700 $ 47,110,027 1,031,978 $ 13,489,949
============ ============ ============ ============
Redemptions:
Class I (5,686,087) $(79,974,071) (5,216,581) $(70,989,205)
Class II (1,932) (27,868) (13,771) (184,264)
------------ ------------ ------------ ------------
Total Redemptions (5,688,019) $(80,001,939) (5,230,352) $(71,173,469)
============ ============ ============ ============
Capital transactions for First Trust Multi Income were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2019 DECEMBER 31, 2018
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 512,373 $ 5,725,331 935,128 $ 10,021,784
Class II 46 476 3,916 40,654
------------ ------------ ------------ ------------
Total Sales 512,419 $ 5,725,807 939,044 $ 10,062,438
============ ============ ============ ============
Dividend Reinvestment:
Class I 63,416 $ 720,385 50,041 $ 516,531
Class II 89 1,007 30 296
------------ ------------ ------------ ------------
Total Dividend Reinvestment 63,505 $ 721,392 50,071 $ 516,827
============ ============ ============ ============
Redemptions:
Class I (294,214) $ (3,278,342) (425,750) $ (4,546,268)
Class II (1,157) (12,974) (4,510) (48,124)
------------ ------------ ------------ ------------
Total Redemptions (295,371) $ (3,291,316) (430,260) $ (4,594,392)
============ ============ ============ ============
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
Capital transactions for First Trust Dorsey Wright were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2019 DECEMBER 31, 2018
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
Sales:
Class I 1,020,944 $ 11,962,787 2,028,796 $ 24,081,320
Class II 608 6,726 2,825 34,014
------------ ------------ ------------ ------------
Total Sales 1,021,552 $ 11,969,513 2,031,621 $ 24,115,334
============ ============ ============ ============
Dividend Reinvestment:
Class I 86,854 $ 1,047,809 14,641 $ 155,085
Class II 204 2,466 57 618
------------ ------------ ------------ ------------
Total Dividend Reinvestment 87,058 $ 1,050,275 14,698 $ 155,703
============ ============ ============ ============
Redemptions:
Class I (662,387) $ (7,860,803) (348,389) $ (4,020,869)
Class II (40) (468) (20) (243)
------------ ------------ ------------ ------------
Total Redemptions (662,427) $ (7,861,271) (348,409) $ (4,021,112)
============ ============ ============ ============
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 fiscal year ended
December 31, 2019, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 653,314,576 $ 611,645,135
First Trust Multi Income 9,999,596 7,490,262
First Trust Dorsey Wright 20,415,854 16,346,883
Cost of purchases and proceeds from sales of U.S. Government investment
securities, excluding short-term investments, for the fiscal year ended December
31, 2019, were as follows:
PURCHASES SALES
--------------- ---------------
First Trust Dow Jones $ 167,714,936 $ 166,582,404
First Trust Multi Income 1,479,092 772,597
First Trust Dorsey Wright -- --
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
6. DERIVATIVE TRANSACTIONS
The following table presents the type of derivatives held by First Trust Dow
Jones at December 31, 2019, the primary underlying risk exposure and the
location of these instruments as presented on the Statements of Assets and
Liabilities. First Trust Multi Income and First Trust Dorsey Wright did not hold
any derivative instruments as of December 31, 2019.
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* $ 149,827 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.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal year
ended December 31, 2019, 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 $ (1,817,823)
Net change in unrealized appreciation (depreciation) on futures 566,382
During the fiscal year ended December 31, 2019, the notional value of futures
contracts opened and closed were $79,439,863 and $81,480,980 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 December
31, 2019, and for the fiscal year then ended are:
CHANGE IN
UNREALIZED
SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND
SECURITY NAME 12/31/2019 12/31/2018 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2019 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust
Institutional
Preferred
Securities and
Income ETF 30,550 $ 430,829 $ 257,802 $ (133,903) $ 61,414 $ (3,309) $ 612,833 $ 31,640
First Trust Long
Duration
Opportunities ETF 500 -- 13,780 -- (230) -- 13,550 178
First Trust Low
Duration
Opportunities ETF 2,000 102,100 62,087 (61,576) 521 468 103,600 2,073
First Trust Preferred
Securities and
Income ETF 91,140 1,279,835 775,495 (427,373) 190,271 10,952 1,829,180 101,473
First Trust Senior
Loan Fund 89,010 3,620,661 674,163 (217,134) 205,613 (17,944) 4,265,359 173,047
First Trust Tactical
High Yield ETF 56,320 1,456,279 1,094,297 -- 197,277 -- 2,747,853 130,192
----------- ----------- ------------ --------------- ----------- ----------- ------------
$ 6,889,704 $ 2,877,624 $ (839,986) $ 654,866 $ (9,833) $ 9,572,375 $ 438,603
=========== =========== ============ =============== =========== =========== ============
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
Amounts relating to these investments in First Trust Dorsey Wright at December
31, 2019, and for the fiscal year then ended are:
CHANGE IN
UNREALIZED
SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND
SECURITY NAME 12/31/2019 12/31/2018 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2019 INCOME
---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------
First Trust BICK Index
Fund 8,495 $ 211,855 $ 33,224 $ (34,538) $ 38,051 $ 311 $ 248,903 $ 3,043
First Trust Brazil
AlphaDEX(R) Fund 15,578 188,392 35,308 (13,439) 57,792 979 269,032 24,783
First Trust Developed
Markets ex-US
AlphaDEX(R) Fund 10,839 662,064 129,596 (266,198) 73,892 3,782 603,136 19,813
First Trust Dow Jones
Internet Index Fund 30,872 3,274,413 736,827 (370,113) 495,959 157,827 4,294,913 --
First Trust Emerging
Markets AlphaDEX(R)
Fund 23,150 521,391 90,176 (77,175) 63,955 16,054 614,401 20,790
First Trust Financials
AlphaDEX(R) Fund 115,181 -- 3,838,460 (120,607) 138,217 3,645 3,859,715 49,370
First Trust Germany
AlphaDEX(R) Fund 5,618 178,425 47,224 (11,525) 32,646 1,827 248,597 5,836
First Trust Health
Care AlphaDEX(R)
Fund -- 3,280,760 721,616 (4,242,754) 463,689 (223,311) -- --
First Trust Large Cap
Growth AlphaDEX(R)
Fund 71,763 3,686,880 746,157 (294,846) 1,010,271 84,496 5,232,958 33,874
First Trust Latin
America AlphaDEX(R)
Fund 11,229 -- 238,483 (7,311) 24,278 122 255,572 756
First Trust Mid Cap
Growth AlphaDEX(R)
Fund 109,456 3,490,476 962,458 (466,929) 1,252,079 1,575 5,239,659 14,729
First Trust NASDAQ-100-
Technology Sector
Index Fund 52,750 3,430,728 603,711 (442,513) 1,510,016 178,333 5,280,275 36,642
First Trust NYSE Arca
Biotechnology Index
Fund -- 3,104,379 905,859 (4,129,096) 804,336 (685,478) -- --
First Trust Small Cap
Growth AlphaDEX(R)
Fund 101,876 3,417,640 1,013,629 (305,180) 560,229 68,235 4,754,553 18,980
First Trust Switzerland
AlphaDEX(R) Fund 4,935 191,844 40,810 (14,946) 46,026 2,813 266,547 5,436
First Trust Technology
AlphaDEX(R) Fund 67,682 3,351,271 657,688 (445,089) 1,257,013 90,800 4,911,683 18,336
First Trust Utilities
AlphaDEX(R) Fund 142,781 -- 4,149,025 (128,028) 147,246 2,390 4,170,633 77,634
----------- ----------- ------------ --------------- ----------- ----------- ------------
$28,990,518 $14,950,251 $(11,370,287) $ 7,975,695 $ (295,600) $40,250,577 $ 330,022
=========== =========== ============ =============== =========== =========== ============
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019
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 year ended December 31, 2019, 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.
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
year ended December 31, 2019.
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 to the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST VARIABLE INSURANCE
TRUST:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statements of assets and liabilities of First
Trust/Dow Jones Dividend & Income Allocation Portfolio, First Trust Multi Income
Allocation Portfolio, and First Trust Dorsey Wright Tactical Core Portfolio (the
"Funds"), each a series of the First Trust Variable Insurance Trust, including
the portfolios of investments, as of December 31, 2019, the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for the periods indicated in the table below for the Funds; and the related
notes. In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the Funds as
of December 31, 2019, and the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for the periods listed in the table
below in conformity with accounting principles generally accepted in the United
States of America.
INDIVIDUAL FUND COMPRISING THE TRUST FINANCIAL HIGHLIGHTS
First Trust/Dow Jones Dividend & Income For the years ended December 31, 2019, 2018, 2017, 2016, and 2015
Allocation Portfolio
First Trust Multi Income Allocation Portfolio
First Trust Dorsey Wright Tactical Core For the years ended December 31, 2019, 2018, 2017, 2016, and the
Portfolio period from October 30, 2015 (commencement of operations)
through December 31, 2015
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on the Funds'
financial statements and financial highlights based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Funds in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Funds are not
required to have, nor were we engaged to perform, an audit of their internal
control over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Funds' internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audits
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2019, by correspondence with
the custodian and brokers; when replies were not received from brokers and agent
banks, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 13, 2020
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that each Fund uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable year ended December 31, 2019, the following percentages of
income dividend paid by the Funds qualify for the dividends received deduction
available to corporations:
DIVIDENDS RECEIVED DEDUCTION
-------------------------------------
First Trust/Dow Jones Dividend & Income Allocation Portfolio 45.60%
First Trust Multi Income Allocation Portfolio 20.22%
First Trust Dorsey Wright Tactical Core Portfolio 78.98%
For the taxable year ended December 31, 2019, the amount of long-term capital
gain distribution designated by the Funds which are taxable at the applicable
taxable gains rates for federal income tax purposes were:
LONG-TERM CAPITAL GAIN DISTRIBUTIONS
-------------------------------------
First Trust/Dow Jones Dividend & Income Allocation Portfolio $ 23,270,288
First Trust Multi Income Allocation Portfolio 16,411
First Trust Dorsey Wright Tactical Core Portfolio 737,450
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
Page 79
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
Portfolio is to be managed. S&P Dow Jones Indices has no obligation or liability
in connection with the administration, marketing or trading of the First
Trust/Dow Jones Dividend & Income Allocation Portfolio. There is no assurance
that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE will accurately track index performance or provide
positive investment returns. S&P Dow Jones Indices LLC is not an investment
advisor. Inclusion of a security within an index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it considered to
be investment advice.
NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY,
ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S.
ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND
DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT
BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS
OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED
CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW
JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
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 INDEX 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
Page 80
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
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.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
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
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.
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
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 overthe-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.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
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. 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
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FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
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.
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.
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician; Officer, Wheaton Orthopedics; 169 None
(1951) Limited Partner, Gundersen Real Estate
o Since Inception Limited Partnership (June 1992 to
December 2016); Member, Sportsmed
LLC (April 2007 to November 2015)
Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 169 Director of ADM
(1957) (Futures Commission Merchant) 169 Investor Services,
o Since Inception Inc., ADM
Investor Services
International,
Futures Industry
Association, and
National Futures
Association
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 169 Director of Trust
(1956) and Management Consulting) Company of
o Since Inception Illinois
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 169 None
(1954) Managing Director and Chief Operating
o Since Inception Officer (January 2015 to August 2018),
Pelita Harapan Educational Foundation
(Educational Products and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Servant
Interactive LLC (Educational Products and
Services); President and Chief Executive
Officer (June 2012 to September 2014),
Dew Learning LLC (Educational Products
and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee o Indefinite Term Chief Executive Officer, First Trust 169 None
and Chairman of the Board Advisors L.P. and First Trust Portfolios
(1955) o Since Inception L.P.; Chairman of the Board of Directors,
BondWave LLC (Software Development
Company) and Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as CEO of First Trust Advisors L.P., investment advisor of the
Trust.
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer
(1966) Executive Officer (January 2016 to Present), Controller (January 2011
o Since January 2016 to January 2016), Senior Vice President (April 2007
to January 2016), First Trust Advisors L.P. and First
Trust Portfolios L.P.; Chief Financial Officer
(January 2016 to Present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice
(1972) Officer and Chief President (April 2012 to July 2016), First Trust
Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust\ Advisors L.P. and
(1960) Legal Officer First Trust Portfolios L.P.; Secretary and General
o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge
Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Fund Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P.
(1966) and Assistant Secretary and First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1966) and First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P.
(1970) and First Trust Portfolios L.P
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST VARIABLE INSURANCE TRUST
DECEMBER 31, 2019 (UNAUDITED)
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2019
Page 88
FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
Energy Income Partners, LLC
10 Wright Street
Westport, CT 06880
Stonebridge Advisors LLC
10 Westport Road, Suite C101
Wilton, CT 06897
ADMINISTRATOR, CUSTODIAN &
FUND ACCOUNTANT
FIRST TRUST DORSEY WRIGHT TACTICAL
CORE PORTFOLIO
Brown Brothers Harriman & Co.
50 Post Office Square
Boston, MA 02110
FIRST TRUST/DOW JONES DIVIDEND & INCOME
ALLOCATION PORTFOLIO
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the Registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees -- The aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal accountant for
the audit of the registrant's annual financial statements or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements were $90,750 for the fiscal year ended December 31, 2018
and $90,750 for the fiscal year ended December 31, 2019.
(b) Audit-Related Fees (Registrant) -- The aggregate fees billed for each
of the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the
fiscal year ended December 31, 2019.
Audit-Related Fees (Investment Adviser) -- The aggregate fees billed for
each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for
the fiscal year ended December 31, 2019.
Audit-Related Fees (Distributor) -- The aggregate fees billed for each of
the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the
fiscal year ended December 31, 2019.
Audit-Related Fees (Investment Sub-Advisor) -- The aggregate fees billed
for each of the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for
the fiscal year ended December 31, 2019.
(c) Tax Fees (Registrant) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant
were $12,175 for the fiscal year ended December 31, 2018 and $12,797 for the
fiscal year ended December 31, 2019.
Tax Fees (Investment Adviser) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning were $0 for the
fiscal year ended December 31, 2018 and $0 for the fiscal year ended December
31, 2019.
Tax Fees (Distributor) -- The aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning were $0 for the fiscal year
ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019.
Tax Fees (Investment Sub-Adviser) -- The aggregate fees billed for each of
the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning were $0 for the
fiscal year ended December 31, 2018 and $0 for the fiscal year ended December
31, 2019.
(d) All Other Fees (Registrant) -- The aggregate fees for each of the last
two fiscal years for products and services provided by the principal accountant
to the registrant, other than the services reported in paragraphs (a) through
(c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for
the fiscal year ended December 31, 2019.
All Other Fees (Investment Adviser) -- The aggregate fees billed for
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for
the fiscal year ended December 31, 2019.
All Other Fees (Distributor) -- The aggregate fees billed for each of the
last two fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through (c) of
this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the
fiscal year ended December 31, 2019.
All Other Fees (Investment Sub-Adviser) -- The aggregate fees billed for
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for
the fiscal year ended December 31, 2019.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) for the registrant and the registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the
pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for the fiscal year
ended December 31, 2018 were $12,175 for the registrant, $48,190 for the
registrant's investment adviser, $80,310 for the registrant's distributor and
$3,000 for the registrant's investment sub-adviser, and for the fiscal year
ended December 31, 2019 were $12,797 for the registrant, $75,670 for the
registrant's investment adviser, $104,730 for the registrant's distributor and
$32,500 for the registrant's investment sub-adviser.
(h) The registrant's audit committee of its Board of Trustees has
determined that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the period covered by this report that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
(a) Not applicable.
(b) Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Variable Insurance Trust
-----------------------------------------
By (Signature and Title) /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: February 21, 2020
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: February 21, 2020
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By (Signature and Title) /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: February 21, 2020
-------------------