N-CSRS 1 vit_ncsr.txt SEMI-ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-22652 ----------- First Trust Variable Insurance Trust ------------------------------------------------------------ (Exact name of registrant as specified in charter) 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ------------------------------------------------------------ (Address of principal executive offices) (Zip code) W. Scott Jardine, Esq. First Trust Portfolios L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ------------------------------------------------------------ (Name and address of agent for service) registrant's telephone number, including area code: 630-765-8000 -------------- Date of fiscal year end: December 31 ------------- Date of reporting period: June 30, 2016 --------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. FIRST TRUST VARIABLE INSURANCE TRUST SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2016 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST SEMI-ANNUAL REPORT JUNE 30, 2016 Shareholder Letter.......................................................... 1 Portfolio Management........................................................ 2 Performance Summary and Portfolio Components First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 5 First Trust Multi Income Allocation Portfolio.......................... 7 First Trust Dorsey Wright Tactical Core Portfolio...................... 9 Understanding Your Fund Expenses............................................ 11 Portfolio of Investments First Trust/Dow Jones Dividend & Income Allocation Portfolio........... 12 First Trust Multi Income Allocation Portfolio.......................... 32 First Trust Dorsey Wright Tactical Core Portfolio...................... 42 Statements of Assets and Liabilities........................................ 43 Statements of Operations.................................................... 44 Statements of Changes in Net Assets......................................... 45 Financial Highlights........................................................ 48 Notes to Financial Statements............................................... 51 Additional Information...................................................... 63 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 Stonebridge Advisors, LLC ("Stonebridge" or a "Sub-Advisor") and their representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of the First Trust Variable Insurance Trust (the "Trust") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisors and their representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any series (individually called a "Fund" and collectively the "Funds") of the Trust will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of certain other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit http://www.ftportfolios.com or speak with your financial advisor. Investment returns and net asset value will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at http://www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment in each Fund. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of First Trust and the Sub-Advisors are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, the statement of additional information, this report and other Fund regulatory filings. -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO JUNE 30, 2016 Dear Shareholders: Thank you for your investment in First Trust Variable Insurance Trust (the "Trust"). First Trust Advisors L.P. ("First Trust") is pleased to provide you with this semi-annual report which contains detailed information about your investment for the six months ended June 30, 2016. Additionally, First Trust has compiled each Fund's financial statements for you to review. We encourage you to read this report and discuss it with your financial advisor. While markets were up and down during 2015, we believe there are three important things to remember. First, the U.S. economy grew, despite the massive decline in oil prices. Second, the tapering that began in 2014 by the Federal Reserve (the "Fed") did not stop growth in the U.S. economy. Finally, the long-anticipated rate hike by the Fed in December had little effect on the money supply, and the stock market was not shocked by the hike. Early in 2016, many investors were concerned that the volatility we saw in the market in 2015 would continue, and it did. From December 31, 2015 through February 11, 2016, the S&P 500(R) Index declined by 10.27%. Since then, the market has made a steady comeback, and as of June 30, 2016, the S&P 500(R) Index was up 15.73%. First Trust believes that having a long-term investment horizon and investing in quality products can help you reach your goals, regardless of how the market behaves. We have always maintained perspective about the markets and believe investors should as well. We will continue to strive to provide quality investment opportunities each and every day, which has been one of the hallmarks of our firm since its inception 25 years ago. Thank you for giving First Trust the opportunity to be a part of your investment plan. We value our relationship with you and will continue to focus on helping investors like you reach your financial goals. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 INVESTMENT ADVISOR First Trust Advisors L.P. ("First Trust") is a registered investment advisor based in Wheaton, IL and is the investment advisor to First Trust/Dow Jones Dividend & Income Allocation Portfolio (the "Fund"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the Fund. PORTFOLIO MANAGEMENT TEAM Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust Todd Larson, Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Page 2 -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 INVESTMENT ADVISOR First Trust is a registered investment advisor based in Wheaton, IL and is the investment advisor to First Trust Multi Income Allocation Portfolio (the "Fund"). First Trust manages the Fund's fixed income investments, as well as a portion of the Fund's equity investments. SUB-ADVISORS Stonebridge Advisors LLC ("Stonebridge" or a "Sub-Advisor") is a sub-advisor to the Fund and is a registered investment advisor based in Wilton, CT. Stonebridge specializes in the management of preferred securities and North American equity income securities. Energy Income Partners, LLC ("EIP" or a "Sub-Advisor"), is a sub-advisor to the Fund and is a registered investment advisor based in Westport, CT. EIP was founded in 2003 to provide professional asset management services in the area of energy-related master limited partnerships ("MLPs") and other high-payout securities such as pipeline companies, power utilities and Canadian income equities. PORTFOLIO MANAGEMENT TEAMS FIRST TRUST Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust William Housey, Senior Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Todd Larson, Vice President, First Trust James Snyder, Vice President, First Trust Jeremiah Charles, Vice President, First Trust STONEBRIDGE Scott Fleming, Portfolio Manager, President and Chief Investment Officer of Stonebridge Robert Wolf, Senior Portfolio Manager and Senior Vice President of Stonebridge EIP James J. Murchie, Portfolio Manager, Founder, Principal and CEO of EIP Eva Pao, Co-Portfolio Manager, Principal of EIP John Tysseland, Co-Portfolio Manager, Principal of EIP Page 3 -------------------------------------------------------------------------------- PORTFOLIO MANAGEMENT (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 INVESTMENT ADVISOR First Trust is a registered investment advisor based in Wheaton, IL and is the investment advisor to First Trust Dorsey Wright Tactical Core Portfolio (the "Fund"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the Fund. PORTFOLIO MANAGEMENT TEAM Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust Todd Larson, Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Page 4 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED JUNE 30, 2016 1 YEAR SIX MONTH ANNUAL SINCE INCEPTION AVERAGE INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/12 6.51% 6.29% 8.04% Blended Benchmark (a) 5.72% 5.21% 8.50% Barclays U.S. Corporate Investment-Grade Index (b) 7.68% 7.94% 4.55% Russell 3000(R) Index (c) 3.62% 2.14% 12.23% Secondary Blended Benchmark (d) 6.06% 6.00% 8.80% Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 8.17% 9.13% 4.97% Dow Jones U.S. Total Stock Market Index(SM) (f) 3.54% 2.03% 12.12% ------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------- 1 YEAR SIX MONTH ANNUAL SINCE INCEPTION AVERAGE INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 6.71% 6.53% 6.81% Blended Benchmark (a) 5.72% 5.21% 5.68% Barclays U.S. Corporate Investment-Grade Index (b) 7.68% 7.94% 4.48% Russell 3000(R) Index (c) 3.62% 2.14% 6.56% Secondary Blended Benchmark (d) 6.06% 6.00% 6.17% Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 8.17% 9.13% 5.19% Dow Jones U.S. Total Stock Market Index(SM) (f) 3.54% 2.03% 6.46% -------------------------------------------------------------------------------------------------------------------------
(a) The Blended Benchmark returns are a 50/50 split between the Russell 3000(R) Index and the Barclays U.S. Corporate Investment-Grade Index returns. (b) Barclays U.S. Corporate Investment-Grade Index measures the performance of investment grade U.S. corporate bonds. The index includes all publicly issued, dollar-denominated corporate bonds with a minimum of $250 million par outstanding that are investment grade-rated (Baa3/BBB- or higher). The index excludes bonds having less than one year to final maturity as well as floating rate bonds, non-registered private placements, structured notes, hybrids, and convertible securities. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as determined by market capitalization. This index represents approximately 98% of the investable U.S. equity market. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (d) The Secondary Blended Benchmark return is a 50/50 split between the Dow Jones U.S. Total Stock Market Index(SM) and the Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) returns. (e) The Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) measures the return of readily tradable, high-grade U.S. corporate bonds. The index includes an equally weighted basket of 96 recently issued investment-grade corporate bonds with laddered maturities. (The index reflects no deduction for fees, expenses or taxes). (f) The Dow Jones U.S. Total Stock Market Index(SM) measures all U.S. equity securities that have readily available prices. (The index reflects no deduction for fees, expenses or taxes). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT May 1, 2012 - June 30, 2016 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
Page 5 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP EQUITY HOLDINGS INVESTMENTS ------------------------------------------------------ Primerica, Inc. 0.5% Hershey (The) Co. 0.5 Pfizer, Inc. 0.4 MarketAxess Holdings, Inc. 0.4 A.O. Smith Corp. 0.4 Cincinnati Financial Corp. 0.4 Exponent, Inc. 0.4 AFLAC, Inc. 0.4 Torchmark Corp. 0.4 SunTrust Banks, Inc. 0.4 ------------------------------------------------------ Total 4.2% ====== ------------------------------------------------------ % OF TOTAL SECTOR ALLOCATION INVESTMENTS ------------------------------------------------------ Common Stocks: Financials 17.9% Industrials 14.2 Information Technology 7.1 Consumer Discretionary 6.3 Consumer Staples 5.8 Health Care 3.1 Materials 1.2 Energy 0.8 ------------------------------------------------------ Total Common Stocks 56.4 ------------------------------------------------------ Corporate Bonds & Notes: Financials 12.0 Utilities 4.3 Consumer Staples 3.7 Energy 3.5 Information Technology 3.1 Industrials 2.9 Consumer Discretionary 2.8 Health Care 2.7 Telecommunication Services 2.4 Materials 0.3 ------------------------------------------------------ Total Corporate Bonds & Notes 37.7 ------------------------------------------------------ U.S. Government Bonds & Notes 4.8 ------------------------------------------------------ Foreign Corporate Bonds & Notes: Financials 0.6 Health Care 0.3 Materials 0.2 Energy 0.0* ------------------------------------------------------ Total Foreign Corporate Bonds & Notes 1.1 ------------------------------------------------------ Total 100.0% ====== * Amount is less than 0.1%. ------------------------------------------------------ % OF TOTAL TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS ------------------------------------------------------ U.S. Government 4.8% Bank of America Corp. 1.6 Goldman Sachs Group (The), Inc. 1.4 Wells Fargo & Co. 1.4 Citigroup, Inc. 1.3 Morgan Stanley 1.3 JPMorgan Chase & Co. 1.3 AT&T, Inc. 1.3 Verizon Communications, Inc. 1.1 Anheuser-Busch Inbev Worldwide, Inc. 0.8 ------------------------------------------------------ Total 16.3% ====== ------------------------------------------------------ % OF TOTAL FIXED-INCOME CREDIT QUALITY(1) INVESTMENTS ------------------------------------------------------ AAA 12.8% AA+ 1.4 AA 4.3 AA- 8.1 A+ 8.0 A 23.4 A- 19.1 BBB+ 9.4 BBB 8.2 BBB- 5.3 ------------------------------------------------------ Total 100.0% ====== (1) The credit quality information presented reflects the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and ratings are not equivalent, the highest ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. Page 6 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED JUNE 30, 2016 1 YEAR SIX MONTH ANNUAL SINCE INCEPTION AVERAGE INCEPTION DATE TOTAL RETURN TOTAL RETURN ANNUAL TOTAL RETURN FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 7.72% 4.98% 4.06% FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 7.74% 5.13% 4.26% Broad Blended Benchmark (a) 4.75% 4.70% 5.23% Barclays U.S. Aggregate Index (b) 5.31% 6.03% 4.08% Russell 3000(R) Index (c) 3.62% 2.14% 6.56% Multi Asset Class Blended Benchmark (d) 8.16% 4.52% 3.37% -------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Barclays U.S. Aggregate Index (60%) and the Russell 3000(R) Index (40%). (b) The Barclays U.S. Aggregate Index represents the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Bonds included in the index are U.S. dollar denominated; have a fixed rate coupon; carry an investment-grade rating; have at least one year to final maturity; and meet certain criteria for minimum amount of outstanding par value. (The index reflects no deduction for fees, expenses or taxes). (c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as determined by market capitalization. This index represents approximately 98% of the investable U.S. equity market. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (d) The Multi Asset Class Blended Benchmark is weighted to include nine indexes: Russell 3000(R) Index (15%)BofA Merrill Lynch Fixed Rate Preferred Securities Index (8%), Alerian MLP Index (15%), S&P U.S. REIT Index (15%), BofA Merrill Lynch U.S. High Yield Index (8%), S&P/LSTA Leveraged Loan Index (15%), Barclays U.S. Corporate Investment-Grade Index (8%), BofA Merrill Lynch U.S. MBS Index (8%), and BofA Merrill Lynch U.S. Inflation-Linked Treasury Index (8%). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT May 1, 2014 - June 30, 2016 First Trust Multi Barclays Multi Asset Class Income Allocation Broad Blended U.S. Aggregate Russell 3000(R) Blended Portfolio - Class I Benchmark Index Index Benchmark 5/1/2014 $10,000 $10,000 $10,000 $10,000 $10,000 6/30/2014 10,320 10,245 10,096 10,470 10,334 12/31/2014 10,457 10,582 10,295 11,020 10,428 6/30/2015 10,383 10,667 10,284 11,234 10,278 12/31/2015 10,119 10,662 10,354 11,073 9,933 6/30/2016 10,900 11,168 10,904 11,474 10,744
Page 7 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP 10 HOLDINGS INVESTMENTS ------------------------------------------------------ First Trust Senior Loan Fund 15.6% iShares iBoxx $ Investment Grade Corporate Bond ETF 9.0 First Trust Preferred Securities and Income ETF 5.9 First Trust Tactical High Yield ETF 5.9 Enterprise Products Partners, L.P. 1.6 iShares MBS ETF 1.6 Enbridge Energy Partners, L.P. 1.0 Magellan Midstream Partners, L.P. 1.0 Spectra Energy Partners, L.P. 1.0 TransCanada Corp. 0.9 ------------------------------------------------------ Total 43.5% ====== ------------------------------------------------------ % OF TOTAL SECTOR ALLOCATION INVESTMENTS ------------------------------------------------------ ------------------------------------------------------ Exchange-Traded Funds 38.2% ------------------------------------------------------ Common Stocks: Utilities 3.8 Energy 3.8 Financials 3.8 Information Technology 3.1 Industrials 2.6 Consumer Discretionary 1.9 Health Care 1.9 Consumer Staples 1.6 Telecommunication Services 0.7 Materials 0.7 ------------------------------------------------------ Total Common Stocks 23.9 ------------------------------------------------------ Real Estate Investment Trusts: Financials 13.5 ------------------------------------------------------ Total Real Estate Investment Trusts 13.5 ------------------------------------------------------ Master Limited Partnerships: Energy 9.4 Utilities 1.1 Materials 0.3 ------------------------------------------------------ Total Master Limited Partnerships 10.8 ------------------------------------------------------ U.S. Government Bonds & Notes 8.8 ------------------------------------------------------ U.S. Government Agency Mortgage-Backed Securities 4.2 ------------------------------------------------------ Mortgage-Backed Securities 0.5 ------------------------------------------------------ Asset-Backed Securities 0.1 ------------------------------------------------------ Total 100.0% ====== Page 8 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED JUNE 30, 2016 SIX MONTH SINCE INCEPTION INCEPTION DATE TOTAL RETURN CUMULATIVE TOTAL RETURN FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 -1.34% -1.93% FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 -1.23% -1.72% Broad Blended Benchmark (a) 4.52% 3.48% Barclays U.S. Aggregate Index (b) 5.31% 4.69% S&P 500(R) Index (c) 3.84% 2.50% ----------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between Barclays U.S. Aggregate Index (40%) and the S&P 500(R) Index (60%). (b) The Barclays U.S. Aggregate Index represents the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Bonds included in the index are U.S. dollar denominated; have a fixed rate coupon; carry an investment-grade rating; have at least one year to final maturity; and meet certain criteria for minimum amount of outstanding par value. (The index reflects no deduction for fees, expenses or taxes). (c) The S&P 500(R) Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. (The index reflects no deduction for fees, expenses or taxes). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT October 30, 2015 - June 30, 2016 First Trust Dorsey Wright Tactical Core Portfolio - Broad Blended Barclays U.S. Class I Benchmark Aggregate Index S&P 500(R) 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
Page 9 -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND PORTFOLIO COMPONENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 2016 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP 10 HOLDINGS INVESTMENTS ------------------------------------------------------ iShares Core U.S. Aggregate Bond ETF 17.8% SPDR Barclays International Treasury Bond ETF 10.6 SPDR Wells Fargo Preferred Stock ETF 10.5 SPDR Nuveen Barclays Municipal Bond ETF 10.4 SPDR Barclays Emerging Markets Local Bond ETF 10.2 First Trust Mid Cap Growth AlphaDEX(R) Fund 4.8 First Trust Large Cap Growth AlphaDEX(R) Fund 4.7 First Trust Mid Cap Core AlphaDEX(R) Fund 4.7 First Trust Energy AlphaDEX(R) Fund 4.5 First Trust Utilities AlphaDEX(R) Fund 4.3 ------------------------------------------------------ Total 82.5% ====== Page 10 FIRST TRUST VARIABLE INSURANCE TRUST UNDERSTANDING YOUR FUND EXPENSES JUNE 30, 2016 (UNAUDITED) As a shareholder of First Trust/Dow Jones Dividend & Income Allocation Portfolio, First Trust Multi Income Allocation Portfolio or First Trust Dorsey Wright Tactical Core Portfolio (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees; distribution and/or service (including 12b-1) fees, if any; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in U.S. dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended June 30, 2016. ACTUAL EXPENSES The first three columns of the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the third column under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The next three columns of the table below provide information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the hypothetical section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES) ------------------------------------------ ------------------------------------------------------ EXPENSES EXPENSES BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL- ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED VALUE VALUE 1/1/2016- VALUE VALUE 1/1/2016- EXPENSE 1/1/2016 6/30/2016 6/30/2016 (a) 1/1/2016 6/30/2016 6/30/2016 (a) RATIO (b) -------------- ---------- -------------- -------------- ---------- -------------- --------- First Trust/Dow Jones Dividend & Income Allocation Portfolio Class I ................. $ 1,000.00 $ 1,065.10 $ 6.16 $ 1,000.00 $ 1,018.90 $ 6.02 1.20% Class II ................ $ 1,000.00 $ 1,067.10 $ 4.88 $ 1,000.00 $ 1,020.14 $ 4.77 0.95% First Trust Multi Income Allocation Portfolio Class I ................. $ 1,000.00 $ 1,077.20 $ 4.29 $ 1,000.00 $ 1,020.74 $ 4.17 0.83% Class II ................ $ 1,000.00 $ 1,077.40 $ 3.00 $ 1,000.00 $ 1,021.98 $ 2.92 0.58% First Trust Dorsey Wright Tactical Core Portfolio Class I ................. $ 1,000.00 $ 986.60 $ 4.25 $ 1,000.00 $ 1,020.59 $ 4.32 0.86% Class II ................ $ 1,000.00 $ 987.70 $ 2.97 $ 1,000.00 $ 1,021.88 $ 3.02 0.60%
(a) Expenses are equal to the annualized expense ratio as indicated in the table, multiplied by the average account value over the period (January 1, 2016 through June 30, 2016), multiplied by 182/366 (to reflect the one-half year period). (b) The expense ratios reflect an expense cap. First Trust Multi Income Allocation Portfolio expense ratios reflect an additional waiver. See Note 3 in the Notes to Financial Statements. Page 11 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS -- 55.1% AEROSPACE & DEFENSE -- 2.0% 10,007 General Dynamics Corp........................................................ $ 1,393,375 11,733 Honeywell International, Inc................................................. 1,364,782 5,935 Lockheed Martin Corp......................................................... 1,472,889 6,643 Northrop Grumman Corp........................................................ 1,476,606 10,721 Raytheon Co.................................................................. 1,457,520 ------------- 7,165,172 ------------- AIR FREIGHT & LOGISTICS -- 0.4% 26,934 Expeditors International of Washington, Inc.................................. 1,320,843 ------------- BANKS -- 2.9% 43,939 Columbia Banking System, Inc................................................. 1,232,928 29,247 Commerce Bancshares, Inc..................................................... 1,400,931 72,956 First Midwest Bancorp, Inc................................................... 1,281,107 20,468 South State Corp............................................................. 1,392,848 36,438 SunTrust Banks, Inc.......................................................... 1,496,873 107,232 TCF Financial Corp........................................................... 1,356,485 32,389 U.S. Bancorp................................................................. 1,306,249 27,185 Wells Fargo & Co............................................................. 1,286,666 ------------- 10,754,087 ------------- BEVERAGES -- 0.7% 28,340 Coca-Cola (The) Co........................................................... 1,284,652 14,702 Dr. Pepper Snapple Group, Inc................................................ 1,420,654 ------------- 2,705,306 ------------- BUILDING PRODUCTS -- 0.4% 17,228 A.O. Smith Corp.............................................................. 1,517,959 ------------- CAPITAL MARKETS -- 0.8% 30,538 SEI Investments Co........................................................... 1,469,183 17,896 T. Rowe Price Group, Inc..................................................... 1,305,871 ------------- 2,775,054 ------------- CHEMICALS -- 1.2% 11,789 Ecolab, Inc.................................................................. 1,398,175 11,556 International Flavors & Fragrances, Inc...................................... 1,456,865 3,318 NewMarket Corp............................................................... 1,374,913 ------------- 4,229,953 ------------- COMMERCIAL SERVICES & SUPPLIES -- 0.8% 14,638 Cintas Corp.................................................................. 1,436,427 48,476 Rollins, Inc................................................................. 1,418,892 ------------- 2,855,319 ------------- COMMUNICATIONS EQUIPMENT -- 0.4% 46,177 Cisco Systems, Inc........................................................... 1,324,818 ------------- DISTRIBUTORS -- 0.8% 13,231 Genuine Parts Co............................................................. 1,339,639 14,984 Pool Corp.................................................................... 1,408,945 ------------- 2,748,584 -------------
Page 12 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) DIVERSIFIED FINANCIAL SERVICES -- 1.8% 13,687 CME Group, Inc............................................................... $ 1,333,114 8,676 FactSet Research Systems, Inc................................................ 1,400,480 10,532 MarketAxess Holdings, Inc.................................................... 1,531,353 14,894 Morningstar, Inc............................................................. 1,218,031 19,805 Nasdaq, Inc.................................................................. 1,280,789 ------------- 6,763,767 ------------- ELECTRICAL EQUIPMENT -- 1.4% 26,304 AMETEK, Inc.................................................................. 1,216,034 24,176 Emerson Electric Co.......................................................... 1,261,020 12,411 Hubbell, Inc................................................................. 1,308,988 11,558 Rockwell Automation, Inc..................................................... 1,327,090 ------------- 5,113,132 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0% 22,737 Amphenol Corp., Class A...................................................... 1,303,512 10,679 Littelfuse, Inc.............................................................. 1,262,151 21,232 TE Connectivity, Ltd......................................................... 1,212,560 ------------- 3,778,223 ------------- FOOD & STAPLES RETAILING -- 0.7% 12,674 CVS Health Corp.............................................................. 1,213,409 19,195 Wal-Mart Stores, Inc......................................................... 1,401,619 ------------- 2,615,028 ------------- FOOD PRODUCTS -- 2.7% 20,752 General Mills, Inc........................................................... 1,480,033 14,276 Hershey (The) Co............................................................. 1,620,183 30,404 Hormel Foods Corp............................................................ 1,112,786 12,141 J&J Snack Foods Corp......................................................... 1,448,057 13,215 McCormick & Co., Inc......................................................... 1,409,644 32,768 Mondelez International, Inc., Class A........................................ 1,491,272 14,578 Sanderson Farms, Inc......................................................... 1,263,038 ------------- 9,825,013 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.1% 31,429 Abbott Laboratories.......................................................... 1,235,474 22,737 ResMed, Inc.................................................................. 1,437,661 12,253 Stryker Corp................................................................. 1,468,277 ------------- 4,141,412 ------------- HEALTH CARE PROVIDERS & SERVICES -- 1.1% 9,459 Anthem, Inc.................................................................. 1,242,345 28,254 Patterson Cos., Inc.......................................................... 1,353,084 10,199 UnitedHealth Group, Inc...................................................... 1,440,099 ------------- 4,035,528 ------------- HOTELS, RESTAURANTS & LEISURE -- 1.1% 24,763 Cheesecake Factory (The), Inc................................................ 1,192,091 8,611 Cracker Barrel Old Country Store, Inc........................................ 1,476,528 22,021 Starbucks Corp............................................................... 1,257,840 ------------- 3,926,459 -------------
See Notes to Financial Statements Page 13 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) HOUSEHOLD PRODUCTS -- 0.8% 14,262 Church & Dwight Co., Inc..................................................... $ 1,467,417 15,972 Procter & Gamble (The) Co.................................................... 1,352,349 ------------- 2,819,766 ------------- INDUSTRIAL CONGLOMERATES -- 1.5% 7,890 3M Co........................................................................ 1,381,697 13,213 Carlisle Cos., Inc........................................................... 1,396,350 13,859 Danaher Corp................................................................. 1,399,759 7,193 Roper Industries, Inc........................................................ 1,226,838 ------------- 5,404,644 ------------- INSURANCE -- 11.6% 20,822 AFLAC, Inc................................................................... 1,502,516 37,626 Allied World Assurance Co. Holdings AG....................................... 1,322,178 19,514 Allstate (The) Corp.......................................................... 1,365,004 18,682 American Financial Group, Inc................................................ 1,381,160 12,587 Aon PLC...................................................................... 1,374,878 25,198 Argo Group International Holdings, Ltd....................................... 1,307,776 27,561 Aspen Insurance Holdings, Ltd................................................ 1,278,279 17,040 Assurant, Inc................................................................ 1,470,722 23,705 Axis Capital Holdings, Ltd................................................... 1,303,775 36,723 Brown & Brown, Inc........................................................... 1,376,011 11,034 Chubb, Ltd................................................................... 1,442,254 20,114 Cincinnati Financial Corp.................................................... 1,506,337 40,854 CNA Financial Corp........................................................... 1,283,633 20,120 Endurance Specialty Holdings, Ltd............................................ 1,351,259 14,138 Erie Indemnity Co., Class A.................................................. 1,404,469 6,659 Everest Re Group, Ltd........................................................ 1,216,400 34,497 First American Financial Corp................................................ 1,387,469 14,572 Hanover Insurance Group (The), Inc........................................... 1,233,083 28,530 Hartford Financial Services Group, Inc....................................... 1,266,161 21,626 Marsh & McLennan Cos., Inc................................................... 1,480,516 29,523 Primerica, Inc............................................................... 1,689,896 25,982 ProAssurance Corp............................................................ 1,391,336 37,412 Progressive (The) Corp....................................................... 1,253,302 13,659 Reinsurance Group of America, Inc............................................ 1,324,786 10,971 RenaissanceRe Holdings, Ltd.................................................. 1,288,434 24,274 Torchmark Corp............................................................... 1,500,619 11,264 Travelers (The) Cos., Inc.................................................... 1,340,867 42,518 Unum Group................................................................... 1,351,647 27,859 Validus Holdings, Ltd........................................................ 1,353,669 23,393 W.R. Berkley Corp............................................................ 1,401,709 35,725 XL Group PLC................................................................. 1,190,000 ------------- 42,340,145 ------------- IT SERVICES -- 3.3% 11,392 Accenture PLC, Class A....................................................... 1,290,600 21,759 Amdocs Ltd................................................................... 1,255,929 14,655 Automatic Data Processing, Inc............................................... 1,346,355 22,166 Broadridge Financial Solutions, Inc.......................................... 1,445,223 8,681 International Business Machines Corp......................................... 1,317,602 15,545 Jack Henry & Associates, Inc................................................. 1,356,612
Page 14 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 13,912 MasterCard, Inc., Class A.................................................... $ 1,225,091 24,341 Paychex, Inc................................................................. 1,448,290 17,190 Visa, Inc., Class A.......................................................... 1,274,982 ------------- 11,960,684 ------------- MACHINERY -- 3.9% 22,749 CLARCOR, Inc................................................................. 1,383,822 11,958 Cummins, Inc................................................................. 1,344,557 41,199 Donaldson Co., Inc........................................................... 1,415,598 15,658 Graco, Inc................................................................... 1,236,825 15,862 IDEX Corp.................................................................... 1,302,270 12,834 Illinois Tool Works, Inc..................................................... 1,336,789 22,446 Lincoln Electric Holdings, Inc............................................... 1,326,110 24,039 PACCAR, Inc.................................................................. 1,246,903 8,374 Snap-On, Inc................................................................. 1,321,585 15,266 Toro (The) Co................................................................ 1,346,461 16,581 Wabtec Corp.................................................................. 1,164,484 ------------- 14,425,404 ------------- MEDIA -- 0.7% 21,524 Comcast Corp., Class A....................................................... 1,403,150 13,238 Walt Disney (The) Co......................................................... 1,294,941 ------------- 2,698,091 ------------- MULTILINE RETAIL -- 0.3% 15,978 Target Corp.................................................................. 1,115,584 ------------- OIL, GAS & CONSUMABLE FUELS -- 0.7% 15,728 Exxon Mobil Corp............................................................. 1,474,343 15,183 Phillips 66.................................................................. 1,204,619 ------------- 2,678,962 ------------- PERSONAL PRODUCTS -- 0.3% 13,940 Estee Lauder (The) Cos., Inc., Class A....................................... 1,268,819 ------------- PHARMACEUTICALS -- 0.8% 12,150 Johnson & Johnson............................................................ 1,473,795 44,355 Pfizer, Inc.................................................................. 1,561,740 ------------- 3,035,535 ------------- PROFESSIONAL SERVICES -- 1.4% 11,503 Equifax, Inc................................................................. 1,476,985 25,773 Exponent, Inc................................................................ 1,505,401 16,147 ManpowerGroup, Inc........................................................... 1,038,898 28,224 Robert Half International, Inc............................................... 1,077,028 ------------- 5,098,312 ------------- REAL ESTATE INVESTMENT TRUSTS -- 0.7% 13,080 PS Business Parks, Inc....................................................... 1,387,526 4,766 Public Storage............................................................... 1,218,142 ------------- 2,605,668 -------------
See Notes to Financial Statements Page 15 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) ROAD & RAIL -- 1.1% 15,606 JB Hunt Transport Services, Inc.............................................. $ 1,262,994 20,348 Landstar System, Inc......................................................... 1,397,094 16,526 Union Pacific Corp........................................................... 1,441,893 ------------- 4,101,981 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.1% 29,503 Linear Technology Corp....................................................... 1,372,775 42,409 Tessera Technologies, Inc.................................................... 1,299,412 22,896 Texas Instruments, Inc....................................................... 1,434,434 ------------- 4,106,621 ------------- SOFTWARE -- 0.7% 42,698 CA, Inc...................................................................... 1,401,775 32,136 Oracle Corp.................................................................. 1,315,327 ------------- 2,717,102 ------------- SPECIALTY RETAIL -- 2.3% 20,382 Foot Locker, Inc............................................................. 1,118,156 44,717 Gap (The), Inc............................................................... 948,895 9,853 Home Depot (The), Inc........................................................ 1,258,130 22,706 Ross Stores, Inc............................................................. 1,287,203 16,779 TJX (The) Cos., Inc.......................................................... 1,295,842 14,533 Tractor Supply Co............................................................ 1,325,119 24,017 Williams-Sonoma, Inc......................................................... 1,252,006 ------------- 8,485,351 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.7% 21,387 NIKE, Inc., Class B.......................................................... 1,180,562 20,301 VF Corp...................................................................... 1,248,309 ------------- 2,428,871 ------------- THRIFTS & MORTGAGE FINANCE -- 0.4% 97,311 Northwest Bancshares, Inc.................................................... 1,443,122 ------------- TOBACCO -- 0.4% 26,131 Reynolds American, Inc....................................................... 1,409,245 ------------- TRADING COMPANIES & DISTRIBUTORS -- 1.1% 26,830 Fastenal Co.................................................................. 1,190,984 5,632 W.W. Grainger, Inc........................................................... 1,279,872 9,757 Watsco, Inc.................................................................. 1,372,712 ------------- 3,843,568 ------------- TOTAL COMMON STOCKS.......................................................... 201,583,132 (Cost $186,722,997) -------------
Page 16 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES -- 36.8% AEROSPACE & DEFENSE -- 1.1% $ 50,000 BAE Systems Holdings, Inc. (a)...................... 4.75% 10/07/44 $ 54,769 100,000 Boeing (The) Co..................................... 1.65% 10/30/20 101,275 250,000 Boeing (The) Co..................................... 2.35% 10/30/21 259,218 100,000 Boeing (The) Co..................................... 2.20% 10/30/22 102,753 175,000 Boeing (The) Co..................................... 1.88% 06/15/23 175,150 150,000 Boeing (The) Co..................................... 2.50% 03/01/25 155,582 100,000 Boeing (The) Co..................................... 2.60% 10/30/25 104,256 175,000 Boeing (The) Co..................................... 2.25% 06/15/26 176,033 25,000 Boeing (The) Co..................................... 6.63% 02/15/38 36,417 150,000 Boeing (The) Co..................................... 3.50% 03/01/45 153,496 150,000 Boeing (The) Co..................................... 3.38% 06/15/46 150,977 300,000 Boeing Capital Corp................................. 4.70% 10/27/19 334,589 200,000 Lockheed Martin Corp................................ 2.50% 11/23/20 206,584 250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 272,103 220,000 Lockheed Martin Corp................................ 4.70% 05/15/46 260,432 200,000 Northrop Grumman Corp............................... 5.05% 11/15/40 240,850 250,000 United Technologies Corp............................ 1.80% 06/01/17 251,947 650,000 United Technologies Corp............................ 3.10% 06/01/22 693,421 100,000 United Technologies Corp............................ 6.05% 06/01/36 133,730 150,000 United Technologies Corp............................ 4.50% 06/01/42 172,209 ------------- 4,035,791 ------------- AIR FREIGHT & LOGISTICS -- 0.3% 150,000 FedEx Corp.......................................... 2.30% 02/01/20 153,702 300,000 FedEx Corp.......................................... 3.20% 02/01/25 312,933 50,000 FedEx Corp.......................................... 3.25% 04/01/26 52,409 50,000 FedEx Corp.......................................... 4.75% 11/15/45 55,949 350,000 FedEx Corp.......................................... 4.55% 04/01/46 381,368 ------------- 956,361 ------------- AIRLINES -- 0.2% 385,000 Southwest Airlines Co............................... 2.75% 11/06/19 398,313 420,000 Southwest Airlines Co............................... 2.65% 11/05/20 433,942 ------------- 832,255 ------------- BANKS -- 6.0% 1,400,000 Bank of America Corp................................ 2.60% 01/15/19 1,433,450 50,000 Bank of America Corp................................ 2.65% 04/01/19 51,257 100,000 Bank of America Corp................................ 2.63% 10/19/20 101,696 600,000 Bank of America Corp................................ 2.63% 04/19/21 609,885 725,000 Bank of America Corp................................ 5.70% 01/24/22 840,433 450,000 Bank of America Corp................................ 4.00% 04/01/24 481,084 100,000 Bank of America Corp................................ 4.00% 01/22/25 102,115 100,000 Bank of America Corp................................ 4.45% 03/03/26 104,799 700,000 Bank of America Corp................................ 3.50% 04/19/26 724,869 225,000 Bank of America Corp................................ 5.88% 02/07/42 285,046 225,000 Bank of America Corp................................ 4.88% 04/01/44 257,435 600,000 Bank of America N.A................................. 5.30% 03/15/17 616,286 800,000 Citigroup, Inc...................................... 2.15% 07/30/18 810,160 300,000 Citigroup, Inc...................................... 2.50% 09/26/18 306,111 300,000 Citigroup, Inc...................................... 2.05% 06/07/19 302,278
See Notes to Financial Statements Page 17 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 250,000 Citigroup, Inc...................................... 2.40% 02/18/20 $ 252,777 550,000 Citigroup, Inc...................................... 2.70% 03/30/21 560,406 775,000 Citigroup, Inc...................................... 4.50% 01/14/22 857,697 350,000 Citigroup, Inc...................................... 4.60% 03/09/26 371,791 300,000 Citigroup, Inc...................................... 3.40% 05/01/26 308,245 300,000 Citigroup, Inc...................................... 4.30% 11/20/26 309,723 200,000 Citigroup, Inc...................................... 5.88% 01/30/42 254,084 100,000 Citigroup, Inc...................................... 6.68% 09/13/43 128,839 50,000 Citigroup, Inc...................................... 4.65% 07/30/45 55,174 250,000 Citigroup, Inc...................................... 4.75% 05/18/46 251,876 600,000 HSBC Bank USA N.A................................... 4.88% 08/24/20 652,207 100,000 HSBC USA, Inc....................................... 1.50% 11/13/17 99,813 890,000 HSBC USA, Inc....................................... 1.63% 01/16/18 888,614 300,000 JPMorgan Chase & Co................................. 1.85% 03/22/19 303,225 300,000 JPMorgan Chase & Co................................. 2.20% 10/22/19 305,083 150,000 JPMorgan Chase & Co................................. 2.55% 03/01/21 152,556 550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 612,456 200,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 202,934 325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 337,169 250,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 252,774 400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 432,556 650,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 673,456 100,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 106,177 400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 548,904 100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 120,265 150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 165,091 437,000 JPMorgan Chase Bank N.A............................. 6.00% 10/01/17 461,648 175,000 PNC Financial Services Group (The), Inc............. 3.90% 04/29/24 188,063 600,000 Wells Fargo & Co.................................... 6.00% 11/15/17 638,543 375,000 Wells Fargo & Co.................................... 2.13% 04/22/19 383,230 200,000 Wells Fargo & Co.................................... 2.15% 01/30/20 203,497 100,000 Wells Fargo & Co.................................... 2.55% 12/07/20 102,978 900,000 Wells Fargo & Co.................................... 3.00% 01/22/21 941,011 550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 564,362 425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 446,230 550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 561,355 200,000 Wells Fargo & Co.................................... 3.90% 05/01/45 210,477 100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 109,695 275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 280,877 250,000 Wells Fargo Bank N.A................................ 1.75% 05/24/19 253,489 200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 252,553 ------------- 21,828,804 ------------- BEVERAGES -- 1.3% 63,000 Anheuser-Busch InBev Finance, Inc................... 1.90% 02/01/19 64,110 475,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.65% 02/01/21 493,103 200,000 Anheuser-Busch Inbev Worldwide, Inc................. 2.50% 07/15/22 203,755 375,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.30% 02/01/23 395,697 600,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.65% 02/01/26 644,023 325,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.70% 02/01/36 366,397
Page 18 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BEVERAGES (CONTINUED) $ 475,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 02/01/46 $ 558,927 250,000 Coca-Cola (The) Co.................................. 1.38% 05/30/19 252,798 150,000 Coca-Cola (The) Co.................................. 1.88% 10/27/20 153,401 875,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 943,366 100,000 Coca-Cola (The) Co.................................. 2.88% 10/27/25 106,046 100,000 Coca-Cola (The) Co.................................. 2.55% 06/01/26 103,071 100,000 Molson Coors Brewing Co............................. 1.45% 07/15/19 100,327 100,000 Molson Coors Brewing Co............................. 2.10% 07/15/21 100,421 200,000 Molson Coors Brewing Co............................. 3.00% 07/15/26 200,233 200,000 Molson Coors Brewing Co............................. 4.20% 07/15/46 201,704 ------------- 4,887,379 ------------- BIOTECHNOLOGY -- 0.9% 750,000 AbbVie, Inc......................................... 1.75% 11/06/17 754,678 250,000 AbbVie, Inc......................................... 2.50% 05/14/20 255,810 375,000 AbbVie, Inc......................................... 2.90% 11/06/22 382,909 150,000 AbbVie, Inc......................................... 3.60% 05/14/25 157,466 175,000 AbbVie, Inc......................................... 4.40% 11/06/42 179,017 100,000 AbbVie, Inc......................................... 4.70% 05/14/45 106,178 450,000 Amgen, Inc.......................................... 2.70% 05/01/22 463,716 200,000 Amgen, Inc.......................................... 3.63% 05/22/24 214,948 50,000 Amgen, Inc.......................................... 3.13% 05/01/25 52,260 200,000 Amgen, Inc.......................................... 5.38% 05/15/43 235,085 175,000 Gilead Sciences, Inc................................ 2.35% 02/01/20 179,609 325,000 Gilead Sciences, Inc................................ 3.50% 02/01/25 346,852 125,000 Gilead Sciences, Inc................................ 4.50% 02/01/45 136,588 ------------- 3,465,116 ------------- BUILDING PRODUCTS -- 0.0% 100,000 Masco Corp.......................................... 3.50% 04/01/21 102,530 ------------- CAPITAL MARKETS -- 2.7% 825,000 Goldman Sachs Group (The), Inc...................... 6.15% 04/01/18 889,304 300,000 Goldman Sachs Group (The), Inc...................... 2.00% 04/25/19 303,278 400,000 Goldman Sachs Group (The), Inc...................... 2.55% 10/23/19 409,585 350,000 Goldman Sachs Group (The), Inc...................... 2.60% 04/23/20 356,139 500,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 507,625 600,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 630,292 600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 642,504 150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 154,403 550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 580,023 400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 519,454 50,000 Goldman Sachs Group (The), Inc...................... 4.75% 10/21/45 55,339 450,000 Morgan Stanley...................................... 2.13% 04/25/18 454,910 695,000 Morgan Stanley...................................... 2.50% 01/24/19 709,483 50,000 Morgan Stanley...................................... 2.45% 02/01/19 50,970 400,000 Morgan Stanley...................................... 2.65% 01/27/20 406,940 600,000 Morgan Stanley...................................... 2.50% 04/21/21 606,958 550,000 Morgan Stanley...................................... 5.50% 07/28/21 628,734 300,000 Morgan Stanley...................................... 3.75% 02/25/23 318,220 450,000 Morgan Stanley...................................... 3.88% 04/29/24 482,503 450,000 Morgan Stanley...................................... 3.88% 01/27/26 478,672
See Notes to Financial Statements Page 19 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) CAPITAL MARKETS (CONTINUED) $ 350,000 Morgan Stanley...................................... 6.38% 07/24/42 $ 475,703 100,000 Morgan Stanley...................................... 4.30% 01/27/45 105,695 ------------- 9,766,734 ------------- CHEMICALS -- 0.3% 525,000 Dow Chemical (The) Co............................... 8.55% 05/15/19 623,599 200,000 Dow Chemical (The) Co............................... 3.00% 11/15/22 205,767 25,000 Dow Chemical (The) Co............................... 4.25% 10/01/34 25,885 75,000 Dow Chemical (The) Co............................... 4.63% 10/01/44 79,739 228,000 Eastman Chemical Co................................. 4.65% 10/15/44 234,119 ------------- 1,169,109 ------------- COMMERCIAL SERVICES & SUPPLIES -- 0.1% 250,000 Republic Services, Inc.............................. 2.90% 07/01/26 254,081 ------------- COMMUNICATIONS EQUIPMENT -- 0.4% 100,000 Cisco Systems, Inc.................................. 2.45% 06/15/20 104,184 100,000 Cisco Systems, Inc.................................. 2.20% 02/28/21 103,130 100,000 Cisco Systems, Inc.................................. 3.00% 06/15/22 107,572 100,000 Cisco Systems, Inc.................................. 2.60% 02/28/23 105,475 500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 561,026 100,000 Cisco Systems, Inc.................................. 2.95% 02/28/26 106,566 225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 306,070 75,000 QUALCOMM, Inc....................................... 3.45% 05/20/25 79,793 25,000 QUALCOMM, Inc....................................... 4.80% 05/20/45 26,286 ------------- 1,500,102 ------------- CONSUMER FINANCE -- 1.5% 50,000 American Express Co................................. 8.13% 05/20/19 58,651 450,000 American Express Co................................. 3.63% 12/05/24 462,352 800,000 American Express Credit Corp........................ 2.13% 07/27/18 812,574 200,000 American Express Credit Corp........................ 1.88% 11/05/18 202,194 150,000 American Express Credit Corp........................ 2.60% 09/14/20 155,057 250,000 American Express Credit Corp........................ 2.25% 05/05/21 254,606 550,000 Capital One Financial Corp.......................... 3.75% 04/24/24 574,768 150,000 Caterpillar Financial Services Corp................. 3.25% 12/01/24 160,982 400,000 Ford Motor Credit Co., LLC.......................... 2.88% 10/01/18 410,594 250,000 Ford Motor Credit Co., LLC.......................... 2.02% 05/03/19 252,300 200,000 Ford Motor Credit Co., LLC.......................... 2.46% 03/27/20 201,829 100,000 Ford Motor Credit Co., LLC.......................... 3.22% 01/09/22 102,563 250,000 Ford Motor Credit Co., LLC.......................... 3.10% 05/04/23 253,881 725,000 Ford Motor Credit Co., LLC.......................... 4.38% 08/06/23 789,167 200,000 Ford Motor Credit Co., LLC.......................... 4.13% 08/04/25 214,838 100,000 General Motors Financial Co., Inc................... 2.40% 05/09/19 100,347 250,000 General Motors Financial Co., Inc................... 4.20% 03/01/21 261,810 250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 250,681 150,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 163,368 ------------- 5,682,562 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.5% 175,000 Berkshire Hathaway, Inc............................. 2.20% 03/15/21 180,647 125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 129,269
Page 20 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) DIVERSIFIED FINANCIAL SERVICES (CONTINUED) $ 425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 $ 446,179 350,000 Diamond 1 Finance Corp./Diamond 2 Finance Corp. (a).............................................. 3.48% 06/01/19 358,790 250,000 Diamond 1 Finance Corp./Diamond 2 Finance Corp. (a).............................................. 4.42% 06/15/21 257,598 129,000 General Electric Capital Corp....................... 6.75% 03/15/32 181,336 300,000 Nasdaq, Inc......................................... 3.85% 06/30/26 305,422 ------------- 1,859,241 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.3% 850,000 AT&T, Inc........................................... 1.70% 06/01/17 853,685 500,000 AT&T, Inc........................................... 2.30% 03/11/19 510,973 300,000 AT&T, Inc........................................... 2.45% 06/30/20 306,572 250,000 AT&T, Inc........................................... 2.80% 02/17/21 256,782 275,000 AT&T, Inc........................................... 3.88% 08/15/21 296,609 300,000 AT&T, Inc........................................... 3.00% 06/30/22 307,631 150,000 AT&T, Inc........................................... 3.60% 02/17/23 156,702 150,000 AT&T, Inc........................................... 3.90% 03/11/24 159,033 350,000 AT&T, Inc........................................... 3.40% 05/15/25 358,683 350,000 AT&T, Inc........................................... 4.13% 02/17/26 376,716 100,000 AT&T, Inc........................................... 4.50% 05/15/35 102,619 425,000 AT&T, Inc........................................... 4.80% 06/15/44 437,987 200,000 AT&T, Inc........................................... 4.75% 05/15/46 205,793 200,000 AT&T, Inc........................................... 5.65% 02/15/47 229,926 150,000 Verizon Communications, Inc......................... 1.35% 06/09/17 150,436 1,006,000 Verizon Communications, Inc......................... 2.63% 02/21/20 1,041,975 525,000 Verizon Communications, Inc......................... 5.15% 09/15/23 612,365 650,000 Verizon Communications, Inc......................... 3.50% 11/01/24 692,515 231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 237,193 300,000 Verizon Communications, Inc......................... 4.86% 08/21/46 329,272 249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 264,485 522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 530,347 ------------- 8,418,299 ------------- ELECTRIC UTILITIES -- 3.5% 100,000 Alabama Power Co.................................... 3.75% 03/01/45 104,266 675,000 American Electric Power Co., Inc.................... 1.65% 12/15/17 677,172 300,000 Appalachian Power Co................................ 4.40% 05/15/44 323,400 240,000 CenterPoint Energy Houston Electric LLC............. 2.25% 08/01/22 242,188 295,000 CenterPoint Energy Houston Electric LLC............. 4.50% 04/01/44 348,900 200,000 Commonwealth Edison Co.............................. 2.55% 06/15/26 203,600 300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 323,702 300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 308,354 200,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 204,893 575,000 Constellation Energy Group, Inc..................... 5.15% 12/01/20 640,537 100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 103,605 350,000 Duke Energy Carolinas LLC........................... 6.00% 01/15/38 469,805 50,000 Duke Energy Carolinas LLC........................... 3.75% 06/01/45 52,933 100,000 Duke Energy Carolinas LLC........................... 3.88% 03/15/46 107,701 200,000 Duke Energy Corp.................................... 2.10% 06/15/18 201,865 300,000 Duke Energy Corp.................................... 3.55% 09/15/21 320,062 100,000 Duke Energy Indiana LLC............................. 3.75% 05/15/46 104,093 200,000 Exelon Corp......................................... 2.45% 04/15/21 203,038
See Notes to Financial Statements Page 21 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) ELECTRIC UTILITIES (CONTINUED) $ 50,000 Exelon Corp......................................... 3.95% 06/15/25 $ 53,552 50,000 Exelon Corp......................................... 5.10% 06/15/45 57,686 350,000 Florida Power & Light Co............................ 3.25% 06/01/24 376,548 210,000 Florida Power & Light Co............................ 4.05% 06/01/42 235,322 100,000 Indiana Michigan Power Co........................... 4.55% 03/15/46 111,604 410,000 Metropolitan Edison Co. (a)......................... 3.50% 03/15/23 422,618 200,000 MidAmerican Energy Co............................... 3.50% 10/15/24 219,163 250,000 MidAmerican Energy Co............................... 4.40% 10/15/44 290,831 125,000 Monongahela Power Co. (a)........................... 5.40% 12/15/43 157,504 625,000 NV Energy, Inc...................................... 6.25% 11/15/20 740,669 150,000 Ohio Edison Co...................................... 6.88% 07/15/36 185,166 250,000 Pacific Gas & Electric Co........................... 3.50% 06/15/25 273,036 100,000 Pacific Gas & Electric Co........................... 2.95% 03/01/26 104,351 350,000 Pacific Gas & Electric Co........................... 4.30% 03/15/45 394,115 100,000 Pacific Gas & Electric Co........................... 4.25% 03/15/46 111,599 100,000 Public Service Electric & Gas Co.................... 1.90% 03/15/21 101,778 195,000 Public Service Electric & Gas Co.................... 2.38% 05/15/23 199,453 275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 303,769 100,000 Public Service Electric & Gas Co.................... 3.80% 03/01/46 108,783 300,000 Sierra Pacific Power Co. (a)........................ 2.60% 05/01/26 306,971 550,000 Southern (The) Co................................... 1.85% 07/01/19 557,362 375,000 Southern (The) Co................................... 2.35% 07/01/21 382,887 250,000 Southern (The) Co................................... 3.25% 07/01/26 260,223 200,000 Southern (The) Co................................... 4.25% 07/01/36 212,812 325,000 Southern (The) Co................................... 4.40% 07/01/46 350,833 200,000 Southern California Edison Co....................... 3.50% 10/01/23 219,144 200,000 Southern California Edison Co....................... 3.60% 02/01/45 208,289 100,000 Southwestern Electric Power Co...................... 6.20% 03/15/40 124,942 200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 216,961 100,000 Virginia Electric & Power Co........................ 3.15% 01/15/26 105,790 475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 548,218 ------------- 12,882,093 ------------- ENERGY EQUIPMENT & SERVICES -- 0.0% 100,000 Halliburton Co...................................... 5.00% 11/15/45 110,425 ------------- FOOD & STAPLES RETAILING -- 1.3% 600,000 CVS Health Corp..................................... 1.90% 07/20/18 609,382 150,000 CVS Health Corp..................................... 2.80% 07/20/20 156,337 300,000 CVS Health Corp..................................... 2.13% 06/01/21 304,036 700,000 CVS Health Corp..................................... 4.00% 12/05/23 775,313 178,000 CVS Health Corp..................................... 3.88% 07/20/25 196,164 50,000 CVS Health Corp..................................... 2.88% 06/01/26 51,204 300,000 CVS Health Corp..................................... 5.13% 07/20/45 373,698 250,000 Kroger (The) Co..................................... 3.30% 01/15/21 265,976 200,000 Kroger (The) Co..................................... 3.50% 02/01/26 215,946 300,000 Kroger (The) Co..................................... 5.15% 08/01/43 359,417 200,000 Sysco Corp.......................................... 1.90% 04/01/19 202,540 100,000 Sysco Corp.......................................... 2.50% 07/15/21 102,305 100,000 Sysco Corp.......................................... 3.30% 07/15/26 103,964 100,000 Sysco Corp.......................................... 4.50% 04/01/46 107,117
Page 22 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) FOOD & STAPLES RETAILING (CONTINUED) $ 325,000 Wal-Mart Stores, Inc................................ 3.30% 04/22/24 $ 356,383 100,000 Wal-Mart Stores, Inc................................ 4.30% 04/22/44 116,987 100,000 Walgreens Boots Alliance, Inc....................... 3.10% 06/01/23 102,006 200,000 Walgreens Boots Alliance, Inc....................... 3.45% 06/01/26 205,728 ------------- 4,604,503 ------------- FOOD PRODUCTS -- 0.4% 200,000 JM Smucker (The) Co................................. 3.50% 03/15/25 216,379 50,000 JM Smucker (The) Co................................. 4.38% 03/15/45 54,576 200,000 Kraft Foods Group, Inc.............................. 5.00% 06/04/42 230,822 200,000 Kraft Heinz Foods Co. (a)........................... 3.50% 07/15/22 212,694 200,000 Kraft Heinz Foods Co. (a)........................... 3.95% 07/15/25 217,862 150,000 Kraft Heinz Foods Co. (a)........................... 3.00% 06/01/26 151,542 150,000 Kraft Heinz Foods Co. (a)........................... 5.20% 07/15/45 178,333 150,000 Kraft Heinz Foods Co. (a)........................... 4.38% 06/01/46 159,298 ------------- 1,421,506 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7% 225,000 Becton Dickinson and Co............................. 2.68% 12/15/19 231,610 250,000 Becton Dickinson and Co............................. 3.73% 12/15/24 269,763 100,000 Becton Dickinson and Co............................. 4.69% 12/15/44 113,117 50,000 Medtronic, Inc...................................... 1.50% 03/15/18 50,447 250,000 Medtronic, Inc...................................... 2.50% 03/15/20 259,416 450,000 Medtronic, Inc...................................... 3.15% 03/15/22 480,602 500,000 Medtronic, Inc...................................... 3.50% 03/15/25 545,679 450,000 Medtronic, Inc...................................... 4.63% 03/15/45 530,492 ------------- 2,481,126 ------------- HEALTH CARE PROVIDERS & SERVICES -- 0.6% 650,000 UnitedHealth Group, Inc............................. 1.63% 03/15/19 656,909 275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 310,689 550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 579,729 100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 109,839 150,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 156,595 150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 219,318 250,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 301,942 ------------- 2,335,021 ------------- HOTELS, RESTAURANTS & LEISURE -- 0.1% 150,000 McDonald's Corp..................................... 3.70% 01/30/26 162,388 100,000 McDonald's Corp..................................... 4.88% 12/09/45 117,411 ------------- 279,799 ------------- HOUSEHOLD DURABLES -- 0.3% 250,000 Newell Rubbermaid, Inc.............................. 3.15% 04/01/21 260,727 250,000 Newell Rubbermaid, Inc.............................. 4.20% 04/01/26 271,333 375,000 Newell Rubbermaid, Inc.............................. 5.50% 04/01/46 447,200 ------------- 979,260 -------------
See Notes to Financial Statements Page 23 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) HOUSEHOLD PRODUCTS -- 0.1% $ 100,000 Proctor & Gamble (The) Co........................... 1.85% 02/02/21 $ 102,576 100,000 Proctor & Gamble (The) Co........................... 2.70% 02/02/26 105,952 ------------- 208,528 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.3% 250,000 NextEra Energy Capital Holdings, Inc................ 2.30% 04/01/19 255,015 525,000 NextEra Energy Capital Holdings, Inc................ 2.40% 09/15/19 536,397 200,000 PSEG Power LLC...................................... 3.00% 06/15/21 202,992 ------------- 994,404 ------------- INDUSTRIAL CONGLOMERATES -- 0.1% 425,000 General Electric Co................................. 4.50% 03/11/44 491,667 ------------- INSURANCE -- 1.0% 400,000 American International Group, Inc................... 3.38% 08/15/20 420,071 200,000 American International Group, Inc................... 4.13% 02/15/24 211,331 50,000 American International Group, Inc................... 3.88% 01/15/35 48,029 200,000 American International Group, Inc................... 6.25% 05/01/36 238,592 400,000 Chubb INA Holdings, Inc............................. 2.30% 11/03/20 411,504 150,000 Chubb INA Holdings, Inc............................. 2.88% 11/03/22 157,039 300,000 Chubb INA Holdings, Inc............................. 3.35% 05/03/26 320,164 250,000 Chubb INA Holdings, Inc............................. 4.35% 11/03/45 288,351 150,000 Hartford Financial Services Group (The), Inc........ 5.95% 10/15/36 184,603 100,000 MetLife, Inc........................................ 3.00% 03/01/25 101,362 150,000 MetLife, Inc........................................ 3.60% 11/13/25 157,582 300,000 MetLife, Inc........................................ 4.88% 11/13/43 332,394 20,000 MetLife, Inc........................................ 4.60% 05/13/46 21,555 100,000 Prudential Financial, Inc........................... 3.50% 05/15/24 104,089 275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 296,434 325,000 Travelers (The) Cos., Inc........................... 6.75% 06/20/36 471,527 80,000 Travelers (The) Cos., Inc........................... 3.75% 05/15/46 83,939 ------------- 3,848,566 ------------- IT SERVICES -- 0.8% 500,000 International Business Machines Corp................ 1.63% 05/15/20 506,546 100,000 International Business Machines Corp................ 3.63% 02/12/24 109,160 400,000 Visa, Inc........................................... 2.20% 12/14/20 412,689 550,000 Visa, Inc........................................... 2.80% 12/14/22 580,745 550,000 Visa, Inc........................................... 3.15% 12/14/25 588,717 303,000 Visa, Inc........................................... 4.15% 12/14/35 343,376 300,000 Visa, Inc........................................... 4.30% 12/14/45 348,232 ------------- 2,889,465 ------------- MACHINERY -- 0.2% 650,000 Caterpillar, Inc.................................... 3.90% 05/27/21 715,733 100,000 Fortive Corp. (a)................................... 1.80% 06/15/19 100,713 100,000 Fortive Corp. (a)................................... 2.35% 06/15/21 101,583 ------------- 918,029 ------------- MEDIA -- 1.7% 150,000 21st Century Fox America, Inc....................... 3.00% 09/15/22 156,448 175,000 21st Century Fox America, Inc....................... 5.40% 10/01/43 204,041 50,000 21st Century Fox America, Inc....................... 4.95% 10/15/45 57,162
Page 24 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) MEDIA (CONTINUED) $ 275,000 CBS Corp............................................ 2.30% 08/15/19 $ 279,436 610,000 Charter Communications Operating LLC/Charter Communications Operating Capital (a)............. 4.91% 07/23/25 668,115 300,000 Charter Communications Operating LLC/Charter Communications Operating Capital (a)............. 6.48% 10/23/45 359,485 350,000 Comcast Corp........................................ 2.85% 01/15/23 368,285 200,000 Comcast Corp........................................ 2.75% 03/01/23 209,640 200,000 Comcast Corp........................................ 3.38% 08/15/25 216,357 200,000 Comcast Corp........................................ 3.15% 03/01/26 213,138 675,000 Comcast Corp........................................ 4.25% 01/15/33 746,122 100,000 Comcast Corp........................................ 4.60% 08/15/45 115,426 200,000 Discovery Communications LLC........................ 4.90% 03/11/26 212,497 329,000 Time Warner Cable, Inc.............................. 6.75% 07/01/18 360,931 100,000 Time Warner Cable, Inc.............................. 4.50% 09/15/42 93,492 350,000 Time Warner, Inc.................................... 4.88% 03/15/20 389,113 150,000 Time Warner, Inc.................................... 3.60% 07/15/25 159,021 100,000 Time Warner, Inc.................................... 2.95% 07/15/26 100,967 200,000 Time Warner, Inc.................................... 6.50% 11/15/36 254,411 50,000 Time Warner, Inc.................................... 4.85% 07/15/45 54,581 50,000 Viacom, Inc......................................... 2.75% 12/15/19 50,766 125,000 Viacom, Inc......................................... 3.88% 04/01/24 127,168 50,000 Viacom, Inc......................................... 4.85% 12/15/34 46,753 100,000 Walt Disney (The) Co................................ 2.15% 09/17/20 103,561 75,000 Walt Disney (The) Co................................ 2.30% 02/12/21 78,085 150,000 Walt Disney (The) Co................................ 3.00% 02/13/26 161,572 475,000 Walt Disney (The) Co................................ 4.13% 06/01/44 538,301 ------------- 6,324,874 ------------- MULTI-UTILITIES -- 0.4% 320,000 CMS Energy Corp..................................... 3.00% 05/15/26 327,595 95,000 Consolidated Edison Co. of New York, Inc............ 4.50% 12/01/45 108,252 230,000 Consolidated Edison Co. of New York, Inc............ 3.30% 12/01/24 248,320 335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 378,341 100,000 Consolidated Edison Co. of New York, Inc............ 3.85% 06/15/46 103,896 100,000 Consolidated Edison, Inc............................ 2.00% 05/15/21 101,163 50,000 Dominion Gas Holdings LLC........................... 2.50% 12/15/19 51,183 200,000 Dominion Resources, Inc............................. 5.20% 08/15/19 221,692 100,000 San Diego Gas & Electric Co......................... 2.50% 05/15/26 101,752 ------------- 1,642,194 ------------- OIL, GAS & CONSUMABLE FUELS -- 3.4% 150,000 Anadarko Petroleum Corp............................. 5.55% 03/15/26 165,950 100,000 Anadarko Petroleum Corp............................. 6.60% 03/15/46 121,182 200,000 Chevron Corp........................................ 1.56% 05/16/19 202,324 175,000 Chevron Corp........................................ 2.19% 11/15/19 179,997 200,000 Chevron Corp........................................ 1.96% 03/03/20 202,663 100,000 Chevron Corp........................................ 2.10% 05/16/21 101,978 100,000 Chevron Corp........................................ 2.57% 05/16/23 102,224 150,000 Chevron Corp........................................ 3.33% 11/17/25 160,504 300,000 Chevron Corp........................................ 2.95% 05/16/26 310,425
See Notes to Financial Statements Page 25 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) $ 368,000 ConocoPhillips...................................... 5.75% 02/01/19 $ 405,104 225,000 ConocoPhillips...................................... 6.50% 02/01/39 291,271 100,000 ConocoPhillips Co................................... 1.50% 05/15/18 100,424 300,000 ConocoPhillips Co................................... 4.20% 03/15/21 325,164 350,000 ConocoPhillips Co................................... 2.40% 12/15/22 346,480 150,000 ConocoPhillips Co................................... 4.95% 03/15/26 170,414 50,000 ConocoPhillips Co................................... 4.15% 11/15/34 50,670 250,000 ConocoPhillips Co................................... 5.95% 03/15/46 312,256 325,000 Devon Energy Corp................................... 3.25% 05/15/22 315,599 100,000 Devon Energy Corp................................... 5.85% 12/15/25 110,507 50,000 Enbridge Energy Partners L.P........................ 4.38% 10/15/20 51,364 185,000 Enbridge Energy Partners L.P........................ 5.50% 09/15/40 181,796 50,000 Enbridge Energy Partners L.P........................ 7.38% 10/15/45 61,144 50,000 Energy Transfer Partners L.P........................ 4.15% 10/01/20 50,795 300,000 Energy Transfer Partners L.P........................ 3.60% 02/01/23 287,887 50,000 Energy Transfer Partners L.P........................ 4.05% 03/15/25 49,156 50,000 Energy Transfer Partners L.P........................ 4.75% 01/15/26 51,516 175,000 Energy Transfer Partners L.P........................ 6.50% 02/01/42 184,341 50,000 Energy Transfer Partners L.P........................ 6.13% 12/15/45 52,025 200,000 Enterprise Products Operating LLC................... 1.65% 05/07/18 200,259 250,000 Enterprise Products Operating LLC................... 2.85% 04/15/21 258,584 400,000 Enterprise Products Operating LLC................... 3.70% 02/15/26 417,086 50,000 Enterprise Products Operating LLC................... 3.95% 02/15/27 53,145 250,000 Enterprise Products Operating LLC................... 4.90% 05/15/46 270,412 100,000 Exxon Mobil Corp.................................... 1.71% 03/01/19 101,664 250,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 257,929 150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 156,798 200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 212,564 200,000 Exxon Mobil Corp.................................... 3.57% 03/06/45 207,554 375,000 Exxon Mobil Corp.................................... 4.11% 03/01/46 424,056 200,000 Kinder Morgan Energy Partners L.P................... 6.00% 02/01/17 204,676 220,000 Kinder Morgan Energy Partners L.P................... 3.50% 03/01/21 220,945 175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 193,687 300,000 Kinder Morgan, Inc.................................. 3.05% 12/01/19 303,371 450,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 461,593 100,000 Kinder Morgan, Inc.................................. 5.55% 06/01/45 101,973 50,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 47,704 150,000 Occidental Petroleum Corp........................... 2.60% 04/15/22 153,825 200,000 Occidental Petroleum Corp........................... 3.40% 04/15/26 211,196 200,000 Occidental Petroleum Corp........................... 4.40% 04/15/46 221,564 750,000 ONEOK Partners L.P.................................. 2.00% 10/01/17 749,191 175,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 171,459 50,000 ONEOK Partners L.P.................................. 4.90% 03/15/25 52,524 75,000 Phillips 66......................................... 4.30% 04/01/22 82,019 75,000 Phillips 66......................................... 5.88% 05/01/42 90,384 50,000 Pioneer Natural Resources Co........................ 3.45% 01/15/21 51,682 400,000 Pioneer Natural Resources Co........................ 3.95% 07/15/22 419,047 50,000 Pioneer Natural Resources Co........................ 4.45% 01/15/26 54,579 250,000 Plains All American Pipeline L.P./PAA Finance Corp.. 6.13% 01/15/17 256,316 250,000 Plains All American Pipeline L.P./PAA Finance Corp.. 2.60% 12/15/19 243,753
Page 26 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) $ 200,000 Plains All American Pipeline L.P./PAA Finance Corp.. 4.65% 10/15/25 $ 202,299 350,000 Spectra Energy Capital LLC.......................... 3.30% 03/15/23 336,869 125,000 Valero Energy Corp.................................. 6.63% 06/15/37 137,549 50,000 Valero Energy Corp.................................. 4.90% 03/15/45 46,484 ------------- 12,519,900 ------------- PHARMACEUTICALS -- 0.4% 75,000 Merck & Co, Inc..................................... 1.85% 02/10/20 76,609 50,000 Merck & Co, Inc..................................... 3.70% 02/10/45 53,124 300,000 Pfizer, Inc......................................... 1.20% 06/01/18 301,475 100,000 Pfizer, Inc......................................... 1.45% 06/03/19 100,875 100,000 Pfizer, Inc......................................... 1.95% 06/03/21 101,426 250,000 Pfizer, Inc......................................... 3.40% 05/15/24 273,836 100,000 Pfizer, Inc......................................... 2.75% 06/03/26 103,255 250,000 Pfizer, Inc......................................... 4.40% 05/15/44 285,684 ------------- 1,296,284 ------------- ROAD & RAIL -- 0.7% 200,000 CSX Corp............................................ 6.25% 03/15/18 216,568 425,000 CSX Corp............................................ 3.40% 08/01/24 457,552 200,000 CSX Corp............................................ 4.50% 08/01/54 215,188 250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 257,774 425,000 Ryder System, Inc................................... 2.45% 09/03/19 432,501 300,000 Ryder System, Inc................................... 2.65% 03/02/20 304,082 300,000 Union Pacific Corp.................................. 3.75% 03/15/24 334,018 100,000 Union Pacific Corp.................................. 2.75% 03/01/26 104,392 70,000 Union Pacific Corp.................................. 4.85% 06/15/44 83,812 150,000 Union Pacific Corp.................................. 4.15% 01/15/45 164,838 100,000 Union Pacific Corp.................................. 4.05% 03/01/46 110,154 ------------- 2,680,879 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5% 100,000 Intel Corp.......................................... 1.70% 05/19/21 101,004 100,000 Intel Corp.......................................... 3.10% 07/29/22 107,162 375,000 Intel Corp.......................................... 2.70% 12/15/22 392,674 100,000 Intel Corp.......................................... 2.60% 05/19/26 102,056 160,000 Intel Corp.......................................... 4.80% 10/01/41 182,136 150,000 Intel Corp.......................................... 4.90% 07/29/45 175,159 100,000 Intel Corp.......................................... 4.10% 05/19/46 104,240 100,000 Lam Research Corp................................... 2.80% 06/15/21 102,490 100,000 Lam Research Corp................................... 3.45% 06/15/23 103,434 200,000 Lam Research Corp................................... 3.90% 06/15/26 210,982 193,000 QUALCOMM, Inc....................................... 2.25% 05/20/20 198,479 ------------- 1,779,816 ------------- SOFTWARE -- 0.9% 150,000 Microsoft Corp...................................... 1.30% 11/03/18 151,414 75,000 Microsoft Corp...................................... 1.85% 02/12/20 76,692 150,000 Microsoft Corp...................................... 2.00% 11/03/20 153,922 200,000 Microsoft Corp...................................... 2.38% 02/12/22 206,567 150,000 Microsoft Corp...................................... 2.65% 11/03/22 156,905
See Notes to Financial Statements Page 27 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) SOFTWARE (CONTINUED) $ 150,000 Microsoft Corp...................................... 3.63% 12/15/23 $ 166,398 200,000 Microsoft Corp...................................... 3.13% 11/03/25 214,460 75,000 Microsoft Corp...................................... 4.88% 12/15/43 89,621 200,000 Microsoft Corp...................................... 4.45% 11/03/45 226,104 200,000 Oracle Corp......................................... 1.90% 09/15/21 200,881 100,000 Oracle Corp......................................... 2.50% 05/15/22 102,260 200,000 Oracle Corp......................................... 3.63% 07/15/23 219,297 250,000 Oracle Corp......................................... 3.40% 07/08/24 269,136 200,000 Oracle Corp......................................... 2.65% 07/15/26 200,760 400,000 Oracle Corp......................................... 5.38% 07/15/40 484,698 200,000 Oracle Corp......................................... 4.00% 07/15/46 202,164 ------------- 3,121,279 ------------- SPECIALTY RETAIL -- 0.7% 400,000 Home Depot (The), Inc............................... 2.00% 04/01/21 411,104 600,000 Home Depot (The), Inc............................... 4.40% 04/01/21 676,914 100,000 Home Depot (The), Inc............................... 3.35% 09/15/25 109,107 400,000 Home Depot (The), Inc............................... 3.00% 04/01/26 425,637 200,000 Home Depot (The), Inc............................... 5.40% 09/15/40 260,720 150,000 Home Depot (The), Inc............................... 4.25% 04/01/46 172,420 200,000 Lowe's Cos., Inc.................................... 2.50% 04/15/26 203,959 150,000 Lowe's Cos., Inc.................................... 3.70% 04/15/46 154,644 ------------- 2,414,505 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 100,000 Apple, Inc.......................................... 2.25% 02/23/21 102,955 250,000 Apple, Inc.......................................... 2.85% 05/06/21 264,216 375,000 Apple, Inc.......................................... 2.40% 05/03/23 382,241 50,000 Apple, Inc.......................................... 3.85% 05/04/43 50,327 100,000 Apple, Inc.......................................... 4.45% 05/06/44 109,514 50,000 Apple, Inc.......................................... 3.45% 02/09/45 47,108 100,000 Apple, Inc.......................................... 4.65% 02/23/46 113,241 150,000 Hewlett Packard Enterprise Co. (a).................. 2.45% 10/05/17 151,991 50,000 Hewlett Packard Enterprise Co. (a).................. 2.85% 10/05/18 51,231 100,000 Hewlett Packard Enterprise Co. (a).................. 3.60% 10/15/20 104,480 150,000 Hewlett Packard Enterprise Co. (a).................. 4.40% 10/15/22 160,740 125,000 Hewlett Packard Enterprise Co. (a).................. 4.90% 10/15/25 130,841 50,000 Hewlett Packard Enterprise Co. (a).................. 6.35% 10/15/45 49,946 ------------- 1,718,831 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.0% 100,000 NIKE, Inc........................................... 3.88% 11/01/45 111,154 ------------- TOBACCO -- 0.6% 200,000 Altria Group, Inc................................... 10.20% 02/06/39 371,767 250,000 Philip Morris International, Inc.................... 4.25% 11/10/44 275,292 250,000 Reynolds American, Inc.............................. 3.50% 08/04/16 250,522 200,000 Reynolds American, Inc.............................. 2.30% 08/21/17 202,486 200,000 Reynolds American, Inc.............................. 4.00% 06/12/22 217,646 300,000 Reynolds American, Inc.............................. 4.45% 06/12/25 336,594
Page 28 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) TOBACCO (CONTINUED) $ 375,000 Reynolds American, Inc.............................. 5.85% 08/15/45 $ 481,012 ------------- 2,135,319 ------------- TOTAL CORPORATE BONDS AND NOTES.............................................. 134,947,791 (Cost $129,817,739) ------------- U.S. GOVERNMENT BONDS AND NOTES -- 4.7% 275,000 U.S. Treasury Bond.................................. 5.38% 02/15/31 408,042 1,630,000 U.S. Treasury Bond.................................. 4.50% 02/15/36 2,348,506 2,076,000 U.S. Treasury Bond.................................. 2.50% 02/15/46 2,161,797 1,125,000 U.S. Treasury Note (b).............................. 0.88% 10/15/17 1,129,592 530,000 U.S. Treasury Note.................................. 0.88% 05/31/18 532,899 2,868,000 U.S. Treasury Note.................................. 0.88% 04/15/19 2,881,781 381,000 U.S. Treasury Note.................................. 0.88% 05/15/19 382,845 3,000,500 U.S. Treasury Note.................................. 1.13% 02/28/21 3,021,713 900,000 U.S. Treasury Note.................................. 1.25% 03/31/21 910,512 250,000 U.S. Treasury Note.................................. 1.38% 05/31/21 254,516 2,000,000 U.S. Treasury Note.................................. 1.50% 02/28/23 2,029,140 1,014,000 U.S. Treasury Note.................................. 1.63% 05/31/23 1,036,934 ------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 17,098,277 (Cost $16,630,548) ------------- FOREIGN CORPORATE BONDS AND NOTES -- 1.1% BANKS -- 0.1% 225,000 HSBC Holdings PLC................................... 2.95% 05/25/21 227,485 225,000 HSBC Holdings PLC................................... 3.90% 05/25/26 231,768 ------------- 459,253 ------------- CAPITAL MARKETS -- 0.1% 200,000 Credit Suisse....................................... 5.40% 01/14/20 217,291 250,000 Credit Suisse Group Funding Guernsey Ltd. (a)....... 3.80% 06/09/23 249,735 ------------- 467,026 ------------- CHEMICALS -- 0.1% 175,000 LYB International Finance, B.V...................... 4.88% 03/15/44 185,748 100,000 LyondellBasell Industries N.V....................... 4.63% 02/26/55 98,029 ------------- 283,777 ------------- CONSUMER FINANCE -- 0.2% 444,000 GE Capital International Funding Co. (a)............ 4.42% 11/15/35 498,983 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.2% 100,000 Shell International Finance, B.V.................... 1.38% 05/10/19 100,390 150,000 Shell International Finance, B.V.................... 1.88% 05/10/21 150,899 250,000 Shell International Finance, B.V.................... 2.88% 05/10/26 254,321 250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 255,646 ------------- 761,256 ------------- METALS & MINING -- 0.1% 49,000 Rio Tinto Finance USA PLC........................... 2.88% 08/21/22 49,816 186,000 Rio Tinto Finance USA, Ltd.......................... 3.75% 06/15/25 194,940 ------------- 244,756 -------------
See Notes to Financial Statements Page 29 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) OIL, GAS & CONSUMABLE FUELS -- 0.0% $ 100,000 BP Capital Markets PLC.............................. 3.12% 05/04/26 $ 102,273 ------------- PHARMACEUTICALS -- 0.3% 375,000 Actavis Funding SCS................................. 3.00% 03/12/20 387,078 300,000 Actavis Funding SCS................................. 3.45% 03/15/22 311,959 300,000 Actavis Funding SCS................................. 3.80% 03/15/25 313,112 100,000 Actavis Funding SCS................................. 4.75% 03/15/45 105,423 ------------- 1,117,572 ------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 3,934,896 (Cost $3,810,028) ------------- TOTAL INVESTMENTS -- 97.7%.................................................... 357,564,096 (Cost $336,981,312) (c) NET OTHER ASSETS AND LIABILITIES -- 2.3%...................................... 8,528,525 ------------- NET ASSETS -- 100.0%.......................................................... $ 366,092,621 =============
----------------------------- (a) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund's advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgement. At June 30, 2016, securities noted as such amounted to $5,105,822 or 1.39% of net assets. (b) All or a portion of this security is segregated as collateral for open futures contracts. (c) Aggregate cost for financial reporting purposes, which approximates the aggregate cost for federal income tax purposes. As of June 30, 2016, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $23,612,482 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $3,029,698. Page 30 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED) ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of June 30, 2016 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 6/30/2016 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Common Stocks*.................................... $201,583,132 $201,583,132 $ -- $ -- Corporate Bonds and Notes*........................ 134,947,791 -- 134,947,791 -- U.S. Government Bonds and Notes................... 17,098,277 -- 17,098,277 -- Foreign Corporate Bonds and Notes*................ 3,934,896 -- 3,934,896 -- ------------ ------------ ------------ ------------ Total Investments................................. $357,564,096 $201,583,132 $155,980,964 $ -- ============ ============ ============ ============ LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 6/30/2016 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Futures Contracts**............................... $ (234,336) $ (234,336) $ -- $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. ** Includes cumulative appreciation/depreciation on futures contracts as presented on the Statements of Operations. Only the current day's variation margin is presented on the Statements of Assets and Liabilities. All transfers in and out of the Levels during the period are assumed to be transferred on the last day of the period at their current value. There were no transfers between Levels at June 30, 2016. OPEN FUTURES CONTRACTS AT JUNE 30, 2016 (see Note 2D - Futures Contracts in the Notes to Financial Statements):
UNREALIZED NUMBER OF EXPIRATION NOTIONAL APPRECIATION/ SHORT FUTURES CONTRACTS CONTRACTS MONTH VALUE (DEPRECIATION) -------------------------------------------------- ------------ ------------ ------------ ------------ U.S. Treasury 5-Year Notes 53 Sep-2016 $ 6,474,695 $ (103,133) U.S. Treasury 10-Year Notes 24 Sep-2016 3,191,625 (73,906) U.S. Treasury Ultra Long Term Bond Futures 13 Sep-2016 1,893,735 (57,297) ------------ ------------ Total Futures Contracts $ 11,560,055 $ (234,336) ============ ============
See Notes to Financial Statements Page 31 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- EXCHANGE-TRADED FUNDS -- 37.3% CAPITAL MARKETS -- 37.3% 1 First Trust Low Duration Opportunities ETF (a)............................... $ 52 45,070 First Trust Preferred Securities and Income ETF (a).......................... 857,231 47,060 First Trust Senior Loan Fund (a)............................................. 2,250,409 17,780 First Trust Tactical High Yield ETF (a)...................................... 847,573 70 iShares 20+ Year Treasury Bond ETF........................................... 9,723 215 iShares 7-10 Year Treasury Bond ETF.......................................... 24,288 10,605 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 1,301,552 2,044 iShares MBS ETF.............................................................. 224,779 1 Vanguard Mortgage-Backed Securities ETF...................................... 54 ------------- TOTAL EXCHANGE-TRADED FUNDS.................................................. 5,515,661 (Cost $5,539,260) ------------- COMMON STOCKS -- 23.3% AEROSPACE & DEFENSE -- 1.2% 368 General Dynamics Corp........................................................ 51,240 536 Honeywell International, Inc................................................. 62,348 415 Raytheon Co.................................................................. 56,419 ------------- 170,007 ------------- BANKS -- 1.4% 966 JPMorgan Chase & Co.......................................................... 60,027 1,271 U.S. Bancorp................................................................. 51,259 1,396 Webster Financial Corp....................................................... 47,394 1,121 Wells Fargo & Co............................................................. 53,057 ------------- 211,737 ------------- BEVERAGES -- 0.4% 441 Anheuser-Busch InBev N.V., ADR............................................... 58,071 ------------- CAPITAL MARKETS -- 0.3% 142 BlackRock, Inc............................................................... 48,639 ------------- CHEMICALS -- 0.6% 480 International Flavors & Fragrances, Inc...................................... 60,514 471 LyondellBasell Industries N.V., Class A...................................... 35,052 ------------- 95,566 ------------- COMMUNICATIONS EQUIPMENT -- 0.8% 1,962 Cisco Systems, Inc........................................................... 56,290 697 Harris Corp.................................................................. 58,158 ------------- 114,448 ------------- CONSUMER FINANCE -- 0.4 831 Capital One Financial Corp................................................... 52,777 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 998 Verizon Communications, Inc.................................................. 55,728 ------------- ELECTRIC UTILITIES -- 2.0% 490 Alliant Energy Corp.......................................................... 19,453 557 American Electric Power Co., Inc............................................. 39,040 72 Duke Energy Corp............................................................. 6,177 775 Edison International......................................................... 60,194 286 Emera, Inc. (CAD)............................................................ 10,763
Page 32 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) ELECTRIC UTILITIES (CONTINUED) 607 Eversource Energy............................................................ $ 36,359 460 NextEra Energy, Inc.......................................................... 59,984 853 Pinnacle West Capital Corp................................................... 69,144 ------------- 301,114 ------------- ELECTRICAL EQUIPMENT -- 0.3% 776 Eaton Corp. PLC.............................................................. 46,351 ------------- ENERGY EQUIPMENT & SERVICES -- 0.3% 501 Schlumberger Ltd............................................................. 39,619 ------------- FOOD & STAPLES RETAILING -- 0.4% 605 CVS Health Corp.............................................................. 57,923 ------------- GAS UTILITIES -- 0.6% 150 Atmos Energy Corp............................................................ 12,198 517 Chesapeake Utilities Corp.................................................... 34,215 317 New Jersey Resources Corp.................................................... 12,220 522 UGI Corp..................................................................... 23,621 ------------- 82,254 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.7% 1,155 Abbott Laboratories.......................................................... 45,403 661 Medtronic PLC................................................................ 57,355 ------------- 102,758 ------------- HEALTH CARE PROVIDERS & SERVICES -- 0.8% 496 Aetna, Inc................................................................... 60,577 691 Cardinal Health, Inc......................................................... 53,905 ------------- 114,482 ------------- HOTELS, RESTAURANTS & LEISURE -- 0.3% 882 Starbucks Corp............................................................... 50,380 ------------- INDUSTRIAL CONGLOMERATES -- 0.4% 524 Siemens AG, ADR.............................................................. 53,757 ------------- INSURANCE -- 1.6% 1,705 FNF Group.................................................................... 63,938 1,351 Hartford Financial Services Group (The), Inc................................. 59,957 1,733 Horace Mann Educators Corp................................................... 58,558 1,245 MetLife, Inc................................................................. 49,588 ------------- 232,041 ------------- IT SERVICES -- 0.5% 604 Accenture PLC, Class A....................................................... 68,427 ------------- MACHINERY -- 0.4% 411 Snap-on, Inc................................................................. 64,864 ------------- MEDIA -- 0.4% 550 Walt Disney (The) Co......................................................... 53,801 ------------- MULTI-UTILITIES -- 1.1% 510 National Grid PLC, ADR....................................................... 37,908 748 Public Service Enterprise Group, Inc......................................... 34,864 481 SCANA Corp................................................................... 36,393
See Notes to Financial Statements Page 33 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES (CONTINUED) 318 Sempra Energy................................................................ $ 36,258 365 WEC Energy Group, Inc........................................................ 23,835 ------------- 169,258 ------------- OIL, GAS & CONSUMABLE FUELS -- 3.4% 1,406 Enbridge Income Fund Holdings, Inc. (CAD).................................... 34,890 264 Enbridge, Inc................................................................ 11,183 750 Exxon Mobil Corp............................................................. 70,305 1,046 Inter Pipeline Ltd. (CAD).................................................... 22,184 6,313 Kinder Morgan, Inc........................................................... 118,179 815 Targa Resources Corp......................................................... 34,344 2,900 TransCanada Corp............................................................. 131,138 946 Valero Energy Corp........................................................... 48,246 1,662 Williams (The) Cos., Inc..................................................... 35,949 ------------- 506,418 ------------- PHARMACEUTICALS -- 0.4% 1,035 Teva Pharmaceutical Industries Ltd., ADR..................................... 51,988 ------------- ROAD & RAIL -- 0.3% 524 Union Pacific Corp........................................................... 45,719 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7% 1,421 Intel Corp................................................................... 46,609 939 Texas Instruments, Inc....................................................... 58,828 ------------- 105,437 ------------- SOFTWARE -- 0.8% 1,219 Microsoft Corp............................................................... 62,376 1,241 Oracle Corp.................................................................. 50,794 ------------- 113,170 ------------- SPECIALTY RETAIL -- 0.8% 520 Home Depot (The), Inc........................................................ 66,399 715 TJX (The) Cos., Inc.......................................................... 55,219 ------------- 121,618 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.3% 482 Apple, Inc................................................................... 46,079 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.3% 736 VF Corp...................................................................... 45,257 ------------- TOBACCO -- 0.7% 803 Altria Group, Inc............................................................ 55,375 426 British American Tobacco PLC, ADR............................................ 55,159 ------------- 110,534 ------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.3% 1,643 Vodafone Group PLC, ADR...................................................... 50,752 ------------- TOTAL COMMON STOCKS.......................................................... 3,440,974 (Cost $3,295,367) -------------
Page 34 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- REAL ESTATE INVESTMENT TRUSTS -- 13.2% DIVERSIFIED REITS -- 1.7% 9,198 Lexington Realty Trust....................................................... $ 92,992 710 PS Business Parks, Inc....................................................... 75,317 2,521 Washington Real Estate Investment Trust...................................... 79,311 ------------- 247,620 ------------- HEALTH CARE REITS -- 1.1% 1,115 National Health Investors, Inc............................................... 83,725 2,268 Omega Healthcare Investors, Inc.............................................. 76,999 ------------- 160,724 ------------- HOTEL & RESORT REITS -- 1.5% 2,799 Hospitality Properties Trust................................................. 80,611 4,423 Host Hotels & Resorts, Inc................................................... 71,697 3,435 RLJ Lodging Trust............................................................ 73,681 ------------- 225,989 ------------- INDUSTRIAL REITS -- 1.6% 1,784 DCT Industrial Trust, Inc.................................................... 85,703 1,670 Prologis, Inc................................................................ 81,897 2,880 Terreno Realty Corp.......................................................... 74,506 ------------- 242,106 ------------- RESIDENTIAL REITS -- 2.0% 378 AvalonBay Communities, Inc................................................... 68,187 858 Camden Property Trust........................................................ 75,864 944 Equity LifeStyle Properties, Inc............................................. 75,567 722 Mid-America Apartment Communities, Inc....................................... 76,821 ------------- 296,439 ------------- RETAIL REITS -- 2.0% 425 Federal Realty Investment Trust.............................................. 70,359 2,329 Kimco Realty Corp............................................................ 73,084 1,408 National Retail Properties, Inc.............................................. 72,822 343 Simon Property Group, Inc.................................................... 74,397 ------------- 290,662 ------------- SPECIALIZED REITS -- 3.3% 1,811 CyrusOne, Inc................................................................ 100,800 798 Digital Realty Trust, Inc.................................................... 86,974 1,054 EPR Properties............................................................... 85,037 780 Extra Space Storage, Inc..................................................... 72,181 1,499 QTS Realty Trust, Inc., Class A.............................................. 83,914 609 Sovran Self Storage, Inc..................................................... 63,896 ------------- 492,802 ------------- TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 1,956,342 (Cost $1,613,769) -------------
See Notes to Financial Statements Page 35 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
UNITS DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- MASTER LIMITED PARTNERSHIPS -- 10.5% CHEMICALS -- 0.3% 2,015 Westlake Chemical Partners, L.P.............................................. $ 40,260 ------------- GAS UTILITIES -- 0.5% 1,528 AmeriGas Partners, L.P....................................................... 71,358 348 Suburban Propane Partners, L.P............................................... 11,623 ------------- 82,981 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.5% 2,499 NextEra Energy Partners, L.P................................................. 75,920 ------------- OIL, GAS & CONSUMABLE FUELS -- 9.2% 1,228 Alliance Holdings GP, L.P.................................................... 25,837 3,432 Alliance Resource Partners, L.P.............................................. 54,088 317 Buckeye Partners, L.P........................................................ 22,295 4,527 Columbia Pipeline Partners, L.P.............................................. 67,905 6,458 Enbridge Energy Partners, L.P................................................ 149,826 8,002 Enterprise Products Partners, L.P............................................ 234,138 1,378 EQT Midstream Partners, L.P.................................................. 110,653 3,387 Holly Energy Partners, L.P................................................... 117,360 1,837 Magellan Midstream Partners, L.P............................................. 139,612 1,463 ONEOK Partners, L.P.......................................................... 58,608 4,278 Plains All American Pipeline, L.P............................................ 117,602 2,953 Spectra Energy Partners, L.P................................................. 139,322 777 Tallgrass Energy Partners, L.P............................................... 35,757 1,457 TC PipeLines, L.P............................................................ 83,428 ------------- 1,356,431 ------------- TOTAL MASTER LIMITED PARTNERSHIPS............................................ 1,555,592 (Cost $1,405,121) -------------
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT BONDS AND NOTES -- 8.6% $ 18,387 U.S. Treasury Inflation Indexed Bond................ 2.38% 01/15/27 22,588 50,244 U.S. Treasury Inflation Indexed Bond................ 1.75% 01/15/28 58,821 26,741 U.S. Treasury Inflation Indexed Bond................ 2.50% 01/15/29 33,937 32,481 U.S. Treasury Inflation Indexed Bond................ 3.38% 04/15/32 47,649 14,388 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/40 18,851 20,537 U.S. Treasury Inflation Indexed Bond................ 2.13% 02/15/41 27,151 18,845 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/42 18,932 43,285 U.S. Treasury Inflation Indexed Bond................ 0.63% 02/15/43 42,245 25,456 U.S. Treasury Inflation Indexed Bond................ 1.38% 02/15/44 29,492 25,702 U.S. Treasury Inflation Indexed Bond................ 0.75% 02/15/45 25,876 10,096 U.S. Treasury Inflation Indexed Bond................ 1.00% 02/15/46 10,916 14,113 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/17 14,208 65,508 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/18 66,515 28,843 U.S. Treasury Inflation Indexed Note................ 1.38% 07/15/18 30,269 94,844 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/19 96,901 29,205 U.S. Treasury Inflation Indexed Note................ 1.38% 01/15/20 31,205 50,055 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/20 51,232 38,393 U.S. Treasury Inflation Indexed Note................ 1.25% 07/15/20 41,298
Page 36 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT BONDS AND NOTES (CONTINUED) $ 42,868 U.S. Treasury Inflation Indexed Note................ 1.13% 01/15/21 $ 45,898 18,168 U.S. Treasury Inflation Indexed Note................ 0.13% 04/15/21 18,630 41,395 U.S. Treasury Inflation Indexed Note................ 0.63% 07/15/21 43,612 47,457 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/22 48,425 45,772 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/22 46,860 51,820 U.S. Treasury Inflation Indexed Note................ 0.13% 01/15/23 52,572 40,090 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/23 41,503 42,036 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/24 44,062 48,561 U.S. Treasury Inflation Indexed Note................ 0.13% 07/15/24 49,112 47,470 U.S. Treasury Inflation Indexed Note................ 0.25% 01/15/25 48,241 34,901 U.S. Treasury Inflation Indexed Note................ 2.38% 01/15/25 41,719 47,412 U.S. Treasury Inflation Indexed Note................ 0.38% 07/15/25 48,863 44,298 U.S. Treasury Inflation Indexed Note................ 0.63% 01/15/26 46,690 25,914 U.S. Treasury Inflation Indexed Note................ 2.00% 01/15/26 30,524 ------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 1,274,797 (Cost $1,237,207) ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.1% COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.4% Fannie Mae REMICS 136 Series 1988-16, Class B.......................... 9.50% 06/25/18 141 1,623 Series 1988-30, Class D.......................... 9.50% 12/25/18 1,718 406 Series 1989-69, Class G.......................... 7.60% 10/25/19 430 1,092 Series 1989-82, Class G.......................... 8.40% 11/25/19 1,187 3,515 Series 1990-109, Class J......................... 7.00% 09/25/20 3,710 1,638 Series 1992-24, Class Z.......................... 6.50% 04/25/22 1,783 195 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 201 3,480 Series 1993-1, Class KA.......................... 7.90% 01/25/23 3,938 2,424 Series 1993-62, Class E.......................... 7.00% 04/25/23 2,708 848 Series 1993-119, Class H......................... 6.50% 07/25/23 942 5,254 Series 1993-178, Class PK........................ 6.50% 09/25/23 5,865 5,158 Series 1995-24, Class G.......................... 6.50% 04/25/23 5,650 146 Series 2001-69, Class PG......................... 6.00% 12/25/16 146 138 Series 2001-71, Class QE......................... 6.00% 12/25/16 140 1,685 Series 2002-2, Class UC.......................... 6.00% 02/25/17 1,713 54,105 Series 2002-9, Class MS, IO (b).................. 7.65% 03/25/32 12,192 5,113 Series 2002-10, Class FB (b)..................... 0.95% 03/25/17 5,119 2,389 Series 2002-67, Class PE......................... 5.50% 11/25/32 2,680 245 Series 2003-9, Class EB.......................... 5.00% 02/25/18 251 6,739 Series 2003-14, Class AQ......................... 3.50% 03/25/33 7,032 9,089 Series 2003-41, Class OA......................... 4.00% 05/25/33 9,637 367 Series 2003-92, Class HP......................... 4.50% 09/25/18 378 10,198 Series 2004-10, Class ZB......................... 6.00% 02/25/34 13,031 11,044 Series 2004-76, Class CL......................... 4.00% 10/25/19 11,292 7,414 Series 2004-92, Class S, IO (b).................. 6.25% 08/25/34 563 2,702 Series 2005-46, Class LW......................... 5.00% 06/25/20 2,760 399 Series 2005-48, Class MD......................... 5.00% 04/25/34 408 14,346 Series 2005-68, Class BC......................... 5.25% 06/25/35 15,291 4,896 Series 2005-70, Class KJ......................... 5.50% 09/25/34 5,114 720 Series 2005-120, Class NF (b).................... 0.55% 01/25/21 720
See Notes to Financial Statements Page 37 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Fannie Mae REMICS (Continued) $ 1,492 Series 2010-39, Class PG......................... 4.00% 06/25/38 $ 1,503 932 Series 2011-38, Class AH......................... 2.75% 05/25/20 946 4,632 Series 2012-35, Class PL......................... 2.00% 11/25/41 4,685 9,850 Series 2013-31, Class NT......................... 3.00% 04/25/43 10,099 Fannie Mae Trust 8,409 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 10,062 FHLMC - GNMA 678 Series 1993-5, Class HA.......................... 7.50% 02/25/23 743 1,456 Series 1994-27, Class D.......................... 7.00% 03/25/24 1,635 Freddie Mac REMICS 2,260 Series 1988-23, Class F.......................... 9.60% 04/15/20 2,404 1,666 Series 1989-84, Class F.......................... 9.20% 10/15/20 1,812 161 Series 1991-1074, Class I........................ 6.75% 05/15/21 170 3,754 Series 1991-1078, Class GZ....................... 6.50% 05/15/21 3,895 1,208 Series 1992-1250, Class J........................ 7.00% 05/15/22 1,335 9,023 Series 1994-1673, Class FB (b)................... 1.32% 02/15/24 9,079 1,885 Series 1996-1807, Class G........................ 9.00% 10/15/20 2,001 114 Series 1996-1847, Class LL....................... 7.50% 04/15/26 130 21,891 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 3,037 18,108 Series 1999-2174, Class PN....................... 6.00% 07/15/29 20,541 618 Series 2001-2353, Class TD....................... 6.00% 09/15/16 626 885 Series 2001-2354, Class TY....................... 5.75% 09/15/16 887 153 Series 2001-2366, Class MD....................... 6.00% 10/15/16 154 826 Series 2002-2399, Class PG....................... 6.00% 01/15/17 833 604 Series 2002-2447, Class LB....................... 5.50% 05/15/17 611 773 Series 2003-2559, Class PB....................... 5.50% 08/15/30 804 8,176 Series 2003-2590, Class NV....................... 5.00% 03/15/18 8,390 5,308 Series 2003-2649, Class KA....................... 4.50% 07/15/18 5,442 14,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 15,825 3,384 Series 2004-2780, Class JA....................... 4.50% 04/15/19 3,555 1,412 Series 2005-2922, Class QE....................... 5.00% 05/15/34 1,466 43,435 Series 2006-3114, Class GI, IO (b)............... 6.16% 02/15/36 10,709 65,577 Series 2006-3199, Class DS, IO (b)............... 6.71% 08/15/36 14,846 2,043 Series 2006-3237, Class CB....................... 5.50% 07/15/36 2,174 24,251 Series 2011-3824, Class FA (b)................... 0.59% 03/15/26 24,203 3,041 Series 2012-4097, Class DC....................... 1.50% 06/15/41 2,993 8,473 Series 2013-4253, Class TD....................... 2.00% 07/15/40 8,535 Freddie Mac Strips 34,417 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 7,186 Government National Mortgage Association 17,080 Series 1999-30, Class S, IO (b).................. 8.16% 08/16/29 4,390 6,506 Series 2004-42, Class LE......................... 5.50% 07/20/33 6,598 830 Series 2008-85, Class HP......................... 4.00% 04/20/38 839 14,154 Series 2009-29, Class TA......................... 4.50% 03/16/39 14,975 468 Series 2009-81, Class PA......................... 5.50% 02/16/38 492 1,019 Series 2010-117, Class MA........................ 2.50% 09/16/23 1,030 6,665 Series 2010-121, Class PQ........................ 3.00% 02/20/39 6,814
Page 38 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
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) $ 5,754 Series 2011-136, Class GB........................ 2.50% 05/20/40 $ 5,863 48,726 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 6,841 ------------- 347,898 ------------- PASS-THROUGH SECURITIES -- 1.7% Federal Home Loan Mortgage Corporation 20,966 Pool A47829...................................... 4.00% 08/01/35 22,523 12,619 Pool C01252...................................... 6.50% 11/01/31 15,196 24,779 Pool G06358...................................... 4.00% 04/01/41 26,999 15,618 Pool G11418...................................... 6.50% 07/01/17 15,840 5,820 Pool O20138 (b).................................. 5.00% 11/01/30 6,466 31,001 Pool U90316...................................... 4.00% 10/01/42 33,599 Federal National Mortgage Association 16,550 Pool AH1568...................................... 4.50% 12/01/40 18,230 13,908 Pool AL0791...................................... 4.00% 02/01/41 15,179 59,438 Pool AU4289...................................... 4.00% 09/01/43 64,417 Government National Mortgage Association 18,682 Pool 3500........................................ 5.50% 01/20/34 21,075 13,304 Pool 3711........................................ 5.50% 05/20/35 15,012 ------------- 254,536 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 602,434 (Cost $587,662) ------------- MORTGAGE-BACKED SECURITIES -- 0.5% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% Credit Suisse First Boston Mortgage Securities Corp. 4,277 Series 2004-1, Class 1A1......................... 5.75% 02/25/34 4,294 3,397 Series 2004-4, Class 1A3......................... 5.75% 08/25/34 3,462 Jefferies Resecuritization Trust 8,485 Series 2009-R7, Class 4A1 (b) (c)................ 2.73% 09/26/34 8,426 818 Series 2009-R7, Class 12A1 (b) (c)............... 2.89% 08/26/36 818 JPMorgan Resecuritization Trust 10,365 Series 2009-7, Class 5A1 (b) (c)................. 6.00% 02/27/37 10,431 164 Series 2010-4, Class 7A1 (b) (c)................. 1.99% 08/26/35 165 MASTR Alternative Loan Trust 6,655 Series 2004-10, Class 2A1........................ 5.50% 10/25/19 6,829 MASTR Asset Securitization Trust 6,587 Series 2003-5, Class 2A1......................... 5.00% 06/25/18 6,754 3,650 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 3,728 Prime Mortgage Trust 140 Series 2004-CL1, Class 2A1....................... 5.00% 02/25/19 141 RAAC Trust 3,953 Series 2005-SP1, Class 2A1....................... 5.25% 09/25/34 4,044 Structured Asset Mortgage Investments Trust 14,431 Series 1999-1, Class 2A (b)...................... 8.91% 06/25/29 14,825 Structured Asset Securities Corp. Mortgage Pass-Through Certificates 4,709 Series 2004-21XS, Class 2A6A..................... 4.74% 12/25/34 4,797
See Notes to Financial Statements Page 39 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) WAMU Mortgage Pass-Through Certificates $ 576 Series 2002-S8, Class 2A7........................ 5.25% 01/25/18 $ 581 Wells Fargo Alternative Loan Trust 2,448 Series 2007-PA5, Class 2A1....................... 6.00% 11/25/22 2,481 Wells Fargo Mortgage-Backed Securities Trust 3,720 Series 2006-17, Class A4......................... 5.50% 11/25/21 3,764 ------------- TOTAL MORTGAGE-BACKED SECURITIES............................................. 75,540 (Cost $74,371) ------------- ASSET-BACKED SECURITIES -- 0.1% AFC Home Equity Loan Trust 1,146 Series 1997-4, Class 1A2 (b)..................... 1.16% 12/22/27 1,012 Bear Stearns Asset Backed Securities Trust 11,218 Series 2005-SD1, Class 1A3 (b)................... 0.85% 08/25/43 11,097 Conseco Financial Corp. 2,140 Series 1993-4, Class A5.......................... 7.05% 01/15/19 2,184 ------------- TOTAL ASSET-BACKED SECURITIES................................................ 14,293 (Cost $13,872) ------------- TOTAL INVESTMENTS -- 97.6%................................................... 14,435,633 (Cost $13,766,629) (d) NET OTHER ASSETS AND LIABILITIES -- 2.4%..................................... 352,300 ------------- NET ASSETS -- 100.0%......................................................... $ 14,787,933 =============
----------------------------- (a) Investment in an affiliated fund. (b) Floating or variable rate security. The interest rate shown reflects the rate in effect at June 30, 2016. (c) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund's advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. At June 30, 2016, securities noted as such amounted to $19,840 or 0.13% of net assets. (d) Aggregate cost for financial reporting purposes, which approximates the aggregate cost for federal income tax purposes. As of June 30, 2016, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $892,268 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $223,264. 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. Page 40 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) JUNE 30, 2016 (UNAUDITED) ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of June 30, 2016 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements)
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 6/30/2016 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Exchange-Traded Funds*............................ $ 5,515,661 $ 5,515,661 $ -- $ -- Common Stocks*.................................... 3,440,974 3,440,974 -- -- Real Estate Investment Trusts*.................... 1,956,342 1,956,342 -- -- Master Limited Partnerships*...................... 1,555,592 1,555,592 -- -- U.S. Government Bonds and Notes................... 1,274,797 -- 1,274,797 -- U.S. Government Agency Mortgage-Backed............ Securities.................................... 602,434 -- 602,434 -- Mortgage-Backed Securities........................ 75,540 -- 75,540 -- Asset-Backed Securities........................... 14,293 -- 14,293 -- ------------ ------------ ------------ ------------ Total Investments................................. $ 14,435,633 $ 12,468,569 $ 1,967,064 $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. All transfers in and out of the Levels during the period are assumed to be transferred on the last day of the period at their current value. There were no transfers between Levels at June 30, 2016. See Notes to Financial Statements Page 41 FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- EXCHANGE-TRADED FUNDS -- 98.5% CAPITAL MARKETS -- 98.5% 16,360 First Trust Consumer Discretionary AlphaDEX(R) Fund (a)...................... $ 551,659 12,264 First Trust Consumer Staples AlphaDEX(R) Fund (a)............................ 593,210 3,734 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 168,142 8,315 First Trust Dow Jones Internet Index Fund (a) (b)............................ 599,678 9,035 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 173,924 41,685 First Trust Energy AlphaDEX(R) Fund (a)...................................... 621,106 1,890 First Trust Germany AlphaDEX(R) Fund (a)..................................... 65,432 2,524 First Trust ISE Chindia Index Fund (a)....................................... 68,527 1,565 First Trust Japan AlphaDEX(R) Fund (a)....................................... 71,145 13,065 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 651,943 12,878 First Trust Mid Cap Core AlphaDEX(R) Fund (a)................................ 650,597 21,960 First Trust Mid Cap Growth AlphaDEX(R) Fund (a).............................. 659,020 1,694 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 65,371 1,841 First Trust United Kingdom AlphaDEX(R) Fund (a).............................. 61,213 22,236 First Trust Utilities AlphaDEX(R) Fund (a)................................... 601,039 21,870 iShares Core U.S. Aggregate Bond ETF......................................... 2,461,906 50,643 SPDR Barclays Emerging Markets Local Bond ETF (b)............................ 1,409,395 25,737 SPDR Barclays International Treasury Bond ETF (b)............................ 1,471,127 28,594 SPDR Nuveen Barclays Municipal Bond ETF...................................... 1,446,570 31,677 SPDR Wells Fargo Preferred Stock ETF......................................... 1,457,775 ------------- TOTAL INVESTMENTS -- 98.5%.................................................... 13,848,779 (Cost $13,467,785) (c) ------------- NET OTHER ASSETS AND LIABILITIES - 1.5%...................................... 210,343 ------------- NET ASSETS -- 100.0%.......................................................... $ 14,059,122 =============
----------------------------- (a) Investment in an affiliated fund. (b) Non-income producing security. (c) Aggregate cost for financial reporting purposes, which approximates the aggregate cost for federal income tax purposes. As of June 30, 2016, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $401,466 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $20,472. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of June 30, 2016 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 6/30/2016 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Exchange-Traded Funds*............................ $ 13,848,779 $ 13,848,779 $ -- $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. All transfers in and out of the Levels during the period are assumed to be transferred on the last day of the period at their current value. There were no transfers between Levels at June 30, 2016. Page 42 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2016 (UNAUDITED)
FIRST TRUST/DOW JONES DIVIDEND FIRST TRUST FIRST TRUST & INCOME MULTI INCOME DORSEY WRIGHT ALLOCATION ALLOCATION TACTICAL CORE PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- ASSETS: Investments, at value................................................... $ 357,564,096 $ 10,480,368 $ 8,246,773 Investments in affiliated funds, at value............................... -- 3,955,265 5,602,006 Cash and cash equivalents............................................... 10,174,909 422,845 259,256 Receivables: Interest............................................................. 1,295,506 7,131 -- Investment securities sold........................................... 1,074,301 82,882 -- Fund shares sold..................................................... 520,800 8,938 6,188 Dividends............................................................ 182,392 15,684 -- Variation margin..................................................... 3,906 -- -- From investment advisor.............................................. -- 15,794 7,015 Reclaim.............................................................. -- 466 -- Prepaid expenses........................................................ 8,976 762 -- --------------- --------------- --------------- Total Assets......................................................... 370,824,886 14,990,135 14,121,238 --------------- --------------- --------------- LIABILITIES: Payables: Investment securities purchased...................................... 4,332,791 127,011 -- Investment advisory fees............................................. 133,503 -- -- 12b-1 service fees (Class I)......................................... 71,260 2,926 2,688 Administrative service fees.......................................... 57,011 2,358 2,175 Printing fees........................................................ 30,858 8,476 7,446 Licensing fees....................................................... 26,357 -- 4,701 Accounting and administration fees................................... 18,555 6,263 11,883 Audit and tax fees................................................... 17,460 31,150 14,113 Transfer agent fees.................................................. 13,927 8,552 6,763 Custodian fees....................................................... 12,407 2,410 5,160 Fund shares redeemed................................................. 10,000 10,032 114 Variation margin..................................................... 4,141 -- -- Commitment fees...................................................... 2,677 1,502 -- Financial reporting fees............................................. 771 -- 2,683 Trustees' fees and expenses.......................................... 408 -- 1 Legal fees........................................................... -- 373 4,286 Other liabilities....................................................... 139 1,149 103 --------------- --------------- --------------- Total Liabilities.................................................... 4,732,265 202,202 62,116 --------------- --------------- --------------- NET ASSETS.............................................................. $ 366,092,621 $ 14,787,933 $ 14,059,122 =============== =============== =============== NET ASSETS CONSIST OF: Paid-in capital......................................................... $ 346,725,927 $ 14,545,531 $ 14,002,711 Accumulated net investment income (loss)................................ 171,191 54,722 38,290 Accumulated net realized gain (loss) on investments, futures and foreign currency transactions........................................ (1,152,945) (481,324) (362,873) Net unrealized appreciation (depreciation) on investments and futures... 20,348,448 669,004 380,994 --------------- --------------- --------------- NET ASSETS.............................................................. $ 366,092,621 $ 14,787,933 $ 14,059,122 =============== =============== =============== Investments, at cost.................................................... $ 336,981,312 $ 9,735,726 $ 8,054,102 =============== =============== =============== Investments in affiliated funds, at cost................................ $ -- $ 4,030,903 $ 5,413,683 =============== =============== =============== CLASS I SHARES: NET ASSETS.............................................................. $ 366,076,070 $ 14,681,840 $ 14,009,980 =============== =============== =============== NET ASSET VALUE, per share.............................................. $ 12.40 $ 10.53 $ 9.80 =============== =============== =============== Number of Shares outstanding............................................ 29,513,120 1,394,884 1,429,966 =============== =============== =============== CLASS II SHARES: NET ASSETS.............................................................. $ 16,551 $ 106,093 $ 49,142 =============== =============== =============== NET ASSET VALUE, per share.............................................. $ 12.42 $ 10.52 $ 9.81 =============== =============== =============== Number of Shares outstanding............................................ 1,333 10,080 5,009 =============== =============== ===============
See Notes to Financial Statements Page 43 FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2016 (UNAUDITED)
FIRST TRUST/DOW JONES DIVIDEND FIRST TRUST FIRST TRUST & INCOME MULTI INCOME DORSEY WRIGHT ALLOCATION ALLOCATION TACTICAL CORE PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- INVESTMENT INCOME: Interest................................................................ $ 1,794,276 $ 18,208 $ 613 Dividends............................................................... 1,715,158 105,816 52,907 Dividends from affiliated funds......................................... -- 88,920 25,827 Foreign withholding tax on dividend income.............................. -- (1,310) -- Other................................................................... -- -- 25 --------------- --------------- --------------- Total investment income.............................................. 3,509,434 211,634 79,372 --------------- --------------- --------------- EXPENSES: Investment advisory fees................................................ 861,258 39,726 14,979 12b-1 distribution and service fees (Class I)........................... 358,840 16,427 10,641 Administrative service fees............................................. 287,054 13,142 8,482 Accounting and administration fees...................................... 90,646 8,897 10,151 Custodian fees.......................................................... 64,464 4,135 3,910 Licensing fees.......................................................... 46,873 -- 4,280 Transfer agent fees..................................................... 44,409 25,866 26,249 Printing fees........................................................... 30,062 4,815 6,623 Legal fees.............................................................. 28,287 1,353 1,106 Commitment fees......................................................... 15,513 9,101 -- Audit and tax fees...................................................... 14,421 25,361 11,399 Trustees' fees and expenses............................................. 9,357 8,057 8,748 Financial reporting fees................................................ 4,625 -- 3,579 Excise tax.............................................................. -- -- 248 Other................................................................... 4,752 4,062 1,243 --------------- --------------- --------------- Total expenses....................................................... 1,860,561 160,942 111,638 Fees waived or expenses reimbursed by the investment advisor......... (137,978) (106,113) (74,204) --------------- --------------- --------------- Net expenses............................................................ 1,722,583 54,829 37,434 --------------- --------------- --------------- NET INVESTMENT INCOME (LOSS)............................................ 1,786,851 156,805 41,938 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.......................................................... (548,322) (256,998) 23,323 Investments in affiliated funds...................................... -- (15,551) (386,196) Foreign currency transactions........................................ -- 12 -- Futures.............................................................. (308,609) -- -- --------------- --------------- --------------- Net realized gain (loss)................................................ (856,931) (272,537) (362,873) --------------- --------------- --------------- Net change in unrealized appreciation (depreciation) on: Investments.......................................................... 18,971,849 1,076,787 194,884 Investments in affiliated funds...................................... -- 67,001 237,961 Futures.............................................................. (257,141) -- -- --------------- --------------- --------------- Net change in unrealized appreciation (depreciation).................... 18,714,708 1,143,788 432,845 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 17,857,777 871,251 69,972 --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 19,644,628 $ 1,028,056 $ 111,910 =============== =============== ===============
Page 44 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO -------------------------------- FOR THE SIX MONTHS FOR THE ENDED YEAR 6/30/2016 ENDED (UNAUDITED) 12/31/2015 -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 1,786,851 $ 3,342,508 Net realized gain (loss)............................................................. (856,931) 8,084,683 Net change in unrealized appreciation (depreciation)................................. 18,714,708 (12,219,844) ------------ ------------ Net increase (decrease) in net assets resulting from operations...................... 19,644,628 (792,653) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class I.............................................................................. (1,615,565) (5,442,059) Class II............................................................................. (95) (382) ------------ ------------ (1,615,660) (5,442,441) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN: Class I.............................................................................. (7,142,647) (4,388,357) Class II............................................................................. (337) (185) ------------ ------------ (7,142,984) (4,388,542) ------------ ------------ Total distributions to shareholders.................................................. (8,758,644) (9,830,983) ------------ ------------ CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 108,567,495 112,078,962 Proceeds from shares reinvested...................................................... 8,758,361 9,830,537 Cost of shares redeemed.............................................................. (5,379,355) (63,164,485) ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions............ 111,946,501 58,745,014 ------------ ------------ Total increase (decrease) in net assets.............................................. 122,832,485 48,121,378 NET ASSETS: Beginning of period.................................................................. 243,260,136 195,138,758 ------------ ------------ End of period........................................................................ $366,092,621 $243,260,136 ============ ============ Accumulated net investment income (loss) at end of period............................ $ 171,191 $ -- ============ ============
See Notes to Financial Statements Page 45 FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO -------------------------------- FOR THE SIX MONTHS FOR THE ENDED YEAR 6/30/2016 ENDED (UNAUDITED) 12/31/2015 -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 156,805 $ 236,497 Net realized gain (loss)............................................................. (272,537) (192,777) Net increase from payment by the advisor............................................. -- 5,471 Net change in unrealized appreciation (depreciation)................................. 1,143,788 (564,737) ------------ ------------ Net increase (decrease) in net assets resulting from operations...................... 1,028,056 (515,546) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class I.............................................................................. (125,781) (234,799) Class II............................................................................. (1,038) (2,203) ------------ ------------ Total distributions to shareholders.................................................. (126,819) (237,002) ------------ ------------ CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 2,495,922 9,660,473 Proceeds from shares reinvested...................................................... 125,781 234,279 Cost of shares redeemed.............................................................. (1,091,690) (3,784,387) ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions............ 1,530,013 6,110,365 ------------ ------------ Total increase (decrease) in net assets.............................................. 2,431,250 5,357,817 NET ASSETS: Beginning of period.................................................................. 12,356,683 6,998,866 ------------ ------------ End of period........................................................................ $ 14,787,933 $ 12,356,683 ============ ============ Accumulated net investment income (loss) at end of period............................ $ 54,722 $ 24,736 ============ ============
Page 46 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO -------------------------------- FOR THE SIX MONTHS FOR THE ENDED PERIOD 6/30/2016 ENDED (UNAUDITED) 12/31/2015 (a) -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 41,938 $ 6,431 Net realized gain (loss)............................................................. (362,873) -- Net change in unrealized appreciation (depreciation)................................. 432,845 (51,851) ------------ ------------ Net increase (decrease) in net assets resulting from operations...................... 111,910 (45,420) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class I.............................................................................. (9,989) -- Class II............................................................................. (90) -- ------------ ------------ Total distributions to shareholders.................................................. (10,079) -- ------------ ------------ CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 9,450,807 5,538,309 Proceeds from shares reinvested...................................................... 10,079 -- Cost of shares redeemed.............................................................. (994,009) (2,475) ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions............ 8,466,877 5,535,834 ------------ ------------ Total increase (decrease) in net assets.............................................. 8,568,708 5,490,414 NET ASSETS: Beginning of period.................................................................. 5,490,414 -- ------------ ------------ End of period........................................................................ $ 14,059,122 $ 5,490,414 ============ ============ Accumulated net investment income (loss) at end of period............................ $ 38,290 $ 6,431 ============ ============
----------------------------- (a) The Fund's Class I and Class II Shares were seeded on October 29, 2015, and commenced operations on October 30, 2015. See Notes to Financial Statements Page 47 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES SIX MONTHS FOR THE ENDED YEAR ENDED DECEMBER 31, PERIOD 6/30/2016 ------------------------------------- ENDED (UNAUDITED) 2015 2014 2013 12/31/2012 (a) ------------ ---------- ---------- ---------- -------------- Net asset value, beginning of period........... $ 11.94 $ 12.41 $ 11.37 $ 10.31 $ 10.00 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.07 0.16 0.15 0.14 0.15 Net realized and unrealized gain (loss)........ 0.71 (0.15) 0.99 1.17 0.29 -------- -------- -------- -------- -------- Total from investment operations............... 0.78 0.01 1.14 1.31 0.44 -------- -------- -------- -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.06) (0.27) (0.10) (0.09) (0.07) Net realized gain.............................. (0.26) (0.21) -- (0.16) (0.04) Return of capital.............................. -- -- -- -- (0.02) -------- -------- -------- -------- -------- Total from distributions....................... (0.32) (0.48) (0.10) (0.25) (0.13) -------- -------- -------- -------- -------- Net asset value, end of period................. $ 12.40 $ 11.94 $ 12.41 $ 11.37 $ 10.31 ======== ======== ======== ======== ======== TOTAL RETURN (b) (c)........................... 6.51% 0.09% 10.04% 12.75% 4.38% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $366,076 $243,244 $195,128 $106,079 $ 32,176 Ratio of total expenses to average net assets...................................... 1.30% (d) 1.34% 1.43% 1.65% 2.69% (d) Ratio of net expenses to average net assets...................................... 1.20% (d) 1.20% 1.20% 1.20% 1.20% (d) Ratio of net investment income (loss) to average net assets....................... 1.24% (d) 1.35% 1.40% 1.27% 2.25% (d) Portfolio turnover rate........................ 44% 81% 65% 73% 34%
CLASS II SHARES SIX MONTHS FOR THE ENDED YEAR PERIOD 6/30/2016 ENDED ENDED (UNAUDITED) 12/31/2015 12/31/2014 (e) ------------ ---------- -------------- Net asset value, beginning of period........... $ 11.95 $ 12.43 $ 11.63 -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.09 0.17 0.14 Net realized and unrealized gain (loss)........ 0.71 (0.14) 0.77 -------- -------- -------- Total from investment operations............... 0.80 0.03 0.91 -------- -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.07) (0.30) (0.11) Net realized gain.............................. (0.26) (0.21) -- -------- -------- -------- Total from distributions....................... (0.33) (0.51) (0.11) -------- -------- -------- Net asset value, end of period................. $ 12.42 $ 11.95 $ 12.43 ======== ======== ======== TOTAL RETURN (b) (c)........................... 6.71% 0.25% 7.82% ======== ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $ 17 $ 16 $ 11 Ratio of total expenses to average net assets...................................... 1.05% (d) 1.09% 1.21% (d) Ratio of net expenses to average net assets...................................... 0.95% (d) 0.95% 0.95% (d) Ratio of net investment income (loss) to average net assets........................ 1.50% (d) 1.64% 1.69% (d) Portfolio turnover rate........................ 44% 81% 65%
----------------------------- (a) The Fund's Class I shares were seeded on April 12, 2012, and commenced operations on May 1, 2012. (b) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions, if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (c) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (d) Annualized. (e) The Fund's Class II shares were seeded on April 30, 2014, and commenced operations on May 1, 2014. Page 48 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES SIX MONTHS FOR THE ENDED YEAR PERIOD 6/30/2016 ENDED ENDED (UNAUDITED) 12/31/2015 12/31/2014 (a) ------------ ---------- -------------- Net asset value, beginning of period........... $ 9.86 $ 10.39 $ 10.00 -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.11 0.19 0.07 Net realized and unrealized gain (loss)........ 0.65 (0.53) (b) 0.39 -------- -------- -------- Total from investment operations............... 0.76 (0.34) 0.46 -------- -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.09) (0.19) (0.07) -------- -------- -------- Total from distributions....................... (0.09) (0.19) (0.07) -------- -------- -------- Net asset value, end of period................. $ 10.53 $ 9.86 $ 10.39 ======== ======== ======== TOTAL RETURN (c) (d)........................... 7.72% (3.24)% (b) 4.57% ======== ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $ 14,682 $ 12,257 $ 6,894 Ratio of total expenses to average net assets...................................... 2.43% (e) 2.60% 6.00% (e) Ratio of net expenses to average net assets...................................... 0.83% (e) 0.90% 1.20% (e) Ratio of net investment income (loss) to average net assets....................... 2.37% (e) 2.17% 2.35% (e) Portfolio turnover rate........................ 29% 93% 15%
CLASS II SHARES SIX MONTHS FOR THE ENDED YEAR PERIOD 6/30/2016 ENDED ENDED (UNAUDITED) 12/31/2015 12/31/2014 (a) ------------ ---------- -------------- Net asset value, beginning of period........... $ 9.86 $ 10.39 $ 10.00 -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.12 0.24 0.04 Net realized and unrealized gain (loss)........ 0.64 (0.55) (b) 0.43 -------- -------- -------- Total from investment operations............... 0.76 (0.31) 0.47 -------- -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.10) (0.22) (0.08) -------- -------- -------- Total from distributions....................... (0.10) (0.22) (0.08) -------- -------- -------- Net asset value, end of period................. $ 10.52 $ 9.86 $ 10.39 ======== ======== ======== TOTAL RETURN (c) (d)........................... 7.74% (3.01)% (b) 4.74% ======== ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $ 106 $ 100 $ 105 Ratio of total expenses to average net assets...................................... 2.18% (e) 2.31% 14.44% (e) Ratio of net expenses to average net assets...................................... 0.58% (e) 0.67% 0.95% (e) Ratio of net investment income (loss) to average net assets....................... 2.59% (e) 2.32% 0.54% (e) Portfolio turnover rate........................ 29% 93% 15%
----------------------------- (a) The Fund's Class I and Class II shares were seeded on April 30, 2014, and commenced operations on May 1, 2014. (b) First Trust Multi Income Allocation Portfolio received a reimbursement from the Advisor in the amount of $5,471, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the total return. (c) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions, if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (d) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (e) Annualized. See Notes to Financial Statements Page 49 FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES SIX MONTHS FOR THE ENDED PERIOD 6/30/2016 ENDED (UNAUDITED) 12/31/2015 (a) ------------ -------------- Net asset value, beginning of period........... $ 9.94 $ 10.00 -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.02 0.01 Net realized and unrealized gain (loss)........ (0.15) (0.07) -------- -------- Total from investment operations............... (0.13) (0.06) -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.01) -- -------- -------- Total from distributions....................... (0.01) -- -------- -------- Net asset value, end of period................. $ 9.80 $ 9.94 ======== ======== TOTAL RETURN (b) (c)........................... (1.34)% (0.60)% ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $ 14,010 $ 5,440 Ratio of total expenses to average net assets...................................... 2.28% (d) 11.71% (d) Ratio of net expenses to average net assets...................................... 0.86% (d) 0.79% (d) Ratio of net investment income (loss) to average net assets....................... 0.97% (d) 1.54% (d) Portfolio turnover rate........................ 110% --%
CLASS II SHARES SIX MONTHS FOR THE ENDED PERIOD 6/30/2016 ENDED (UNAUDITED) 12/31/2015 (a) ------------ -------------- Net asset value, beginning of period........... $ 9.95 $ 10.00 -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................... 0.04 0.01 Net realized and unrealized gain (loss)........ (0.16) (0.06) -------- -------- Total from investment operations............... (0.12) (0.05) -------- -------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................... (0.02) -- -------- -------- Total from distributions....................... (0.02) -- -------- -------- Net asset value, end of period................. $ 9.81 $ 9.95 ======== ======== TOTAL RETURN (b) (c)........................... (1.23)% (0.50)% ======== ======== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........... $ 49 $ 50 Ratio of total expenses to average net assets...................................... 56.58% (d) 37.40% (d) Ratio of net expenses to average net assets...................................... 0.60% (d) 0.51% (d) Ratio of net investment income (loss) to average net assets....................... 0.94% (d) 0.86% (d) Portfolio turnover rate........................ 110% --%
----------------------------- (a) The Fund's Class I and Class II shares were seeded on October 29, 2015, and commenced operations on October 30, 2015. (b) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions, if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (c) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (d) Annualized. Page 50 See Notes to Financial Statements -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) 1. ORGANIZATION First Trust Variable Insurance Trust (the "Trust") is a diversified open-end management investment company organized as a Massachusetts business trust on December 14, 2011 and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently offers shares of three series (each a "Fund" and collectively, the "Funds"), First Trust/Dow Jones Dividend & Income Allocation Portfolio ("First Trust Dow Jones"), which commenced investment operations on May 1, 2012, First Trust Multi Income Allocation Portfolio ("First Trust Multi Income"), which commenced investment operations on May 1, 2014, and First Trust Dorsey Wright Tactical Core Portfolio ("First Trust Dorsey Wright"), which commenced investment operations on October 30, 2015. Each Fund's shares are sold only to variable insurance accounts (each an "Account") to fund the benefits of the variable annuity and variable life insurance contracts (each a "Contract" and collectively the "Contracts") issued by life insurance companies writing variable annuity contracts and variable life insurance contracts with which the Trust has a contract (each a "Participating Insurance Company"). First Trust Dow Jones' investment objective is to seek to provide total return by allocating among dividend-paying stocks and investment-grade bonds. First Trust Dow Jones seeks to achieve its investment objective by investing, under normal market conditions, approximately 40-60% of its net assets in equity securities and approximately 40-60% of its net assets in fixed-income securities at the time of purchase. The equity portion of the portfolio will be derived from a quantitative process that seeks to provide total return through investing generally in dividend paying stocks included in the Dow Jones U.S. Total Stock Market Index(SM). First Trust Advisors L.P. ("First Trust" or the "Advisor") reserves the right to over-weight, under-weight or exclude certain securities from the Fund that would otherwise be selected pursuant to the quantitative process in certain instances. First Trust Dow Jones' fixed-income component seeks to provide income and preserve capital through investing in a diversified investment-grade bond portfolio. Investment-grade bonds are those bonds rated "BBB-" or higher by Standard & Poor's Ratings Group or Fitch Ratings, Inc. or "Baa3" or higher by Moody's Investors Service, Inc. at the time of purchase. Under normal market conditions, at the time of purchase approximately 80% of the net assets of the Fund allocated to corporate bonds are invested in: investment-grade bonds included in the Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (the "Bond Index"(1)) and other investment-grade bonds of issuers whose securities are included in the Bond Index; and investment-grade bonds of issuers included in the Dow Jones Composite Average. The Fund may also invest in U.S. government and agency securities, including mortgage-backed securities. The Fund may, at certain times, also hold exchange-traded funds ("ETFs") that invest in investment-grade corporate bonds and U.S. government bonds in lieu of investing directly in bonds. First Trust Multi Income's investment objective is to maximize current income, with a secondary objective of capital appreciation. First Trust Multi Income seeks to achieve its objectives through diversified exposure to nine income generating asset classes: dividend paying stocks, preferred stocks, energy infrastructure companies and master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), high yield or "junk" bonds, floating rate loans, corporate bonds, mortgage-backed securities and Treasury Inflation Protected Securities ("TIPS"). The Fund is actively managed by First Trust and implementing the strategy involves multiple portfolio managers. The Advisor tactically adjusts allocation weights in a manner deemed to offer attractive levels of total return relative to the level of expected risk. The Advisor intends to adjust asset allocation weights quarterly but may do so more or less frequently depending upon market conditions. The maximum weight of any asset class, at the time of adjustment, is 20%. The minimum weight of any asset class, at the time of adjustment, is 5%. First Trust Multi Income may, at certain times, invest in ETFs that generally provide exposure to the nine asset classes in lieu of investing directly in such asset classes. Certain of the ETFs may be advised by First Trust. As a result, First Trust will also earn advisory fees on the underlying ETFs. In general, the U.S. dollar-denominated fixed-income securities in which First Trust Multi Income invests may be issued by U.S. and non-U.S. issuers, of any credit quality, including high yield securities. The high yield securities in which the Fund invests are rated below investment-grade at the time of purchase or unrated and deemed by the Advisor to be of comparable quality, commonly referred to as "junk" bonds. The Fund also invests in the equity securities of domestic and foreign issuers listed on a U.S. or foreign securities exchange and non-U.S. securities that are listed on a U.S. securities exchange in the form of American Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs"). The Fund may invest in equity securities issued by small, mid- or large capitalization companies. ----------------------------- (1) Prior to April 30, 2013, the Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) was known as the Dow Jones Corporate Bond Index(SM). Page 51 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) First Trust Dorsey Wright's investment objective is to provide total return. First Trust Dorsey Wright seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (plus any investment borrowings) in ETFs and cash and cash equivalents that comprise the Dorsey Wright Tactical Tilt Moderate Core Index. It is expected that a majority of the ETFs in which the Fund invests will be advised by First Trust. Each Fund offers two classes of shares: Class I and Class II. Each class represents an interest in the same portfolio of investments but with a different combination of service (12b-1) fees, eligibility requirements and other features. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds, each of which is an investment company within the scope of Financial Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follow accounting and reporting guidance under FASB Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of 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 52 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Fixed income and other debt securities having a remaining maturity of 60 days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a pricing service is unable to provide a market or fair value price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities. Fair valuation of a debt security will be based on the consideration of all available information, including, but not limited to, the following: 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only); 11) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 12) other relevant factors. Fair valuation of an equity security will be based on the consideration of all available information, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or pricing services; 6) relationships among various securities; Page 53 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. If the securities in question are foreign securities, the following additional information may be considered: 1) the value of similar foreign securities traded on other foreign markets; 2) ADR trading of similar securities; 3) closed-end fund trading of similar securities; 4) foreign currency exchange activity; 5) the trading prices of financial products that are tied to baskets of foreign securities; 6) factors relating to the event that precipitated the pricing problem; 7) whether the event is likely to recur; and 8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of June 30, 2016, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. Distributions received from a Fund's investments in MLPs generally are comprised of return of capital and investment income. A Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. Distributions received from a Fund's investments in REITs may be comprised of return of capital, capital gains and investment income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from REITs during the year based on estimates available. The characterization of distributions received by a Fund may subsequently be revised based on information received from the REITs after their tax reporting periods are concluded. C. CASH AND CASH EQUIVALENTS Normally, the Funds invest substantially all of their assets to meet their investment objectives. The Funds may invest the remainder of their assets in securities with maturities of less than one year or cash equivalents, or they may hold cash. The investment in such instruments is not a principal investment strategy of First Trust Dow Jones or First Trust Multi Income. The percentage of Page 54 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) each Fund's net assets invested in such holdings varies and depends on several factors, including market conditions. For temporary defensive purposes and during periods of high cash inflows or outflows, the Funds may depart from their principal investment strategies and invest part or all of their assets in these securities, or they may hold cash. D. FUTURES CONTRACTS First Trust Dow Jones purchases or sells (i.e., is long or short) futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on Futures" on the Statements of Operations. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contacts are marked-to-market daily with the change in value recognized as a component of, "Net change in unrealized appreciation (depreciation) on Futures" on the Statements of Operations. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin payable or receivable" on the Statements of Assets and Liabilities. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income of each Fund, if any, are declared and paid semi-annually. Each Fund distributes its net realized capital gains, if any, to shareholders at least annually. All dividends payable by each Fund will be reinvested in the Fund. Distributions from income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some point in the future. The tax character of distributions paid by each applicable Fund during the period ended December 31, 2015 was as follows:
Distributions paid Distributions paid Distributions paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ------------------ ------------------ First Trust Dow Jones $ 7,639,768 $ 2,191,215 $ -- First Trust Multi Income 237,002 -- -- First Trust Dorsey Wright -- -- --
As of December 31, 2015, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net Undistributed Capital and Unrealized Ordinary Other Appreciation Income Gains (Loss) (Depreciation) ------------------ ------------------ ------------------ First Trust Dow Jones $ -- $ 7,108,070 $ 1,372,640 First Trust Multi Income 24,736 (108,013) (575,558) First Trust Dorsey Wright 6,330 -- (51,750)
Page 55 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) F. INCOME TAXES First Trust Dow Jones and First Trust Multi Income intend to continue to qualify, and First Trust Dorsey Wright intends to qualify, as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), which includes distributing substantially all of their net investment income and net realized gains to shareholders. Each Fund intends to comply with the provisions of Section 817(h) of the Internal Revenue Code, which impose certain diversification requirements upon variable contracts that are based on segregated asset accounts. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2012, 2013, 2014 and 2015 remain open to federal and state audit for First Trust Dow Jones. Taxable years ended 2014 and 2015 remain open to federal and state audit for First Trust Multi Income. Also, the taxable year ended 2015 remains open for First Trust Dorsey Wright. As of June 30, 2016, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Each Fund intends to utilize provisions of the federal income tax laws which allow it to carry realized capital losses forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2015, for federal income tax purposes, the Funds had capital loss carryforward available, to the extent provided by regulations, to offset capital gains as follows: Non-Expiring Capital Loss Carryforwards --------------- First Trust Dow Jones $ -- First Trust Multi Income 108,013 First Trust Dorsey Wright -- G. EXPENSES Each Fund will pay all expenses directly related to its operations. Each Participating Insurance Company performs certain administrative services for the Funds, their Accounts and the Contracts. Each Fund pays an administrative services fee of 0.20% of average daily net assets to cover expenses incurred by Participating Insurance Companies in connection with these services. First Trust has entered into various licensing agreements, which allow First Trust to use certain trademarks and trade names of the applicable licensors (see Licensing Information in the Additional Information section of this report). The Trust, on behalf of First Trust Dow Jones and First Trust Dorsey Wright, is a sub-licensee to these license agreements and is required to pay licensing fees, which are shown on the Statements of Operations. H. FOREIGN CURRENCY The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are shown in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments" on the Statements of Operations. Page 56 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) I. INTEREST-ONLY SECURITIES An interest-only security "(IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on the Portfolio of Investments. 3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust provides each Fund with discretionary investment services and certain administrative services necessary for the management of the Funds. For its investment advisory and management services, First Trust is entitled to a monthly fee calculated at an annual rate of 0.60% of the average daily net assets for both First Trust Dow Jones and First Trust Multi Income, and 0.35% of the average daily net assets for First Trust Dorsey Wright. First Trust also provides fund reporting services to First Trust Dow Jones and First Trust Dorsey Wright for a flat annual fee in the amount of $9,250 per Fund. First Trust Multi Income and First Trust have retained Energy Income Partners, LLC ("EIP") and Stonebridge Advisors LLC ("Stonebridge") (collectively the "Sub-Advisors"), affiliates of First Trust, to serve as investment sub-advisors. In this capacity, the Sub-Advisors provide recommendations to the Advisor regarding the selection and on-going monitoring of certain securities in First Trust Multi Income's investment portfolio. EIP acts as sub-advisor for, and manages on a discretionary basis the investment and reinvestment of, only the assets of First Trust Multi Income allocated to EIP by the Advisor and furnishes an investment program in respect of and makes investment decisions only with respect to the portion of First Trust Multi Income's investment portfolio allocated to it by the Advisor. EIP, an affiliate of the Advisor, has been retained by First Trust Multi Income and the Advisor to provide recommendations regarding the selection and ongoing monitoring of the MLP, MLP affiliate and energy infrastructure securities in First Trust Multi Income's investment portfolio and to exercise discretion only with respect to assets of First Trust Multi Income allocated to EIP. Stonebridge serves as a non-discretionary sub-advisor. Stonebridge has been retained by First Trust Multi Income and the Advisor to provide recommendations regarding the selection and ongoing monitoring of the preferred and hybrid securities in First Trust Multi Income's investment portfolio. For the services provided and the expenses assumed pursuant to the investment sub-advisory agreement, First Trust will pay EIP a sub-advisory fee equal to 40% monthly in arrears of any remaining monthly investment management fee paid to the Advisor for the average daily net assets allocated to EIP after First Trust's waiver of any of its investment management fee to comply with the then-current expense cap, as defined below. For the services provided and the expenses assumed pursuant to the investment sub-advisory agreement, First Trust will pay Stonebridge a portfolio management fee equal to an annual rate of 0.20% of the Fund's average daily net assets allocated to Stonebridge. During the year ended December 31, 2015, First Trust Multi Income received a reimbursement from the Advisor of $5,471 in connection with a trade error. First Trust has agreed to waive fees and/or pay First Trust Dow Jones' and First Trust Multi Income's expenses to the extent necessary to prevent the operating expenses of Class I shares and Class II shares (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, and taxes and extraordinary expenses) from exceeding 1.20% and 0.95% (the "Expense Cap"), respectively, of each Fund's average daily net assets per year at least until May 1, 2017. First Trust has agreed to waive fees and/or pay First Trust Dorsey Wright's expenses to the extent necessary to prevent the operating expenses of Class I shares and Class II shares (excluding interest expense, brokerage commissions and other trading expenses, taxes and extraordinary expenses) from exceeding 1.30% and 1.05%, respectively, of the Fund's average daily net assets per year at least until October 31, 2017. In First Trust Dorsey Wright, because acquired fund fees and expenses are estimated, First Trust will periodically adjust the amount of the fee waiver and expense reimbursement in order to attempt to meet the Expense Cap. However, total net annual fund expense may be higher or lower than the Expense Cap. Expenses borne and fees waived by First Trust are subject to reimbursement by each Fund for up to three years from the date the fee or expense was incurred by the Fund, but no reimbursement payment will be made by the Fund at any time if it would result in the Fund's expenses exceeding the Expense Cap. These amounts, if any, are included in "Expenses previously waived or reimbursed" on the Statements of Operations. Page 57 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) The advisory fee waivers and expense reimbursements for the six-month period ended June 30, 2016, and the expenses borne by First Trust subject to recovery from the applicable Fund at June 30, 2016, are included in the table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY -------------------------------------------------------------------------------------------------- SIX MONTHS YEAR YEAR SIX MONTHS ENDED ENDED ENDED ENDED FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, WAIVED REIMBURSED 2013 2014 2015 2016 TOTAL ------------ ------------ ------------ ------------ ------------ ---------- ---------- First Trust Dow Jones $ 137,978 $ -- $ 123,752 $ 308,178 $ 347,277 $ 137,978 $ 917,185 First Trust Multi Income 39,726 41,889 -- 101,172 151,967 81,615 334,754 First Trust Dorsey Wright 14,979 59,225 -- -- 48,180 74,204 122,384
During the six months ended June 30, 2016, First Trust did not recover any fees that were previously waived or reimbursed. First Trust agreed to waive and/or reimburse the acquired fund fees and expenses of the shares of investment companies held by First Trust Multi Income up to 0.37% of the Fund's average daily net assets through May 1, 2017. During the six-month period ended June 30, 2016, First Trust reimbursed First Trust Multi Income $24,498 of fees that are not subject to recovery. First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns, through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and EIP Partners, LLC, an affiliate of EIP. Stonebridge is a majority-owned affiliate of FTCP. BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as First Trust Dow Jones' and First Trust Multi Income's administrator, fund accountant and transfer agent in accordance with certain fee arrangements. As administrator and fund accountant, BNYM IS is responsible for providing certain administrative and accounting services to the Funds, including maintaining the Funds' books of account, records of the Funds' securities transactions, and certain other books and records. As transfer agent, BNYM IS is responsible for maintaining shareholder records for the Funds. BNYM IS is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. The Bank of New York Mellon ("BNYM") serves as First Trust Dow Jones' and First Trust Multi Income's custodian in accordance with certain fee arrangements. As custodian, BNYM is responsible for custody of each Fund's assets. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Brown Brothers Harriman & Co. ("BBH") serves as First Trust Dorsey Wright's administrator, fund accountant and custodian. As custodian, BBH is responsible for custody of the Fund's assets. As administrator and fund accountant, BBH is responsible for providing certain administrative and accounting services to the Fund, including maintaining the Fund's books of account, records of the Fund's securities transactions, and certain other books and records. BNYM IS serves as the Fund's transfer agent in accordance with certain fee arrangements. As transfer agent, BNYM IS is responsible for maintaining shareholder records for the Fund. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. 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. Page 58 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS Capital transactions for First Trust Dow Jones were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2016 DECEMBER 31, 2015 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 8,866,710 $108,567,495 9,010,497 $112,072,958 Class II -- -- 485 6,004 ------------ ------------ ------------ ------------ Total Sales: 8,866,710 $108,567,495 9,010,982 $112,078,962 ============ ============ ============ ============ Dividend Reinvestment: Class I 715,540 $ 8,758,213 810,396 $ 9,830,416 Class II 12 148 11 121 ------------ ------------ ------------ ------------ Total Dividend Reinvestment: 715,552 $ 8,758,361 810,407 $ 9,830,537 ============ ============ ============ ============ Redemptions: Class I (448,685) $ (5,378,871) (5,160,259) $(63,164,485) Class II (42) (484) -- -- ------------ ------------ ------------ ------------ Total Redemptions: (448,727) $ (5,379,355) (5,160,259) $(63,164,485) ============ ============ ============ ============
Capital transactions for First Trust Multi Income were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2016 DECEMBER 31, 2015 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 248,278 $ 2,495,922 929,411 $ 9,657,422 Class II -- -- 290 3,051 ------------ ------------ ------------ ------------ Total Sales: 248,278 $ 2,495,922 929,701 $ 9,660,473 ============ ============ ============ ============ Dividend Reinvestment: Class I 12,094 $ 125,781 23,869 $ 234,274 Class II -- -- -- 5 ------------ ------------ ------------ ------------ Total Dividend Reinvestment: 12,094 $ 125,781 23,869 $ 234,279 ============ ============ ============ ============ Redemptions: Class I (108,094) $ (1,091,690) (374,076) $ (3,781,375) Class II -- -- (290) (3,012) ------------ ------------ ------------ ------------ Total Redemptions: (108,094) $ (1,091,690) (374,366) $ (3,784,387) ============ ============ ============ ============
Page 59 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) Capital transactions for First Trust Dorsey Wright were as follows:
SIX MONTHS ENDED PERIOD ENDED JUNE 30, 2016 DECEMBER 31, 2015 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 985,435 $ 9,450,807 547,381 $ 5,488,309 Class II -- -- 5,000 50,000 ------------ ------------ ------------ ------------ Total Sales: 985,435 $ 9,450,807 552,381 $ 5,538,309 ============ ============ ============ ============ Dividend Reinvestment: Class I 1,027 $ 9,989 -- $ -- Class II 9 90 -- -- ------------ ------------ ------------ ------------ Total Dividend Reinvestment: 1,036 $ 10,079 -- $ -- ============ ============ ============ ============ Redemptions: Class I (103,630) $ (994,009) (247) $ (2,475) Class II -- -- -- -- ------------ ------------ ------------ ------------ Total Redemptions: (103,630) $ (994,009) (247) $ (2,475) ============ ============ ============ ============
5. DERIVATIVE TRANSACTIONS The following table presents the types of derivatives held by First Trust Dow Jones at June 30, 2016, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities. First Trust Multi Income and First Trust Dorsey Wright did not hold any derivative instruments as of June 30, 2016.
ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- ---------------------------------------- DERIVATIVE STATEMENTS OF ASSETS STATEMENTS OF ASSETS INSTRUMENT RISK EXPOSURE AND LIABILITIES LOCATION VALUE AND LIABILITIES LOCATION VALUE ---------- ------------------ --------------------------- ---------- --------------------------- ---------- Futures Interest Rate Risk Variation Margin Receivable $ 3,906 Variation Margin Payable $ 4,141
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended June 30, 2016, on derivative instruments, as well as the primary underlying risk exposure associated with each instrument. STATEMENTS OF OPERATIONS LOCATION INTEREST RATE RISK ------------------------------------------------------------------- Net realized gain (loss) on futures $ (308,609) Net change in unrealized gain (loss) on futures (257,141) During the six months ended June 30, 2016, the amount of notional values of futures contracts opened and closed were $33,374,047 and $33,219,696, respectively. First Trust Dow Jones does not have the right to offset financial assets and financial liabilities related to futures contracts on the Statements of Assets and Liabilities. 6. AFFILIATED TRANSACTIONS First Trust Multi Income and First Trust Dorsey Wright invest in securities of affiliated funds. Dividend income and realized gains and losses from affiliated funds are presented on the Statements of Operations. The Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated funds. Page 60 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) Amounts relating to these investments in First Trust Multi Income at June 30, 2016, and for the period then ended are as follows:
SHARE ACTIVITY -------------------------------------------- BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED SECURITY NAME 12/31/2015 PURCHASES SALES 6/30/2016 6/30/2016 INCOME GAIN (LOSS) ------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- ----------- First Trust Low Duration Opportunities ETF -- 3,297 (3,296) 1 $ 52 $ -- $ 687 First Trust Preferred Securities and Income ETF 45,430 5,760 (6,120) 45,070 857,231 26,434 (2,496) First Trust Senior Loan Fund 37,730 11,480 (2,150) 47,060 2,250,409 37,915 (4,086) First Trust Tactical High Yield ETF 17,680 2,990 (2,890) 17,780 847,573 24,571 (9,656) ----------------------------------- $3,955,265 $ 88,920 $ (15,551) ===================================
Amounts relating to these investments in First Trust Dorsey Wright at June 30, 2016, and for the period then ended are as follows:
SHARE ACTIVITY -------------------------------------------- BALANCE AT BALANCE AT VALUE AT DIVIDEND REALIZED SECURITY NAME 12/31/2015 PURCHASES SALES 6/30/2016 6/30/2016 INCOME GAIN (LOSS) ------------------------------------------------ ---------- --------- --------- ---------- ---------- ---------- ----------- First Trust Consumer Discretionary AlphaDEX(R) Fund 11,835 18,545 (14,020) 16,360 $ 551,659 $ 2,033 $ (6,136) First Trust Consumer Staples AlphaDEX(R) Fund 10,272 12,160 (10,168) 12,264 593,210 5,030 13,895 First Trust Developed Markets Ex-US AlphaDEX(R) Fund 1,405 2,464 (135) 3,734 168,142 1,676 (326) First Trust Dow Jones Internet Index Fund 7,025 8,294 (7,004) 8,315 599,678 -- (57,067) First Trust Emerging Markets AlphaDEX(R) Fund 3,196 6,325 (486) 9,035 173,924 1,686 (394) First Trust Energy AlphaDEX(R) Fund -- 42,142 (457) 41,685 621,106 2,389 477 First Trust Germany AlphaDEX(R) Fund 760 1,210 (80) 1,890 65,432 890 (31) First Trust Health Care AlphaDEX(R) Fund 7,993 3,663 (11,656) -- -- -- (46,498) First Trust Hong Kong AlphaDEX(R) Fund 707 249 (956) -- -- -- (4,252) First Trust ISE Chindia Index Fund 870 1,775 (121) 2,524 68,527 266 (215) First Trust Japan AlphaDEX(R) Fund -- 1,592 (27) 1,565 71,145 335 (7) First Trust Large Cap Growth AlphaDEX(R) Fund -- 23,989 (10,924) 13,065 651,943 1,661 33,965 First Trust Mid Cap Core AlphaDEX(R) Fund 10,218 16,621 (13,961) 12,878 650,597 2,345 (67,428) First Trust Mid Cap Growth AlphaDEX(R) Fund 18,758 21,795 (18,593) 21,960 659,020 738 (26,071) First Trust NYSE Arca Biotechnology Index Fund 5,574 1,965 (7,539) -- -- -- (204,063) First Trust Small Cap Growth AlphaDEX(R) Fund 18,576 6,550 (25,126) -- -- -- (39,815) First Trust Switzerland AlphaDEX(R) Fund 692 1,100 (98) 1,694 65,371 1,336 (12) First Trust United Kingdom AlphaDEX(R) Fund 698 1,215 (72) 1,841 61,213 732 (364) First Trust Utilities AlphaDEX(R) Fund -- 41,201 (18,965) 22,236 601,039 4,710 18,146 ----------------------------------- $5,602,006 $ 25,827 $ (386,196) ===================================
7. 12B-1 SERVICE PLAN The Trust has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act, which provides that Class I shares of each of the Funds will be subject to an annual service fee. First Trust Portfolios L.P. ("FTP"), an affiliate of First Trust, serves as the distributor of shares of the Funds. FTP uses the service fee to compensate each Participating Insurance Company for providing account services to policy owners. These services include establishing and maintaining Contract owners' accounts, supplying information to Contract owners, delivering Fund materials to Contract owners, answering inquiries, and providing other personal services to Contract owners. Each Fund may spend up to 0.25% per year of the average daily net assets Page 61 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) of its Class I shares as a service fee under the Plan. In addition, the Plan permits First Trust to use a portion of its advisory fee to compensate FTP for expenses incurred in connection with the sale of a Fund's Class I shares including, without limitation, compensation of its sales force, expenses of printing and distributing the Prospectus to persons other than Contract owners, expenses of preparing, printing and distributing advertising and sales literature and reports to Contract owners used in connection with the sale of a Fund's Class I Shares, certain other expenses associated with the servicing of Class I shares of a Fund, and any service-related expenses that may be authorized from time to time by the Board. During the six months ended June 30, 2016, all service fees received by FTP were paid to the Participating Insurance Companies, with no portion of such fees retained by FTP. The Plan may be renewed from year to year if approved by a vote of the Trust's Board and a vote of the Independent Trustees, who have no direct or indirect financial interest in the Plan, cast in person at a meeting called for the purpose of voting on the Plan. 8. PURCHASES AND SALES OF SECURITIES Cost of purchases and proceeds from sales of investment securities, excluding U.S. Government securities and short-term investments, for the six months ended June 30, 2016, were as follows: PURCHASES SALES --------------- --------------- First Trust Dow Jones $ 176,330,581 $ 76,199,354 First Trust Multi Income 4,440,883 3,578,926 First Trust Dorsey Wright 17,263,706 9,289,795 Cost of purchases and proceeds from sales of U.S. Government investment securities, excluding short-term investments, for the six months ended June 30, 2016, were as follows: PURCHASES SALES --------------- --------------- First Trust Dow Jones $ 50,642,145 $ 50,383,858 First Trust Multi Income 738,893 182,140 First Trust Dorsey Wright -- -- 9. BORROWINGS The Trust, on behalf of First Trust Dow Jones and First Trust Multi Income, along with First Trust Series Fund and First Trust Exchange-Traded Fund IV, has a $135 million Credit Agreement with BNYM (the "BNYM Line of Credit") to be a liquidity backstop during periods of high redemption volume. A commitment fee of 0.15% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans will be charged by BNYM, which First Trust will allocate amongst the funds that have access to the BNYM Line of Credit. These fees are reflected in the Statements of Operations in the Commitment fees line item. To the extent that either fund accesses the BNYM Line of Credit, there would also be an interest fee charged. Neither First Trust Dow Jones or First Trust Multi Income drew on the BNYM Line of Credit during the six months ended June 30, 2016. 10. INDEMNIFICATION The Trust has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 11. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 62 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Trust voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Trust's website located at http://www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. PORTFOLIO HOLDINGS The Trust files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on the Trust's website located at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov; and (4) for review and copying at the SEC's Public Reference Room ("PRR") in Washington, DC. Information regarding the operation of the PRR may be obtained by calling (800) SEC-0330. LICENSING INFORMATION Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). The trademarks have been licensed to S&P Dow Jones Indices LLC and have been sublicensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE are products of S&P Dow Jones Indices LLC and has been licensed for use by First Trust. The First Trust/Dow Jones Dividend & Income Allocation Portfolio is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or any of their respective affiliates (collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor its affiliates make any representation or warranty, express or implied, to the owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or any member of the public regarding the advisability of investing in securities generally or in the First Trust/Dow Jones Dividend & Income Allocation Portfolio particularly or the ability of the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE to track general market performance. S&P Dow Jones Indices only relationship to First Trust with respect to the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices. The DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE is determined, composed and calculated by S&P Dow Jones Indices without regard to First Trust or the First Trust/Dow Jones Dividend & Income Allocation Portfolio. S&P Dow Jones Indices has no obligation to take the needs of First Trust or the owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio into consideration in determining, composing or calculating the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE. Neither S&P Dow Jones Indices nor its affiliates are responsible for and have not participated in the determination of the prices, and amount of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or the timing of the issuance or sale of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or in the determination or calculation of the equation by which the First Trust/Dow Jones Dividend & Income Allocation Portfolio is to be managed. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the First Trust/Dow Jones Dividend & Income Allocation Portfolio. There is no assurance that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING Page 63 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND FIRST TRUST, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES. The First Trust Dorsey Wright Tactical Core Portfolio (the "Portfolio") is not sponsored, endorsed, sold or promoted by Dorsey Wright & Associates, LLC ("Licensor"). Licensor makes no representation or warranty, express or implied, to the owners of the Portfolio or any member of the public regarding the advisability of trading in the Portfolio. Licensor's only relationship to First Trust Advisors L.P. ("First Trust") is the licensing of certain trademarks and trade names of Licensor and of the Dorsey Wright Tactical Tilt Moderate Core Index which is determined, composed and calculated by Licensor without regard to First Trust or the Portfolio, Licensor has no obligation to take the needs of First Trust or the owners of the Portfolio into consideration in determining, composing or calculating Dorsey Wright Tactical Tilt Moderate Core Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Portfolio to be listed or in the determination or calculation of the equation by which the Portfolio are to be converted into cash. Licensor has no obligation or liability in connection with the administration, marketing or trading of the Portfolio. LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE OR ANY DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN LICENSOR AND FIRST TRUST. RISK CONSIDERATIONS Risks are inherent in all investing. The following summarizes some of the risks that should be considered for the Funds. For additional information about the risks associated with investing in the Funds, please see the Funds' prospectuses and statements of additional information, as well as other regulatory filings. AFFILIATED FUND RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in securities of affiliated ETFs, which involves additional expenses that would not be present in a direct investment in such affiliated ETFs. Furthermore, the Funds' investment performance and risks are directly related to the investment performance and risks of the affiliated ETFs. CALL RISK. If an issuer calls higher-yielding debt instruments held by the Funds, performance could be adversely impacted. CONVERTIBLE SECURITIES RISK. The ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest may invest in convertible securities. Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security's market value also tends to reflect the market price of the common stock of the issuing company, particularly when the stock price is greater than the convertible security's conversion price (i.e., the predetermined price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock). Convertible securities are also exposed to the risk that an issuer is unable to meet its obligation to make dividend or principal payments when due as a result of changing financial or market conditions. Convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of their potential for capital appreciation. CREDIT RISK. The Funds are subject to credit risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CURRENCY RISK. The ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest may hold investments that are denominated in non-U.S. currencies, or in securities that provide exposure to such currencies, currency exchange rates or interest rates denominated in such currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the Funds' investment and the value of your Fund shares. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, the value of an investment in the Funds may change quickly and without warning and you may lose money. Page 64 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) DEPOSITORY RECEIPTS RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in equity securities in the form of Depositary Receipts, which may be less liquid than the underlying securities in their primary trading market. Any distributions paid to the holders of Depositary Receipts are usually subject to a fee charged by the depositary. Holders of Depositary Receipts may have limited voting rights, and investment restrictions in certain countries may adversely impact the value of Depositary Receipts because such restrictions may limit the ability to convert the securities into Depositary Receipts and vice versa. Such restrictions may cause the securities of the underlying issuer to trade at a discount or premium to the market price of the Depositary Receipts. DIVIDEND RISK. The Funds are subject to dividend risk. There is no guarantee that the issuers of the Funds' equity securities will declare dividends in the future or that, if declared, they will either remain at current levels or increase over time. ENERGY INFRASTRUCTURE COMPANIES RISK. The First Trust Multi Income Allocation Portfolio invests in energy infrastructure companies. These companies principally include publicly-traded MLPs and limited liability companies taxed as partnerships, MLP affiliates, Canadian income trusts and their successor companies, pipeline companies, utilities, and other companies that derive at least 50% of their revenues from operating or providing services in support of infrastructure assets such as pipeline, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries. The Fund invests in energy infrastructure companies and is subject to certain risks inherent in investing in these types of securities. Energy infrastructure companies may be directly affected by energy commodity prices, especially those companies that own the underlying energy commodity. A decrease in the production or availability of natural gas, natural gas liquids, crude oil, coal or other energy commodities or a decrease in the volume of such commodities available for transportation, processing, storage or distribution may adversely impact the financial performance of energy infrastructure companies. Energy infrastructure companies are subject to significant federal, state and local government regulation in virtually every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls, and the prices they may charge for products and services. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future which would likely increase compliance costs and may adversely affect the financial performance of energy infrastructure companies. Natural disasters, such as hurricanes in the Gulf of Mexico, also may impact energy infrastructure companies. Certain energy infrastructure companies in the utilities industry are subject to imposition of rate caps, increased competition due to deregulation, difficulty in obtaining an adequate return on invested capital or in financing large construction projects, limitations on operations and increased costs and delays attributable to environmental considerations, and the capital market's ability to absorb utility debt. In addition, taxes, government regulation, international politics, price and supply fluctuations, volatile interest rates and energy conservation may cause difficulties for these companies. Such issuers have been experiencing certain of these problems to varying degrees. EQUITY SECURITIES RISK. Because the Funds and the ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest hold equity securities, the value of the Funds' shares will fluctuate with changes in the value of these equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. The equity markets have experienced recent volatility that may lead to sharp declines in the value of the underlying ETFs and the Funds. ETF RISK. An ETF trades like common stock and represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile. ETFs have management fees and other operating expenses that increase their costs. In general, as a shareholder in other investment companies, the Funds bear their ratable share of the underlying fund's expenses, and are subject to duplicative expenses to the extent a Fund invests in other ETFs. FINANCIAL COMPANIES RISK. Financial companies are especially subject to the adverse effects of economic recession, currency exchange rates, government regulation, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business. FIXED INCOME SECURITIES RISK. An investment in the Funds involves risk associated with an investment in fixed income securities including the risk that certain of the securities in the Funds may not have the benefit of covenants that would prevent the issuer from engaging in capital restructurings or borrowing transactions in connection with corporate acquisitions, leveraged buyouts or restructurings. This limitation could reduce the ability of the issuer to meet its payment obligations and might result in increased credit risk. In addition, certain of the securities may be redeemed or prepaid by the issuer, resulting in lower interest payments by the Funds and reduced distributions to shareholders. FLOATING RATE LOAN RISK. The Funds and the ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest may invest in floating rate loans, which may include high yield securities, or "junk" loans. An investment in floating rate loans subjects the Funds to credit risk, which is heightened for loans in which the Funds invest because companies that issue such loans tend to be highly leveraged and thus are Page 65 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) more susceptible to the risks of interest deferral and/or bankruptcy. The loans are usually rated below investment grade but may also be unrated. An economic downturn would generally lead to a higher non-payment rate, and a loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. Loans are subject to a number of risks described elsewhere in this annual report, including liquidity risk and the risk of investing in below investment grade debt instruments. Floating rate loans are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. Floating rate loans may also not be considered "securities" under the 1940 Act and therefore prevent the Funds from relying on the anti-fraud provisions of the Act. FUND OF FUNDS RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in securities of other ETFs, which involves additional expenses that would not be present in a direct investment in such ETFs. Furthermore, the Funds' investment performance and risks are directly related to the investment performance and risks of the underlying ETFs in which the Funds invest. HIGH YIELD SECURITIES RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in high yield securities, or "junk" bonds, which are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. These securities are issued by companies that may have limited operating history, narrowly focused operations, and/or other impediments to the timely payment of periodic interest and principal at maturity. If the economy slows down or dips into recession, the issuers of high yield securities may not have sufficient resources to continue making timely payment of periodic interest and principal at maturity. The market for high yield securities is generally smaller and less liquid than that for investment grade securities. High yield securities are generally not listed on a national securities exchange but trade in the over-the-counter markets. Due to the smaller, less liquid market for high yield securities, the bid-offer spread on such securities is generally greater than it is for investment grade securities and the purchase or sale of such securities may take longer to complete. ILLIQUID SECURITIES RISK. Some of the securities held by the First Trust Multi Income Allocation Portfolio may be illiquid. Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by the Fund or at prices approximately the value at which the Fund is carrying the securities on its books. INCOME RISK. Income from the Funds' fixed income investments could decline during periods of falling interest rates. INDEX CONSTITUENT RISK. The Fund may be a constituent of one or more indices. As a result, the Fund may be included in one or more index-tracking ETFs or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving the Fund, the size of the Fund and the market volatility of the Fund. Inclusion in an index could significantly increase demand for the Fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, the Fund's NAV could be negatively impacted and the Fund's market price may be significantly below the Fund's net asset value during certain periods In addition, index rebalances may potentially result in increased trading activity. To the extent buying or selling activity increases, the Fund can be exposed to increased brokerage costs and adverse tax consequences and the market price of the Fund can be negatively affected. INDEX REBALANCE RISK. Pursuant to the methodology that the Fund's index provider uses to calculate and maintain the Fund's underlying index, the Fund may own a significant portion of the First Trust ETF's included in the Fund. Such ETFs may be removed from the underlying Index in the event that it does not comply with the eligibility requirements of the underlying index. As a result, the Fund may be forced to sell shares of certain First Trust ETFs at inopportune times or for prices other than at current market values or may elect not to sell such shares on the day that they are removed from the underlying index, due to market conditions or otherwise. Due to these factors, the variation between the Fund's annual return and the return of the underlying index may increase significantly. Apart from scheduled rebalances, the index provider may carry out additional ad hoc rebalances to the underlying index to, for example, correct an error in the selection of constituents. When the Fund in turn rebalances its portfolio, any transaction costs and market exposure arising from such portfolio rebalancing will be borne by the Fund and its shareholders. Unscheduled rebalances may also expose the Fund to additional tracking error risk. Therefore, errors and additional ad hoc rebalances carried out by the index provider may increase the Fund's costs and market exposure. INTEREST RATE RISK. Interest rate risk is the risk that the value of the fixed-income securities in the Funds will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term investments and higher for longer term investments. Mortgage-related securities are particularly subject to the risk that interest rate volatility may adversely impact the valuation and price of such securities. Additionally, the return on the floating rate loans in which the Funds may invest will decline during a period of falling interest rates. INVESTMENT COMPANIES RISK. The Funds may invest in the shares of other investment companies, and therefore, the Funds' investment performance and risks may be related to the investment performance and risks of the underlying funds. In general, as a shareholder in other investment companies, the Funds bear their ratable share of the underlying Fund's expenses, and would be subject to duplicative expenses to the extent the Funds invest in other investment companies. Page 66 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) LIQUIDITY RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest a portion of their assets in other funds which invest in lower-quality debt issued by companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues tend to be less liquid than larger debt issues. If the economy experiences a sudden downturn, or if the debt markets for such companies become distressed, the Funds may have particular difficulty selling their assets in sufficient amounts, at reasonable prices and in a sufficiently timely manner to raise the cash necessary to meet any potentially heavy redemption requests by shareholders. As of the fourth quarter of 2015, the market for high yield debt has experienced decreased liquidity, and investor perception of increased risk has caused yield spreads to widen. Decreased liquidity may negatively affect the First Trust Multi Income Allocation Portfolio's and the First Trust Dorsey Wright Tactical Core Portfolio's ability to mitigate risk and to meet redemptions. LOAN PREPAYMENT RISK. Loans are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which the Funds derive interest income will be reduced. The Funds may not be able to reinvest the proceeds received on terms as favorable as the prepaid loan. LOAN RISK. An investment in loans subjects the Funds to credit risk, which is heightened for loans in which the Funds invest because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. The loans are usually rated below investment grade but may also be unrated. An economic downturn would generally lead to a higher non-payment rate, and a loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. Unlike the securities markets, there is no central clearinghouse for loan trades, and the loan market has not established enforceable settlement standards or remedies for failure to settle. Therefore, portfolio transactions in loans may have uncertain settlement time periods. Loans are subject to a number of risks described elsewhere in this annual report, including liquidity risk and the risk of investing in below investment grade debt instruments. MANAGEMENT RISK. The Funds are subject to management risk because they have actively managed portfolios. The Advisor will apply investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that the Funds will MARKET RISK. Market risk is the risk that a particular security owned by a Fund or shares of the Funds in general may fall in value. Shares are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Overall Fund share values could decline generally or could underperform other investments. MLP RISK. The First Trust Multi Income Allocation Portfolio's investment in MLP units involves risks which differ from an investment in common stock of a corporation. Holders of MLP units have limited control and voting rights on matters affecting the partnership. In addition, there are certain tax risks associated with an investment in MLP units and conflicts of interest may exist between common unit holders and the general partner, including those arising from incentive distribution payments. In addition, there is the risk that an MLP could be, contrary to its intention, taxed as a corporation, resulting in decreased returns from such MLP. MLP TAX RISK. With respect to First Trust Multi Income Allocation Portfolio, the Fund's ability to meet its investment objectives depends, in part, on the level of taxable income and distributions it receives from the MLP and MLP-related entities in which the Fund invests, a factor over which the Fund has no control. The benefit the Fund derives from its investment in MLPs is dependent on the MLPs being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no income tax liability at the entity level. If, as a result of a change in an MLP's business, an MLP were treated as a corporation for federal income tax purposes, such MLP would be obligated to pay federal income tax on its income at the applicable corporate tax rate. If an MLP was classified as a corporation for federal income tax purposes, the amount of cash available for distribution with respect to its units would be reduced and any such distributions received by the Fund would be taxed entirely as dividend income if paid out of the earnings of the MLP. Therefore, treatment of an MLP as a corporation for federal income tax purposes would result in a material reduction in the after-tax return to the Fund, likely causing a substantial reduction in the value of the shares of a Fund. MORTGAGE SECURITIES RISK. The ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in mortgage-related securities, including mortgage-backed securities, which may make the Funds more susceptible to adverse economic, political or regulatory events that affect the value of real estate. The First Trust/Dow Jones Dividend & Income Allocation Portfolio may invest in such securities. Changes in local, state and federal policies could negatively impact the mortgage-related securities market, which include various government initiated and sponsored homeowner assistance programs and eminent domain issues. Mortgage related securities may also face liquidity issues when a Fund seeks to sell such securities, but is unable to find buyers at a bid-ask spread to make the transaction feasible. These securities are also subject to the risk that the underlying borrowers may default on their mortgages, resulting in a non-payment of principal and interest. Finally, the mortgage-related securities market may be negatively impacted by regulatory changes including those that are related to the mandate or existence of the government-sponsored enterprises, Fannie Mae, Freddie Mac and Ginnie Mae. Mortgage-related securities are subject to Page 67 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which a Fund derives interest income will be reduced. In declining interest rate environments, the extent to which borrowers prepay a mortgage generally increases, which increase reinvestment risk, or the risk that the proceeds received are not reinvested on terms as favorable as the prepaid loan. Conversely, mortgage-related securities are subject to the risk that the rate of mortgage prepayments decreases, which extends the average life of a security and increases the interest rate risk exposure. MUNICIPAL BONDS RISK. Certain of the ETFs in which the First Trust Dorsey Wright Tactical Core Portfolio invests may invest in municipal bonds. In addition to being subject to credit, income and interest rate risk (as described in the prospectus), municipal bonds are subject to tax risk. Interest income from municipal bonds is normally not subject to regular federal income tax, but income from municipal bonds held by the underlying ETFs could be declared taxable because of, among other things, unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities or noncompliant conduct of a bond issuer. Consequently, the attractiveness of municipal bonds in relation to other investment alternatives is affected by changes in federal income tax rates or changes in the tax-exempt status of interest income from municipal bonds. NEW FUND RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio currently have fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the Funds' market exposure for limited periods of time. This impact may be positive or negative, depending on the direction of market movement during the period affected. NON-CORRELATION RISK. The Funds' returns may not match the return of an Index for a number of reasons. For example, the Funds incur operating expenses not applicable to the Indexes, and may incur costs in buying and selling securities, especially when rebalancing the Funds' portfolio holdings to reflect changes in the composition of the Indexes. In addition, the Funds' portfolio holdings may not exactly replicate the securities included in the Indexes or the ratios between the securities included in the Indexes. NON-DIVERSIFICATION RISK. The First Trust Dorsey Wright Tactical Core Portfolio is classified as "non-diversified" under the 1940 Act. As a result, the First Trust Dorsey Wright Tactical Core Portfolio is only limited as to the percentage of its assets that may be invested in the securities of any one issuer by the diversification requirements imposed by the Internal Revenue Code of 1986, as amended (the "Code"). The First Trust Dorsey Wright Tactical Core Portfolio may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the First Trust Dorsey Wright Tactical Core Portfolio may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers. NON-U.S. SECURITIES AND EMERGING MARKETS RISK. The First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in securities of non-U.S. issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards and less government supervision and regulation of exchanges in foreign countries. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries. PREFERRED SECURITIES RISK. The Funds and certain of the ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in preferred securities. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt instruments in a company's capital structure in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Preferred securities are also subject to credit risk, interest rate risk and income risk. REIT RISK. The First Trust Multi Income Allocation Portfolio invests in REITs, and as a result, the Fund is subject to the risks associated with investing in real estate, which may include, but are not limited to, fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local operating expenses; and other economic, political or regulatory occurrences affecting companies in the real estate industry. In addition to risks related to investments in real estate generally, investing in REITs involves certain other risks related to their structure and focus, which include, but are not limited to, dependency upon management skills, limited diversification, the risks of locating and managing financing for projects, heavy cash flow dependency, possible default by borrowers, the costs and potential losses of self-liquidation of one or more holdings, the risk of a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages, changes in neighborhood values and appeal to purchases, the possibility of failing to maintain exemptions from registration under the 1940 Act and, in many cases, relatively small market capitalization, which may result in less market liquidity and greater price volatility. REITs are also subject to the risk that the real estate market may experience an economic downturn generally, which may have a material effect on the real estate in which the REITs invest and their underlying portfolio securities. Page 68 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) SMALL FUND RISK. The Funds currently have fewer assets than larger funds, and like other relatively smaller funds, large inflows and outflows may impact the Funds' market exposure for limited periods of time. This impact may be positive or negative, depending on the direction of market movement during the period affected. SMALLER COMPANY RISK. The Funds and certain of the ETFs in which the First Trust Multi Income Allocation Portfolio and the First Trust Dorsey Wright Tactical Core Portfolio invest in small- and mid-capitalization companies. Such companies may be more vulnerable to adverse general market or economic developments, and their securities may be less liquid and may experience greater price volatility than larger, more established companies as a result of several factors, including limited trading volumes, products or financial resources, management inexperience and less publicly available information. Accordingly, such companies are generally subject to greater market risk than larger, more established companies. TIPS RISK. The First Trust Multi Income Allocation Portfolio invests in TIPs. TIPS are inflation-indexed fixed-income securities issued by the U.S. Department of Treasury and are subject to the same risks as other fixed income investments. In a falling inflationary environment, both interest payments and the value of the TIPS will decline. BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT AND INVESTMENT SUB-ADVISORY AGREEMENTS The Board of Trustees (the "Board") of the First Trust Variable Insurance Trust (the "Trust"), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. ("First Trust" or the "Advisor") on behalf of each of First Trust/Dow Jones Dividend & Income Allocation Portfolio and First Trust Multi Income Allocation Portfolio (each a "Fund" and together the "Funds"); the Investment Sub-Advisory Agreement (the "Stonebridge Sub-Advisory Agreement") among the Trust, on behalf of First Trust Multi Income Allocation Portfolio, the Advisor and Stonebridge Advisors LLC ("Stonebridge"); and the Investment Sub-Advisory Agreement (the "Energy Income Partners Sub-Advisory Agreement") among the Trust, on behalf of First Trust Multi Income Allocation Portfolio, the Advisor and Energy Income Partners, LLC ("Energy Income Partners") for a one-year period ending June 30, 2017 at a meeting held on June 13, 2016. The Stonebridge Sub-Advisory Agreement and the Energy Income Partners Sub-Advisory Agreement are collectively referred to as the "Sub-Advisory Agreements." Stonebridge and Energy Income Partners are individually referred to as a "Sub-Advisor" and are collectively referred to as the "Sub-Advisors." The Sub-Advisory Agreements together with the Advisory Agreement are referred to as the "Agreements." The Board determined that the continuation of the Advisory Agreement is in the best interests of each Fund and the continuation of the Sub-Advisory Agreements is in the best interests of First Trust Multi Income Allocation Portfolio in light of the extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 22, 2016 and June 13, 2016, the Board, including the Independent Trustees, reviewed materials provided by the Advisor and each of the Sub-Advisors responding to requests for information from counsel to the Independent Trustees that, among other things, outlined the services provided by the Advisor to the Funds and by the Sub-Advisors to First Trust Multi Income Allocation Portfolio (including the relevant personnel responsible for these services and their experience); the advisory fee rates payable by each Fund and the sub-advisory fees for First Trust Multi Income Allocation Portfolio as compared to fees charged to a peer group of funds provided by Management Practice, Inc. ("MPI"), an independent source (the "MPI Peer Group"), and as compared to fees charged to other clients of the Advisor and the Sub-Advisor; expenses of each Fund as compared to expense ratios of the funds in the Fund's MPI Peer Group; performance information for each Fund; the nature of expenses incurred in providing services to the Funds and the potential for economies of scale, if any; financial data on the Advisor and each Sub-Advisor; any fall out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"), and the Sub-Advisors; and information on the Advisor's and each Sub-Advisor's compliance program. The Board reviewed initial materials with the Advisor at a special meeting held on April 22, 2016, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor and each of the Sub-Advisors. Following the April meeting, independent legal counsel on behalf of the Independent Trustees requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and independent legal counsel held prior to the June 13, 2016 meeting, as well as at the meeting held that day. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor continue to be reasonable business arrangements from the perspective of the Funds and the Funds' shareholders. Similarly, the Board applied its business judgment to determine whether the arrangements among the Trust, the Advisor and each of the Sub-Advisors continue to be reasonable business arrangements from the perspective of First Trust Multi Income Allocation Portfolio and the Fund's shareholders. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in the Funds knowing that the Advisor manages the Funds and knowing that the Sub-Advisors serve as such for First Trust Multi Income Allocation Portfolio and knowing the advisory fee. Page 69 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) In reviewing the Agreements, the Board considered the nature, extent and quality of the services provided by the Advisor and each Sub-Advisor under the Agreements. With respect to the Advisory Agreement, the Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Funds, and reviewed all of the services provided by the Advisor to the Funds. The Board also considered the background and experience of the persons responsible for the day-to-day management of the Funds, including for the management of the Funds' investments and the oversight of the Sub-Advisors for First Trust Multi Income Allocation Portfolio. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's, the Sub-Advisors' and the Funds' compliance with the 1940 Act, as well as each Fund's compliance with its investment objective and policies. In addition, as part of the Board's consideration of the Advisor's services, the Advisor, in its written materials and at the April 22, 2016 meeting, described to the Board the scope of its ongoing investment in additional infrastructure and personnel to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. With respect to the Sub-Advisory Agreements for First Trust Multi Income Allocation Portfolio, the Board considered the services that each Sub-Advisor provides to the Fund, noting that Energy Income Partners is responsible for the day-to-day management of a portion of the Fund's investments and that Stonebridge serves in a non-discretionary capacity for a portion of the Fund's investments. The Board noted the background and experience of each Sub-Advisor's portfolio management team. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Funds by the Advisor and to First Trust Multi Income Allocation Portfolio by the Sub-Advisors under the Agreements have been and are expected to remain satisfactory and that the Advisor and, for First Trust Multi Income Allocation Portfolio, the Sub-Advisors, have managed the Funds consistent with each Fund's respective investment objectives and policies. The Board considered the advisory fee rate payable by each Fund under the Advisory Agreement and, for First Trust Multi Income Allocation Portfolio, considered the sub-advisory fees paid under the Sub-Advisory Agreements for the services provided, noting that the sub-advisory fees are paid by the Advisor from its advisory fee. The Board considered that the Advisor had agreed to extend the current expense caps for Class I and Class II shares of each Fund at least until May 1, 2017. The Board noted that expenses borne or advisory fees waived by First Trust are subject to reimbursement by the applicable Fund for up to three years from the date the expense was incurred or advisory fee was waived, but no reimbursement payment would be made by the Fund if it would result in the Fund exceeding an expense ratio equal to the expense cap in place at the time of the reimbursement or at the time the expenses were borne or advisory fees were waived by First Trust. The Board also noted that the Advisor had extended through May 1, 2017 its agreement to reduce the advisory fee payable by First Trust Multi Income Allocation Portfolio in the amount of 0.37% of the Fund's average daily net assets. The Board received and reviewed information for each Fund showing the advisory fee rates and expense ratios of the peer funds in the MPI Peer Group, as well as advisory fee rates charged by the Advisor and the Sub-Advisor to other fund and non-fund clients, as applicable. Based on the information provided, the Board noted that the advisory fee of each Fund was below the median advisory fee of the peer funds in the Fund's MPI Peer Group. The Board also noted that with respect to the total (net) expense ratio of each Fund's Class I shares, First Trust Multi Income Allocation Portfolio's net expense ratio was below, and First Trust/Dow Jones Dividend & Income Allocation Portfolio's net expense ratio was above, the median expense ratio of the peer funds in the Fund's MPI Peer Group. With respect to fees charged to other clients, the Board considered differences between the Funds and other clients that limited their comparability. In considering the advisory fee rates overall, the Board also considered the Advisor's statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor's description of its long-term commitment to each Fund. The Board considered performance information for the Funds. The Board noted the process it has established for monitoring the Fund's performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor and Sub-Advisor for the Funds. The Board determined that this process continues to be effective for reviewing the Funds' performance. The Board received and reviewed information comparing each Fund's performance for periods ended December 31, 2015 to the performance of the Fund's MPI Peer Group and to benchmark indexes, including at least one blended benchmark. Based on the information provided, the Board noted that First Trust/Dow Jones Dividend & Income Allocation Portfolio's performance (Class I shares) outperformed the MPI Peer Group average for the one-year period ended December 31, 2015 and underperformed the MPI Peer Group average for the three-year period ended December 31, 2015. The Board noted that First Trust Multi Income Allocation Portfolio's performance (Class I shares) underperformed the MPI Peer Group average for the one-year period ended December 31, 2015. On the basis of all the information provided on the fees, expenses and performance of the Funds and the ongoing oversight by the Board, the Board concluded that the advisory fee for each Fund and the sub-advisory fees for First Trust Multi Income Allocation Portfolio continue to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Advisory Agreement and provided to First Trust Multi Income Allocation Portfolio by the Sub-Advisors under the Sub-Advisory Agreements. The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to each Fund and noted the Advisor's statement that it expects its expenses to increase over the next twelve months as the Advisor continues to make investments in personnel and infrastructure. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2015 and the estimated profitability level for each Fund calculated by the Page 70 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST JUNE 30, 2016 (UNAUDITED) Advisor based on such data, as well as complex-wide and product-line profitability data for the same period. The Board noted the inherent limitations in the profitability analysis, and concluded that, based on the information provided, the Advisor's profitability level for each Fund was not unreasonable. The Board considered that the Advisor had identified as a fall out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP. The Board also considered the majority ownership interest of an affiliate of the Advisor in Stonebridge and the investment by an affiliate of the Advisor in Energy Income Partners and potential fall-out benefits to the Advisor from such interests. The Board noted that FTP is compensated for services provided to the Funds through Rule 12b 1 distribution and service fees payable by Class I shares, and that the Advisor receives compensation from the Funds for providing fund reporting services pursuant to a separate Fund Reporting Services Agreement. The Board also noted that the Advisor does not utilize soft dollars in connection with its management of the Funds' portfolios. With respect to the Stonebridge Sub-Advisory Agreement, the Board considered Stonebridge's expenses and noted Stonebridge's recent hiring of additional personnel. The Board considered that the sub advisory fee rate was negotiated at arm's length between the Advisor and Stonebridge. The Board also considered information provided by Stonebridge with respect to the profitability of the Stonebridge Sub Advisory Agreement to Stonebridge. The Board noted the inherent limitations in the profitability analysis and concluded that the profitability analysis for the Advisor was more relevant. The Board considered fall-out benefits that may be realized by Stonebridge from its relationship with First Trust Multi Income Allocation Portfolio, including potential fall-out benefits to Stonebridge from the ownership interest of an affiliate of the Advisor in Stonebridge. The Board noted that Stonebridge does not provide trade execution services on behalf of First Trust Multi Income Allocation Portfolio. With respect to the Energy Income Partners Sub-Advisory Agreement, the Board considered that Energy Income Partners' investment services expenses are primarily fixed, and that Energy Income Partners has made recent investments in infrastructure and personnel. The Board considered that the sub advisory fee rate was negotiated at arm's length between the Advisor and Energy Income Partners. The Board also considered information provided by Energy Income Partners as to the profitability of the Energy Income Partners Sub Advisory Agreement to Energy Income Partners. The Board noted the inherent limitations in the profitability analysis and concluded that the profitability analysis for the Advisor was more relevant. The Board considered fall-out benefits that may be realized by Energy Income Partners from its relationship with First Trust Multi Income Allocation Portfolio, including the potential fall-out benefits to Energy Income Partners from the ownership interest of an affiliate of the Advisor in Energy Income Partners. The Board noted that Energy Income Partners does not provide trade execution services on behalf of First Trust Multi Income Allocation Portfolio. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of the applicable Funds. No single factor was determinative in the Board's analysis. Page 71 This Page Left Blank Intentionally.
FIRST TRUST INVESTMENT ADVISOR First Trust Advisors L.P. 120 E. Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISORS FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Energy Income Partners, LLC Stonebridge Advisors, LLC 10 Wright Street 10 Westport Road, Suite C101 Westport, CT 06880 Wilton, CT 06897 ADMINISTRATOR & FUND ACCOUNTANT FIRST TRUST/DOW JONES DIVIDEND & INCOME FIRST TRUST DORSEY WRIGHT TACTICAL ALLOCATION PORTFOLIO CORE PORTFOLIO FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Brown Brothers Harriman & Co. BNY Mellon Investment Servicing (US) Inc. 50 Post Office Square 301 Bellevue Parkway Boston, MA 02110 Wilmington, DE 19809 CUSTODIAN FIRST TRUST/DOW JONES DIVIDEND & INCOME FIRST TRUST DORSEY WRIGHT TACTICAL ALLOCATION PORTFOLIO CORE PORTFOLIO FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Brown Brothers Harriman & Co. The Bank of New York Mellon 50 Post Office Square 101 Barclay Street, 20th Floor Boston, MA 02110 New York, NY 10286 TRANSFER AGENT BNY Mellon Investment Servicing (US) Inc. 301 Bellevue Parkway Wilmington, DE 19809 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603
[BLANK BACK COVER] ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) First Trust Variable Insurance Trust --------------------------------------------- By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: August 22, 2016 ------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: August 22, 2016 ------------------- By (Signature and Title)* /s/ Donald P. Swade ---------------------------------------- Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: August 22, 2016 ------------------- * Print the name and title of each signing officer under his or her signature.