N-CSR 1 vit_ncsr.txt 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: December 31, 2019 ------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. FIRST TRUST VARIABLE INSURANCE TRUST ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2019 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST ANNUAL REPORT DECEMBER 31, 2019 Shareholder Letter........................................................... 1 Portfolio Commentary and Performance Summary First Trust/Dow Jones Dividend & Income Allocation Portfolio............ 2 First Trust Multi Income Allocation Portfolio........................... 7 First Trust Dorsey Wright Tactical Core Portfolio....................... 13 Understanding Your Fund Expenses............................................. 16 Portfolio of Investments First Trust/Dow Jones Dividend & Income Allocation Portfolio............ 17 First Trust Multi Income Allocation Portfolio........................... 44 First Trust Dorsey Wright Tactical Core Portfolio....................... 54 Statements of Assets and Liabilities......................................... 55 Statements of Operations..................................................... 56 Statements of Changes in Net Assets.......................................... 57 Financial Highlights......................................................... 60 Notes to Financial Statements................................................ 64 Report of Independent Registered Public Accounting Firm...................... 78 Additional Information....................................................... 79 Board of Trustees and Officers............................................... 86 Privacy Policy............................................................... 88 CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor"), Energy Income Partners, LLC ("EIP" or a "Sub-Advisor"), and/or Stonebridge Advisors LLC ("Stonebridge" or a "Sub-Advisor") and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of the First Trust Variable Insurance Trust (the "Trust") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any series (individually called a "Fund" and collectively the "Funds") of the Trust will achieve its investment objectives. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of certain other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's web page at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance. By reading the portfolio commentary by each Fund's portfolio management team, you may obtain an understanding of how the market environment affected each Fund's performance. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or the Sub-Advisors are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings. -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2019 Dear Shareholders: First Trust is pleased to provide you with the annual report for the First Trust Variable Insurance Trust (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2019, including a market overview and a performance analysis. A significant event for the markets in the past year was the decision by the Federal Reserve (the "Fed") to reverse course with respect to monetary policy. For those who may not follow the Fed closely, after holding its federal funds target rate (upper bound) at an artificially low 0.25% for seven years (December 2008-December 2015) to help stimulate U.S. economic activity, it spent the better part of the next four years (December 2015-July 2019) increasing its benchmark lending rate in an effort to normalize it. Over that period, the Fed increased the rate from 0.25% to 2.50%. To lend some perspective, the average federal funds target rate (upper bound) was 2.95% for the 30-year period ended December 31, 2019, so the Fed came close to achieving its goal of normalizing it, according to data from Bloomberg. From the end of July 2019 through the end of December, however, the Fed initiated three rate cuts that dropped it from 2.50% to 1.75%. So why did the Fed reverse course on monetary policy? We believe, as well as others in the financial media, that the Fed's reversal on monetary policy has to do with the trade tariffs. The Trump Administration first began implementing new trade tariffs on imported goods back in March 2018. While the original tariffs targeted just imported steel and aluminum, the use of tariffs quickly escalated to other goods and services. The lion's share of the tariff conflict today is between the U.S. and China, the two largest economies in the world. In our opinion, it is believed that President Donald J. Trump is utilizing tariffs as leverage to try and negotiate more favorable trade agreements between the U.S. and its major trading partners. One of the by-products of the escalation in the use of tariffs by all parties involved has been a slowdown in global economic growth, particularly in the U.S. The annualized U.S. real gross domestic product growth rate in the second quarter of 2018 (when new tariffs were introduced) was 3.5%. As of the second and third quarters of 2019, that annualized growth rate was down to 2.0% and 2.1%, respectively, according to data from the Bureau of Economic Analysis. For many months, President Trump has publicly challenged the Fed to lower rates aggressively to help offset the tempering of economic growth. President Trump has noted that the Fed has room to lower rates due to the extremely low-to-negative rate levels found in many countries abroad as well as the lack of any significant inflationary pressure in the current climate. While the Fed has delivered some rate cuts in recent months, we believe that President Trump will continue to bang the drum for even more rate cuts. Investors continue to flock to income-oriented investment products, such as open-end bond mutual funds and exchange-traded bond funds ("ETFs"). Net inflows to taxable bond funds and ETFs totaled an estimated $413.9 billion for the 12-month period ended December 31, 2019, according to Morningstar. The current climate featuring low interest rates, low bond yields and low inflation, if sustained, could make closed-end funds an attractive alternative to other income-oriented products moving forward, in our opinion. Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 1 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust") is a registered investment advisor based in Wheaton, IL and is the investment advisor to the First Trust/Dow Jones Dividend & Income Allocation Portfolio (the "Fund"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the Fund. PORTFOLIO MANAGEMENT TEAM Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust Todd Larson, Senior Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Eric Maisel, Senior Vice President, First Trust FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO For the year ended December 31, 2019, the First Trust/Dow Jones Dividend & Income Allocation Portfolio (the "Fund") Class I Shares returned 20.77% versus 22.80% for the Blended Benchmark: 50% Russell 3000(R) Index and 50% Bloomberg Barclays U.S Corporate Investment-Grade Index. As of December 31, 2019, the total investments for the Fund were allocated as follows: Equities, 57.4% and Fixed Income, 42.6%. EQUITIES COMMENTARY U.S. equities ended 2019 near all-time highs. The Russell 3000(R) Index returned 31.02% during 2019, ending above 30% for just the third time this century. During the first quarter of 2019, a dovish Federal Reserve (the "Fed"), along with receding trade threats, helped to revitalize U.S. equity markets after a rocky fourth quarter of 2018. Modest inflation and soft international economic data motivated the Fed to signal an incrementally more dovish policy stance at the March Federal Open Market Committee ("FOMC") meeting, with the most recent Fed "Dot Plot" indicating that the majority of FOMC members did not expect further rate hikes during 2019. Lower risk of the Fed overtightening, along with diminished threats of U.S.-China trade war, helped fuel the Russell 3000(R) Index to return 14.0% during the first quarter of 2019. U.S. equities had a more volatile second quarter, particularly during the month of May. Volatility and Value were the two worst performing factors as the Bloomberg U.S. Pure Factor Index's returned -1.55% for Volatility and -1.42% for Value for the second quarter. The Financial Services sector was the top performing sector during the second quarter, as the possibility of future Fed cuts lifted odds of prolonging the business cycle, buoying banks as the Russell 3000(R) Financial Services Index returned 7.0%. The Technology sector also had strong returns during the quarter, with the Russell 3000(R) Technology Index returning 4.0%. For the third quarter, volatility in stocks remained elevated as trade tensions intensified and then moderated later in the quarter while U.S. manufacturing data weakened. Large size and Dividends were positive factors as the Bloomberg U.S. Pure Factor Index's returned 0.7% and 0.2%, respectively, for the third quarter. Treasury yields fell providing a tailwind to interest rate sensitive utility and real estate stocks, which were top performers for the third quarter. The Russell 3000(R) Utilities Index returned 8.5% while the Dow Jones Equity REIT Index returned 7.7%. The Russell 3000(R) Consumer Staples Index returned 5.7% for the third quarter as investors bid them higher in search of relative safety. Trade progress bolstered U.S. equities in the fourth quarter of 2019. The rally was spurred after China and the U.S. announced they had reached a "Phase One" trade agreement, and the United States-Canada-Mexico Trade Agreement was signed by the parties and subsequently ratified in the U.S. House of Representatives. The respite from trade tensions, combined with a hold in Fed policy and steady economic growth, drove markets higher, as the Russell 3000(R) Index had a 9.1% total return for the fourth quarter. The equity portion of the Fund has a quarterly rebalance in early January, April, July and October. The selection process is focused on identifying stocks exhibiting dividend strength, capital strength and price stability. This process resulted in overweight positions in Producer Durables, Financial Services, and Materials & Processing stocks, while Technology, Health Care, Utilities, Consumer Discretionary, Energy and Consumer Staples were underweight. Page 2 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) Of the nine Russell Global Sectors, five had a positive total attribution effect (allocation effect combined with selection effect) and four had a negative total attribution effect. The Health Care, Energy and Utilities sectors had a positive allocation effect while Technology had a negative allocation effect. Two sectors had a positive selection effect: Materials & Processing and Producer Durables. Four sectors had a negative selection effect: Financial Services, Technology, Consumer Staples and Consumer Discretionary. The equity portion of the Fund benefited from a positive allocation effect but was hindered by a negative selection effect. The Health Care sector was the largest overall contributor to relative performance. The equity portion of the Fund was underweight the underperforming sector in the benchmark, which led to a positive allocation effect. Some of the positions in the Fund included Chemed Corp, Quest Diagnostics, and UnitedHealth Group Incorporated, among a few others. The Technology sector was the biggest detractor from relative performance. The equity portion of the Fund was underweight the best performing sector in the Russell 3000(R) benchmark, which led to a negative allocation effect and had a negative selection effect. Relative to the benchmark, the equity portion of the Fund also outperformed in the Producer Durables, Energy, and Materials & Processing sectors. The Fund was overweight the Producer Durables sector resulting in a positive allocation effect and had a positive selection effect. In the Energy sector, the Fund was underweight the worst performing sector in the benchmark, which led to a positive allocation effect. In the Materials & Processing sector, the Fund was overweight the sector resulting in a slightly negative allocation effect, however the Fund's positions in the sector outperformed the benchmark's positions resulting in a positive selection effect. The equity portion of the Fund's top five contributors to performance were Reliance Steel & Aluminum Co., CDW Corporation, Tetra Tech, Inc., HEICO Corporation and Cintas Corporation. The top five detractors from performance were Cabot Oil & Gas Corporation, The 3M Company, The Kraft Heinz Company, Franklin Resources Inc. and Walgreens Boots Alliance, Inc. Heading into 2020, we believe the overall state of the economy remains strong from employment and wages, to corporate earnings, to gross domestic product growth and industrial production. While equity markets rallied in 2019, they continue to display opportunities and a positive outlook as the Fed remains accommodative, in our opinion. FIXED-INCOME COMMENTARY The investment-grade corporate bond market experienced a major rally during 2019, as credit spreads retraced their 2018 sell-off. Spreads tightened dramatically as the market became more constructive on corporate earnings, cash flow, and the rating stability of BBB-rated credits. Macro concerns were also alleviated as hope for a "Phase One" trade deal between the U.S. and China increased, and as signs emerged that global economic growth is stabilizing. Additionally, the Fed contributed to the improved market backdrop as it shifted from predicting two short-term interest rate hikes to the reality of cutting short-term rates three times over the course of 2019. For the 12-month period ended December 31, 2019, corporate bonds outperformed Treasuries. As measured by the Bloomberg Barclays U.S. Corporate Investment-Grade Index, spreads tightened by 60 basis points ("bps") to 153 bps at year end. Investment-grade corporate bonds had a positive total return for the period as the narrowing in credit spreads, along with the move lower in Treasury rates, added to the carry provided by corporate bonds. It is interesting to note that investment-grade corporate credit spreads ended 2019 exactly where they began 2018. But from a broader perspective this coincidence makes intuitive sense. The sell-off in 2018 was the result of the very fears whose alleviation in 2019 led to a sharp recovery. Fear that global central bank policy normalization would go too far in tightening financial conditions dissipated as both the European Central Bank and the Fed reversed course. Similarly, the late-2018 fear that a large chunk of the BBB-rated segment of investment grade was in imminent danger of being downgraded to high yield dissipated as financial conditions loosened and many of the individual credits in question successfully reduced leverage. And finally, fear that the positive supply/demand technical in investment grade could reverse was Page 3 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) alleviated by the combination of lower interest rates renewing the reach for yield, cheaper currency hedging costs for overseas buyers (arising from lower U.S. short-term interest rates), the tailwind of U.S. Treasuries rallying, and the supportive asset-allocation impact of needing more and more fixed income to keep portfolio weightings in balance as equity prices kept rising. The fixed-income portion of the Fund seeks to provide income along with preservation of capital. To accomplish this, the selection process is primarily value oriented, strongly emphasizes downside protection and focuses on free cash flow, leverage, interest coverage and revenue growth rates. This process resulted in overweight positions in Electric, Banking, and Transportation bonds, while Consumer Non-Cyclical, Real Estate Investment Trusts ("REITs"), and Communications were the largest underweights. Given the significant rally in spreads, the bond portion of the Fund's higher quality mandate resulted in the total return for the bond portion of the Fund modestly underperforming the Bloomberg Barclays U.S. Corporate Investment-Grade Index. Yield curve changes reduced relative performance. Treasury yields decreased during the year as the Fed reversed course and lowered short-term interest rates. The portfolio maintained a moderate duration underweight early in the year, with the underweight primarily at the front-end of the curve. Among credit quality and maturity cohorts, overweights in single-A and double-A credits, along with active bets in the 10- and 30-year maturity buckets, added the most to relative return. Among the 18 fixed-income industry groups, allocations to Banking, Electric, and Energy added the most to relative returns. Allocations to Consumer Non-Cyclical, REITs, and Communications, by contrast, reduced relative returns. Overall, the allocation effect modestly detracted from relative performance. Within these industries, credit selection in Consumer Non-Cyclical, Electric, and Communications had the greatest positive impacts, while credit selection within Consumer Cyclical, Technology, and Insurance reduced relative returns. Overall, credit selection within these industries had a net positive impact on relative performance. Issuer allocation contributed to relative performance, with overweights to Citigroup Inc., The Bank of America Corporation, and JPMorgan Chase & Co. having the greatest positive impact on relative returns. Security selection also contributed to relative return, with selection among bonds by Vodafone Group Plc, Consolidated Edison, Inc., and IBM contributing the most to relative return. As we begin 2020, we have a near-term positive outlook for credit spreads. We anticipate modestly higher interest rates and a steeper yield curve. We expect the Fed to be on hold during 2020 against a backdrop of modestly higher inflation and continued economic growth. We have a positive outlook for U.S. investment grade fundamentals as continued economic growth supports profitability and cash flow. Additionally, we anticipate that the supply/demand picture for U.S. investment grade should remain supportive in 2020. Nonetheless, given the 2019 rally in spreads, valuations are full, the recovery is another year further along, and the upcoming November 2020 U.S. Presidential election season could result in heightened market volatility, in our opinion. Accordingly, our focus for the portfolio will be on our process and on issuers and sectors with credit profiles well suited to weather the upcoming challenges. Page 4 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/12 20.77% 7.82% 8.63% Blended Benchmark (a) 22.80% 8.08% 9.15% Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 14.53% 4.60% 4.58% Russell 3000(R) Index (c) 31.02% 11.24% 13.53% Secondary Blended Benchmark (d) 23.52% 8.24% 9.32% Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 15.95% 4.79% 4.79% Dow Jones U.S. Total Stock Market Index(SM) (f) 30.90% 11.18% 13.44% ------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------- 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE TOTAL DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 21.02% 8.09% 8.54% Blended Benchmark (a) 22.80% 8.08% 8.29% Bloomberg Barclays U.S. Corporate Investment-Grade Index (b) 14.53% 4.60% 4.56% Russell 3000(R) Index (c) 31.02% 11.24% 11.75% Secondary Blended Benchmark (d) 23.52% 8.24% 8.49% Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (e) 15.95% 4.79% 4.81% Dow Jones U.S. Total Stock Market Index(SM) (f) 30.90% 11.18% 11.67% -------------------------------------------------------------------------------------------------------------------------
(a) The Blended Benchmark returns are a 50/50 split between the Russell 3000(R) Index and the Bloomberg Barclays U.S. Corporate Investment-Grade Index returns. (b) Bloomberg Barclays U.S. Corporate Investment-Grade Index measures the performance of investment grade U.S. corporate bonds. The index includes all publicly issued, dollar-denominated corporate bonds with a minimum of $250 million par outstanding that are investment grade-rated (Baa3/BBB- or higher). The index excludes bonds having less than one year to final maturity as well as floating rate bonds, non-registered private placements, structured notes, hybrids, and convertible securities. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as determined by market capitalization. This index represents approximately 98% of the investable U.S. equity market. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (d) The Secondary Blended Benchmark return is a 50/50 split between the Dow Jones U.S. Total Stock Market Index(SM) and the Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) returns. (e) The Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) measures the return of readily tradable, high-grade U.S. corporate bonds. The index includes an equally weighted basket of 96 recently issued investment-grade corporate bonds with laddered maturities. (The index reflects no deduction for fees, expenses or taxes). (f) The Dow Jones U.S. Total Stock Market Index(SM) measures all U.S. equity securities that have readily available prices. (The index reflects no deduction for fees, expenses or taxes). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT May 1, 2012 - December 31, 2019 Bloomberg Dow Jones First Trust/ Dow Barclays U.S. Equal Weight Dow Jones Jones Dividend & Corporate Russell Secondary U.S. Issued U.S. Total Income Allocation Blended Investment-Grade 3000(R) Blended Corporate Bond Stock Market Portfolio - Class I Benchmark Index Index Benchmark Index(SM) Index(SM) 5/1/2012 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 6/30/2012 10,020 9,925 10,135 9,701 9,933 10,152 9,702 12/31/2012 10,438 10,495 10,636 10,331 10,519 10,677 10,322 6/30/2013 10,904 11,026 10,273 11,784 11,047 10,290 11,786 12/31/2013 11,770 12,055 10,472 13,798 12,088 10,523 13,777 6/30/2014 12,318 12,823 11,067 14,756 12,844 11,083 14,733 12/31/2014 12,951 13,269 11,254 15,531 13,336 11,336 15,493 6/30/2015 12,989 13,350 11,150 15,832 13,409 11,215 15,790 12/31/2015 12,962 13,286 11,177 15,606 13,402 11,315 15,559 6/30/2016 13,806 14,046 12,035 16,171 14,214 12,239 16,110 12/31/2017 14,484 14,554 11,859 17,592 14,672 11,975 17,521 6/30/2017 15,285 15,478 12,310 19,163 15,592 12,395 19,093 12/31/2017 16,436 16,531 12,621 21,309 16,643 12,691 21,228 6/30/2018 16,306 16,529 12,208 21,995 16,638 12,239 21,916 12/31/2018 15,628 15,936 12,304 20,191 16,042 12,350 20,101 6/30/2019 17,828 18,231 13,516 23,969 18,424 13,690 23,860 12/31/2019 18,873 19,569 14,092 26,455 19,815 14,320 26,313
Page 5 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP EQUITY HOLDINGS INVESTMENTS ------------------------------------------------------ Humana, Inc. 0.5% UnitedHealth Group, Inc. 0.5 Altria Group, Inc. 0.4 Reliance Steel & Aluminum Co. 0.4 Allegion PLC 0.4 Franklin Electric Co., Inc. 0.4 Wolverine World Wide, Inc. 0.4 Huntington Ingalls Industries, Inc. 0.4 Commerce Bancshares, Inc. 0.4 Zions Bancorp N.A. 0.4 ------------------------------------------------------ Total 4.2% ====== ------------------------------------------------------ % OF TOTAL TOP FIXED-INCOME HOLDINGS BY ISSUER INVESTMENTS ------------------------------------------------------ Bank of America Corp. 1.8% U.S. Government 1.8 Citigroup, Inc. 1.5 JPMorgan Chase & Co. 1.4 Goldman Sachs Group (The), Inc. 1.2 AbbVie, Inc. 1.2 Morgan Stanley 1.0 UnitedHealth Group, Inc. 0.9 Duke Energy Corp. 0.9 Wells Fargo & Co. 0.8 ------------------------------------------------------ Total 12.5% ====== ------------------------------------------------------ % OF TOTAL FIXED-INCOME CREDIT QUALITY(1) INVESTMENTS ------------------------------------------------------ AAA 5.8% AA+ 1.6 AA 6.3 AA- 8.4 A+ 14.0 A 18.7 A- 17.6 BBB+ 9.5 BBB 11.7 BBB- 5.1 A-1 (short-term) 1.1 A-2 (short-term) 0.2 ------------------------------------------------------ Total 100.0% ====== ------------------------------------------------------ % OF TOTAL SECTOR ALLOCATION INVESTMENTS ------------------------------------------------------ Common Stocks: Financials 17.7% Industrials 13.9 Information Technology 6.9 Consumer Discretionary 5.3 Health Care 4.8 Consumer Staples 3.1 Materials 2.4 Communication Services 1.2 Energy 1.1 Real Estate 1.0 ------------------------------------------------------ Total Common Stocks 57.4 ------------------------------------------------------ Corporate Bonds & Notes: Financials 10.6 Utilities 5.4 Health Care 5.0 Energy 3.4 Communication Services 2.9 Industrials 2.8 Information Technology 2.8 Consumer Staples 2.4 Consumer Discretionary 1.0 Materials 0.3 Real Estate 0.1 ------------------------------------------------------ Total Corporate Bonds & Notes 36.7 ------------------------------------------------------ Foreign Corporate Bonds & Notes: Financials 2.1 Energy 0.5 Health Care 0.4 Communication Services 0.3 Materials 0.1 Industrials 0.1 Consumer Staples 0.1 ------------------------------------------------------ Total Foreign Corporate Bonds & Notes 3.6 ------------------------------------------------------ U.S. Government Bonds & Notes 1.7 ------------------------------------------------------ Commercial Paper: Utilities 0.5 Energy 0.1 ------------------------------------------------------ Total Commercial Paper 0.6 ------------------------------------------------------ Total 100.0% ====== (1) The credit quality and ratings information presented reflects the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and ratings are not equivalent, the highest rating is used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. Page 6 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ADVISOR First Trust is a registered investment advisor based in Wheaton, IL and is the investment advisor to the First Trust Multi Income Allocation Portfolio (the "Fund"). First Trust manages the Fund's fixed income investments, as well as a portion of the Fund's equity investments. SUB-ADVISORS Stonebridge Advisors LLC ("Stonebridge" or a "Sub-Advisor) is a sub-advisor to the Fund and is a registered investment advisor based in Wilton, CT. Stonebridge specializes in the management of preferred securities and North American equity income securities. Energy Income Partners, LLC ("EIP" or a "Sub-Advisor) is a sub-advisor to the Fund and is a registered investment advisor based in Westport, CT. EIP was founded in 2003 to provide professional asset management services in the area of energy-related master limited partnerships ("MLPs") and other high-payout securities such as pipeline companies, power utilities, YieldCos, and energy infrastructure real estate investment trusts ("REITS"). PORTFOLIO MANAGEMENT TEAM FIRST TRUST Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust William Housey, Senior Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Todd Larson, Senior Vice President, First Trust James Snyder, Senior Vice President, First Trust Jeremiah Charles, Senior Vice President, First Trust STONEBRIDGE Scott Fleming, Portfolio Manager, President and Chief Investment Officer of Stonebridge Robert Wolf, Senior Portfolio Manager and Senior Vice President of Stonebridge EIP James J. Murchie, Portfolio Manager, Founder, Principal and CEO of EIP Eva Pao, Co-Portfolio Manager, Principal of EIP John Tysseland, Co-Portfolio Manager, Principal of EIP FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO For the year ended December 31, 2019, the First Trust Multi Income Allocation Portfolio (the "Fund") Class I Shares returned 16.38% versus 17.47% for the Broad Blended Benchmark (60% Bloomberg Barclays U.S. Aggregate Bond Index and 40% Russell 3000(R) Index) and 15.61% for the Multi Asset Class Blended Benchmark (15% Russell 3000(R) Index; 8% ICE BofAML Fixed Rate Preferred Securities Index; 15% Alerian MLP Index; 15% S&P U.S. REIT Index; 8% ICE BofAML U.S. High Yield Index; 15% S&P/LSTA Leveraged Loan Index; 8% Bloomberg Barclays U.S. Corporate Investment-Grade Index; 8% ICE BofAML U.S. MBS Index; and 8% ICE BofAML U.S. Inflation-Linked Treasury Index). The Fund invests in nine asset classes which are: dividend-paying stocks, preferred stocks, energy infrastructure companies and master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), high yield or "junk" bonds, floating-rate loans, corporate bonds, mortgage-backed securities ("MBS") and Treasury Inflation Protected Securities ("TIPS"). The weight assigned to each asset class is determined on a quarterly basis. As of December 31, 2019, the dividend-paying securities were the highest-weighted asset class, Page 7 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) while the preferred stocks asset class was the lowest-weighted asset class. As of December 31, 2019, the Fund held approximately 2.6% in cash. The following asset classes had the most positive impact on the overall Fund performance for the year: dividend-paying stocks and REITs, while the following asset classes had the smallest impact on the overall Fund performance: MBS and TIPS. Dividend-paying stocks returned 29.01% (Gross of Fees) for the year ended December 31, 2019 and represented 16.8% of the portfolio as of December 31, 2019. After a sell-off to end 2018, equities roared back to start 2019 and largely maintained their momentum to the upside throughout the year. For the year, U.S. equities, as measured by the Russell 3000(R), returned 31.02%. Stocks were boosted by expectations of an uptick in global economic activity along with receding Brexit and trade war concerns, though at times these caused market volatility. From a factor viewpoint, the first eight months of the year were dominated by momentum and low volatility names while the final four months saw a rotation to value. Dividend paying stocks lagged over the year which was a headwind for the sleeve relative to the broader equity market. In breaking down portfolio performance by sector, Health Care and Industrials were the top two sectors in the portfolio, both due to stock selection. While strong stock selection drove Health Care and Industrials performance, an overweight in both sectors offset some of the outperformance as the sectors lagged the overall market. Stock selection in Information Technology and Communication Services stocks was the biggest drag on performance over the 12-month period ended December 31, 2019. The portfolio's holdings in these sectors failed to keep up in these growth focused areas of the market. Preferred securities returned 17.29% (Gross of Fees) for the year ended December 31, 2019 and represented 8.1% of the portfolio as of December 31, 2019. The performance of preferred securities had a positive impact on the overall performance of the Fund. It was a strong period for the preferred and hybrid securities market with all parts of the market experiencing positive performance as interest rates trended lower and central banks established a more dovish stance. Security selection and an overweight to variable rate preferred securities and contingent convertible capital securities (CoCos) were the largest contributors to positive performance within the Fund's preferred securities allocation. Investments in newly issued preferred and hybrid securities also added to performance. The energy infrastructure companies and MLPs returned 22.98% (Gross of Fees) for the year ended December 31, 2019 and represented 13.8% of the portfolio as of December 31, 2019. The performance of the equity securities of energy infrastructure companies outperformed the overall performance of the Fund. Positions in utilities and pipeline C-Corporations ("C-Corps") led performance among the energy infrastructure companies and MLPs. REITs returned 25.84% (Gross of Fees) for the year ended December 31, 2019 and represented 9.8% of the portfolio as of December 31, 2019. The REIT sleeve beat the S&P USA REIT Index's 24.45% return for 2019. After outperforming the S&P 500(R) for the majority of the year, REIT returns plateaued as interest rates stabilized in November and December. The sector slightly lagged the broader market for the year. During 2020, their performance will likely hinge on easy monetary policy and a continued low-interest rate environment. Industrial REITs provided the portfolio with a 42.2% average return and was the best performing sub-industry for the period. The returns were driven by the rise in e-commerce and subsequent increase in demand for warehouses and distributions centers. However, the e-commerce revolution has put pressure on Retail REITs which were among the largest drags on the sleeve's performance. Specialized REITs also boosted the sleeve's performance with an average return of 30.2%. Data-centers American Tower Corporation (AMT) and CyrusOne, Inc. (CONE) led the group as they capitalize on the secular shift to the cloud. The best performing equities by contribution to return were Prologis, Inc.; CyrusOne, Inc.; and American Tower Corporation. The worst performing equities by contribution to return were Simon Property Group, Inc.; VEREIT, Inc.; and Welltower Inc. High-yield bonds returned 15.07% (Gross of Fees) for the year ended December 31, 2019 and represented 9.0% of the portfolio as of December 31, 2019. High-yield bond spreads over U.S. Treasuries were rangebound for the first 11 months of the year but ended 2019 at T+360 basis points ("bps"), a narrowing of 174 bps, well below the historic average (the long-term average spread over U.S. Treasuries is T+565 bps, December 1997 - December 2019). Within the high yield bond market higher quality bonds rated B and above outperformed lower quality CCC bonds for most of the year. However, this relationship flipped in December 2019 where lower quality CCC rated bonds returned 5.09% compared to higher quality B and BB bonds that returned 2.36% and 1.37% respectively as investors reached for yield Page 8 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) in higher risk assets. The high-yield bond default rate within the JP Morgan High-Yield Bond Universe increased to 2.63% from 1.81% entering the year. This remains below the long-term average default rate of 3.11% (March 1999 - December 2019). We believe the low default rate is reflective of the sound financial condition of most companies in the high-yield market and the supporting backdrop of a healthy macroeconomic environment. Floating-rate loans returned 9.86% (Gross of Fees) for the year ended December 31, 2019 and represented 14.0% of the portfolio as of December 31, 2019. Senior loan spreads over 3-month London Inter-Bank Offered Rate ("LIBOR") entered the year at their widest levels since June 2016 but narrowed 90 bps during the year to L+461 bps. The benchmark rate for senior loan coupon, 3-month LIBOR, fell 90 bps to 1.91% due to the Fed's three policy interest rate cuts during the year. The Fed's rate cuts contributed to persistent outflows from retail investors in the senior loan market. For the 12-month period ended December 31, 2019 outflows totaled approximately $37 billion, the highest year of outflows on record. Despite these historic outflows we believe senior loans remain relatively attractive given their current yields, the low corporate default rate and secured position in the capital structure. The current senior loan yield-to-maturity ("YTM") is 6.13%, 9 bps higher than the high-yield bond YTM of 6.04%, a relationship that has existed for an unprecedented seven consecutive months. In fact, the last time senior loans yielded more than high-yield bonds in consecutive months was August and September of 2007. Corporate bonds returned 14.56% (Gross of Fees) and represented 8.9% of the portfolio as of December 31, 2019. Both Treasury benchmark yields and credit spreads rallied in 2019, making for a great year on both an excess and total return basis. Results were aided by the December 2018 sell-off that gave investors a great starting point. As measured by the Bloomberg Barclays U.S. Corporate Investment-Grade Index, spreads narrowed 60 bps to 93 bps at year end - completely retracing the widening from 2018. A look at fund flows helps to explain the spread tightening as more than $200 billion flowed into high grade bond funds. That compares to a slight outflow in 2018. Demand for U.S. corporate bonds has been firm from both domestic and foreign investors. We expect yields will remain low in international markets and thus will continue to be a positive factor contributing to demand for U.S. credit. The MBS asset class returned 6.29% (Gross of Fees) for the year ended December 31, 2019 and represented 9.8% of the portfolio as of December 31, 2019. The MBS sleeve benefitted by allocating a portion of invested capital to U.S. Treasury securities, which helped performance as Agency MBS spreads widened for most of 2019. However, its structurally shorter and more defensive duration versus the Mortgage index offset this positive impact as interest rates rallied strongly over the year, with the sleeve mildly underperforming the benchmark. Overall, the Fund continues to manage its duration more in line with the benchmark, with a focus on strategic MBS basis positioning, liquidity as well as maintaining exposure to U.S. Treasury securities. TIPS returned 8.61% (Gross of Fees) and represented 9.8% of the portfolio as of December 31, 2019. Portfolio performance was broadly in line with the benchmark, although the slight duration underweight early in the year resulted in a moderate lag in total return. Owing to a dimmer outlook for growth and inflation expectations, falling yields was thematic of the Treasury market in 2019. The Fed also cut rates by 75 bps, characterizing the move as a "mid-cycle adjustment". Real and nominal yields declined steadily during the year with real yields declining more; particularly in the front-end where 5-year real yields fell 19 bps more than nominals. As a result, TIPS outperformed nominal Treasury bonds in 2019 with the ICE BofA US Inflation-Linked Treasury Index returning 8.8% compared to 7.0% for the ICE BofA US Treasury Index. Consumer Price Inflation, which determines the inflation accrual in TIPS securities, increased at a 2.3% rate in 2019, up from a 1.9% increase during 2018. While the Fed targets an inflation rate of 2% in core Personal Consumption Expenditures, its preferred inflation gauge, aside from a handful of months, it has consistently undershot this target since the end of the financial crisis. INVESTMENT CLIMATE After devoting the last three-and-a-half years to tightening monetary policy, the Fed cut the federal funds target rate (upper bound) three times in the second half of 2019, taking the rate down from 2.50% to 1.75%. Brian Wesbury, Chief Economist at First Trust Advisors L.P., has been steadfast in his opposition to these Fed rate reductions. Wesbury believes the Fed has Page 9 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) been basing its monetary policy of late on concerns over trade negotiations, Brexit and turbulence in the financial system, as opposed to the economic data. Prior to these recent rate cuts, the Fed had characterized its approach to monetary policy as data dependent. The combination of low interest rates, low inflation, strong job growth, regulatory reform and a more favorable U.S. corporate tax structure following the passage of the Tax Cuts and Jobs Act of 2017 makes the current climate an attractive one for investors, in our opinion. Minus tax reform, which took effect in 2018, and regulatory reform, which has been driven by the Trump Administration since it took power in 2017, investors have been prospering in a low rate/low inflation/strong job growth climate for the better part of the last decade. Very little has changed in that regard. One thing that has created some uncertainty in the markets is the extent of the potential fallout from the implementation and escalation of trade tariffs by the Trump Administration. That effort is now 21 months old and counting. The mid-December announcement that the U.S. and China had struck a "Phase One" deal is encouraging. The yield on the benchmark 10-Year Treasury Note (T-Note) closed trading on December 31, 2019, at 1.92%, down 77 bps from its 2.69% close a year earlier, according to Bloomberg. The yield stood 48 bps below its 2.40% average for the 10-year period ended December 31, 2019. For those investors still concerned about the prospects for an inverted yield curve, the spread between the 2-Year T-Note and the 10-Year T-Note closed 2019 at 35 bps (1.57% vs. 1.92%), according to data from Bloomberg. For comparative purposes, the average spread was 117 bps (3.33% vs. 4.50%) for the 30-year period ended December 31, 2019. The yield curve, while not inverted, remains flat. We will monitor this scenario moving forward. Moody's Investors Service expects the number of defaults in the high yield corporate bond market to rise in 2020 but remain below the historical average. Moody's reported that its global speculative-grade default rate stood at 3.0% in December 2019, according to its most recent release. It sees the rate rising to 3.3% by the end of December 2020. Moody's puts the historical average default rate at 4.1% since 1983. The fact that Moody's expects the speculative-grade default rate to remain below its historical average in 2020 this deep into an economic expansion should be construed as a positive sign by investors, in our opinion. Page 10 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019 1 YEAR 5 YEAR SINCE INCEPTION INCEPTION ANNUAL AVERAGE ANNUAL AVERAGE ANNUAL DATE TOTAL RETURN TOTAL RETURN TOTAL RETURN FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS I 5/1/14 16.38% 4.51% 4.79% FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO - CLASS II 5/1/14 16.57% 4.75% 5.04% Broad Blended Benchmark (a) 17.47% 6.47% 6.75% Bloomberg Barclays U.S. Aggregate Bond Index (b) 8.72% 3.05% 3.21% Russell 3000(R) Index (c) 31.02% 11.24% 11.75% Multi Asset Class Blended Benchmark (d) 15.61% 4.37% 4.62% -------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays U.S. Aggregate Bond Index (60%) and the Russell 3000(R) Index (40%). (b) The Bloomberg Barclays U.S. Aggregate Bond Index represents the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Bonds included in the index are U.S. dollar denominated; have a fixed rate coupon; carry an investment-grade rating; have at least one year to final maturity; and meet certain criteria for minimum amount of outstanding par value. (The index reflects no deduction for fees, expenses or taxes). (c) The Russell 3000(R) Index is composed of 3,000 large U.S. companies, as determined by market capitalization. This index represents approximately 98% of the investable U.S. equity market. (Bloomberg). (The index reflects no deduction for fees, expenses or taxes). (d) The Multi Asset Class Blended Benchmark is weighted to include nine indexes: Russell 3000(R) Index (15%), ICE BofAML Fixed Rate Preferred Securities Index (8%), Alerian MLP Index (15%), S&P U.S. REIT Index (15%), ICE BofAML U.S. High Yield Index (8%), S&P/LSTA Leveraged Loan Index (15%), Bloomberg Barclays U.S. Corporate Investment-Grade Index (8%), ICE BofAML U.S. MBS Index (8%), and ICE BofAML U.S. Inflation-Linked Treasury Index (8%). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT May 1, 2014 - December 31, 2019 First Trust Multi Income Allocation Broad Blended Bloomberg Barclays U.S. Russell 3000(R) Multi Asset Class Portfolio - Class I Benchmark Aggregate Bond Index Index Blended Benchmark 5/1/2014 $10,000 $10,000 $10,000 $10,000 $10,000 6/30/2014 10,320 10,245 10,096 10,470 10,334 12/31/2014 10,457 10,582 10,294 11,020 10,428 6/30/2015 10,383 10,667 10,284 11,234 10,278 12/31/2015 10,119 10,662 10,354 11,073 9,933 6/30/2016 10,900 11,168 10,904 11,474 10,744 12/31/2016 11,057 11,384 10,628 12,483 10,958 6/30/2017 11,437 11,942 10,869 13,598 11,299 12/31/2017 11,725 12,556 11,004 15,121 11,585 6/30/2018 11,611 12,601 10,826 15,608 11,681 12/31/2018 11,205 12,328 11,006 14,328 11,173 6/30/2019 12,447 13,712 11,678 17,009 12,535 12/31/2019 13,041 14,483 11,964 18,773 12,916
Page 11 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP 10 HOLDINGS INVESTMENTS ------------------------------------------------------ First Trust Senior Loan Fund 14.0% First Trust Tactical High Yield ETF 9.0 iShares iBoxx $ Investment Grade Corporate Bond ETF 8.0 First Trust Preferred Securities and Income ETF 6.0 iShares MBS ETF 4.2 First Trust Institutional Preferred Securities and Income ETF 2.0 Enterprise Products Partners, L.P. 1.8 Invesco Bulletshares 2020 Corporate Bond ETF 1.2 Magellan Midstream Partners, L.P. 1.0 TC Energy Corp. 1.0 ------------------------------------------------------ Total 48.2% ====== ------------------------------------------------------ % OF TOTAL SECTOR ALLOCATION INVESTMENTS ------------------------------------------------------ Exchange-Traded Funds 45.3% ------------------------------------------------------ Common Stocks: Energy 4.0 Information Technology 3.6 Utilities 3.2 Health Care 3.2 Industrials 2.2 Financials 2.0 Consumer Discretionary 1.7 Consumer Staples 1.4 Communication Services 0.8 Materials 0.5 ------------------------------------------------------ Total Common Stocks 22.6 ------------------------------------------------------ U.S. Government Bonds & Notes 10.0 ------------------------------------------------------ Real Estate Investment Trusts: Financials 9.8 ------------------------------------------------------ Total Real Estate Investment Trusts 9.8 ------------------------------------------------------ Master Limited Partnerships: Energy 7.0 Utilities 0.5 Materials 0.3 ------------------------------------------------------ Total Master Limited Partnerships 7.8 ------------------------------------------------------ U.S. Government Agency Mortgage-Backed Securities 4.4 ------------------------------------------------------ Mortgage-Backed Securities 0.1 ------------------------------------------------------ Asset-Backed Securities 0.0* ------------------------------------------------------ Total 100.0% ====== * Amount is less than 0.1%. Page 12 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ADVISOR First Trust Advisors L.P. ("First Trust") is a registered investment advisor based in Wheaton, IL and is the investment advisor to the First Trust Dorsey Wright Tactical Core Portfolio (the "Fund"). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the Fund. PORTFOLIO MANAGEMENT TEAM Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director, First Trust David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director, First Trust Jon C. Erickson, Senior Vice President, First Trust Roger F. Testin, Senior Vice President, First Trust Todd Larson, Senior Vice President, First Trust Chris A. Peterson, Senior Vice President, First Trust Eric Maisel, Senior Vice President, First Trust FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO For the year ended December 31, 2019, the First Trust Dorsey Wright Tactical Core Portfolio (the "Fund") Class I Shares returned 20.87% versus 22.18% for the Broad Blended Benchmark: 60% S&P 500(R) Index and 40% Bloomberg Barclays U.S. Aggregate Bond Index. The Fund seeks to provide total return. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (including any investment borrowings) in exchange-traded funds ("ETFs") and cash and cash equivalents that comprise the Dorsey Wright Tactical Tilt Moderate Core Index (the "Index"). It is expected that a majority of the ETFs in which the Fund invests will be advised by First Trust. The Index is owned and was developed by Dorsey, Wright & Associates (the "Index Provider"). The Index is constructed pursuant to the Index Provider's proprietary methodology, which takes into account the performance of four distinct asset classes relative to one another. The Index is designed to strategically allocate its investments among (i) domestic equity securities; (ii) international equity securities; (iii) fixed income securities; and (iv) cash and cash equivalents. The Index will gain exposure to the first three asset classes by investing in ETFs that invest in such assets. The Index Provider has retained Nasdaq, Inc. ("Nasdaq") to calculate and maintain the Index. The Index will utilize the Dynamic Asset Level Investing ("DALI") asset allocation process developed by the Index Provider in order to allocate assets over the four asset classes. The asset class allocations are determined using a relative strength methodology that is based upon each asset class's market performance and characteristics that offer the greatest potential to outperform the other asset classes at a given time. Relative strength is a momentum technique that relies on unbiased, unemotional and objective data, rather than biased forecasting and subjective research. Relative strength is a way of recording historic performance patterns, and the Index Provider uses relative strength signals as a trend indicator for current momentum trends of each asset class against the others. PERFORMANCE REVIEW The Fund began 2019 with the following allocations to the four asset classes: domestic equity securities (70.5%), international equity securities (5.1%), fixed income securities (22.8%), and cash equivalents (1.6%). Throughout 2019, the DALI asset allocation to the four asset classes remained largely the same. At the end of 2019, the Fund had the following allocations: domestic equity securities (74.2%), international equity securities (4.9%), fixed income securities (19.1%), and cash equivalents (1.8%). The Fund's largest contributing holdings contributing to performance in 2019 were the First Trust NASDAQ-100 Technology Sector Index Fund and First Trust Technology AlphaDEX(R) Fund. The Fund's largest detracting holdings were the First Trust Latin America AlphaDEX(R) Fund and the SPDR(R) Portfolio Long Term Treasury ETF. Page 13 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------- RETURN COMPARISON PERIOD ENDED DECEMBER 31, 2019 1 YEAR SINCE INCEPTION INCEPTION ANNUAL AVERAGE ANNUAL DATE TOTAL RETURN TOTAL RETURN FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS I 10/30/15 20.87% 6.71% FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO - CLASS II 10/30/15 21.29% 6.97% Broad Blended Benchmark (a) 22.18% 9.52% Bloomberg Barclays U.S. Aggregate Bond Index (b) 8.72% 3.38% S&P 500(R) Index (c) 31.49% 13.46% -------------------------------------------------------------------------------------------------------------------------
(a) The Broad Blended Benchmark return is split between the Bloomberg Barclays U.S. Aggregate Bond Index (40%) and the S&P 500(R) Index (60%). (b) The Bloomberg Barclays U.S. Aggregate Bond Index represents the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Bonds included in the index are U.S. dollar denominated; have a fixed rate coupon; carry an investment-grade rating; have at least one year to final maturity; and meet certain criteria for minimum amount of outstanding par value. (The index reflects no deduction for fees, expenses or taxes). (c) The S&P 500(R) Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. (The index reflects no deduction for fees, expenses or taxes). The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns shown.
PERFORMANCE OF A $10,000 INITIAL INVESTMENT October 30, 2015 - December 31, 2019 First Trust Dorsey Wright Broad Bloomberg Barclays Tactical Core Portfolio - Blended U.S. Aggregate S&P 500(R) Class I Benchmark Bond Index Index 10/30/15 $10,000 $10,000 $10,000 $10,000 12/31/15 9,940 9,900 9,941 9,872 6/30/16 9,807 10,347 10,469 10,251 12/31/16 10,035 10,722 10,204 11,053 6/30/17 10,773 11,417 10,436 12,085 12/31/17 11,791 12,246 10,565 13,465 6/30/18 12,317 12,368 10,394 13,822 12/31/18 10,838 11,957 10,567 12,875 6/30/19 12,632 13,588 11,213 15,262 12/31/19 13,112 14,610 11,488 16,929
Page 14 -------------------------------------------------------------------------------- PORTFOLIO COMMENTARY AND PERFORMANCE SUMMARY (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO ANNUAL REPORT DECEMBER 31, 2019 (UNAUDITED) ------------------------------------------------------ % OF TOTAL TOP 10 HOLDINGS INVESTMENTS ------------------------------------------------------ First Trust NASDAQ-100-Technology Sector Index Fund 10.6% First Trust Mid Cap Growth AlphaDEX(R) Fund 10.5 First Trust Large Cap Growth AlphaDEX(R) Fund 10.5 First Trust Technology AlphaDEX(R) Fund 9.8 First Trust Small Cap Growth AlphaDEX(R) Fund 9.5 First Trust Dow Jones Internet Index Fund 8.6 First Trust Utilities AlphaDEX(R) Fund 8.3 First Trust Financials AlphaDEX(R) Fund 7.7 iShares Core U.S. Aggregate Bond ETF 5.9 SPDR Portfolio Intermediate Term Corporate Bond ETF 3.5 ------------------------------------------------------ Total 84.9% ====== Page 15 FIRST TRUST VARIABLE INSURANCE TRUST UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2019 (UNAUDITED) As a shareholder of First Trust/Dow Jones Dividend & Income Allocation Portfolio, First Trust Multi Income Allocation Portfolio or First Trust Dorsey Wright Tactical Core Portfolio (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees, if any; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in U.S. dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended December 31, 2019. ACTUAL EXPENSES The first three columns of the table below provide information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the third column under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The next three columns of the table below provide information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or contingent deferred sales charges. Therefore, the hypothetical section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL ACTUAL EXPENSES (5% RETURN BEFORE EXPENSES) ------------------------------------------ ------------------------------------------------------ EXPENSES EXPENSES BEGINNING ENDING PAID DURING BEGINNING ENDING PAID DURING ANNUAL- ACCOUNT ACCOUNT PERIOD ACCOUNT ACCOUNT PERIOD IZED VALUE VALUE 7/1/2019- VALUE VALUE 7/1/2019- EXPENSE 7/1/2019 12/31/2019 12/31/2019 (a) 7/1/2019 12/31/2019 12/31/2019 (a) RATIO (b) -------------- ---------- -------------- -------------- ---------- -------------- ---------- First Trust/Dow Jones Dividend & Income Allocation Portfolio Class I..................... $1,000.00 $1,058.60 $ 6.23 $1,000.00 $1,019.16 $ 6.11 1.20% Class II.................... $1,000.00 $1,059.90 $ 4.93 $1,000.00 $1,020.42 $ 4.84 0.95% First Trust Multi Income Allocation Portfolio (c) Class I..................... $1,000.00 $1,047.70 $ 4.28 $1,000.00 $1,021.02 $ 4.23 0.83% Class II.................... $1,000.00 $1,048.30 $ 2.99 $1,000.00 $1,022.28 $ 2.96 0.58% First Trust Dorsey Wright Tactical Core Portfolio (c) Class I..................... $1,000.00 $1,038.00 $ 4.01 $1,000.00 $1,021.27 $ 3.97 0.78% Class II.................... $1,000.00 $1,039.50 $ 2.72 $1,000.00 $1,022.53 $ 2.70 0.53%
(a) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2019 through December 31, 2019), multiplied by 184/365 (to reflect the six-month period). (b) The expense ratios reflect an expense cap. First Trust Multi Income Allocation Portfolio expense ratios reflect an additional waiver. See Note 3 in the Notes to Financial Statements. (c) Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of the underlying funds in which the Fund invests. Page 16 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS - 56.9% AEROSPACE & DEFENSE - 1.4% 19,024 General Dynamics Corp........................................................ $ 3,354,882 27,838 HEICO Corp................................................................... 3,177,708 42,328 Hexcel Corp.................................................................. 3,103,066 16,413 Huntington Ingalls Industries, Inc........................................... 4,117,693 ------------- 13,753,349 ------------- AIR FREIGHT & LOGISTICS - 1.1% 41,003 CH Robinson Worldwide, Inc................................................... 3,206,435 46,795 Expeditors International of Washington, Inc.................................. 3,650,946 54,554 Forward Air Corp............................................................. 3,816,052 ------------- 10,673,433 ------------- AIRLINES - 0.7% 60,352 Delta Air Lines, Inc......................................................... 3,529,385 64,364 Southwest Airlines Co........................................................ 3,474,369 ------------- 7,003,754 ------------- AUTO COMPONENTS - 0.8% 126,252 Gentex Corp.................................................................. 3,658,783 29,485 Lear Corp.................................................................... 4,045,342 ------------- 7,704,125 ------------- BANKS - 4.8% 171,670 Associated Banc-Corp......................................................... 3,783,607 40,455 Bank of Hawaii Corp.......................................................... 3,849,698 100,081 Cathay General Bancorp....................................................... 3,808,082 60,180 Commerce Bancshares, Inc..................................................... 4,088,629 39,259 Cullen/Frost Bankers, Inc.................................................... 3,838,745 166,573 CVB Financial Corp........................................................... 3,594,645 214,588 First Horizon National Corp.................................................. 3,553,577 92,370 First Merchants Corp......................................................... 3,841,668 77,701 Heartland Financial USA, Inc................................................. 3,864,848 64,282 Popular, Inc................................................................. 3,776,568 62,819 US Bancorp................................................................... 3,724,539 78,085 Zions Bancorp N.A............................................................ 4,054,173 ------------- 45,778,779 ------------- BEVERAGES - 0.4% 25,356 PepsiCo, Inc................................................................. 3,465,404 ------------- BIOTECHNOLOGY - 0.4% 54,849 Gilead Sciences, Inc......................................................... 3,564,088 ------------- BUILDING PRODUCTS - 0.8% 33,538 Allegion PLC................................................................. 4,176,823 72,863 AO Smith Corp................................................................ 3,471,193 ------------- 7,648,016 ------------- CAPITAL MARKETS - 5.4% 7,800 BlackRock, Inc............................................................... 3,921,060 83,106 Charles Schwab (The) Corp.................................................... 3,952,521 63,286 Cohen & Steers, Inc.......................................................... 3,971,829 77,373 Eaton Vance Corp............................................................. 3,612,545 43,400 Evercore, Inc., Class A...................................................... 3,244,584 14,308 FactSet Research Systems, Inc................................................ 3,838,836
See Notes to Financial Statements Page 17 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) CAPITAL MARKETS (CONTINUED) 120,454 Franklin Resources, Inc...................................................... $ 3,129,395 77,081 Houlihan Lokey, Inc.......................................................... 3,766,949 37,676 Intercontinental Exchange, Inc............................................... 3,486,914 37,251 Northern Trust Corp.......................................................... 3,957,546 42,158 Raymond James Financial, Inc................................................. 3,771,455 58,666 SEI Investments Co........................................................... 3,841,450 30,427 T Rowe Price Group, Inc...................................................... 3,707,226 74,439 TD Ameritrade Holding Corp................................................... 3,699,618 ------------- 51,901,928 ------------- CHEMICALS - 1.1% 15,670 Air Products & Chemicals, Inc................................................ 3,682,293 28,426 Celanese Corp................................................................ 3,499,809 38,854 LyondellBasell Industries N.V., Class A...................................... 3,670,926 ------------- 10,853,028 ------------- COMMERCIAL SERVICES & SUPPLIES - 1.4% 12,966 Cintas Corp.................................................................. 3,488,891 102,035 Rollins, Inc................................................................. 3,383,480 40,068 Tetra Tech, Inc.............................................................. 3,452,259 17,816 UniFirst Corp................................................................ 3,598,476 ------------- 13,923,106 ------------- COMMUNICATIONS EQUIPMENT - 0.7% 70,358 Cisco Systems, Inc........................................................... 3,374,370 140,459 Juniper Networks, Inc........................................................ 3,459,505 ------------- 6,833,875 ------------- CONTAINERS & PACKAGING - 0.8% 32,766 Packaging Corp. of America................................................... 3,669,464 59,720 Sonoco Products Co........................................................... 3,685,919 ------------- 7,355,383 ------------- DIVERSIFIED CONSUMER SERVICES - 0.3% 5,241 Graham Holdings Co., Class B................................................. 3,348,947 ------------- ELECTRICAL EQUIPMENT - 0.8% 37,859 AMETEK, Inc.................................................................. 3,776,056 41,808 Eaton Corp PLC............................................................... 3,960,054 ------------- 7,736,110 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 1.6% 36,025 Amphenol Corp., Class A...................................................... 3,898,986 28,208 CDW Corp..................................................................... 4,029,230 53,780 Dolby Laboratories, Inc., Class A............................................ 3,700,064 37,306 TE Connectivity, Ltd......................................................... 3,575,407 ------------- 15,203,687 ------------- ENTERTAINMENT - 0.4% 26,675 Walt Disney (The) Co......................................................... 3,858,005 ------------- EQUITY REAL ESTATE INVESTMENT TRUSTS - 1.0% 19,107 PS Business Parks, Inc....................................................... 3,150,171 14,173 Public Storage............................................................... 3,018,282
Page 18 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 253,007 Sunstone Hotel Investors, Inc................................................ $ 3,521,858 ------------- 9,690,311 ------------- FOOD PRODUCTS - 1.5% 79,496 Hormel Foods Corp............................................................ 3,586,065 18,107 J&J Snack Foods Corp......................................................... 3,336,577 25,074 Lancaster Colony Corp........................................................ 4,014,347 62,841 Mondelez International, Inc., Class A........................................ 3,461,282 ------------- 14,398,271 ------------- HEALTH CARE EQUIPMENT & SUPPLIES - 1.0% 4,461 Atrion Corp.................................................................. 3,352,441 39,743 Baxter International, Inc.................................................... 3,323,310 16,071 Stryker Corp................................................................. 3,373,946 ------------- 10,049,697 ------------- HEALTH CARE PROVIDERS & SERVICES - 1.7% 8,325 Chemed Corp.................................................................. 3,656,840 13,597 Humana, Inc.................................................................. 4,983,572 32,479 Quest Diagnostics, Inc....................................................... 3,468,432 15,997 UnitedHealth Group, Inc...................................................... 4,702,798 ------------- 16,811,642 ------------- HOTELS, RESTAURANTS & LEISURE - 1.5% 79,532 Carnival Corp................................................................ 4,042,612 83,408 Cheesecake Factory (The), Inc................................................ 3,241,235 29,407 Darden Restaurants, Inc...................................................... 3,205,657 66,191 Texas Roadhouse, Inc......................................................... 3,727,877 ------------- 14,217,381 ------------- HOUSEHOLD DURABLES - 0.4% 65,952 DR Horton, Inc............................................................... 3,478,968 ------------- HOUSEHOLD PRODUCTS - 0.4% 18,941 WD-40 Co..................................................................... 3,677,206 ------------- INDUSTRIAL CONGLOMERATES - 0.7% 20,545 Honeywell International, Inc................................................. 3,636,465 9,749 Roper Technologies, Inc...................................................... 3,453,388 ------------- 7,089,853 ------------- INSURANCE - 7.1% 66,444 Aflac, Inc................................................................... 3,514,888 31,986 Allstate (The) Corp.......................................................... 3,596,826 32,235 American Financial Group, Inc................................................ 3,534,568 28,096 American National Insurance Co............................................... 3,306,337 52,586 AMERISAFE, Inc............................................................... 3,472,254 96,403 Brown & Brown, Inc........................................................... 3,805,990 29,795 Cincinnati Financial Corp.................................................... 3,132,944 70,585 CNA Financial Corp........................................................... 3,162,914 79,769 Employers Holdings, Inc...................................................... 3,330,356 78,280 Fidelity National Financial, Inc............................................. 3,549,998 58,911 First American Financial Corp................................................ 3,435,689 36,300 Globe Life, Inc.............................................................. 3,820,575 57,357 Hartford Financial Services Group (The), Inc................................. 3,485,585
See Notes to Financial Statements Page 19 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) INSURANCE (CONTINUED) 33,649 Kinsale Capital Group, Inc................................................... $ 3,420,757 147,490 Old Republic International Corp.............................................. 3,299,351 60,837 Principal Financial Group, Inc............................................... 3,346,035 21,744 Reinsurance Group of America, Inc............................................ 3,545,577 46,234 Selective Insurance Group, Inc............................................... 3,013,994 23,380 Travelers (The) Cos., Inc.................................................... 3,201,891 48,127 WR Berkley Corp.............................................................. 3,325,576 ------------- 68,302,105 ------------- IT SERVICES - 2.6% 18,074 Accenture PLC, Class A....................................................... 3,805,842 21,535 Automatic Data Processing, Inc............................................... 3,671,718 23,816 Jack Henry & Associates, Inc................................................. 3,469,277 12,799 Mastercard, Inc., Class A.................................................... 3,821,653 44,995 MAXIMUS, Inc................................................................. 3,347,178 42,000 Paychex, Inc................................................................. 3,572,520 20,212 Visa, Inc., Class A.......................................................... 3,797,835 ------------- 25,486,023 ------------- LIFE SCIENCES TOOLS & SERVICES - 0.4% 45,365 Agilent Technologies, Inc.................................................... 3,870,088 ------------- MACHINERY - 4.0% 21,371 Cummins, Inc................................................................. 3,824,554 72,711 Franklin Electric Co., Inc................................................... 4,167,795 75,506 Graco, Inc................................................................... 3,926,312 21,213 IDEX Corp.................................................................... 3,648,636 22,214 Illinois Tool Works, Inc..................................................... 3,990,301 28,214 Ingersoll-Rand PLC........................................................... 3,750,205 40,068 Lincoln Electric Holdings, Inc............................................... 3,875,778 49,655 PACCAR, Inc.................................................................. 3,927,710 22,206 Snap-on, Inc................................................................. 3,761,696 47,426 Toro (The) Co................................................................ 3,778,429 ------------- 38,651,416 ------------- MEDIA - 0.8% 161,240 Interpublic Group of (The) Cos., Inc......................................... 3,724,644 44,397 Omnicom Group, Inc........................................................... 3,597,045 ------------- 7,321,689 ------------- METALS & MINING - 0.4% 34,884 Reliance Steel & Aluminum Co................................................. 4,177,708 ------------- MULTILINE RETAIL - 0.3% 21,874 Dollar General Corp.......................................................... 3,411,907 ------------- OIL, GAS & CONSUMABLE FUELS - 1.1% 197,856 Cabot Oil & Gas Corp......................................................... 3,444,673 49,232 Exxon Mobil Corp............................................................. 3,435,409 33,948 Phillips 66.................................................................. 3,782,147 ------------- 10,662,229 ------------- PERSONAL PRODUCTS - 0.4% 49,683 Inter Parfums, Inc........................................................... 3,612,451 -------------
Page 20 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) PHARMACEUTICALS - 1.2% 26,868 Johnson & Johnson............................................................ $ 3,919,235 96,753 Pfizer, Inc.................................................................. 3,790,782 27,902 Zoetis, Inc.................................................................. 3,692,830 ------------- 11,402,847 ------------- PROFESSIONAL SERVICES - 0.8% 49,733 Exponent, Inc................................................................ 3,432,074 62,456 Robert Half International, Inc............................................... 3,944,097 ------------- 7,376,171 ------------- ROAD & RAIL - 1.2% 30,877 Landstar System, Inc......................................................... 3,515,964 19,348 Norfolk Southern Corp........................................................ 3,756,027 21,460 Union Pacific Corp........................................................... 3,879,754 ------------- 11,151,745 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.2% 67,462 Intel Corp................................................................... 4,037,601 60,030 Maxim Integrated Products, Inc............................................... 3,692,445 26,898 Texas Instruments, Inc....................................................... 3,450,744 ------------- 11,180,790 ------------- SOFTWARE - 0.8% 13,071 Intuit, Inc.................................................................. 3,423,687 25,005 Microsoft Corp............................................................... 3,943,289 ------------- 7,366,976 ------------- SPECIALTY RETAIL - 1.1% 31,648 Ross Stores, Inc............................................................. 3,684,460 62,367 TJX (The) Cos., Inc.......................................................... 3,808,129 38,438 Tractor Supply Co............................................................ 3,591,647 ------------- 11,084,236 ------------- TEXTILES, APPAREL & LUXURY GOODS - 0.8% 35,880 Columbia Sportswear Co....................................................... 3,594,817 123,012 Wolverine World Wide, Inc.................................................... 4,150,425 ------------- 7,745,242 ------------- THRIFTS & MORTGAGE FINANCE - 0.4% 212,102 Northwest Bancshares, Inc.................................................... 3,527,256 ------------- TOBACCO - 0.4% 84,998 Altria Group, Inc............................................................ 4,242,250 ------------- TRADING COMPANIES & DISTRIBUTORS - 0.8% 47,930 MSC Industrial Direct Co., Inc., Class A..................................... 3,761,067 20,548 Watsco, Inc.................................................................. 3,701,722 ------------- 7,462,789 ------------- TOTAL COMMON STOCKS.......................................................... 548,054,264 (Cost $466,470,479) -------------
See Notes to Financial Statements Page 21 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES - 36.4% AEROSPACE & DEFENSE - 0.5% $ 250,000 L3Harris Technologies, Inc.......................... 2.90% 12/15/29 $ 254,504 250,000 Lockheed Martin Corp................................ 3.55% 01/15/26 268,412 248,000 Lockheed Martin Corp................................ 4.09% 09/15/52 291,444 250,000 Northrop Grumman Corp............................... 2.08% 10/15/20 250,310 500,000 Northrop Grumman Corp............................... 2.55% 10/15/22 507,745 250,000 Northrop Grumman Corp............................... 2.93% 01/15/25 257,963 500,000 Northrop Grumman Corp............................... 3.25% 01/15/28 522,277 500,000 Northrop Grumman Corp............................... 4.03% 10/15/47 559,408 750,000 United Technologies Corp............................ 3.35% 08/16/21 768,192 250,000 United Technologies Corp............................ 3.65% 08/16/23 263,759 250,000 United Technologies Corp............................ 3.95% 08/16/25 272,839 500,000 United Technologies Corp............................ 4.63% 11/16/48 627,504 ------------- 4,844,357 ------------- AIR FREIGHT & LOGISTICS - 1.0% 850,000 FedEx Corp.......................................... 3.30% 03/15/27 879,706 500,000 FedEx Corp.......................................... 4.20% 10/17/28 545,639 648,000 FedEx Corp.......................................... 4.55% 04/01/46 667,612 550,000 FedEx Corp.......................................... 4.40% 01/15/47 553,441 500,000 FedEx Corp.......................................... 4.95% 10/17/48 547,447 1,000,000 United Parcel Service, Inc.......................... 2.05% 04/01/21 1,002,918 500,000 United Parcel Service, Inc.......................... 2.35% 05/16/22 505,757 545,000 United Parcel Service, Inc.......................... 2.45% 10/01/22 553,921 500,000 United Parcel Service, Inc.......................... 2.50% 04/01/23 509,503 250,000 United Parcel Service, Inc.......................... 2.20% 09/01/24 251,592 250,000 United Parcel Service, Inc.......................... 2.80% 11/15/24 259,105 500,000 United Parcel Service, Inc.......................... 2.40% 11/15/26 505,938 250,000 United Parcel Service, Inc.......................... 3.05% 11/15/27 263,205 500,000 United Parcel Service, Inc.......................... 3.40% 03/15/29 537,598 250,000 United Parcel Service, Inc.......................... 2.50% 09/01/29 249,760 500,000 United Parcel Service, Inc.......................... 3.40% 11/15/46 500,178 500,000 United Parcel Service, Inc.......................... 4.25% 03/15/49 586,555 250,000 United Parcel Service, Inc.......................... 3.40% 09/01/49 254,021 ------------- 9,173,896 ------------- AIRLINES - 0.1% 500,000 Delta Air Lines, Inc................................ 2.90% 10/28/24 501,258 500,000 Delta Air Lines, Inc................................ 3.75% 10/28/29 500,130 250,000 Southwest Airlines Co............................... 3.00% 11/15/26 256,265 ------------- 1,257,653 ------------- AUTOMOBILES - 0.1% 500,000 American Honda Finance Corp......................... 1.95% 05/20/22 501,989 250,000 General Motors Co................................... 5.00% 10/01/28 272,604 ------------- 774,593 ------------- BANKS - 6.1% 600,000 Bank of America Corp................................ 2.63% 04/19/21 605,643 500,000 Bank of America Corp. (a)........................... 2.37% 07/21/21 501,074 250,000 Bank of America Corp. (a)........................... 2.33% 10/01/21 250,741 500,000 Bank of America Corp. (a)........................... 2.74% 01/23/22 503,722 250,000 Bank of America Corp................................ 2.50% 10/21/22 252,489
Page 22 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 500,000 Bank of America Corp. (a)........................... 2.88% 04/24/23 $ 508,633 500,000 Bank of America Corp. (a)........................... 2.82% 07/21/23 508,228 1,207,000 Bank of America Corp. (a)........................... 3.00% 12/20/23 1,235,771 250,000 Bank of America Corp. (a)........................... 3.55% 03/05/24 259,588 450,000 Bank of America Corp................................ 4.00% 04/01/24 482,280 500,000 Bank of America Corp. (a)........................... 3.86% 07/23/24 526,454 500,000 Bank of America Corp. (a)........................... 3.46% 03/15/25 522,419 500,000 Bank of America Corp. (a)........................... 3.09% 10/01/25 516,388 500,000 Bank of America Corp. (a)........................... 2.46% 10/22/25 503,686 250,000 Bank of America Corp. (a)........................... 3.37% 01/23/26 261,676 400,000 Bank of America Corp................................ 4.45% 03/03/26 439,658 950,000 Bank of America Corp................................ 3.50% 04/19/26 1,011,174 500,000 Bank of America Corp. (a)........................... 3.56% 04/23/27 528,915 150,000 Bank of America Corp................................ 3.25% 10/21/27 156,488 250,000 Bank of America Corp................................ 4.18% 11/25/27 271,316 500,000 Bank of America Corp. (a)........................... 3.82% 01/20/28 537,251 500,000 Bank of America Corp. (a)........................... 3.71% 04/24/28 535,039 500,000 Bank of America Corp. (a)........................... 3.59% 07/21/28 530,443 1,091,000 Bank of America Corp. (a)........................... 3.42% 12/20/28 1,146,626 250,000 Bank of America Corp. (a)........................... 3.97% 03/05/29 272,654 500,000 Bank of America Corp. (a)........................... 4.27% 07/23/29 556,180 500,000 Bank of America Corp. (a)........................... 3.97% 02/07/30 549,356 500,000 Bank of America Corp. (a)........................... 3.19% 07/23/30 517,930 500,000 Bank of America Corp. (a)........................... 2.88% 10/22/30 505,036 250,000 Bank of America Corp. (a)........................... 4.24% 04/24/38 288,667 500,000 Bank of America Corp. (a)........................... 4.08% 04/23/40 568,168 225,000 Bank of America Corp................................ 5.88% 02/07/42 320,182 250,000 Bank of America Corp. (a)........................... 4.44% 01/20/48 305,395 500,000 Bank of America Corp. (a)........................... 3.95% 01/23/49 568,834 500,000 Bank of America Corp. (a)........................... 4.33% 03/15/50 603,685 500,000 CIT Bank N.A. (a)................................... 2.97% 09/27/25 499,687 250,000 Citibank N.A........................................ 3.40% 07/23/21 255,429 500,000 Citibank N.A. (a)................................... 3.17% 02/19/22 506,418 500,000 Citibank N.A. (a)................................... 2.84% 05/20/22 506,168 600,000 Citigroup, Inc...................................... 2.70% 03/30/21 605,778 350,000 Citigroup, Inc...................................... 2.35% 08/02/21 352,250 250,000 Citigroup, Inc...................................... 2.90% 12/08/21 254,184 775,000 Citigroup, Inc...................................... 4.50% 01/14/22 812,823 500,000 Citigroup, Inc...................................... 2.75% 04/25/22 508,165 500,000 Citigroup, Inc...................................... 2.70% 10/27/22 508,496 1,000,000 Citigroup, Inc. (a)................................. 2.31% 11/04/22 1,003,383 500,000 Citigroup, Inc. (a)................................. 2.88% 07/24/23 508,691 250,000 Citigroup, Inc. (a)................................. 4.04% 06/01/24 264,608 500,000 Citigroup, Inc. (a)................................. 3.35% 04/24/25 520,736 450,000 Citigroup, Inc...................................... 4.60% 03/09/26 495,894 300,000 Citigroup, Inc...................................... 3.40% 05/01/26 315,453 250,000 Citigroup, Inc...................................... 3.20% 10/21/26 259,612 300,000 Citigroup, Inc...................................... 4.30% 11/20/26 326,949 350,000 Citigroup, Inc...................................... 4.45% 09/29/27 385,942 500,000 Citigroup, Inc. (a)................................. 3.89% 01/10/28 539,255
See Notes to Financial Statements Page 23 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 1,000,000 Citigroup, Inc. (a)................................. 3.67% 07/24/28 $ 1,066,954 500,000 Citigroup, Inc...................................... 4.13% 07/25/28 546,090 500,000 Citigroup, Inc. (a)................................. 3.52% 10/27/28 526,863 250,000 Citigroup, Inc. (a)................................. 4.08% 04/23/29 273,874 500,000 Citigroup, Inc. (a)................................. 3.98% 03/20/30 547,832 1,000,000 Citigroup, Inc. (a)................................. 2.98% 11/05/30 1,016,851 500,000 Citigroup, Inc. (a)................................. 3.88% 01/24/39 548,791 200,000 Citigroup, Inc...................................... 5.88% 01/30/42 281,984 100,000 Citigroup, Inc...................................... 6.68% 09/13/43 146,184 750,000 Citigroup, Inc...................................... 4.75% 05/18/46 898,464 500,000 Citigroup, Inc. (a)................................. 4.28% 04/24/48 595,410 500,000 Citigroup, Inc...................................... 4.65% 07/23/48 626,327 500,000 Fifth Third Bancorp................................. 2.38% 01/28/25 501,229 250,000 Huntington National Bank (The)...................... 3.55% 10/06/23 262,442 550,000 JPMorgan Chase & Co................................. 4.63% 05/10/21 569,359 450,000 JPMorgan Chase & Co................................. 2.40% 06/07/21 453,076 325,000 JPMorgan Chase & Co................................. 3.20% 01/25/23 335,615 500,000 JPMorgan Chase & Co. (a)............................ 3.21% 04/01/23 512,139 250,000 JPMorgan Chase & Co. (a)............................ 2.78% 04/25/23 254,058 500,000 JPMorgan Chase & Co................................. 2.70% 05/18/23 509,402 400,000 JPMorgan Chase & Co................................. 3.88% 02/01/24 427,212 250,000 JPMorgan Chase & Co. (a)............................ 3.56% 04/23/24 260,648 250,000 JPMorgan Chase & Co. (a)............................ 3.80% 07/23/24 263,644 500,000 JPMorgan Chase & Co. (a)............................ 2.30% 10/15/25 499,774 850,000 JPMorgan Chase & Co................................. 3.30% 04/01/26 895,434 300,000 JPMorgan Chase & Co................................. 4.13% 12/15/26 328,933 250,000 JPMorgan Chase & Co................................. 3.63% 12/01/27 264,335 500,000 JPMorgan Chase & Co. (a)............................ 3.78% 02/01/28 539,596 500,000 JPMorgan Chase & Co. (a)............................ 3.54% 05/01/28 531,674 500,000 JPMorgan Chase & Co. (a)............................ 3.51% 01/23/29 531,869 250,000 JPMorgan Chase & Co. (a)............................ 4.01% 04/23/29 274,814 500,000 JPMorgan Chase & Co. (a)............................ 4.20% 07/23/29 558,571 500,000 JPMorgan Chase & Co. (a)............................ 3.70% 05/06/30 539,121 500,000 JPMorgan Chase & Co. (a)............................ 2.74% 10/15/30 500,714 400,000 JPMorgan Chase & Co................................. 6.40% 05/15/38 580,374 250,000 JPMorgan Chase & Co. (a)............................ 3.88% 07/24/38 277,164 100,000 JPMorgan Chase & Co................................. 4.85% 02/01/44 128,043 150,000 JPMorgan Chase & Co................................. 4.95% 06/01/45 191,199 500,000 JPMorgan Chase & Co. (a)............................ 4.26% 02/22/48 591,808 500,000 JPMorgan Chase & Co. (a)............................ 4.03% 07/24/48 572,381 750,000 JPMorgan Chase & Co. (a)............................ 3.96% 11/15/48 851,177 500,000 JPMorgan Chase & Co. (a)............................ 3.90% 01/23/49 563,637 500,000 JPMorgan Chase Bank N.A. (a)........................ 2.60% 02/01/21 500,272 250,000 JPMorgan Chase Bank N.A. (a)........................ 3.09% 04/26/21 250,873 500,000 MUFG Union Bank N.A................................. 2.10% 12/09/22 501,611 500,000 PNC Financial Services Group (The), Inc............. 2.60% 07/23/26 506,823 500,000 Regions Bank........................................ 2.75% 04/01/21 504,270 500,000 Regions Financial Corp.............................. 3.80% 08/14/23 529,646 550,000 Wells Fargo & Co.................................... 2.50% 03/04/21 554,083 300,000 Wells Fargo & Co.................................... 2.10% 07/26/21 300,519
Page 24 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 500,000 Wells Fargo & Co.................................... 2.63% 07/22/22 $ 507,634 425,000 Wells Fargo & Co.................................... 3.30% 09/09/24 445,691 500,000 Wells Fargo & Co. (a)............................... 2.41% 10/30/25 500,811 550,000 Wells Fargo & Co.................................... 3.00% 04/22/26 566,231 100,000 Wells Fargo & Co.................................... 4.10% 06/03/26 107,923 250,000 Wells Fargo & Co.................................... 3.00% 10/23/26 256,446 200,000 Wells Fargo & Co.................................... 4.30% 07/22/27 219,356 500,000 Wells Fargo & Co. (a)............................... 3.58% 05/22/28 531,931 500,000 Wells Fargo & Co. (a)............................... 2.88% 10/30/30 504,119 100,000 Wells Fargo & Co.................................... 4.90% 11/17/45 122,502 275,000 Wells Fargo & Co.................................... 4.40% 06/14/46 314,156 750,000 Wells Fargo & Co.................................... 4.75% 12/07/46 901,988 250,000 Wells Fargo Bank N.A. (a)........................... 3.33% 07/23/21 251,981 1,000,000 Wells Fargo Bank N.A................................ 3.63% 10/22/21 1,029,476 500,000 Wells Fargo Bank N.A. (a)........................... 2.08% 09/09/22 500,899 200,000 Wells Fargo Bank N.A................................ 5.95% 08/26/36 266,731 500,000 Zions Bancorp N.A................................... 3.25% 10/29/29 491,621 ------------- 58,894,369 ------------- BEVERAGES - 0.8% 875,000 Anheuser-Busch Cos., LLC/Anheuser-Busch InBev Worldwide, Inc................................... 4.70% 02/01/36 1,015,469 1,100,000 Anheuser-Busch Cos., LLC/Anheuser-Busch InBev Worldwide, Inc................................... 4.90% 02/01/46 1,306,756 562,000 Anheuser-Busch Inbev Finance, Inc................... 3.30% 02/01/23 582,592 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 3.50% 01/12/24 263,622 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.15% 01/23/25 272,633 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.75% 01/23/29 290,016 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.90% 01/23/31 298,190 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.38% 04/15/38 281,290 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.60% 04/15/48 286,572 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 5.55% 01/23/49 325,298 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 4.75% 04/15/58 292,897 250,000 Anheuser-Busch Inbev Worldwide, Inc................. 5.80% 01/23/59 341,936 975,000 Coca-Cola (The) Co.................................. 3.20% 11/01/23 1,023,302 500,000 Coca-Cola (The) Co.................................. 1.75% 09/06/24 496,909 500,000 PepsiCo, Inc........................................ 3.38% 07/29/49 525,972 ------------- 7,603,454 ------------- BIOTECHNOLOGY - 1.4% 250,000 AbbVie, Inc......................................... 3.38% 11/14/21 256,531 2,000,000 AbbVie, Inc. (b).................................... 2.15% 11/19/21 2,003,815 375,000 AbbVie, Inc......................................... 2.90% 11/06/22 382,961 2,000,000 AbbVie, Inc. (b).................................... 2.30% 11/21/22 2,011,506 250,000 AbbVie, Inc......................................... 3.75% 11/14/23 263,313 1,000,000 AbbVie, Inc. (b).................................... 2.60% 11/21/24 1,009,224 250,000 AbbVie, Inc......................................... 3.60% 05/14/25 264,316 1,000,000 AbbVie, Inc. (b).................................... 2.95% 11/21/26 1,019,710 250,000 AbbVie, Inc......................................... 4.25% 11/14/28 276,753 1,000,000 AbbVie, Inc. (b).................................... 3.20% 11/21/29 1,018,615 500,000 AbbVie, Inc. (b).................................... 4.05% 11/21/39 527,309
See Notes to Financial Statements Page 25 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) BIOTECHNOLOGY (CONTINUED) $ 275,000 AbbVie, Inc......................................... 4.40% 11/06/42 $ 296,190 300,000 AbbVie, Inc......................................... 4.70% 05/14/45 335,802 250,000 AbbVie, Inc......................................... 4.88% 11/14/48 289,304 1,000,000 AbbVie, Inc. (b).................................... 4.25% 11/21/49 1,066,370 450,000 Amgen, Inc.......................................... 2.70% 05/01/22 456,214 500,000 Amgen, Inc.......................................... 2.65% 05/11/22 507,646 200,000 Amgen, Inc.......................................... 3.63% 05/22/24 211,464 100,000 Amgen, Inc.......................................... 2.60% 08/19/26 101,393 500,000 Amgen, Inc.......................................... 3.20% 11/02/27 527,405 350,000 Amgen, Inc.......................................... 4.40% 05/01/45 392,806 ------------- 13,218,647 ------------- BUILDING PRODUCTS - 0.0% 250,000 Owens Corning....................................... 3.95% 08/15/29 260,745 250,000 Owens Corning....................................... 4.30% 07/15/47 237,759 ------------- 498,504 ------------- CAPITAL MARKETS - 2.2% 700,000 Goldman Sachs Group (The), Inc...................... 2.63% 04/25/21 706,271 500,000 Goldman Sachs Group (The), Inc...................... 2.35% 11/15/21 502,060 500,000 Goldman Sachs Group (The), Inc...................... 3.00% 04/26/22 506,406 500,000 Goldman Sachs Group (The), Inc. (a)................. 2.88% 10/31/22 507,203 700,000 Goldman Sachs Group (The), Inc...................... 3.63% 01/22/23 729,502 250,000 Goldman Sachs Group (The), Inc. (a)................. 2.91% 06/05/23 254,234 500,000 Goldman Sachs Group (The), Inc. (a)................. 2.91% 07/24/23 509,257 500,000 Goldman Sachs Group (The), Inc...................... 3.63% 02/20/24 525,190 600,000 Goldman Sachs Group (The), Inc...................... 4.00% 03/03/24 639,775 150,000 Goldman Sachs Group (The), Inc...................... 3.50% 01/23/25 157,569 500,000 Goldman Sachs Group (The), Inc. (a)................. 3.27% 09/29/25 517,992 600,000 Goldman Sachs Group (The), Inc...................... 4.25% 10/21/25 652,246 550,000 Goldman Sachs Group (The), Inc...................... 3.75% 02/25/26 582,615 500,000 Goldman Sachs Group (The), Inc...................... 3.50% 11/16/26 526,614 750,000 Goldman Sachs Group (The), Inc...................... 3.85% 01/26/27 798,995 250,000 Goldman Sachs Group (The), Inc. (a)................. 3.69% 06/05/28 266,204 500,000 Goldman Sachs Group (The), Inc. (a)................. 3.81% 04/23/29 536,861 500,000 Goldman Sachs Group (The), Inc. (a)................. 4.22% 05/01/29 551,719 500,000 Goldman Sachs Group (The), Inc. (a)................. 4.02% 10/31/38 544,409 500,000 Goldman Sachs Group (The), Inc. (a)................. 4.41% 04/23/39 570,767 400,000 Goldman Sachs Group (The), Inc...................... 6.25% 02/01/41 560,157 1,000,000 Morgan Stanley...................................... 2.50% 04/21/21 1,007,827 550,000 Morgan Stanley...................................... 5.50% 07/28/21 579,526 500,000 Morgan Stanley...................................... 2.63% 11/17/21 506,146 500,000 Morgan Stanley...................................... 2.75% 05/19/22 509,397 500,000 Morgan Stanley...................................... 3.13% 01/23/23 514,350 300,000 Morgan Stanley...................................... 3.75% 02/25/23 314,350 500,000 Morgan Stanley (a).................................. 3.74% 04/24/24 522,701 450,000 Morgan Stanley...................................... 3.88% 04/29/24 478,681 250,000 Morgan Stanley (a).................................. 2.72% 07/22/25 253,323 800,000 Morgan Stanley...................................... 3.88% 01/27/26 859,927 250,000 Morgan Stanley...................................... 4.35% 09/08/26 273,678 250,000 Morgan Stanley...................................... 3.63% 01/20/27 266,428
Page 26 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) CAPITAL MARKETS (CONTINUED) $ 500,000 Morgan Stanley (a).................................. 3.59% 07/22/28 $ 532,062 500,000 Morgan Stanley (a).................................. 3.77% 01/24/29 538,640 500,000 Morgan Stanley (a).................................. 4.43% 01/23/30 565,965 500,000 Morgan Stanley (a).................................. 3.97% 07/22/38 556,329 500,000 Morgan Stanley (a).................................. 4.46% 04/22/39 590,366 350,000 Morgan Stanley...................................... 6.38% 07/24/42 516,740 100,000 Morgan Stanley...................................... 4.30% 01/27/45 117,812 250,000 Morgan Stanley...................................... 4.38% 01/22/47 300,275 ------------- 20,950,569 ------------- CHEMICALS - 0.1% 250,000 Dow Chemical (The) Co............................... 3.15% 05/15/24 259,453 250,000 Dow Chemical (The) Co............................... 4.80% 05/15/49 290,404 500,000 LYB International Finance III, LLC.................. 4.20% 10/15/49 524,101 ------------- 1,073,958 ------------- COMMERCIAL SERVICES & SUPPLIES - 0.0% 250,000 Republic Services, Inc.............................. 2.50% 08/15/24 253,133 ------------- COMMUNICATIONS EQUIPMENT - 0.2% 800,000 Cisco Systems, Inc.................................. 2.20% 09/20/23 810,597 500,000 Cisco Systems, Inc.................................. 3.63% 03/04/24 534,913 200,000 Cisco Systems, Inc.................................. 2.50% 09/20/26 204,072 225,000 Cisco Systems, Inc.................................. 5.90% 02/15/39 315,774 ------------- 1,865,356 ------------- CONSUMER FINANCE - 1.3% 250,000 American Express Co................................. 3.00% 02/22/21 253,047 250,000 American Express Co................................. 2.50% 08/01/22 253,066 250,000 American Express Co................................. 3.70% 08/03/23 263,004 250,000 American Express Co................................. 3.40% 02/22/24 261,686 500,000 American Express Co................................. 2.50% 07/30/24 506,171 500,000 American Express Co................................. 3.00% 10/30/24 517,297 450,000 American Express Co................................. 3.63% 12/05/24 476,072 250,000 American Express Co................................. 4.20% 11/06/25 275,831 575,000 American Express Credit Corp........................ 2.25% 05/05/21 577,903 250,000 American Express Credit Corp........................ 2.70% 03/03/22 254,274 250,000 Capital One Financial Corp.......................... 4.25% 04/30/25 272,404 500,000 Capital One Financial Corp.......................... 3.80% 01/31/28 538,177 500,000 Capital One N.A..................................... 2.65% 08/08/22 507,703 1,039,000 Caterpillar Financial Services Corp................. 1.70% 08/09/21 1,037,776 1,000,000 Caterpillar Financial Services Corp................. 2.55% 11/29/22 1,019,540 500,000 Caterpillar Financial Services Corp................. 2.15% 11/08/24 502,382 500,000 Discover Bank....................................... 3.35% 02/06/23 515,962 500,000 Discover Bank....................................... 2.45% 09/12/24 499,436 250,000 Discover Bank....................................... 4.65% 09/13/28 282,051 500,000 Ford Motor Credit Co., LLC.......................... 2.98% 08/03/22 500,938 250,000 Ford Motor Credit Co., LLC.......................... 3.35% 11/01/22 252,713 250,000 Ford Motor Credit Co., LLC.......................... 4.54% 08/01/26 256,182 250,000 General Motors Financial Co., Inc................... 2.45% 11/06/20 250,637 250,000 General Motors Financial Co., Inc................... 3.20% 07/06/21 253,513 500,000 General Motors Financial Co., Inc................... 4.20% 11/06/21 518,533
See Notes to Financial Statements Page 27 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) CONSUMER FINANCE (CONTINUED) $ 250,000 General Motors Financial Co., Inc................... 3.55% 07/08/22 $ 257,441 250,000 General Motors Financial Co., Inc................... 5.10% 01/17/24 271,569 250,000 General Motors Financial Co., Inc................... 3.50% 11/07/24 257,772 200,000 General Motors Financial Co., Inc................... 5.25% 03/01/26 221,969 100,000 General Motors Financial Co., Inc................... 4.00% 10/06/26 104,940 250,000 General Motors Financial Co., Inc................... 4.35% 01/17/27 263,036 250,000 General Motors Financial Co., Inc................... 3.85% 01/05/28 255,312 ------------- 12,478,337 ------------- CONTAINERS & PACKAGING - 0.1% 350,000 International Paper Co.............................. 4.40% 08/15/47 375,505 250,000 Packaging Corp. of America.......................... 3.00% 12/15/29 251,809 250,000 WRKCo, Inc.......................................... 3.00% 09/15/24 255,292 250,000 WRKCo, Inc.......................................... 3.38% 09/15/27 256,217 250,000 WRKCo, Inc.......................................... 4.20% 06/01/32 274,521 ------------- 1,413,344 ------------- DIVERSIFIED FINANCIAL SERVICES - 0.4% 250,000 Berkshire Hathaway Finance Corp..................... 4.20% 08/15/48 296,434 500,000 Berkshire Hathaway Finance Corp..................... 4.25% 01/15/49 594,122 125,000 Berkshire Hathaway, Inc............................. 2.75% 03/15/23 128,253 425,000 Berkshire Hathaway, Inc............................. 3.13% 03/15/26 448,295 500,000 Dell International LLC/EMC Corp. (b)................ 4.42% 06/15/21 514,675 250,000 Dell International LLC/EMC Corp. (b)................ 4.00% 07/15/24 262,096 500,000 Dell International LLC/EMC Corp. (b)................ 4.90% 10/01/26 551,021 250,000 Dell International LLC/EMC Corp. (b)................ 5.30% 10/01/29 282,132 250,000 Dell International LLC/EMC Corp. (b)................ 8.35% 07/15/46 344,942 ------------- 3,421,970 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 1.2% 250,000 AT&T, Inc........................................... 3.20% 03/01/22 256,013 250,000 AT&T, Inc........................................... 3.80% 03/01/24 265,497 150,000 AT&T, Inc........................................... 3.90% 03/11/24 159,658 350,000 AT&T, Inc........................................... 3.40% 05/15/25 366,821 650,000 AT&T, Inc........................................... 4.13% 02/17/26 705,076 545,000 AT&T, Inc........................................... 4.10% 02/15/28 593,522 500,000 AT&T, Inc........................................... 4.35% 03/01/29 556,713 462,000 AT&T, Inc........................................... 4.30% 02/15/30 513,809 250,000 AT&T, Inc........................................... 5.25% 03/01/37 299,129 500,000 AT&T, Inc........................................... 4.85% 03/01/39 577,775 425,000 AT&T, Inc........................................... 4.80% 06/15/44 485,688 250,000 AT&T, Inc........................................... 4.35% 06/15/45 270,365 250,000 AT&T, Inc........................................... 4.75% 05/15/46 283,397 550,000 AT&T, Inc........................................... 5.65% 02/15/47 701,813 250,000 AT&T, Inc........................................... 4.50% 03/09/48 276,652 250,000 AT&T, Inc........................................... 5.70% 03/01/57 323,303 200,000 Level 3 Financing, Inc. (b)......................... 3.40% 03/01/27 201,776 250,000 Level 3 Financing, Inc. (b)......................... 3.88% 11/15/29 252,338 250,000 Verizon Communications, Inc......................... 2.63% 08/15/26 254,107 250,000 Verizon Communications, Inc......................... 4.13% 03/16/27 277,787 250,000 Verizon Communications, Inc......................... 3.88% 02/08/29 276,008 1,119,000 Verizon Communications, Inc......................... 4.02% 12/03/29 1,248,411
Page 28 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) $ 231,000 Verizon Communications, Inc......................... 4.27% 01/15/36 $ 262,024 298,000 Verizon Communications, Inc......................... 4.13% 08/15/46 337,368 750,000 Verizon Communications, Inc......................... 4.86% 08/21/46 932,401 250,000 Verizon Communications, Inc......................... 4.52% 09/15/48 300,450 249,000 Verizon Communications, Inc......................... 5.01% 08/21/54 321,683 522,000 Verizon Communications, Inc......................... 4.67% 03/15/55 645,954 ------------- 11,945,538 ------------- ELECTRIC UTILITIES - 3.4% 500,000 AEP Texas, Inc...................................... 2.40% 10/01/22 504,829 750,000 AEP Transmission Co., LLC........................... 3.10% 12/01/26 777,888 250,000 AEP Transmission Co., LLC........................... 4.00% 12/01/46 278,746 500,000 AEP Transmission Co., LLC........................... 3.75% 12/01/47 539,061 500,000 AEP Transmission Co., LLC........................... 4.25% 09/15/48 575,261 250,000 AEP Transmission Co., LLC........................... 3.15% 09/15/49 242,588 250,000 Alabama Power Co.................................... 3.70% 12/01/47 264,539 500,000 Alabama Power Co.................................... 3.45% 10/01/49 514,430 750,000 American Electric Power Co., Inc.................... 2.95% 12/15/22 764,745 300,000 Appalachian Power Co................................ 4.40% 05/15/44 339,543 250,000 Appalachian Power Co................................ 4.50% 03/01/49 289,959 500,000 Atlantic City Electric Co........................... 4.00% 10/15/28 558,339 250,000 Baltimore Gas & Electric Co......................... 2.40% 08/15/26 248,425 250,000 Baltimore Gas & Electric Co......................... 3.50% 08/15/46 255,028 250,000 Baltimore Gas & Electric Co......................... 3.75% 08/15/47 267,328 250,000 Baltimore Gas & Electric Co......................... 3.20% 09/15/49 245,730 500,000 Cleveland Electric Illuminating (The) Co. (b)....... 3.50% 04/01/28 521,245 300,000 Commonwealth Edison Co.............................. 3.40% 09/01/21 306,960 250,000 Commonwealth Edison Co.............................. 2.95% 08/15/27 259,285 250,000 Commonwealth Edison Co.............................. 3.70% 08/15/28 273,738 300,000 Commonwealth Edison Co.............................. 3.70% 03/01/45 319,879 400,000 Commonwealth Edison Co.............................. 3.65% 06/15/46 425,544 500,000 Commonwealth Edison Co.............................. 3.75% 08/15/47 541,091 500,000 Commonwealth Edison Co.............................. 4.00% 03/01/49 567,077 100,000 Duke Energy Carolinas LLC........................... 2.50% 03/15/23 101,596 500,000 Duke Energy Carolinas LLC........................... 3.05% 03/15/23 515,682 250,000 Duke Energy Carolinas LLC........................... 2.45% 08/15/29 248,638 250,000 Duke Energy Carolinas LLC........................... 3.20% 08/15/49 249,882 250,000 Duke Energy Corp.................................... 1.80% 09/01/21 249,865 300,000 Duke Energy Corp.................................... 3.55% 09/15/21 306,574 500,000 Duke Energy Corp.................................... 2.40% 08/15/22 505,248 250,000 Duke Energy Corp.................................... 3.15% 08/15/27 257,867 500,000 Duke Energy Corp.................................... 3.40% 06/15/29 523,686 950,000 Duke Energy Corp.................................... 3.75% 09/01/46 984,373 500,000 Duke Energy Corp.................................... 3.95% 08/15/47 530,510 500,000 Duke Energy Corp.................................... 4.20% 06/15/49 555,262 500,000 Duke Energy Florida LLC............................. 3.20% 01/15/27 523,299 250,000 Duke Energy Florida LLC............................. 3.80% 07/15/28 274,087 1,000,000 Duke Energy Florida LLC............................. 2.50% 12/01/29 998,656 250,000 Duke Energy Florida LLC............................. 3.40% 10/01/46 255,165 250,000 Duke Energy Florida LLC............................. 4.20% 07/15/48 290,326
See Notes to Financial Statements Page 29 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) ELECTRIC UTILITIES (CONTINUED) $ 500,000 Duke Energy Progress LLC............................ 3.45% 03/15/29 $ 536,409 250,000 Duke Energy Progress LLC............................ 3.60% 09/15/47 262,686 575,000 Exelon Corp......................................... 5.15% 12/01/20 586,643 200,000 Exelon Corp......................................... 2.45% 04/15/21 200,955 210,000 Florida Power & Light Co............................ 4.05% 06/01/42 239,279 250,000 Florida Power & Light Co............................ 3.95% 03/01/48 285,735 500,000 Georgia Power Co.................................... 2.20% 09/15/24 500,620 250,000 Indiana Michigan Power Co........................... 3.85% 05/15/28 273,379 500,000 Indiana Michigan Power Co........................... 3.75% 07/01/47 524,809 250,000 Indiana Michigan Power Co........................... 4.25% 08/15/48 286,583 500,000 Jersey Central Power & Light Co. (b)................ 4.30% 01/15/26 544,874 410,000 Metropolitan Edison Co. (b)......................... 3.50% 03/15/23 423,954 500,000 Metropolitan Edison Co. (b)......................... 4.30% 01/15/29 557,954 500,000 Oncor Electric Delivery Co., LLC.................... 2.75% 06/01/24 506,541 250,000 PECO Energy Co...................................... 3.70% 09/15/47 274,504 500,000 PECO Energy Co...................................... 3.90% 03/01/48 564,572 250,000 PECO Energy Co...................................... 3.00% 09/15/49 240,979 500,000 Public Service Electric & Gas Co.................... 3.25% 09/01/23 521,118 550,000 Public Service Electric & Gas Co.................... 2.25% 09/15/26 545,716 250,000 Public Service Electric & Gas Co.................... 3.00% 05/15/27 258,898 500,000 Public Service Electric & Gas Co.................... 3.65% 09/01/28 545,833 250,000 Public Service Electric & Gas Co.................... 3.20% 05/15/29 263,988 275,000 Public Service Electric & Gas Co.................... 3.95% 05/01/42 305,712 500,000 Public Service Electric & Gas Co.................... 3.60% 12/01/47 543,009 250,000 Public Service Electric & Gas Co.................... 4.05% 05/01/48 288,040 250,000 Public Service Electric & Gas Co.................... 3.85% 05/01/49 282,066 500,000 Public Service Electric & Gas Co.................... 3.20% 08/01/49 506,711 500,000 Southwestern Electric Power Co...................... 2.75% 10/01/26 501,051 500,000 Virginia Electric & Power Co........................ 2.75% 03/15/23 509,493 200,000 Virginia Electric & Power Co........................ 3.45% 02/15/24 209,743 450,000 Virginia Electric & Power Co........................ 2.95% 11/15/26 466,832 250,000 Virginia Electric & Power Co........................ 3.50% 03/15/27 267,663 500,000 Virginia Electric & Power Co........................ 2.88% 07/15/29 513,418 475,000 Virginia Electric & Power Co........................ 4.45% 02/15/44 552,631 250,000 Virginia Electric & Power Co........................ 4.00% 11/15/46 276,339 250,000 Virginia Electric & Power Co........................ 3.80% 09/15/47 271,051 500,000 Virginia Electric & Power Co........................ 4.60% 12/01/48 613,921 ------------- 32,305,683 ------------- ELECTRICAL EQUIPMENT - 0.1% 250,000 Rockwell Automation, Inc............................ 3.50% 03/01/29 269,050 250,000 Rockwell Automation, Inc............................ 4.20% 03/01/49 292,496 ------------- 561,546 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS - 0.0% 250,000 Corning, Inc........................................ 3.90% 11/15/49 254,774 ------------- ENERGY EQUIPMENT & SERVICES - 0.0% 500,000 National Oilwell Varco, Inc......................... 3.60% 12/01/29 502,542 ------------- ENTERTAINMENT - 0.3% 150,000 TWDC Enterprises 18 Corp............................ 3.00% 02/13/26 158,088 350,000 TWDC Enterprises 18 Corp............................ 1.85% 07/30/26 344,273
Page 30 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) ENTERTAINMENT (CONTINUED) $ 500,000 TWDC Enterprises 18 Corp............................ 2.95% 06/15/27 $ 528,001 475,000 TWDC Enterprises 18 Corp............................ 4.13% 06/01/44 561,660 250,000 Walt Disney (The) Co................................ 1.65% 09/01/22 249,483 500,000 Walt Disney (The) Co................................ 1.75% 08/30/24 496,537 250,000 Walt Disney (The) Co................................ 2.00% 09/01/29 242,942 250,000 Walt Disney (The) Co................................ 2.75% 09/01/49 236,710 ------------- 2,817,694 ------------- EQUITY REAL ESTATE INVESTMENT TRUSTS - 0.1% 500,000 Duke Realty L.P..................................... 2.88% 11/15/29 502,054 250,000 Simon Property Group L.P............................ 2.00% 09/13/24 248,968 ------------- 751,022 ------------- FOOD & STAPLES RETAILING - 0.8% 250,000 Walmart, Inc........................................ 3.13% 06/23/21 255,410 1,000,000 Walmart, Inc........................................ 2.35% 12/15/22 1,018,094 250,000 Walmart, Inc........................................ 3.40% 06/26/23 263,027 325,000 Walmart, Inc........................................ 3.30% 04/22/24 342,018 500,000 Walmart, Inc........................................ 2.85% 07/08/24 519,097 500,000 Walmart, Inc........................................ 2.65% 12/15/24 516,667 1,000,000 Walmart, Inc........................................ 3.55% 06/26/25 1,075,031 500,000 Walmart, Inc........................................ 3.05% 07/08/26 527,842 250,000 Walmart, Inc........................................ 3.70% 06/26/28 275,665 500,000 Walmart, Inc........................................ 3.25% 07/08/29 537,113 500,000 Walmart, Inc........................................ 2.38% 09/24/29 501,228 250,000 Walmart, Inc........................................ 3.95% 06/28/38 290,052 1,000,000 Walmart, Inc........................................ 3.63% 12/15/47 1,114,745 250,000 Walmart, Inc........................................ 4.05% 06/29/48 296,755 500,000 Walmart, Inc........................................ 2.95% 09/24/49 499,643 ------------- 8,032,387 ------------- FOOD PRODUCTS - 0.4% 500,000 Conagra Brands, Inc................................. 3.80% 10/22/21 516,116 500,000 Conagra Brands, Inc................................. 4.30% 05/01/24 538,828 500,000 Conagra Brands, Inc................................. 4.60% 11/01/25 552,813 500,000 Conagra Brands, Inc................................. 4.85% 11/01/28 574,129 500,000 Conagra Brands, Inc................................. 5.40% 11/01/48 611,669 250,000 Hershey (The) Co.................................... 2.05% 11/15/24 250,778 250,000 Hershey (The) Co.................................... 2.45% 11/15/29 251,782 250,000 Kraft Heinz Foods Co. (b)........................... 4.88% 10/01/49 264,294 250,000 Nestle Holdings, Inc. (b)........................... 3.10% 09/24/21 255,670 ------------- 3,816,079 ------------- GAS UTILITIES - 0.2% 1,000,000 CenterPoint Energy Resources Corp................... 3.55% 04/01/23 1,035,931 500,000 Southern Co. Gas Capital Corp....................... 4.40% 05/30/47 554,282 ------------- 1,590,213 ------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.6% 350,000 Abbott Laboratories................................. 3.40% 11/30/23 368,198 282,000 Abbott Laboratories................................. 3.75% 11/30/26 308,365 1,100,000 Abbott Laboratories................................. 4.90% 11/30/46 1,447,694 550,000 Becton Dickinson and Co............................. 3.36% 06/06/24 573,200
See Notes to Financial Statements Page 31 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) $ 522,000 Becton Dickinson and Co............................. 3.70% 06/06/27 $ 555,969 800,000 Becton Dickinson and Co............................. 4.67% 06/06/47 955,159 250,000 Boston Scientific Corp.............................. 3.45% 03/01/24 261,747 250,000 Boston Scientific Corp.............................. 3.75% 03/01/26 268,185 250,000 Boston Scientific Corp.............................. 4.00% 03/01/29 276,904 250,000 Boston Scientific Corp.............................. 4.55% 03/01/39 294,624 250,000 Boston Scientific Corp.............................. 4.70% 03/01/49 304,672 295,000 Medtronic, Inc...................................... 3.15% 03/15/22 303,506 267,000 Medtronic, Inc...................................... 3.50% 03/15/25 286,398 ------------- 6,204,621 ------------- HEALTH CARE PROVIDERS & SERVICES - 2.2% 250,000 Anthem, Inc......................................... 2.38% 01/15/25 250,001 250,000 Anthem, Inc......................................... 2.88% 09/15/29 249,580 250,000 Anthem, Inc......................................... 4.55% 03/01/48 283,388 750,000 Anthem, Inc......................................... 3.70% 09/15/49 752,210 500,000 CIGNA Corp.......................................... 3.40% 09/17/21 512,042 500,000 CIGNA Corp.......................................... 3.75% 07/15/23 524,822 500,000 CIGNA Corp.......................................... 4.13% 11/15/25 543,314 500,000 CIGNA Corp.......................................... 4.80% 08/15/38 585,045 399,000 CVS Health Corp..................................... 3.35% 03/09/21 405,728 1,100,000 CVS Health Corp..................................... 2.13% 06/01/21 1,102,160 500,000 CVS Health Corp..................................... 3.70% 03/09/23 521,473 700,000 CVS Health Corp..................................... 4.00% 12/05/23 741,243 250,000 CVS Health Corp..................................... 2.63% 08/15/24 252,401 500,000 CVS Health Corp..................................... 4.10% 03/25/25 537,164 178,000 CVS Health Corp..................................... 3.88% 07/20/25 189,730 150,000 CVS Health Corp..................................... 2.88% 06/01/26 152,324 250,000 CVS Health Corp..................................... 3.00% 08/15/26 255,435 500,000 CVS Health Corp..................................... 4.30% 03/25/28 546,666 250,000 CVS Health Corp..................................... 3.25% 08/15/29 254,597 350,000 CVS Health Corp..................................... 4.78% 03/25/38 398,542 1,000,000 CVS Health Corp..................................... 5.05% 03/25/48 1,186,917 250,000 HCA, Inc............................................ 4.13% 06/15/29 265,779 250,000 HCA, Inc............................................ 5.13% 06/15/39 276,410 250,000 HCA, Inc............................................ 5.25% 06/15/49 280,341 500,000 Laboratory Corp. of America Holdings................ 2.30% 12/01/24 498,640 500,000 Laboratory Corp. of America Holdings................ 2.95% 12/01/29 502,482 275,000 UnitedHealth Group, Inc............................. 4.70% 02/15/21 282,081 550,000 UnitedHealth Group, Inc............................. 2.88% 12/15/21 561,208 500,000 UnitedHealth Group, Inc............................. 2.38% 10/15/22 506,425 250,000 UnitedHealth Group, Inc............................. 3.50% 02/15/24 264,095 500,000 UnitedHealth Group, Inc............................. 2.38% 08/15/24 506,966 100,000 UnitedHealth Group, Inc............................. 3.75% 07/15/25 108,107 250,000 UnitedHealth Group, Inc............................. 3.70% 12/15/25 270,797 250,000 UnitedHealth Group, Inc............................. 3.10% 03/15/26 262,079 500,000 UnitedHealth Group, Inc............................. 3.45% 01/15/27 536,577 500,000 UnitedHealth Group, Inc............................. 3.38% 04/15/27 534,231 500,000 UnitedHealth Group, Inc............................. 2.95% 10/15/27 520,598 250,000 UnitedHealth Group, Inc............................. 3.88% 12/15/28 277,041
Page 32 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) $ 500,000 UnitedHealth Group, Inc............................. 2.88% 08/15/29 $ 515,292 150,000 UnitedHealth Group, Inc............................. 6.88% 02/15/38 222,629 250,000 UnitedHealth Group, Inc............................. 3.50% 08/15/39 263,100 573,000 UnitedHealth Group, Inc............................. 4.75% 07/15/45 706,569 500,000 UnitedHealth Group, Inc............................. 4.20% 01/15/47 574,942 500,000 UnitedHealth Group, Inc............................. 4.25% 04/15/47 579,771 250,000 UnitedHealth Group, Inc............................. 3.75% 10/15/47 269,518 250,000 UnitedHealth Group, Inc............................. 4.45% 12/15/48 299,460 250,000 UnitedHealth Group, Inc............................. 3.70% 08/15/49 269,452 250,000 UnitedHealth Group, Inc............................. 3.88% 08/15/59 270,854 250,000 Unum Group.......................................... 4.50% 12/15/49 245,147 ------------- 20,915,373 ------------- HOTELS, RESTAURANTS & LEISURE - 0.1% 500,000 Las Vegas Sands Corp................................ 2.90% 06/25/25 505,943 500,000 Marriott International (MD), Inc.................... 2.13% 10/03/22 501,295 ------------- 1,007,238 ------------- HOUSEHOLD DURABLES - 0.0% 500,000 DR Horton, Inc...................................... 2.50% 10/15/24 500,917 ------------- HOUSEHOLD PRODUCTS - 0.1% 250,000 Procter & Gamble (The) Co........................... 1.70% 11/03/21 250,926 500,000 Procter & Gamble (The) Co........................... 2.15% 08/11/22 505,934 ------------- 756,860 ------------- INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS - 0.3% 500,000 NextEra Energy Capital Holdings, Inc................ 2.80% 01/15/23 511,449 500,000 NextEra Energy Capital Holdings, Inc................ 3.15% 04/01/24 518,864 500,000 NextEra Energy Capital Holdings, Inc................ 3.55% 05/01/27 531,682 500,000 NextEra Energy Capital Holdings, Inc................ 3.50% 04/01/29 532,732 500,000 NextEra Energy Capital Holdings, Inc................ 2.75% 11/01/29 503,721 ------------- 2,598,448 ------------- INDUSTRIAL CONGLOMERATES - 0.1% 500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor, Inc.............................................. 2.77% 12/15/22 510,341 500,000 Baker Hughes a GE Co., LLC/Baker Hughes Co-Obligor, Inc.............................................. 4.08% 12/15/47 513,604 ------------- 1,023,945 ------------- INSURANCE - 0.6% 200,000 American International Group, Inc................... 4.13% 02/15/24 214,912 100,000 American International Group, Inc................... 3.90% 04/01/26 107,495 250,000 American International Group, Inc................... 4.25% 03/15/29 278,537 300,000 American International Group, Inc................... 6.25% 05/01/36 401,506 500,000 Aon Corp............................................ 2.20% 11/15/22 502,701 500,000 Aon Corp............................................ 3.75% 05/02/29 535,492 250,000 CNA Financial Corp.................................. 3.90% 05/01/29 269,436 250,000 Hartford Financial Services Group (The), Inc........ 2.80% 08/19/29 253,443 250,000 Hartford Financial Services Group (The), Inc........ 3.60% 08/19/49 257,747 750,000 Marsh & McLennan Cos., Inc.......................... 4.38% 03/15/29 855,780 250,000 Marsh & McLennan Cos., Inc.......................... 4.90% 03/15/49 317,963 300,000 MetLife, Inc........................................ 4.88% 11/13/43 372,528 275,000 Prudential Financial, Inc........................... 4.60% 05/15/44 325,206
See Notes to Financial Statements Page 33 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) INSURANCE (CONTINUED) $ 500,000 Travelers (The) Cos., Inc........................... 4.00% 05/30/47 $ 567,622 500,000 Travelers (The) Cos., Inc........................... 4.10% 03/04/49 576,830 ------------- 5,837,198 ------------- IT SERVICES - 0.9% 500,000 Fiserv, Inc......................................... 2.75% 07/01/24 509,359 500,000 Fiserv, Inc......................................... 3.20% 07/01/26 518,563 500,000 Fiserv, Inc......................................... 3.50% 07/01/29 526,578 500,000 Fiserv, Inc......................................... 4.40% 07/01/49 570,080 500,000 International Business Machines Corp................ 2.85% 05/13/22 511,474 500,000 International Business Machines Corp................ 3.00% 05/15/24 519,188 500,000 International Business Machines Corp................ 3.30% 05/15/26 528,239 500,000 International Business Machines Corp................ 3.50% 05/15/29 538,429 500,000 International Business Machines Corp................ 4.15% 05/15/39 565,055 500,000 International Business Machines Corp................ 4.25% 05/15/49 573,138 500,000 Visa, Inc........................................... 2.15% 09/15/22 505,857 950,000 Visa, Inc........................................... 2.80% 12/14/22 978,165 303,000 Visa, Inc........................................... 4.15% 12/14/35 357,922 450,000 Visa, Inc........................................... 4.30% 12/14/45 553,963 500,000 Visa, Inc........................................... 3.65% 09/15/47 561,055 ------------- 8,317,065 ------------- LEISURE PRODUCTS - 0.1% 500,000 Hasbro, Inc......................................... 2.60% 11/19/22 503,411 250,000 Hasbro, Inc......................................... 3.00% 11/19/24 251,565 ------------- 754,976 ------------- MACHINERY - 0.1% 250,000 Caterpillar, Inc.................................... 2.60% 09/19/29 252,827 250,000 Caterpillar, Inc.................................... 3.25% 09/19/49 251,742 250,000 Wabtec Corp......................................... 4.40% 03/15/24 265,614 ------------- 770,183 ------------- MEDIA - 1.2% 610,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 4.91% 07/23/25 672,208 250,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 5.05% 03/30/29 283,893 750,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 6.48% 10/23/45 931,131 250,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 5.38% 05/01/47 280,936 500,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 5.75% 04/01/48 584,873 500,000 Charter Communications Operating LLC/Charter Communications Operating Capital................. 4.80% 03/01/50 528,145 600,000 Comcast Corp........................................ 3.45% 10/01/21 617,788 575,000 Comcast Corp........................................ 3.70% 04/15/24 613,662 550,000 Comcast Corp........................................ 3.95% 10/15/25 600,718 250,000 Comcast Corp........................................ 3.55% 05/01/28 269,288 350,000 Comcast Corp........................................ 4.15% 10/15/28 394,536 250,000 Comcast Corp........................................ 2.65% 02/01/30 251,395
Page 34 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) MEDIA (CONTINUED) $ 500,000 Comcast Corp........................................ 3.25% 11/01/39 $ 509,027 250,000 Comcast Corp........................................ 3.40% 07/15/46 254,181 500,000 Comcast Corp........................................ 4.00% 08/15/47 552,176 250,000 Comcast Corp........................................ 4.00% 03/01/48 277,973 400,000 Comcast Corp........................................ 4.70% 10/15/48 494,617 500,000 Comcast Corp........................................ 3.45% 02/01/50 514,027 250,000 Comcast Corp........................................ 4.95% 10/15/58 326,285 500,000 Discovery Communications LLC........................ 4.13% 05/15/29 540,881 500,000 Discovery Communications LLC........................ 5.30% 05/15/49 593,659 500,000 Fox Corp. (b)....................................... 3.67% 01/25/22 516,515 500,000 Fox Corp. (b)....................................... 4.03% 01/25/24 533,143 250,000 Fox Corp. (b)....................................... 4.71% 01/25/29 285,315 250,000 Fox Corp. (b)....................................... 5.48% 01/25/39 306,409 250,000 Fox Corp. (b)....................................... 5.58% 01/25/49 318,928 ------------- 12,051,709 ------------- MULTI-UTILITIES - 1.5% 250,000 Cameron LNG LLC (b)................................. 2.90% 07/15/31 250,946 250,000 Cameron LNG LLC (b)................................. 3.30% 01/15/35 252,937 500,000 Cameron LNG LLC (b)................................. 3.70% 01/15/39 511,950 650,000 CenterPoint Energy, Inc............................. 3.60% 11/01/21 667,207 600,000 CenterPoint Energy, Inc............................. 3.85% 02/01/24 633,332 750,000 CenterPoint Energy, Inc............................. 2.50% 09/01/24 751,886 250,000 CenterPoint Energy, Inc............................. 2.95% 03/01/30 247,032 200,000 Consolidated Edison Co. of New York, Inc............ 3.80% 05/15/28 217,988 335,000 Consolidated Edison Co. of New York, Inc............ 4.45% 03/15/44 389,837 500,000 Consolidated Edison Co. of New York, Inc............ 3.88% 06/15/47 543,043 500,000 Consolidated Edison Co. of New York, Inc............ 4.13% 05/15/49 569,058 250,000 Consolidated Edison Co. of New York, Inc............ 4.30% 12/01/56 282,800 1,000,000 Consolidated Edison Co. of New York, Inc............ 3.70% 11/15/59 1,036,634 500,000 Dominion Energy Gas Holdings LLC.................... 2.50% 11/15/24 502,906 500,000 Dominion Energy Gas Holdings LLC.................... 3.00% 11/15/29 499,375 500,000 Dominion Energy Gas Holdings LLC.................... 3.90% 11/15/49 501,593 250,000 Dominion Energy, Inc................................ 2.75% 01/15/22 253,693 495,000 Dominion Energy, Inc................................ 4.70% 12/01/44 575,410 500,000 DTE Energy Co....................................... 2.25% 11/01/22 500,303 500,000 DTE Energy Co....................................... 2.95% 03/01/30 496,230 910,000 NiSource, Inc....................................... 2.65% 11/17/22 921,707 750,000 NiSource, Inc....................................... 3.65% 06/15/23 781,746 250,000 NiSource, Inc....................................... 3.49% 05/15/27 263,221 500,000 NiSource, Inc....................................... 2.95% 09/01/29 499,377 667,000 NiSource, Inc....................................... 4.38% 05/15/47 741,109 250,000 NiSource, Inc....................................... 3.95% 03/30/48 264,080 500,000 Public Service Enterprise Group, Inc................ 2.65% 11/15/22 507,845 500,000 Public Service Enterprise Group, Inc................ 2.88% 06/15/24 511,682 ------------- 14,174,927 ------------- OIL, GAS & CONSUMABLE FUELS - 3.4% 1,000,000 BP Capital Markets America, Inc..................... 3.80% 09/21/25 1,083,073 500,000 BP Capital Markets America, Inc..................... 3.41% 02/11/26 533,152 100,000 BP Capital Markets America, Inc..................... 3.12% 05/04/26 104,580
See Notes to Financial Statements Page 35 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) $ 500,000 BP Capital Markets America, Inc..................... 3.94% 09/21/28 $ 553,102 750,000 BP Capital Markets America, Inc..................... 4.23% 11/06/28 848,970 750,000 Chevron Corp........................................ 2.10% 05/16/21 754,913 550,000 Chevron Corp........................................ 2.57% 05/16/23 561,425 500,000 Chevron Corp........................................ 2.90% 03/03/24 518,603 150,000 Chevron Corp........................................ 3.33% 11/17/25 160,442 1,360,000 Chevron Corp........................................ 2.95% 05/16/26 1,422,636 225,000 ConocoPhillips...................................... 6.50% 02/01/39 328,355 250,000 Diamondback Energy, Inc............................. 3.50% 12/01/29 254,863 250,000 Enable Midstream Partners L.P....................... 4.95% 05/15/28 253,451 250,000 Enable Midstream Partners L.P....................... 4.15% 09/15/29 237,915 400,000 Energy Transfer Operating L.P....................... 3.60% 02/01/23 409,965 150,000 Energy Transfer Operating L.P....................... 4.20% 09/15/23 157,608 500,000 Energy Transfer Operating L.P....................... 4.50% 04/15/24 532,638 250,000 Energy Transfer Operating L.P....................... 4.20% 04/15/27 262,053 250,000 Energy Transfer Operating L.P....................... 4.95% 06/15/28 274,177 250,000 Energy Transfer Operating L.P....................... 5.25% 04/15/29 281,153 250,000 Energy Transfer Operating L.P....................... 5.80% 06/15/38 283,551 250,000 Energy Transfer Operating L.P....................... 5.30% 04/15/47 267,314 250,000 Energy Transfer Operating L.P....................... 6.00% 06/15/48 292,134 250,000 Energy Transfer Operating L.P....................... 6.25% 04/15/49 302,123 500,000 Enterprise Products Operating LLC................... 4.15% 10/16/28 553,911 500,000 Enterprise Products Operating LLC................... 3.13% 07/31/29 515,541 500,000 Enterprise Products Operating LLC................... 4.80% 02/01/49 588,251 500,000 Enterprise Products Operating LLC................... 4.20% 01/31/50 539,047 500,000 Exxon Mobil Corp.................................... 2.22% 03/01/21 503,061 250,000 Exxon Mobil Corp.................................... 1.90% 08/16/22 251,476 250,000 Exxon Mobil Corp.................................... 2.02% 08/16/24 251,068 150,000 Exxon Mobil Corp.................................... 2.71% 03/06/25 155,180 200,000 Exxon Mobil Corp.................................... 3.04% 03/01/26 209,990 250,000 Exxon Mobil Corp.................................... 2.28% 08/16/26 251,913 250,000 Exxon Mobil Corp.................................... 2.44% 08/16/29 252,750 250,000 Exxon Mobil Corp.................................... 3.00% 08/16/39 251,212 250,000 Exxon Mobil Corp.................................... 3.10% 08/16/49 250,329 175,000 Kinder Morgan Energy Partners L.P................... 6.95% 01/15/38 232,156 500,000 Kinder Morgan, Inc.................................. 3.15% 01/15/23 511,658 715,000 Kinder Morgan, Inc.................................. 4.30% 06/01/25 776,323 650,000 Kinder Morgan, Inc.................................. 5.05% 02/15/46 730,518 500,000 Kinder Morgan, Inc.................................. 5.20% 03/01/48 581,483 250,000 Midwest Connector Capital Co., LLC (b).............. 3.63% 04/01/22 256,053 250,000 Midwest Connector Capital Co., LLC (b).............. 3.90% 04/01/24 262,621 500,000 MPLX L.P............................................ 4.00% 03/15/28 518,326 500,000 MPLX L.P............................................ 4.80% 02/15/29 549,240 500,000 MPLX L.P............................................ 5.20% 03/01/47 541,408 250,000 Occidental Petroleum Corp........................... 4.85% 03/15/21 257,576 252,000 Occidental Petroleum Corp........................... 2.60% 08/13/21 253,945 1,000,000 Occidental Petroleum Corp........................... 2.70% 08/15/22 1,010,776 500,000 Occidental Petroleum Corp........................... 2.90% 08/15/24 508,707 250,000 Occidental Petroleum Corp........................... 3.20% 08/15/26 253,223 250,000 Occidental Petroleum Corp........................... 3.50% 08/15/29 255,421
Page 36 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) $ 250,000 Occidental Petroleum Corp........................... 4.30% 08/15/39 $ 255,341 250,000 Occidental Petroleum Corp........................... 4.40% 08/15/49 258,569 400,000 ONEOK Partners L.P.................................. 3.38% 10/01/22 411,800 250,000 ONEOK, Inc.......................................... 2.75% 09/01/24 252,645 250,000 ONEOK, Inc.......................................... 4.55% 07/15/28 275,252 250,000 ONEOK, Inc.......................................... 4.35% 03/15/29 271,019 250,000 ONEOK, Inc.......................................... 3.40% 09/01/29 254,544 250,000 ONEOK, Inc.......................................... 5.20% 07/15/48 284,145 250,000 ONEOK, Inc.......................................... 4.45% 09/01/49 260,391 300,000 Plains All American Pipeline L.P./PAA Finance Corp............................................. 4.65% 10/15/25 321,683 250,000 Plains All American Pipeline L.P./PAA Finance Corp............................................. 3.55% 12/15/29 247,136 500,000 Sabine Pass Liquefaction LLC........................ 5.00% 03/15/27 550,805 250,000 Sabine Pass Liquefaction LLC........................ 4.20% 03/15/28 265,222 350,000 Sunoco Logistics Partners Operations L.P............ 3.90% 07/15/26 363,896 500,000 Sunoco Logistics Partners Operations L.P............ 4.00% 10/01/27 517,758 500,000 Sunoco Logistics Partners Operations L.P............ 5.40% 10/01/47 544,481 500,000 TC PipeLines L.P.................................... 3.90% 05/25/27 523,258 250,000 Transcontinental Gas Pipe Line Co., LLC............. 4.00% 03/15/28 266,211 500,000 Valero Energy Corp.................................. 4.35% 06/01/28 551,382 500,000 Valero Energy Corp.................................. 4.00% 04/01/29 539,884 300,000 Williams (The) Cos., Inc............................ 3.60% 03/15/22 308,564 250,000 Williams (The) Cos., Inc............................ 3.90% 01/15/25 263,443 250,000 Williams (The) Cos., Inc............................ 3.75% 06/15/27 260,979 625,000 Williams (The) Cos., Inc............................ 4.90% 01/15/45 675,868 270,000 Williams (The) Cos., Inc............................ 5.10% 09/15/45 301,525 500,000 Williams (The) Cos., Inc............................ 4.85% 03/01/48 548,253 ------------- 32,325,413 ------------- PHARMACEUTICALS - 0.8% 145,000 Bristol-Myers Squibb Co. (b)........................ 2.55% 05/14/21 146,478 500,000 Bristol-Myers Squibb Co. (b)........................ 2.60% 05/16/22 508,493 500,000 Bristol-Myers Squibb Co. (b)........................ 2.90% 07/26/24 516,624 500,000 Bristol-Myers Squibb Co. (b)........................ 3.20% 06/15/26 525,713 500,000 Bristol-Myers Squibb Co. (b)........................ 3.40% 07/26/29 535,562 500,000 Bristol-Myers Squibb Co. (b)........................ 4.13% 06/15/39 578,181 500,000 Merck & Co., Inc.................................... 2.90% 03/07/24 520,473 300,000 Merck & Co., Inc.................................... 2.75% 02/10/25 311,472 500,000 Merck & Co., Inc.................................... 3.40% 03/07/29 542,133 500,000 Merck & Co., Inc.................................... 3.90% 03/07/39 573,025 500,000 Merck & Co., Inc.................................... 4.00% 03/07/49 587,345 250,000 Pfizer, Inc......................................... 3.00% 09/15/21 255,364 250,000 Pfizer, Inc......................................... 2.80% 03/11/22 255,353 250,000 Pfizer, Inc......................................... 3.45% 03/15/29 269,639 250,000 Pfizer, Inc......................................... 4.10% 09/15/38 286,375 250,000 Pfizer, Inc......................................... 3.90% 03/15/39 282,551 500,000 Pfizer, Inc......................................... 4.20% 09/15/48 587,526 250,000 Pfizer, Inc......................................... 4.00% 03/15/49 288,232 ------------- 7,570,539 ------------- PROFESSIONAL SERVICES - 0.0% 500,000 Equifax, Inc........................................ 2.60% 12/01/24 503,484 -------------
See Notes to Financial Statements Page 37 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) ROAD & RAIL - 0.8% $ 500,000 CSX Corp............................................ 4.25% 03/15/29 $ 563,698 250,000 CSX Corp............................................ 2.40% 02/15/30 245,161 250,000 CSX Corp............................................ 3.80% 11/01/46 262,304 250,000 CSX Corp............................................ 3.35% 09/15/49 247,740 200,000 CSX Corp............................................ 4.50% 08/01/54 230,931 250,000 CSX Corp............................................ 4.25% 11/01/66 267,930 250,000 Kansas City Southern................................ 4.20% 11/15/69 256,962 250,000 Norfolk Southern Corp............................... 3.65% 08/01/25 267,770 250,000 Norfolk Southern Corp............................... 2.90% 06/15/26 258,014 500,000 Norfolk Southern Corp............................... 3.80% 08/01/28 549,986 750,000 Norfolk Southern Corp............................... 4.15% 02/28/48 849,245 500,000 Norfolk Southern Corp............................... 4.10% 05/15/49 553,482 250,000 Ryder System, Inc................................... 3.50% 06/01/21 255,165 250,000 Ryder System, Inc................................... 2.25% 09/01/21 250,656 500,000 Ryder System, Inc................................... 2.80% 03/01/22 506,408 500,000 Ryder System, Inc................................... 3.65% 03/18/24 524,218 500,000 Ryder System, Inc................................... 2.50% 09/01/24 502,900 300,000 Union Pacific Corp.................................. 3.75% 03/15/24 318,482 250,000 Union Pacific Corp.................................. 3.00% 04/15/27 262,636 183,000 Union Pacific Corp.................................. 4.15% 01/15/45 201,130 225,000 Union Pacific Corp.................................. 4.05% 03/01/46 245,684 250,000 Union Pacific Corp.................................. 4.10% 09/15/67 254,183 ------------- 7,874,685 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.3% 1,000,000 Broadcom, Inc. (b).................................. 3.13% 04/15/21 1,012,388 100,000 Intel Corp.......................................... 3.10% 07/29/22 103,231 375,000 Intel Corp.......................................... 2.70% 12/15/22 384,529 500,000 Intel Corp.......................................... 2.88% 05/11/24 519,687 100,000 Intel Corp.......................................... 2.60% 05/19/26 102,619 300,000 Intel Corp.......................................... 4.10% 05/19/46 346,874 500,000 Intel Corp.......................................... 4.10% 05/11/47 581,932 ------------- 3,051,260 ------------- SOFTWARE - 0.7% 800,000 Microsoft Corp...................................... 2.40% 02/06/22 811,547 150,000 Microsoft Corp...................................... 3.63% 12/15/23 159,780 250,000 Microsoft Corp...................................... 2.88% 02/06/24 259,569 200,000 Microsoft Corp...................................... 3.13% 11/03/25 211,579 100,000 Microsoft Corp...................................... 2.40% 08/08/26 101,264 500,000 Microsoft Corp...................................... 3.30% 02/06/27 534,880 250,000 Microsoft Corp...................................... 4.10% 02/06/37 296,175 275,000 Microsoft Corp...................................... 4.45% 11/03/45 344,832 350,000 Microsoft Corp...................................... 3.70% 08/08/46 396,346 950,000 Microsoft Corp...................................... 4.25% 02/06/47 1,167,294 200,000 Oracle Corp......................................... 1.90% 09/15/21 200,470 100,000 Oracle Corp......................................... 2.50% 05/15/22 101,343 500,000 Oracle Corp......................................... 2.40% 09/15/23 508,659 250,000 Oracle Corp......................................... 3.40% 07/08/24 264,079 350,000 Oracle Corp......................................... 2.65% 07/15/26 358,324 400,000 Oracle Corp......................................... 5.38% 07/15/40 520,779
Page 38 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) SOFTWARE (CONTINUED) $ 350,000 Oracle Corp......................................... 4.00% 07/15/46 $ 390,226 ------------- 6,627,146 ------------- SPECIALTY RETAIL - 0.7% 200,000 Home Depot (The), Inc............................... 2.00% 04/01/21 200,529 770,000 Home Depot (The), Inc............................... 4.40% 04/01/21 791,342 500,000 Home Depot (The), Inc............................... 3.25% 03/01/22 516,900 550,000 Home Depot (The), Inc............................... 3.00% 04/01/26 576,128 1,000,000 Home Depot (The), Inc............................... 2.80% 09/14/27 1,041,116 500,000 Home Depot (The), Inc............................... 3.90% 12/06/28 561,981 500,000 Home Depot (The), Inc............................... 4.25% 04/01/46 590,499 500,000 Home Depot (The), Inc............................... 3.90% 06/15/47 566,745 500,000 Home Depot (The), Inc............................... 4.50% 12/06/48 618,520 250,000 Home Depot (The), Inc............................... 3.50% 09/15/56 260,840 500,000 Lowe's Cos., Inc.................................... 3.65% 04/05/29 535,214 500,000 Lowe's Cos., Inc.................................... 4.55% 04/05/49 591,296 ------------- 6,851,110 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 0.7% 450,000 Apple, Inc.......................................... 2.85% 05/06/21 457,053 250,000 Apple, Inc.......................................... 1.55% 08/04/21 249,126 500,000 Apple, Inc.......................................... 1.70% 09/11/22 499,844 250,000 Apple, Inc.......................................... 2.40% 01/13/23 254,304 375,000 Apple, Inc.......................................... 2.40% 05/03/23 381,637 250,000 Apple, Inc.......................................... 3.00% 02/09/24 259,793 500,000 Apple, Inc.......................................... 2.85% 05/11/24 517,536 500,000 Apple, Inc.......................................... 1.80% 09/11/24 497,235 500,000 Apple, Inc.......................................... 2.75% 01/13/25 517,002 100,000 Apple, Inc.......................................... 2.45% 08/04/26 101,508 250,000 Apple, Inc.......................................... 3.35% 02/09/27 266,509 500,000 Apple, Inc.......................................... 3.20% 05/11/27 528,042 250,000 Apple, Inc.......................................... 2.90% 09/12/27 260,503 500,000 Apple, Inc.......................................... 3.00% 11/13/27 525,002 600,000 Apple, Inc.......................................... 4.25% 02/09/47 719,453 250,000 Apple, Inc.......................................... 3.75% 09/12/47 278,918 250,000 Apple, Inc.......................................... 3.75% 11/13/47 278,081 500,000 Hewlett Packard Enterprise Co....................... 3.50% 10/05/21 512,715 ------------- 7,104,261 ------------- TOBACCO - 0.3% 250,000 Altria Group, Inc................................... 3.49% 02/14/22 257,386 250,000 Altria Group, Inc................................... 3.80% 02/14/24 263,429 250,000 Altria Group, Inc................................... 4.80% 02/14/29 278,890 250,000 Altria Group, Inc................................... 5.95% 02/14/49 303,550 250,000 BAT Capital Corp.................................... 3.22% 08/15/24 255,883 250,000 BAT Capital Corp.................................... 2.79% 09/06/24 251,493 250,000 BAT Capital Corp.................................... 3.22% 09/06/26 252,285 250,000 BAT Capital Corp.................................... 3.56% 08/15/27 255,479 250,000 BAT Capital Corp.................................... 4.39% 08/15/37 253,606 250,000 BAT Capital Corp.................................... 4.76% 09/06/49 259,520 ------------- 2,631,521 -------------
See Notes to Financial Statements Page 39 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- CORPORATE BONDS AND NOTES (CONTINUED) WATER UTILITIES - 0.1% $ 250,000 American Water Capital Corp......................... 3.45% 06/01/29 $ 264,687 250,000 American Water Capital Corp......................... 4.15% 06/01/49 283,656 ------------- 548,343 ------------- WIRELESS TELECOMMUNICATION SERVICES - 0.0% 250,000 American Tower Corp................................. 2.75% 01/15/27 250,125 250,000 American Tower Corp................................. 3.70% 10/15/49 250,285 ------------- 500,410 ------------- TOTAL CORPORATE BONDS AND NOTES.............................................. 350,801,250 (Cost $329,580,120) ------------- FOREIGN CORPORATE BONDS AND NOTES - 3.6% BANKS - 1.5% 500,000 Australia & New Zealand Banking Group (New York, NY) Ltd.............................................. 2.05% 11/21/22 501,988 400,000 Banco Santander S.A................................. 2.71% 06/27/24 405,952 400,000 Banco Santander S.A................................. 3.31% 06/27/29 412,758 500,000 Bank of Montreal.................................... 2.90% 03/26/22 509,952 1,000,000 Bank of Montreal.................................... 2.05% 11/01/22 1,004,510 500,000 Bank of Montreal.................................... 3.30% 02/05/24 521,520 500,000 Bank of Nova Scotia (The)........................... 2.00% 11/15/22 501,016 500,000 Bank of Nova Scotia (The)........................... 2.70% 08/03/26 509,374 250,000 BPCE S.A. (b)....................................... 2.70% 10/01/29 248,497 250,000 Cooperatieve Rabobank U.A. (b)...................... 3.88% 09/26/23 264,509 500,000 Cooperatieve Rabobank U.A. (b)...................... 2.63% 07/22/24 506,266 475,000 HSBC Holdings PLC................................... 2.65% 01/05/22 480,390 200,000 HSBC Holdings PLC (a)............................... 3.26% 03/13/23 204,659 500,000 HSBC Holdings PLC (a)............................... 3.95% 05/18/24 526,338 200,000 HSBC Holdings PLC (a)............................... 3.80% 03/11/25 210,071 1,000,000 HSBC Holdings PLC (a)............................... 2.63% 11/07/25 1,004,670 625,000 HSBC Holdings PLC................................... 3.90% 05/25/26 667,231 350,000 HSBC Holdings PLC................................... 4.38% 11/23/26 378,855 200,000 HSBC Holdings PLC (a)............................... 4.04% 03/13/28 214,154 500,000 HSBC Holdings PLC (a)............................... 4.58% 06/19/29 559,537 250,000 HSBC Holdings PLC (a)............................... 3.97% 05/22/30 269,804 1,000,000 Royal Bank of Canada................................ 2.80% 04/29/22 1,020,920 500,000 Royal Bank of Canada................................ 3.70% 10/05/23 528,931 1,000,000 Royal Bank of Canada................................ 2.25% 11/01/24 1,004,931 500,000 Skandinaviska Enskilda Banken A.B. (b).............. 2.20% 12/12/22 501,317 500,000 Sumitomo Mitsui Financial Group, Inc................ 2.70% 07/16/24 507,512 200,000 Sumitomo Mitsui Financial Group, Inc................ 2.45% 09/27/24 200,645 500,000 Sumitomo Mitsui Financial Group, Inc................ 3.04% 07/16/29 510,870 250,000 Sumitomo Mitsui Financial Group, Inc................ 2.72% 09/27/29 249,926 ------------- 14,427,103 ------------- CAPITAL MARKETS - 0.2% 500,000 Credit Suisse (New York, NY) A.G.................... 2.10% 11/12/21 502,503 500,000 Credit Suisse Group AG (b).......................... 3.57% 01/09/23 513,985 500,000 Credit Suisse Group AG (a) (b)...................... 3.87% 01/12/29 533,211 ------------- 1,549,699 -------------
Page 40 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) COMMERCIAL SERVICES & SUPPLIES - 0.1% $ 500,000 Waste Connections, Inc.............................. 3.50% 05/01/29 $ 530,232 ------------- DIVERSIFIED FINANCIAL SERVICES - 0.5% 500,000 Banque Federative du Credit Mutuel S.A. (b)......... 2.13% 11/21/22 500,913 250,000 Credit Agricole (London) S.A. (b)................... 2.38% 01/22/25 249,939 444,000 GE Capital International Funding Co. Unlimited Co... 4.42% 11/15/35 475,756 500,000 LeasePlan Corp. N.V. (b)............................ 2.88% 10/24/24 500,388 500,000 Shell International Finance, B.V.................... 3.50% 11/13/23 527,213 500,000 Shell International Finance, B.V.................... 2.00% 11/07/24 499,027 500,000 Shell International Finance, B.V.................... 2.38% 11/07/29 496,599 250,000 Shell International Finance, B.V.................... 4.00% 05/10/46 285,336 250,000 Shell International Finance, B.V.................... 3.75% 09/12/46 275,361 1,000,000 Shell International Finance, B.V.................... 3.13% 11/07/49 990,649 ------------- 4,801,181 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 500,000 British Telecommunications PLC (b).................. 3.25% 11/08/29 500,678 250,000 Telefonica Emisiones S.A............................ 5.52% 03/01/49 314,117 ------------- 814,795 ------------- FOOD PRODUCTS - 0.0% 500,000 Mondelez International Holdings Netherlands, B.V. (b)......................................... 2.13% 09/19/22 500,435 ------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 250,000 DH Europe Finance II Sarl........................... 2.05% 11/15/22 250,447 250,000 DH Europe Finance II Sarl........................... 2.20% 11/15/24 250,620 250,000 DH Europe Finance II Sarl........................... 2.60% 11/15/29 249,633 250,000 DH Europe Finance II Sarl........................... 3.25% 11/15/39 253,062 250,000 DH Europe Finance II Sarl........................... 3.40% 11/15/49 255,911 ------------- 1,259,673 ------------- METALS & MINING - 0.1% 250,000 Anglo American Capital PLC (b)...................... 3.63% 09/11/24 259,529 250,000 Anglo American Capital PLC (b)...................... 4.00% 09/11/27 262,212 250,000 Anglo American Capital PLC (b)...................... 4.50% 03/15/28 268,167 330,000 BHP Billiton Finance USA, Ltd....................... 5.00% 09/30/43 423,175 ------------- 1,213,083 ------------- OIL, GAS & CONSUMABLE FUELS - 0.5% 500,000 Canadian Natural Resources, Ltd..................... 3.85% 06/01/27 532,966 250,000 Enbridge, Inc....................................... 3.13% 11/15/29 253,632 500,000 Eni S.p.A. (b)...................................... 4.75% 09/12/28 566,568 500,000 Total Capital International S.A..................... 2.43% 01/10/25 506,693 250,000 Total Capital International S.A..................... 2.83% 01/10/30 257,321 500,000 Total Capital International S.A..................... 3.46% 07/12/49 527,544 500,000 Total Capital S.A................................... 3.88% 10/11/28 560,462 500,000 TransCanada PipeLines, Ltd.......................... 4.25% 05/15/28 555,840 500,000 TransCanada PipeLines, Ltd.......................... 5.10% 03/15/49 611,150 ------------- 4,372,176 ------------- PHARMACEUTICALS - 0.2% 500,000 GlaxoSmithKline Capital PLC......................... 2.88% 06/01/22 511,068 500,000 Takeda Pharmaceutical Co. Ltd....................... 4.00% 11/26/21 517,301 250,000 Takeda Pharmaceutical Co. Ltd....................... 4.40% 11/26/23 268,636
See Notes to Financial Statements Page 41 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) PHARMACEUTICALS (CONTINUED) $ 250,000 Takeda Pharmaceutical Co. Ltd....................... 5.00% 11/26/28 $ 291,492 ------------- 1,588,497 ------------- PROFESSIONAL SERVICES - 0.0% 250,000 IHS Markit Ltd...................................... 4.25% 05/01/29 269,718 ------------- TOBACCO - 0.1% 500,000 Imperial Brands Finance PLC (b)..................... 3.13% 07/26/24 505,528 250,000 Imperial Brands Finance PLC (b)..................... 3.50% 07/26/26 251,819 ------------- 757,347 ------------- WIRELESS TELECOMMUNICATION SERVICES - 0.2% 250,000 Rogers Communications, Inc.......................... 3.70% 11/15/49 253,507 250,000 Vodafone Group PLC.................................. 4.38% 05/30/28 277,416 500,000 Vodafone Group PLC.................................. 4.88% 06/19/49 582,260 500,000 Vodafone Group PLC.................................. 4.25% 09/17/50 524,175 500,000 Vodafone Group PLC.................................. 5.13% 06/19/59 590,571 ------------- 2,227,929 ------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................... 34,311,868 (Cost $32,808,177) ------------- U.S. GOVERNMENT BONDS AND NOTES - 1.8% 800,000 U.S. Treasury Note (c).............................. 2.88% 10/31/20 808,031 20,000 U.S. Treasury Note.................................. 1.50% 10/31/21 19,976 310,000 U.S. Treasury Note.................................. 1.50% 11/30/21 309,631 3,575,000 U.S. Treasury Note.................................. 1.50% 08/15/22 3,567,808 4,225,000 U.S. Treasury Note.................................. 1.50% 09/15/22 4,215,923 115,000 U.S. Treasury Note.................................. 1.38% 10/15/22 114,317 1,050,000 U.S. Treasury Note.................................. 1.63% 12/15/22 1,051,107 359,000 U.S. Treasury Note.................................. 1.50% 10/31/24 356,069 3,135,000 U.S. Treasury Note.................................. 1.75% 11/15/29 3,090,608 3,410,000 U.S. Treasury Note.................................. 2.25% 08/15/49 3,318,423 ------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 16,851,893 (Cost $16,935,266) -------------
ANNUALIZED YIELD ON PRINCIPAL DATE OF STATED VALUE DESCRIPTION PURCHASE MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- COMMERCIAL PAPER - 0.6% ELECTRIC UTILITIES - 0.5% 250,000 Alliant Energy Corp................................. 2.00% 01/02/20 249,976 4,500,000 Florida Power & Light Co............................ 1.48% 01/02/20 4,499,606 ------------- 4,749,582 ------------- OIL, GAS & CONSUMABLE FUELS - 0.1% 550,000 Kinder Morgan (DE), Inc............................. 1.45% 01/02/20 549,919 ------------- TOTAL COMMERCIAL PAPER....................................................... 5,299,501 (Cost $5,299,779) -------------
Page 42 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
DESCRIPTION VALUE ----------------------------------------------------------------------------- ------------- TOTAL INVESTMENTS - 99.3%.................................................... $ 955,318,776 (Cost $851,093,821) (d) NET OTHER ASSETS AND LIABILITIES - 0.7%...................................... 7,209,420 ------------- NET ASSETS - 100.0%.......................................................... $ 962,528,196 =============
FUTURES CONTRACTS (See Note 2E - Futures Contracts in the Notes to Financial Statements):
UNREALIZED APPRECIATION NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/ FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE -------------------------------------- ---------- --------- ---------- ------------- --------------- U.S. Treasury Ultra 10-Year Notes Short 86 Mar 2020 $ (12,100,469) $ 149,827
----------------------------- (a) Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at December 31, 2019. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. (b) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the "Advisor"). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At December 31, 2019, securities noted as such amounted to $27,885,737 or 2.9% of net assets. (c) All or a portion of this security is segregated as collateral for open futures contracts. (d) Aggregate cost for federal income tax purposes was $851,488,574. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $110,958,126 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $6,978,097. The net unrealized appreciation was $103,980,029. The amounts presented are inclusive of derivative contracts. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2019 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Common Stocks*.................................... $548,054,264 $548,054,264 $ -- $ -- Corporate Bonds and Notes*........................ 350,801,250 -- 350,801,250 -- Foreign Corporate Bonds and Notes*................ 34,311,868 -- 34,311,868 -- U.S. Government Bonds and Notes................... 16,851,893 -- 16,851,893 -- Commercial Paper*................................. 5,299,501 -- 5,299,501 -- ------------ ------------ ------------ ------------ Total Investments................................. 955,318,776 548,054,264 407,264,512 -- Futures Contracts**............................... 149,827 149,827 -- -- ------------ ------------ ------------ ------------ Total............................................. $955,468,603 $548,204,091 $407,264,512 $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. ** Includes cumulative appreciation (depreciation) on futures contracts as reported in the Futures Contracts table. The current day's variation margin is presented on the Statements of Assets and Liabilities. See Notes to Financial Statements Page 43 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- EXCHANGE-TRADED FUNDS -- 44.2% CAPITAL MARKETS -- 44.2% 30,550 First Trust Institutional Preferred Securities and Income ETF (a)............ $ 612,833 500 First Trust Long Duration Opportunities ETF (a).............................. 13,550 2,000 First Trust Low Duration Opportunities ETF (a)............................... 103,600 91,140 First Trust Preferred Securities and Income ETF (a).......................... 1,829,180 89,010 First Trust Senior Loan Fund (a)............................................. 4,265,359 56,320 First Trust Tactical High Yield ETF (a)...................................... 2,747,853 16,552 Invesco Bulletshares 2020 Corporate Bond ETF................................. 352,392 175 iShares 20+ Year Treasury Bond ETF........................................... 23,709 550 iShares 3-7 Year Treasury Bond ETF........................................... 69,163 525 iShares 7-10 Year Treasury Bond ETF.......................................... 57,865 18,908 iShares iBoxx $ Investment Grade Corporate Bond ETF.......................... 2,419,468 11,750 iShares MBS ETF.............................................................. 1,269,705 1 Vanguard Mortgage-Backed Securities ETF...................................... 53 ------------- TOTAL EXCHANGE-TRADED FUNDS.................................................. 13,764,730 (Cost $13,351,587) ------------- COMMON STOCKS -- 22.1% AEROSPACE & DEFENSE -- 0.7% 290 Lockheed Martin Corp......................................................... 112,920 398 Raytheon Co.................................................................. 87,457 ------------- 200,377 ------------- AIR FREIGHT & LOGISTICS -- 0.3% 776 United Parcel Service, Inc., Class B......................................... 90,839 ------------- BANKS -- 1.4% 1,151 JPMorgan Chase & Co.......................................................... 160,449 521 M&T Bank Corp................................................................ 88,440 1,585 U.S. Bancorp................................................................. 93,975 1,851 Webster Financial Corp....................................................... 98,769 ------------- 441,633 ------------- BEVERAGES -- 0.3% 737 PepsiCo, Inc................................................................. 100,726 ------------- BIOTECHNOLOGY -- 0.2% 721 AbbVie, Inc.................................................................. 63,837 ------------- CAPITAL MARKETS -- 0.2% 150 BlackRock, Inc............................................................... 75,405 ------------- CHEMICALS -- 0.5% 415 Ecolab, Inc.................................................................. 80,091 726 LyondellBasell Industries N.V., Class A...................................... 68,592 ------------- 148,683 ------------- COMMUNICATIONS EQUIPMENT -- 0.3% 2,157 Cisco Systems, Inc........................................................... 103,450 ------------- CONSUMER FINANCE -- 0.3% 1,005 Capital One Financial Corp................................................... 103,424 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4% 2,000 Verizon Communications, Inc.................................................. 122,800 -------------
Page 44 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) ELECTRIC UTILITIES -- 2.2% 380 Alliant Energy Corp.......................................................... $ 20,794 437 American Electric Power Co., Inc............................................. 41,301 456 Emera, Inc. (CAD)............................................................ 19,591 480 Eversource Energy............................................................ 40,834 1,797 Exelon Corp.................................................................. 81,925 1,422 Fortis, Inc. (CAD)........................................................... 59,002 572 NextEra Energy, Inc.......................................................... 138,515 3,125 OGE Energy Corp.............................................................. 138,969 1,952 PPL Corp..................................................................... 70,038 947 Xcel Energy, Inc............................................................. 60,125 ------------- 671,094 ------------- ELECTRICAL EQUIPMENT -- 0.3% 1,043 Eaton Corp. PLC.............................................................. 98,793 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.7% 786 CDW Corp..................................................................... 112,272 1,140 TE Connectivity Ltd.......................................................... 109,258 ------------- 221,530 ------------- FOOD & STAPLES RETAILING -- 0.8% 1,417 Sysco Corp................................................................... 121,210 1,011 Walmart, Inc................................................................. 120,147 ------------- 241,357 ------------- GAS UTILITIES -- 0.1% 180 Atmos Energy Corp............................................................ 20,135 453 New Jersey Resources Corp.................................................... 20,190 ------------- 40,325 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.1% 1,360 Abbott Laboratories.......................................................... 118,130 1,970 Koninklijke Philips N.V...................................................... 96,136 896 STERIS PLC................................................................... 136,568 ------------- 350,834 ------------- HEALTH CARE PROVIDERS & SERVICES -- 0.6% 1,376 CVS Health Corp.............................................................. 102,223 313 UnitedHealth Group, Inc...................................................... 92,016 ------------- 194,239 ------------- INDUSTRIAL CONGLOMERATES -- 0.3% 489 Honeywell International, Inc................................................. 86,553 ------------- INTERNET & DIRECT MARKETING RETAIL -- 0.2% 437 Expedia Group, Inc........................................................... 47,257 ------------- IT SERVICES -- 0.9% 676 Accenture PLC, Class A....................................................... 142,345 940 Fidelity National Information Services, Inc.................................. 130,745 ------------- 273,090 ------------- MACHINERY -- 0.7% 861 Ingersoll-Rand PLC........................................................... 114,444 432 Parker-Hannifin Corp......................................................... 88,914 ------------- 203,358 -------------
See Notes to Financial Statements Page 45 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- COMMON STOCKS (CONTINUED) MEDIA -- 0.3% 2,399 Viacomcbs, Inc., Class B..................................................... $ 100,686 ------------- MULTILINE RETAIL -- 0.4% 1,022 Target Corp.................................................................. 131,031 ------------- MULTI-UTILITIES -- 0.9% 548 ATCO Ltd., Class I (CAD)..................................................... 21,003 3,562 Public Service Enterprise Group, Inc......................................... 210,336 139 Sempra Energy................................................................ 21,056 215 WEC Energy Group, Inc........................................................ 19,830 ------------- 272,225 ------------- OIL, GAS & CONSUMABLE FUELS -- 3.9% 581 Chevron Corp................................................................. 70,016 1,170 ConocoPhillips............................................................... 76,085 3,495 Enbridge, Inc................................................................ 138,996 5,849 Equitrans Midstream Corp..................................................... 78,143 9,944 Kinder Morgan, Inc........................................................... 210,515 1,112 ONEOK, Inc................................................................... 84,145 5,540 TC Energy Corp............................................................... 295,338 1,301 TOTAL S.A., ADR.............................................................. 71,945 8,524 Williams (The) Cos., Inc..................................................... 202,189 ------------- 1,227,372 ------------- PERSONAL PRODUCTS -- 0.3% 1,592 Unilever PLC, ADR............................................................ 91,015 ------------- PHARMACEUTICALS -- 1.2% 1,981 Bristol-Myers Squibb Co...................................................... 127,160 874 Eli Lilly & Co............................................................... 114,870 1,368 Merck & Co., Inc............................................................. 124,420 ------------- 366,450 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.5% 292 Broadcom, Inc................................................................ 92,278 431 KLA Corp..................................................................... 76,791 ------------- 169,069 ------------- SOFTWARE -- 0.5% 966 Microsoft Corp............................................................... 152,338 ------------- SPECIALTY RETAIL -- 0.7% 499 Home Depot (The), Inc........................................................ 108,971 1,761 TJX (The) Cos., Inc.......................................................... 107,527 ------------- 216,498 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 539 Apple, Inc................................................................... 158,277 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.4% 1,145 NIKE, Inc., Class B.......................................................... 116,000 ------------- TOTAL COMMON STOCKS.......................................................... 6,880,565 (Cost $5,598,635) -------------
Page 46 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT BONDS AND NOTES -- 9.8% $ 52,736 U.S. Treasury Inflation Indexed Bond (b)............ 2.50% 01/15/29 $ 63,579 26,610 U.S. Treasury Inflation Indexed Bond (b)............ 3.88% 04/15/29 35,441 13,193 U.S. Treasury Inflation Indexed Bond (b)............ 3.38% 04/15/32 18,121 36,907 U.S. Treasury Inflation Indexed Bond (b)............ 2.13% 02/15/40 48,272 58,518 U.S. Treasury Inflation Indexed Bond (b)............ 2.13% 02/15/41 77,130 56,713 U.S. Treasury Inflation Indexed Bond (b)............ 0.75% 02/15/42 58,950 53,276 U.S. Treasury Inflation Indexed Bond (b)............ 0.63% 02/15/43 53,924 52,777 U.S. Treasury Inflation Indexed Bond (b)............ 1.38% 02/15/44 62,290 52,781 U.S. Treasury Inflation Indexed Bond (b)............ 0.75% 02/15/45 54,785 45,613 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/46 50,206 43,706 U.S. Treasury Inflation Indexed Bond (b)............ 0.88% 02/15/47 46,879 41,740 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/48 46,231 32,724 U.S. Treasury Inflation Indexed Bond (b)............ 1.00% 02/15/49 36,398 79,050 U.S. Treasury Inflation Indexed Note (b)............ 1.13% 01/15/21 79,791 109,660 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 04/15/21 109,447 89,055 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 07/15/21 90,065 98,799 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 01/15/22 98,762 98,404 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 04/15/22 98,275 97,352 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/22 97,776 94,761 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 01/15/23 94,769 102,561 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 04/15/23 104,169 95,095 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/23 96,428 95,947 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 01/15/24 98,000 68,359 U.S. Treasury Inflation Indexed Note (b)............ 0.50% 04/15/24 69,481 92,334 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/24 92,906 39,116 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 10/15/24 39,351 130,373 U.S. Treasury Inflation Indexed Note (b)............ 0.25% 01/15/25 131,565 44,367 U.S. Treasury Inflation Indexed Note (b)............ 2.38% 01/15/25 49,459 95,490 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/25 97,462 115,878 U.S. Treasury Inflation Indexed Note (b)............ 0.63% 01/15/26 119,464 38,247 U.S. Treasury Inflation Indexed Note (b)............ 2.00% 01/15/26 42,526 81,588 U.S. Treasury Inflation Indexed Note (b)............ 0.13% 07/15/26 81,872 102,267 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 01/15/27 103,936 28,710 U.S. Treasury Inflation Indexed Note (b)............ 2.38% 01/15/27 33,148 82,052 U.S. Treasury Inflation Indexed Note (b)............ 0.38% 07/15/27 83,726 119,970 U.S. Treasury Inflation Indexed Note (b)............ 0.50% 01/15/28 123,116 62,644 U.S. Treasury Inflation Indexed Note (b)............ 1.75% 01/15/28 70,398 89,187 U.S. Treasury Inflation Indexed Note (b)............ 0.75% 07/15/28 93,863 103,949 U.S. Treasury Inflation Indexed Note (b)............ 0.88% 01/15/29 110,427 83,497 U.S. Treasury Inflation Indexed Note (b)............ 0.25% 07/15/29 84,344 ------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................ 3,046,732 (Cost $2,954,356) -------------
See Notes to Financial Statements Page 47 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- REAL ESTATE INVESTMENT TRUSTS -- 9.6% DIVERSIFIED REITS -- 1.1% 705 PS Business Parks, Inc....................................................... $ 116,233 2,940 STORE Capital Corp........................................................... 109,486 12,248 VEREIT, Inc.................................................................. 113,172 ------------- 338,891 ------------- HEALTH CARE REITS -- 1.6% 5,949 Medical Properties Trust, Inc................................................ 125,583 2,789 Omega Healthcare Investors, Inc.............................................. 118,114 6,567 Physicians Realty Trust...................................................... 124,379 1,475 Welltower, Inc............................................................... 120,626 ------------- 488,702 ------------- HOTEL & RESORT REITS -- 0.4% 6,831 Host Hotels & Resorts, Inc................................................... 126,715 ------------- INDUSTRIAL REITS -- 1.2% 3,432 Duke Realty Corp............................................................. 118,988 1,302 Prologis, Inc................................................................ 116,060 3,954 STAG Industrial, Inc......................................................... 124,828 ------------- 359,876 ------------- OFFICE REITS -- 0.8% 758 Alexandria Real Estate Equities, Inc......................................... 122,478 2,594 Highwoods Properties, Inc.................................................... 126,872 ------------- 249,350 ------------- RESIDENTIAL REITS -- 1.1% 1,050 Camden Property Trust........................................................ 111,405 393 Essex Property Trust, Inc.................................................... 118,238 897 Mid-America Apartment Communities, Inc....................................... 118,278 ------------- 347,921 ------------- RETAIL REITS -- 1.5% 2,207 National Retail Properties, Inc.............................................. 118,339 1,520 Realty Income Corp........................................................... 111,917 8,624 Retail Properties of America, Inc., Class A.................................. 115,562 808 Simon Property Group, Inc.................................................... 120,360 ------------- 466,178 ------------- SPECIALIZED REITS -- 1.9% 547 American Tower Corp.......................................................... 125,712 991 Digital Realty Trust, Inc.................................................... 118,662 1,595 EPR Properties............................................................... 112,671 212 Equinix, Inc................................................................. 123,744 2,802 Gaming and Leisure Properties, Inc........................................... 120,626 ------------- 601,415 ------------- TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................... 2,979,048 (Cost $2,657,367) -------------
Page 48 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
UNITS DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- MASTER LIMITED PARTNERSHIPS -- 7.6% CHEMICALS -- 0.3% 3,527 Westlake Chemical Partners, L.P.............................................. $ 93,183 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.5% 3,103 NextEra Energy Partners, L.P................................................. 163,373 ------------- OIL, GAS & CONSUMABLE FUELS -- 6.8% 3,609 Alliance Resource Partners, L.P.............................................. 39,050 2,807 BP Midstream Partners, L.P................................................... 43,817 17,875 Energy Transfer, L.P......................................................... 229,336 18,908 Enterprise Products Partners, L.P............................................ 532,449 6,290 Holly Energy Partners, L.P................................................... 139,324 4,930 Magellan Midstream Partners, L.P............................................. 309,949 2,467 MPLX, L.P.................................................................... 62,810 3,728 Phillips 66 Partners, L.P.................................................... 229,794 9,983 Plains All American Pipeline, L.P............................................ 183,587 5,011 Shell Midstream Partners, L.P................................................ 101,272 5,896 TC PipeLines, L.P............................................................ 249,401 ------------- 2,120,789 ------------- TOTAL MASTER LIMITED PARTNERSHIPS............................................ 2,377,345 (Cost $2,171,708) -------------
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.3% COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.5% Fannie Mae REMICS $ 203 Series 1990-109, Class J......................... 7.00% 09/25/20 204 228 Series 1992-24, Class Z.......................... 6.50% 04/25/22 234 5 Series 1992-44, Class ZQ......................... 8.00% 07/25/22 6 923 Series 1993-1, Class KA.......................... 7.90% 01/25/23 979 719 Series 1993-62, Class E.......................... 7.00% 04/25/23 760 232 Series 1993-119, Class H......................... 6.50% 07/25/23 245 1,766 Series 1993-178, Class PK........................ 6.50% 09/25/23 1,874 1,571 Series 1995-24, Class G.......................... 6.50% 04/25/23 1,642 1,383 Series 1999-56, Class Z.......................... 7.00% 12/18/29 1,536 27,205 Series 2002-9, Class MS, IO, 1 Mo. LIBOR (x) -1 + 8.10% (c)..................................... 6.31% 03/25/32 5,317 1,200 Series 2002-67, Class PE......................... 5.50% 11/25/32 1,343 3,912 Series 2002-90, Class A1......................... 6.50% 06/25/42 4,478 2,595 Series 2003-14, Class AQ......................... 3.50% 03/25/33 2,665 3,997 Series 2003-41, Class OA......................... 4.00% 05/25/33 4,121 36,351 Series 2004-10, Class ZB......................... 6.00% 02/25/34 40,792 1 Series 2005-46, Class LW......................... 5.00% 06/25/20 1 5,669 Series 2005-68, Class BC......................... 5.25% 06/25/35 5,677 13,317 Series 2005-79, Class NF, 1 Mo. LIBOR + 0.41% (d)..................................... 2.20% 09/25/35 13,301 27,055 Series 2007-10, Class Z.......................... 6.00% 02/25/37 30,387 51,348 Series 2009-86, Class IP, IO..................... 5.50% 10/25/39 9,070 51,000 Series 2010-45, Class EB......................... 5.00% 05/25/40 61,527 2,015 Series 2012-35, Class PL......................... 2.00% 11/25/41 2,000 735 Series 2013-14, Class QE......................... 1.75% 03/25/43 717 84,053 Series 2013-31, Class NT......................... 3.00% 04/25/43 84,825
See Notes to Financial Statements Page 49 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Fannie Mae REMIC Trust $ 11,445 Series 2007-W8, Class 1A5 (e).................... 6.38% 09/25/37 $ 13,145 Fannie Mae Trust 4,053 Series 2004-W8, Class 3A......................... 7.50% 06/25/44 4,719 FHLMC - GNMA 179 Series 1993-5, Class HA.......................... 7.50% 02/25/23 187 511 Series 1994-27, Class D.......................... 7.00% 03/25/24 547 Freddie Mac REMICS 263 Series 1992-1250, Class J........................ 7.00% 05/15/22 273 8,208 Series 1992-1401, Class Q, 1 Mo. LIBOR + 0.60% (d)..................................... 2.34% 10/15/22 8,247 14,301 Series 1993-1487, Class P, IO, 1 Mo. LIBOR (x) -1 + 9.50% (c)................................ 7.76% 03/15/23 1,227 2,810 Series 1994-1673, Class FB, 10 Yr. U.S. Treasury Yield Curve - 0.50% (d)....................... 1.27% 02/15/24 2,810 58 Series 1996-1807, Class G........................ 9.00% 10/15/20 59 49 Series 1996-1847, Class LL....................... 7.50% 04/15/26 55 10,138 Series 1998-2033, Class IA, IO................... 7.00% 02/15/28 1,170 2,631 Series 1999-2130, Class KB....................... 6.38% 03/15/29 2,929 36,940 Series 1999-2174, Class PN....................... 6.00% 07/15/29 40,538 9,270 Series 2001-2277, Class B........................ 7.50% 01/15/31 11,035 36 Series 2003-2559, Class PB....................... 5.50% 08/15/30 36 26,725 Series 2003-2647, Class LS, 1 Mo. LIBOR (x) -2.50 + 14.00% (c)............................ 9.77% 07/15/33 32,195 42,000 Series 2003-2676, Class LL....................... 5.50% 09/15/33 46,347 23,340 Series 2004-2768, Class PW....................... 4.25% 03/15/34 25,101 5,000 Series 2004-2778, Class MM....................... 5.25% 04/15/34 5,591 26,554 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 + 6.60% (c)................................ 4.86% 02/15/36 4,396 34,939 Series 2006-3199, Class DS, IO, 1 Mo. LIBOR (x) -1 + 7.15% (c)................................ 5.41% 08/15/36 6,490 27,928 Series 2006-3237, Class CB....................... 5.50% 07/15/36 28,927 11,000 Series 2010-3626, Class ME....................... 5.00% 01/15/40 12,562 6,175 Series 2010-3758, Class M........................ 4.50% 10/15/38 6,249 7,162 Series 2010-3775, Class KZ....................... 4.00% 08/15/25 7,495 3,276 Series 2012-3994, Class AE....................... 1.63% 02/15/22 3,269 21,523 Series 2013-4178, Class ZN....................... 3.50% 03/15/43 21,659 373 Series 2013-4253, Class TD....................... 2.00% 07/15/40 373 Freddie Mac Strips 9,809 Series 1994-169, Class IO, IO.................... 8.50% 03/01/23 805 Government National Mortgage Association 28,368 Series 2002-92, Class PB......................... 5.50% 12/20/32 30,524 6,918 Series 2006-16, Class OP, PO..................... (f) 03/20/36 6,270 55,000 Series 2007-35, Class NE......................... 6.00% 06/16/37 63,827 4,559 Series 2009-29, Class TA......................... 4.50% 03/16/39 4,719 49,000 Series 2009-61, Class QE......................... 5.50% 08/20/39 58,526 120 Series 2009-81, Class PA......................... 5.50% 02/16/38 120 1,427 Series 2009-102, Class MA........................ 4.00% 06/16/39 1,438 502 Series 2010-121, Class PQ........................ 3.00% 02/20/39 503 20,632 Series 2010-164, Class LE........................ 3.00% 10/20/38 20,648 19,584 Series 2011-136, Class GB........................ 2.50% 05/20/40 19,664
Page 50 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Government National Mortgage Association (Continued) $ 21,582 Series 2013-20, Class KI, IO..................... 5.00% 01/20/43 $ 3,565 ------------- 771,941 ------------- PASS-THROUGH SECURITIES -- 1.8% Federal Home Loan Mortgage Corporation 14,674 Pool A47829...................................... 4.00% 08/01/35 15,354 6,131 Pool C01252...................................... 6.50% 11/01/31 6,847 44,258 Pool G01731...................................... 6.50% 12/01/29 49,228 27,345 Pool G06358...................................... 4.00% 04/01/41 29,359 2,451 Pool O20138...................................... 5.00% 11/01/30 2,641 16,866 Pool U90316...................................... 4.00% 10/01/42 17,970 Federal National Mortgage Association 15,369 Pool 890383...................................... 4.00% 01/01/42 16,484 20,282 Pool AA9393...................................... 4.50% 07/01/39 22,021 13,738 Pool AD0659...................................... 6.00% 02/01/23 14,157 7,312 Pool AE0050...................................... 5.50% 12/01/22 7,512 23,246 Pool AL0791...................................... 4.00% 02/01/41 24,948 39,904 Pool AU4289...................................... 4.00% 09/01/43 42,695 6,097 Pool MA0561...................................... 4.00% 11/01/40 6,542 28,234 Pool MA1028...................................... 4.00% 04/01/42 30,237 Government National Mortgage Association 8,909 Pool 3428........................................ 5.00% 08/20/33 9,831 19,025 Pool 3500........................................ 5.50% 01/20/34 21,421 6,820 Pool 3711........................................ 5.50% 05/20/35 7,645 24,619 Pool 667422...................................... 5.00% 10/15/39 27,420 10,119 Pool 706201...................................... 5.50% 04/20/39 11,039 12,480 Pool 736558...................................... 5.00% 02/15/40 13,895 23,350 Pool 759248...................................... 4.00% 02/15/41 25,359 87,034 Pool 769055...................................... 3.75% 07/15/41 91,311 47,280 Pool 770005...................................... 4.00% 11/15/33 50,612 14,634 Pool MA3525...................................... 5.50% 03/20/46 16,323 ------------- 560,851 ------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................... 1,332,792 (Cost $1,308,614) ------------- MORTGAGE-BACKED SECURITIES -- 0.0% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0% Credit Suisse First Boston Mortgage Securities Corp. 299 Series 2004-6, Class 2A1......................... 4.75% 09/25/19 0 MASTR Alternative Loan Trust 686 Series 2004-10, Class 2A1........................ 5.50% 01/25/20 684 30 Series 2005-1, Class 5A1......................... 5.50% 01/25/20 30 MASTR Asset Securitization Trust 4,666 Series 2004-1, Class 5A4......................... 5.50% 02/25/34 4,801 Structured Asset Mortgage Investments Trust 6,568 Series 1999-1, Class 2A (g)...................... 6.16% 06/25/29 6,386 ------------- TOTAL MORTGAGE-BACKED SECURITIES............................................. 11,901 (Cost $12,270) -------------
See Notes to Financial Statements Page 51 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ----------- ---------------------------------------------------- --------- ------------ ------------- ASSET-BACKED SECURITIES -- 0.0% ASSET-BACKED SECURITIES -- 0.0% California Republic Auto Receivables Trust $ 5,583 Series 2016-1, Class A4.......................... 2.24% 10/15/21 $ 5,584 ------------- TOTAL ASSET-BACKED SECURITIES................................................ 5,584 (Cost $5,555) ------------- TOTAL INVESTMENTS -- 97.6%................................................... 30,398,697 (Cost $28,060,092) (h) NET OTHER ASSETS AND LIABILITIES -- 2.4%..................................... 763,127 ------------- NET ASSETS -- 100.0%......................................................... $ 31,161,824 =============
----------------------------- (a) Investment in an affiliated fund. (b) Security whose principal value is adjusted in accordance with changes to the country's Consumer Price Index. Interest is calculated on the basis of the current adjusted principal value. (c) Inverse floating rate security. (d) Floating or variable rate security. (e) Weighted Average Coupon security. Coupon is based on the blended interest rate of the underlying holdings, which may have different coupons. The coupon may change in any period. (f) Zero coupon security. (g) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically. (h) Aggregate cost for federal income tax purposes is $28,206,375. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,452,016 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $259,694. The net unrealized appreciation was $2,192,322. ADR American Depositary Receipt CAD Canadian Dollar - Security is denominated in Canadian Dollars and is translated into U.S. Dollars based upon the current exchange rate. IO Interest-Only Security - Principal amount shown represents par value on which interest payments are based. LIBOR London Interbank Offered Rate PO Principal-Only Security Page 52 See Notes to Financial Statements FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2019 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2019 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Exchange-Traded Funds*............................ $ 13,764,730 $ 13,764,730 $ -- $ -- Common Stocks*.................................... 6,880,565 6,880,565 -- -- U.S. Government Bonds and Notes................... 3,046,732 -- 3,046,732 -- Real Estate Investment Trusts*.................... 2,979,048 2,979,048 -- -- Master Limited Partnerships*...................... 2,377,345 2,377,345 -- -- U.S. Government Agency Mortgage-Backed Securities..................................... 1,332,792 -- 1,332,792 -- Mortgage-Backed Securities........................ 11,901 -- 11,901 -- Asset-Backed Securities........................... 5,584 -- 5,584 -- ------------ ------------ ------------ ------------ Total Investments................................. $ 30,398,697 $ 26,001,688 $ 4,397,009 $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 53 FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2019
SHARES DESCRIPTION VALUE ----------- ----------------------------------------------------------------------------- ------------- EXCHANGE-TRADED FUNDS - 98.1% CAPITAL MARKETS - 98.1% 8,495 First Trust BICK Index Fund (a).............................................. $ 248,903 15,578 First Trust Brazil AlphaDEX(R) Fund (a)...................................... 269,032 10,839 First Trust Developed Markets ex-US AlphaDEX(R) Fund (a)..................... 603,136 30,872 First Trust Dow Jones Internet Index Fund (a) (b)............................ 4,294,913 23,150 First Trust Emerging Markets AlphaDEX(R) Fund (a)............................ 614,401 115,181 First Trust Financials AlphaDEX(R) Fund (a).................................. 3,859,715 5,618 First Trust Germany AlphaDEX(R) Fund (a)..................................... 248,597 71,763 First Trust Large Cap Growth AlphaDEX(R) Fund (a)............................ 5,232,958 11,229 First Trust Latin America AlphaDEX(R) Fund (a)............................... 255,572 109,456 First Trust Mid Cap Growth AlphaDEX(R) Fund (a).............................. 5,239,659 52,750 First Trust NASDAQ-100-Technology Sector Index Fund (a)...................... 5,280,275 101,876 First Trust Small Cap Growth AlphaDEX(R) Fund (a)............................ 4,754,553 4,935 First Trust Switzerland AlphaDEX(R) Fund (a)................................. 266,547 67,682 First Trust Technology AlphaDEX(R) Fund (a).................................. 4,911,683 142,781 First Trust Utilities AlphaDEX(R) Fund (a)................................... 4,170,633 26,440 iShares Core U.S. Aggregate Bond ETF......................................... 2,971,063 15,449 SPDR Bloomberg Barclays High Yield Bond ETF.................................. 1,692,283 33,959 SPDR Nuveen Bloomberg Barclays Municipal Bond ETF............................ 1,717,646 48,995 SPDR Portfolio Intermediate Term Corporate Bond ETF.......................... 1,730,013 54,041 SPDR Portfolio Long-Term Corporate Bond ETF.................................. 1,627,175 ------------- TOTAL INVESTMENTS - 98.1%.................................................... 49,988,757 (Cost $44,189,638) (c) ------------- NET OTHER ASSETS AND LIABILITIES - 1.9%...................................... 963,878 ------------- NET ASSETS - 100.0%.......................................................... $ 50,952,635 =============
----------------------------- (a) Investment in an affiliated fund. (b) Non-income producing security. (c) Aggregate cost for federal income tax purposes was $44,196,471. As of December 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $5,816,087 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $23,801. The net unrealized appreciation was $5,792,286. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 12/31/2019 PRICES INPUTS INPUTS ------------ ------------ ------------ ------------ Exchange-Traded Funds*............................ $ 49,988,757 $ 49,988,757 $ -- $ -- ============ ============ ============ ============
* See Portfolio of Investments for industry breakout. Page 54 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2019
FIRST TRUST/DOW JONES DIVIDEND FIRST TRUST FIRST TRUST & INCOME MULTI INCOME DORSEY WRIGHT ALLOCATION ALLOCATION TACTICAL CORE PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- ASSETS: Investments, at value - Unaffiliated.................................... $ 955,318,776 $ 20,826,322 $ 9,738,180 Investments, at value - Affiliated...................................... -- 9,572,375 40,250,577 --------------- --------------- --------------- Total investments, at value............................................. 955,318,776 30,398,697 49,988,757 Cash.................................................................... 4,359,289 809,668 1,045,590 Foreign currency, at value.............................................. -- 145 -- Receivables: Interest............................................................. 3,290,210 13,859 -- Dividends............................................................ 864,727 20,797 -- Investment securities sold........................................... 501,175 -- -- Fund shares sold..................................................... 432,642 22,861 -- Variation margin..................................................... 14,781 -- -- From investment advisor.............................................. -- 6,671 5,071 Reclaim.............................................................. -- 2,573 -- Prepaid expenses........................................................ 9,186 263 415 --------------- --------------- --------------- Total Assets......................................................... 964,790,786 31,275,534 51,039,833 --------------- --------------- --------------- LIABILITIES: Payables: Investment securities purchased...................................... 697,947 12,051 -- Investment advisory fees............................................. 487,175 -- -- Fund shares redeemed................................................. 345,226 700 3,759 12b-1 distribution and service fees.................................. 202,353 6,470 10,676 Administrative service fees.......................................... 162,006 5,201 8,559 Administrative fees.................................................. 93,665 10,099 9,049 Licensing fees....................................................... 76,648 -- 12,481 Shareholder reporting fees........................................... 74,169 6,782 6,477 Custodian fees....................................................... 69,262 4,589 1,945 Audit and tax fees................................................... 28,826 51,705 23,629 Transfer agent fees.................................................. 15,178 13,872 9,145 Legal fees........................................................... 4,530 108 398 Commitment fees...................................................... 4,096 1,729 -- Financial reporting fees............................................. 771 -- 771 Trustees' fees and expenses.......................................... (30) 38 8 Other liabilities....................................................... 768 366 301 --------------- --------------- --------------- Total Liabilities.................................................... 2,262,590 113,710 87,198 --------------- --------------- --------------- NET ASSETS.............................................................. $ 962,528,196 $ 31,161,824 $ 50,952,635 =============== =============== =============== NET ASSETS CONSIST OF: Paid-in capital......................................................... $ 827,754,159 $ 28,551,903 $ 45,528,822 Accumulated distributable earnings (loss)............................... 134,774,037 2,609,921 5,423,813 --------------- --------------- --------------- NET ASSETS.............................................................. $ 962,528,196 $ 31,161,824 $ 50,952,635 =============== =============== =============== Investments, at cost - Unaffiliated..................................... $ 851,093,821 $ 18,702,335 $ 9,326,123 =============== =============== =============== Investments, at cost - Affiliated....................................... $ -- $ 9,357,757 $ 34,863,515 =============== =============== =============== Total Investments, at cost.............................................. $ 851,093,821 $ 28,060,092 $ 44,189,638 =============== =============== =============== Foreign currency, at cost............................................... $ -- $ 145 $ -- =============== =============== =============== CLASS I SHARES: NET ASSETS.............................................................. $ 961,210,130 $ 31,011,709 $ 50,843,466 =============== =============== =============== NET ASSET VALUE, PER SHARE.............................................. $ 14.68 $ 11.55 $ 12.37 =============== =============== =============== Number of Shares outstanding......................................... 65,494,030 2,685,791 4,110,070 =============== =============== =============== CLASS II SHARES: NET ASSETS.............................................................. $ 1,318,066 $ 150,115 $ 109,169 =============== =============== =============== NET ASSET VALUE, PER SHARE.............................................. $ 14.71 $ 11.54 $ 12.37 =============== =============== =============== Number of Shares outstanding......................................... 89,617 13,003 8,826 =============== =============== ===============
See Notes to Financial Statements Page 55 FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2019
FIRST TRUST/DOW JONES DIVIDEND FIRST TRUST FIRST TRUST & INCOME MULTI INCOME DORSEY WRIGHT ALLOCATION ALLOCATION TACTICAL CORE PORTFOLIO PORTFOLIO PORTFOLIO --------------- --------------- --------------- INVESTMENT INCOME: Interest................................................................ $ 12,998,920 $ 113,281 $ 14,555 Dividends - Unaffiliated................................................ 12,128,644 370,273 333,818 Dividends - Affiliated.................................................. -- 438,603 330,022 Foreign withholding tax on dividend income.............................. -- (4,885) -- --------------- --------------- --------------- Total investment income.............................................. 25,127,564 917,272 678,395 --------------- --------------- --------------- EXPENSES: Investment advisory fees................................................ 5,284,013 169,591 170,791 12b-1 distribution and/or service fees: Class I.............................................................. 2,200,992 70,284 121,736 Administrative service fees............................................. 1,761,259 56,307 97,481 Administrative fees..................................................... 530,955 27,621 52,498 Licensing fees.......................................................... 292,736 -- 48,797 Custodian fees.......................................................... 177,422 17,405 7,862 Shareholder reporting fees.............................................. 129,310 20,927 21,708 Transfer agent fees..................................................... 85,993 54,855 54,175 Commitment fees......................................................... 49,083 20,049 -- Legal fees.............................................................. 42,073 1,018 2,039 Audit and tax fees...................................................... 29,207 52,203 24,127 Trustees' fees and expenses............................................. 17,229 16,246 16,244 Financial reporting fees................................................ 9,250 -- 9,250 Other................................................................... 19,097 2,870 767 --------------- --------------- --------------- Total expenses....................................................... 10,628,619 509,376 627,475 Fees waived and expenses reimbursed by the investment advisor........ (75,487) (275,154) (251,423) --------------- --------------- --------------- Net expenses......................................................... 10,553,132 234,222 376,052 --------------- --------------- --------------- NET INVESTMENT INCOME (LOSS)............................................ 14,574,432 683,050 302,343 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments - Unaffiliated........................................... 31,732,605 404,764 (84,148) Investments - Affiliated............................................. -- (9,833) (295,600) Futures.............................................................. (1,817,823) -- -- Foreign currency transactions........................................ -- (6) -- --------------- --------------- --------------- Net realized gain (loss)................................................ 29,914,782 394,925 (379,748) --------------- --------------- --------------- Net change in unrealized appreciation (depreciation) on: Investments - Unaffiliated........................................... 116,334,073 2,404,377 584,616 Investments - Affiliated............................................. -- 654,866 7,975,695 Futures.............................................................. 566,382 -- -- Foreign currency translation......................................... -- 14 -- --------------- --------------- --------------- Net change in unrealized appreciation (depreciation).................... 116,900,455 3,059,257 8,560,311 --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................. 146,815,237 3,454,182 8,180,563 --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................................................... $ 161,389,669 $ 4,137,232 $ 8,482,906 =============== =============== ===============
Page 56 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO -------------------------------- YEAR YEAR ENDED ENDED 12/31/2019 12/31/2018 -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 14,574,432 $ 11,802,416 Net realized gain (loss)............................................................. 29,914,782 33,480,402 Net change in unrealized appreciation (depreciation)................................. 116,900,455 (86,358,578) -------------- -------------- Net increase (decrease) in net assets resulting from operations...................... 161,389,669 (41,075,760) -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS: Class I Shares....................................................................... (47,089,053) (13,489,067) Class II Shares...................................................................... (21,664) (1,119) -------------- -------------- Total distributions to shareholders from investment operations....................... (47,110,717) (13,490,186) -------------- -------------- CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 113,480,580 142,387,501 Proceeds from shares reinvested...................................................... 47,110,027 13,489,949 Cost of shares redeemed ............................................................. (80,001,939) (71,173,469) -------------- -------------- Net increase (decrease) in net assets resulting from capital transactions............ 80,588,668 84,703,981 -------------- -------------- Total increase (decrease) in net assets.............................................. 194,867,620 30,138,035 NET ASSETS: Beginning of period.................................................................. 767,660,576 737,522,541 -------------- -------------- End of period........................................................................ $ 962,528,196 $ 767,660,576 ============== ==============
See Notes to Financial Statements Page 57 FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO -------------------------------- YEAR YEAR ENDED ENDED 12/31/2019 12/31/2018 -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 683,050 $ 495,965 Net realized gain (loss)............................................................. 394,925 36,443 Net change in unrealized appreciation (depreciation)................................. 3,059,257 (1,646,906) -------------- -------------- Net increase (decrease) in net assets resulting from operations...................... 4,137,232 (1,114,498) -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS: Class I Shares....................................................................... (720,385) (516,531) Class II Shares...................................................................... (4,110) (2,977) -------------- -------------- Total distributions to shareholders from investment operations....................... (724,495) (519,508) -------------- -------------- CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 5,725,807 10,062,438 Proceeds from shares reinvested...................................................... 721,392 516,827 Cost of shares redeemed ............................................................. (3,291,316) (4,594,392) -------------- -------------- Net increase (decrease) in net assets resulting from capital transactions............ 3,155,883 5,984,873 -------------- -------------- Total increase (decrease) in net assets.............................................. 6,568,620 4,350,867 NET ASSETS: Beginning of period.................................................................. 24,593,204 20,242,337 -------------- -------------- End of period........................................................................ $ 31,161,824 $ 24,593,204 ============== ==============
Page 58 See Notes to Financial Statements FIRST TRUST VARIABLE INSURANCE TRUST STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO -------------------------------- YEAR YEAR ENDED ENDED 12/31/2019 12/31/2018 -------------- -------------- OPERATIONS: Net investment income (loss)......................................................... $ 302,343 $ 149,095 Net realized gain (loss)............................................................. (379,748) 730,920 Net change in unrealized appreciation (depreciation)................................. 8,560,311 (5,148,691) -------------- -------------- Net increase (decrease) in net assets resulting from operations...................... 8,482,906 (4,268,676) -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM INVESTMENT OPERATIONS: Class I Shares....................................................................... (1,047,809) (155,085) Class II Shares...................................................................... (2,466) (618) -------------- -------------- Total distributions to shareholders from investment operations....................... (1,050,275) (155,703) -------------- -------------- CAPITAL TRANSACTIONS: Proceeds from shares sold............................................................ 11,969,513 24,115,334 Proceeds from shares reinvested...................................................... 1,050,275 155,703 Cost of shares redeemed ............................................................. (7,861,271) (4,021,112) -------------- -------------- Net increase (decrease) in net assets resulting from capital transactions............ 5,158,517 20,249,925 -------------- -------------- Total increase (decrease) in net assets.............................................. 12,591,148 15,825,546 NET ASSETS: Beginning of period.................................................................. 38,361,487 22,535,941 -------------- -------------- End of period........................................................................ $ 50,952,635 $ 38,361,487 ============== ==============
See Notes to Financial Statements Page 59 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 12.82 $ 13.73 $ 12.85 $ 11.94 $ 12.41 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.23 0.21 0.18 0.14 0.16 Net realized and unrealized gain (loss).... 2.39 (0.88) 1.54 1.25 (a) (0.15) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 2.62 (0.67) 1.72 1.39 0.01 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.22) (0.21) (0.18) (0.13) (0.27) Net realized gain.......................... (0.54) (0.03) (0.66) (0.35) (0.21) ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.76) (0.24) (0.84) (0.48) (0.48) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 14.68 $ 12.82 $ 13.73 $ 12.85 $ 11.94 ========== ========== ========== ========== ========== TOTAL RETURN (b) (c)....................... 20.77% (4.92)% 13.47% 11.74% (a) 0.09% ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 961,210 $ 767,616 $ 737,320 $ 543,951 $ 243,244 Ratio of total expenses to average net assets.................................. 1.21% 1.22% 1.23% 1.29% 1.34% Ratio of net expenses to average net assets.................................. 1.20% 1.20% 1.20% 1.20% 1.20% Ratio of net investment income (loss) to average net assets.................... 1.65% 1.56% 1.35% 1.29% 1.35% Portfolio turnover rate.................... 89% 76% 71% 96% 81%
----------------------------- (a) First Trust/Dow Jones Dividend & Income Allocation Portfolio received a reimbursement from the Advisor in the amount of $1,000 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the total return. (b) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (c) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. Page 60 See Notes to Financial Statements FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS II SHARES YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 12.85 $ 13.75 $ 12.87 $ 11.95 $ 12.43 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.28 (a) 0.25 (a) 0.14 0.19 0.17 Net realized and unrealized gain (loss).... 2.38 (0.88) 1.61 1.24 (b) (0.14) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 2.66 (0.63) 1.75 1.43 0.03 ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.26) (0.24) (0.21) (0.16) (0.30) Net realized gain.......................... (0.54) (0.03) (0.66) (0.35) (0.21) ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.80) (0.27) (0.87) (0.51) (0.51) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 14.71 $ 12.85 $ 13.75 $ 12.87 $ 11.95 ========== ========== ========== ========== ========== TOTAL RETURN (c) (d)....................... 21.02% (4.60)% 13.75% 12.07% (b) 0.25% ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 1,318 $ 44 $ 202 $ 17 $ 16 Ratio of total expenses to average net assets.................................. 0.97% 0.97% 1.00% 1.04% 1.09% Ratio of net expenses to average net assets.................................. 0.95% 0.95% 0.95% 0.95% 0.95% Ratio of net investment income (loss) to average net assets.................... 2.00% 1.79% 1.88% 1.53% 1.64% Portfolio turnover rate.................... 89% 76% 71% 96% 81%
----------------------------- (a) Based on average shares outstanding. (b) First Trust/Dow Jones Dividend & Income Allocation Portfolio received a reimbursement from the Advisor in the amount of $1,000 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the total return. (c) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (d) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. See Notes to Financial Statements Page 61 FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 10.17 $ 10.89 $ 10.54 $ 9.86 $ 10.39 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.26 0.23 0.24 0.20 0.19 Net realized and unrealized gain (loss).... 1.40 (0.71) 0.39 0.71 (0.53) (a) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 1.66 (0.48) 0.63 0.91 (0.34) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.27) (0.24) (0.25) (0.23) (0.19) Net realized gain.......................... (0.01) -- (0.03) -- -- ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.28) (0.24) (0.28) (0.23) (0.19) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 11.55 $ 10.17 $ 10.89 $ 10.54 $ 9.86 ========== ========== ========== ========== ========== TOTAL RETURN (b) (c)....................... 16.38% (4.44)% 6.04% 9.27% (3.24)% (a) ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 31,012 $ 24,451 $ 20,083 $ 17,965 $ 12,257 Ratio of total expenses to average net assets (d).............................. 1.80% 2.09% 2.17% 2.22% 2.60% Ratio of net expenses to average net assets (d).............................. 0.83% 0.83% 0.83% 0.83% 0.90% Ratio of net investment income (loss) to average net assets................... 2.42% 2.29% 2.24% 2.10% 2.17% Portfolio turnover rate.................... 30% 40% 46% 46% 93%
CLASS II SHARES YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2019 2018 2017 2016 2015 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 10.17 $ 10.88 $ 10.54 $ 9.86 $ 10.39 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.30 0.26 0.27 0.20 0.24 Net realized and unrealized gain (loss).... 1.38 (0.70) 0.38 0.74 (0.55) (a) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 1.68 (0.44) 0.65 0.94 (0.31) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.30) (0.27) (0.28) (0.26) (0.22) Net realized gain.......................... (0.01) -- (0.03) -- -- ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.31) (0.27) (0.31) (0.26) (0.22) ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 11.54 $ 10.17 $ 10.88 $ 10.54 $ 9.86 ========== ========== ========== ========== ========== TOTAL RETURN (b) (c)....................... 16.57% (4.11)% 6.22% 9.53% (3.01)% (a) ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 150 $ 142 $ 159 $ 156 $ 100 Ratio of total expenses to average net assets (d).............................. 1.56% 1.83% 1.92% 1.99% 2.31% Ratio of net expenses to average net assets (d).............................. 0.58% 0.58% 0.58% 0.58% 0.67% Ratio of net investment income (loss) to average net assets................... 2.66% 2.49% 2.49% 2.34% 2.32% Portfolio turnover rate.................... 30% 40% 46% 46% 93%
----------------------------- (a) First Trust Multi Income Allocation Portfolio received a reimbursement from the Advisor in the amount of $5,471 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the total return. (b) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (c) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (d) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses. Page 62 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
CLASS I SHARES YEAR ENDED DECEMBER 31, PERIOD --------------------------------------------------------------- ENDED 2019 2018 2017 2016 12/31/2015 (a) ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 10.45 $ 11.41 $ 9.85 $ 9.94 $ 10.00 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.08 0.04 0.06 0.09 0.01 Net realized and unrealized gain (loss).... 2.10 (0.95) 1.66 0.01 (0.07) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 2.18 (0.91) 1.72 0.10 (0.06) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.08) (0.03) (0.06) (0.09) -- Net realized gain.......................... (0.18) (0.02) (0.10) (0.10) -- ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.26) (0.05) (0.16) (0.19) -- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 12.37 $ 10.45 $ 11.41 $ 9.85 $ 9.94 ========== ========== ========== ========== ========== TOTAL RETURN (b) (c)....................... 20.87% (8.00)% 17.50% 0.95% (0.60)% ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 50,843 $ 38,277 $ 22,477 $ 10,360 $ 5,440 Ratio of total expenses to average net assets (d).............................. 1.23% 1.40% 1.85% 2.13% 11.71% (e) Ratio of net expenses to average net assets (d).............................. 0.77% 0.74% 0.75% 0.83% 0.79% (e) Ratio of net investment income (loss) to average net assets................... 0.62% 0.48% 0.76% 0.98% 1.54% (e) Portfolio turnover rate.................... 34% 70% 31% 265% --%
CLASS II SHARES YEAR ENDED DECEMBER 31, PERIOD --------------------------------------------------------------- ENDED 2019 2018 2017 2016 12/31/2015 (a) ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period....... $ 10.44 $ 11.40 $ 9.83 $ 9.95 $ 10.00 ---------- ---------- ---------- ---------- ---------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)............... 0.10 0.07 0.10 0.11 0.01 Net realized and unrealized gain (loss).... 2.12 (0.95) 1.66 (0.02) (0.06) ---------- ---------- ---------- ---------- ---------- Total from investment operations........... 2.22 (0.88) 1.76 0.09 (0.05) ---------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income...................... (0.11) (0.06) (0.09) (0.11) -- Net realized gain.......................... (0.18) (0.02) (0.10) (0.10) -- ---------- ---------- ---------- ---------- ---------- Total from distributions................... (0.29) (0.08) (0.19) (0.21) -- ---------- ---------- ---------- ---------- ---------- Net asset value, end of period............. $ 12.37 $ 10.44 $ 11.40 $ 9.83 $ 9.95 ========== ========== ========== ========== ========== TOTAL RETURN (b) (c)....................... 21.29% (7.77)% 17.94% 0.88% (0.50)% ========== ========== ========== ========== ========== RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)....... $ 109 $ 84 $ 59 $ 50 $ 50 Ratio of total expenses to average net assets (d).............................. 26.37% 32.62% 46.41% 57.64% 37.40% (e) Ratio of net expenses to average net assets (d).............................. 0.52% 0.49% 0.50% 0.57% 0.51% (e) Ratio of net investment income (loss) to average net assets................... 0.87% 0.73% 0.93% 1.13% 0.86% (e) Portfolio turnover rate.................... 34% 70% 31% 265% --%
----------------------------- (a) The Fund's Class I and Class II shares were seeded on October 29, 2015, and commenced operations on October 30, 2015. (b) Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions if any. Total return is not annualized for periods of less than one year. The returns for the Fund do not reflect the deduction of expenses associated with variable products, such as mortality and expense risk charges, separate account charges, and sales charges or the effect of taxes. These expenses would reduce the overall returns above. (c) Total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (d) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses. (e) Annualized. See Notes to Financial Statements Page 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 1. ORGANIZATION First Trust Variable Insurance Trust (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on December 14, 2011 and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently offers shares of three series (each a "Fund" and collectively, the "Funds"), First Trust/Dow Jones Dividend & Income Allocation Portfolio ("First Trust Dow Jones"), which commenced investment operations on May 1, 2012, First Trust Multi Income Allocation Portfolio ("First Trust Multi Income"), which commenced investment operations on May 1, 2014, and First Trust Dorsey Wright Tactical Core Portfolio ("First Trust Dorsey Wright"), which commenced investment operations on October 30, 2015. Each Fund's shares are sold only to variable insurance accounts (each an "Account") to fund the benefits of the variable annuity and variable life insurance contracts (each a "Contract" and collectively, the "Contracts") issued by life insurance companies writing variable annuity contracts and variable life insurance contracts with which the Trust has a contract (each a "Participating Insurance Company"). First Trust Dow Jones' investment objective is to seek to provide total return by allocating among dividend-paying stocks and investment-grade bonds. First Trust Dow Jones seeks to achieve its investment objective by investing, under normal market conditions, approximately 40-60% of its net assets in equity securities and approximately 40-60% of its net assets in fixed-income securities at the time of purchase. Under normal market conditions, at the time of purchase at least 80% of the Fund's net assets (including investment borrowings) will be invested in securities of issuers included in a Dow Jones index. The equity portion of the portfolio will be derived from a quantitative process that seeks to provide total return through investing generally in dividend-paying stocks included in the Dow Jones U.S. Total Stock Market Index(SM). First Trust Advisors L.P. ("First Trust" or the "Advisor") reserves the right to over-weight, under-weight or exclude certain securities from the portfolio that would otherwise be selected pursuant to the quantitative process in certain instances. First Trust Dow Jones' fixed-income component seeks to provide income and preserve capital through investing in a diversified investment-grade debt portfolio. Investment-grade debt securities are those long-term debt securities rated "BBB-" or higher by Standard & Poor's Financial Services LLC or Fitch Ratings, Inc. or "Baa3" or higher by Moody's Investors Service, Inc., and those short-term debt securities rated "A-3" or higher by Standard & Poor's Financial Services LLC, "F3" or higher by Fitch Ratings, Inc. or "Prime 3" or higher by Moody's Investor Service, Inc. at the time of purchase. Under normal market conditions, at the time of purchase approximately 80% of the net assets of the Fund allocated to corporate debt will be invested in investment-grade debt securities included in the Dow Jones Equal Weight U.S. Issued Corporate Bond Index(SM) (the "Bond Index") and other investment-grade debt securities of issuers whose securities are included in the Bond Index; and investment-grade debt securities of issuers included in the Dow Jones Composite Average. The Fund may also invest in U.S. government and agency securities, including mortgage-backed securities. The Fund may, at certain times, also hold exchange-traded funds ("ETFs") that invest in investment-grade corporate debt securities and U.S. government bonds in lieu of investing directly in such securities. First Trust Multi Income's primary investment objective is to maximize current income, with a secondary objective of capital appreciation. First Trust Multi Income seeks to achieve its objectives through diversified exposure to nine income generating asset classes: dividend-paying stocks, preferred stocks, energy infrastructure companies and master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), high yield or "junk" bonds, floating-rate loans, corporate bonds, mortgage-backed securities and Treasury Inflation Protected Securities ("TIPS"). The Fund is actively managed by First Trust and implementing the strategy involves multiple portfolio managers. The Advisor tactically adjusts allocation weights in a manner deemed to offer attractive levels of total return relative to the level of expected risk. The Advisor intends to adjust asset allocation weights quarterly but may do so more or less frequently depending upon market conditions. The maximum weight of any asset class, at the time of adjustment, is 20%. The minimum weight of any asset class, at the time of adjustment, is 5%. First Trust Multi Income may, at certain times, invest in ETFs that generally provide exposure to the nine asset classes in lieu of investing directly in such asset classes. Certain of the ETFs may be advised by First Trust. As a result, First Trust will also earn advisory fees on the underlying ETFs. In general, the U.S. dollar-denominated fixed-income securities in which First Trust Multi Income invests may be issued by U.S. and non-U.S. issuers, of any credit quality, including high yield securities. The high yield securities in which the Fund invests are rated below investment-grade at the time of purchase or unrated and deemed by the Advisor to be of comparable quality, commonly referred to as "junk" bonds. The Fund also invests in the equity securities of domestic and foreign issuers listed on a U.S. or foreign securities exchange and non-U.S. securities that are listed on a U.S. securities exchange in the form of American Depository Receipts ("ADRs") and Global Depository Receipts ("GDRs"). The Fund may invest in equity securities issued by small, mid or large capitalization companies. Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 First Trust Dorsey Wright's investment objective is to seek to provide total return. First Trust Dorsey Wright seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in ETFs and cash and cash equivalents that comprise the Dorsey Wright Tactical Tilt Moderate Core Index. It is expected that a majority of the ETFs in which the Fund invests will be advised by First Trust. Each Fund offers two classes of shares: Class I and Class II. Each class represents an interest in the same portfolio of investments but with a different combination of service (12b-1) fees, eligibility requirements and other features. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION The net asset value ("NAV") for each class of shares in each Fund is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The NAV for each class is calculated by dividing the value of each Fund's total assets attributable to such class (including accrued interest and dividends), less all liabilities attributable to such class (including accrued expenses, dividends declared but unpaid, and any borrowings of each Fund) by the total number of shares of the class outstanding. Differences in the NAV of each class of each Fund's shares are generally expected to be due to the daily expense accruals of the specified service (12b-1) fees, if any, and transfer agency costs applicable to such class of shares and the resulting differential in the dividends that may be paid on each class of shares. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee, in accordance with valuation procedures adopted by the Trust's Board of Trustees (the "Board"), and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Common stocks, preferred stocks, MLPs, ETFs, REITs and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Corporate bonds, corporate notes, U.S. government securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board, which may use the following valuation inputs when available: 1) benchmark yields; 2) reported trades; 3) broker/dealer quotes; 4) issuer spreads; 5) benchmark securities; 6) bids and offers; and 7) reference data including market research publications. Page 65 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Commercial paper, fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: 1) the credit conditions in the relevant market and changes thereto; 2) the liquidity conditions in the relevant market and changes thereto; 3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); 4) issuer-specific conditions (such as significant credit deterioration); and 5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities. Fair valuation of a debt security will be based on the consideration of all available information, including, but not limited to, the following: 1) the fundamental business data relating to the issuer; 2) an evaluation of the forces which influence the market in which these securities are purchased and sold; 3) the type, size and cost of the security; 4) the financial statements of the issuer; 5) the credit quality and cash flow of the issuer, based on the Advisor's or external analysis; 6) the information as to any transactions in or offers for the security; 7) the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; 8) the coupon payments; 9) the quality, value and salability of collateral, if any, securing the security; 10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only); 11) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and 12) other relevant factors. Fair valuation of an equity security will be based on the consideration of all available information, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; Page 66 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. If the securities in question are foreign securities, the following additional information may be considered: 1) the value of similar foreign securities traded on other foreign markets; 2) ADR trading of similar securities; 3) closed-end fund or exchange-traded fund trading of similar securities; 4) foreign currency exchange activity; 5) the trading prices of financial products that are tied to baskets of foreign securities; 6) factors relating to the event that precipitated the pricing problem; 7) whether the event is likely to recur; and 8) whether the effects of the event are isolated or whether they affect entire markets, countries or regions. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2019, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method. Distributions received from a Fund's investments in MLPs generally are comprised of return of capital and investment income. A Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. Distributions received from a Fund's investments in REITs may be comprised of return of capital, capital gains, and income. The actual character of the amounts received during the year are not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. On July 27, 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculations of the London Interbank Offered Rates ("LIBOR") after 2021 (the "FCA Announcement"). Furthermore, in the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative References Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. On August 24, 2017, the Federal Reserve Board requested public comment on a proposal by the Federal Reserve Bank of New York, in cooperation with the Office of Financial Research, to produce three new reference rates intended to serve as alternatives to LIBOR. These alternative rates are based on overnight Page 67 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 repurchase agreement transactions secured by U.S. Treasury Securities. On December 12, 2017, following consideration of public comments, the Federal Reserve Board concluded that the public would benefit if the Federal Reserve Bank of New York published the three proposed reference rates as alternatives to LIBOR (the "Federal Reserve Board Notice"). At this time, it is not possible to predict the effect of the FCA Announcement, the Federal Reserve Board Notice, or other regulatory changes or announcements, any establishment of alternative reference rates of any other reforms to LIBOR that may be enacted in the United Kingdom, the United States or elsewhere. As such, the potential effect of any such event on each Fund cannot yet be determined. C. CASH AND CASH EQUIVALENTS Normally, the Funds invest substantially all of their assets to meet their investment objectives. The Funds may invest the remainder of their assets in securities with maturities of less than one year or cash equivalents, or they may hold cash. The investment in such instruments is not a principal investment strategy of First Trust Dow Jones or First Trust Multi Income. The percentage of each Fund's net assets invested in such holdings varies and depends on several factors, including market conditions. For temporary defensive purposes and during periods of high cash inflows or outflows, the Funds may depart from their principal investment strategies and invest part or all of their assets in these securities, or they may hold cash. D. FOREIGN CURRENCY The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are included in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in "Net realized gain (loss) on investments" on the Statements of Operations. E. FUTURES CONTRACTS First Trust Dow Jones purchases or sells (i.e., is long or short) futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on futures" on the Statements of Operations. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contracts are marked-to-market daily with the change in value recognized as a component of "Net change in unrealized appreciation (depreciation) on futures" on the Statements of Operations. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin" payable or receivable on the Statements of Assets and Liabilities. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. F. PRINCIPAL-ONLY SECURITIES A principal-only security ("PO Security") is the principal-only portion of a mortgage-backed security that does not receive any interest, is priced at a deep discount to its redemption value and ultimately receives the redemption value. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of a PO Security will rise. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of a PO Security will fall. These securities, if any, are identified on the Portfolio of Investments. Page 68 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 G. INTEREST-ONLY SECURITIES An interest-only security ("IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on the Portfolio of Investments. H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income of each Fund, if any, are declared and paid semi-annually. Each Fund distributes its net realized capital gains, if any, to shareholders at least annually. All dividends payable by each Fund will be reinvested in the Fund. Distributions from income and capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. Permanent differences incurred during the tax year ended December 31, 2019, have been reclassified at year end to reflect the following:
Accumulated Accumulated Net Investment Net Realized Income (Loss) Gain (Loss) Paid-in Capital ------------------ ------------------ ------------------ First Trust Dow Jones $ -- $ -- $ -- First Trust Multi Income 6,804 (6,343) (461) First Trust Dorsey Wright (4,915) 4,915 --
Accumulated distributable earnings (loss) on the Statement of Assets and Liabilities consists of accumulated net investment income (loss), accumulated net realized gain (loss), and unrealized appreciation (depreciation). Net assets were not affected by this reclassification. The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2019, was as follows:
Distributions paid Distributions paid Distributions paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ------------------ ------------------ First Trust Dow Jones $ 23,840,429 $ 23,270,288 $ -- First Trust Multi Income 708,084 16,411 -- First Trust Dorsey Wright 312,825 737,450 --
The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2018, was as follows:
Distributions paid Distributions paid Distributions paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ------------------ ------------------ First Trust Dow Jones $ 12,292,691 $ 1,197,495 $ -- First Trust Multi Income 519,508 -- -- First Trust Dorsey Wright 120,457 35,246 --
As of December 31, 2019, the components of distributable earnings on a tax basis for each Fund were as follows:
Undistributed Accumulated Net Unrealized Ordinary Capital and Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ------------------ ------------------ First Trust Dow Jones $ 6,749,956 $ 24,044,052 $ 103,980,029 First Trust Multi Income 29,081 388,504 2,192,336 First Trust Dorsey Wright 5,137 (373,610) 5,792,286
Page 69 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 I. INCOME TAXES Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2016, 2017, 2018 and 2019 remain open to federal and state audit for First Trust Dow Jones, First Trust Multi Income and First Trust Dorsey Wright. As of December 31, 2019, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. The Funds intend to utilize provisions of the federal income tax laws, which allow them to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Funds are subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At December 31, 2019, the Funds have the following non-expiring capital loss carryforwards that may be carried forward indefinitely.
Capital Loss Available --------------- First Trust Dow Jones $ -- First Trust Multi Income -- First Trust Dorsey Wright 373,610
J. EXPENSES Each Fund will pay all expenses directly related to its operations. Each Participating Insurance Company performs certain administrative services for the Funds, their Accounts and the Contracts. Each Fund pays an administrative services fee of 0.20% of average daily net assets to cover expenses incurred by Participating Insurance Companies in connection with these services. First Trust has entered into various licensing agreements, which allow First Trust to use certain trademarks and trade names of the applicable licensors (see Licensing Information in the Additional Information section of this report). The Trust, on behalf of First Trust Dow Jones and First Trust Dorsey Wright, is a sub-licensee to these license agreements and is required to pay licensing fees, which are shown on the Statements of Operations. K. NEW ACCOUNTING PRONOUNCEMENT On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08 "Premium Amortization on Purchased Callable Debt Securities," which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised at the earliest call date, the yield is reset to the effective yield using the payment terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security's maturity date. ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. ASU 2017-08 was adopted for these financial statements and did not have a material impact. Page 70 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust provides each Fund with discretionary investment services and certain administrative services necessary for the management of the Funds. For its investment advisory and management services, First Trust is entitled to a monthly fee calculated at an annual rate of 0.60% of the average daily net assets for both First Trust Dow Jones and First Trust Multi Income, and 0.35% of the average daily net assets for First Trust Dorsey Wright. First Trust also provides fund reporting services to First Trust Dow Jones and First Trust Dorsey Wright for a flat annual fee in the amount of $9,250 per Fund. In addition First Trust Multi Income and First Trust Dorsey Wright incur their respective pro rata share of fees and expenses attributable to each Fund's investments in other investment companies ("acquired fund fees and expenses"). The total of net expenses and acquired fund fees and expenses represents each Fund's total net annual operating expenses. First Trust Multi Income and First Trust have retained Energy Income Partners, LLC ("EIP") and Stonebridge Advisors LLC ("Stonebridge") (collectively, the "Sub-Advisors"), affiliates of First Trust, to serve as investment sub-advisors. In this capacity, the Sub-Advisors provide recommendations to the Advisor regarding the selection and ongoing monitoring of certain securities in First Trust Multi Income's investment portfolio. EIP acts as sub-advisor for, and manages on a discretionary basis the investment and reinvestment of, only the assets of First Trust Multi Income allocated to EIP by the Advisor and furnishes an investment program in respect of and makes investment decisions only with respect to the portion of First Trust Multi Income's investment portfolio allocated to it by the Advisor. EIP, an affiliate of the Advisor, has been retained by First Trust Multi Income and the Advisor to provide recommendations regarding the selection and ongoing monitoring of the MLP, MLP affiliate and energy infrastructure securities in First Trust Multi Income's investment portfolio and to exercise discretion only with respect to assets of First Trust Multi Income allocated to EIP. Stonebridge serves as a nondiscretionary sub-advisor. Stonebridge has been retained by First Trust Multi Income and the Advisor to provide recommendations regarding the selection and ongoing monitoring of the preferred and hybrid securities in First Trust Multi Income's investment portfolio. For the services provided and the expenses assumed pursuant to the investment sub-advisory agreement, First Trust will pay EIP a sub-advisory fee equal to 40% monthly in arrears of any remaining monthly investment management fee paid to the Advisor for the average daily net assets allocated to EIP after First Trust's waiver of any of its investment management fee to comply with the then-current expense cap, as defined below. For the services provided and the expenses assumed pursuant to the investment sub-advisory agreement, First Trust will pay Stonebridge a portfolio management fee equal to an annual rate of 0.20% of the Fund's average daily net assets allocated to Stonebridge. First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns, through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and EIP Partners, LLC, an affiliate of EIP. FTCP also owns, through a wholly-owned subsidiary, a 51% ownership interest in Stonebridge. First Trust has agreed to waive fees and/or pay First Trust Dow Jones' and First Trust Multi Income's expenses to the extent necessary to prevent the annual operating expenses of Class I shares and Class II shares (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, if any, taxes and extraordinary expenses) from exceeding 1.20% and 0.95% (each an "Expense Cap"), respectively, of each Fund's average daily net assets per year at least until May 1, 2020. First Trust has agreed to waive fees and/or pay First Trust Dorsey Wright's expenses to the extent necessary to prevent the operating expenses of Class I shares and Class II shares (excluding interest expense, brokerage commissions and other trading expenses, taxes and extraordinary expenses) from exceeding 1.30% and 1.05% (each an "Expense Cap"), respectively, of the Fund's average daily net assets per year at least until May 1, 2020. For First Trust Dorsey Wright, because acquired fund fees and expenses are estimated, First Trust will periodically adjust the amount of the fee waiver and expense reimbursement in order to attempt to meet the Expense Caps. However, total net annual fund expenses may be higher or lower than the Expense Caps. Expenses borne and fees waived by First Trust are subject to reimbursement by each Fund for up to three years from the date the fee or expense was incurred by the Fund, but no reimbursement payment will be made by the Fund at any time if it would result in the Fund's expenses exceeding (i) the Expense Cap in place for the most recent fiscal year for which such expense limitation was in place, (ii) the Expense Cap in place at the time the fees were waived, or (iii) the current Expense Cap. These amounts, if any, are included in "Expenses previously waived or reimbursed" on the Statements of Operations. Page 71 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 The advisory fee waivers and expense reimbursements for the year ended December 31, 2019, and the expenses borne and fees waived by First Trust subject to recovery from the applicable Fund at December 31, 2019, are included in the table below.
FEES WAIVED OR EXPENSES BORNE BY FIRST TRUST SUBJECT TO RECOVERY ---------------------------------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED FEES EXPENSES DECEMBER 31, DECEMBER 31, DECEMBER 31, WAIVED REIMBURSED 2017 2018 2019 TOTAL ------------ ------------ ------------ ------------ ------------ ------------- First Trust Dow Jones $ 75,487 $ -- $ 203,355 $ 186,633 $ 75,487 $ 465,475 First Trust Multi Income 169,591 981 189,257 192,140 170,572 551,969 First Trust Dorsey Wright 170,791 80,632 199,184 230,266 251,423 680,873
During the year ended December 31, 2019, First Trust did not recover any fees that were previously waived or reimbursed. For First Trust Multi Income, First Trust agreed to waive and/or reimburse the acquired fund fees and expenses of the shares of investment companies held by First Trust Multi Income up to 0.37% of the Fund's average daily net assets through May 1, 2020. During the year ended December 31, 2019, First Trust reimbursed First Trust Multi Income $104,582 of fees that are not subject to recovery. BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as First Trust Down Jones', First Trust Multi Income's and First Trust Dorsey Wright's transfer agent in accordance with certain fee arrangements. As transfer agent, BNYM IS is responsible for maintaining shareholder records for the Funds. BNYM IS is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. The Bank of New York Mellon ("BNYM") serves as First Trust Dow Jones' and First Trust Multi Income's administrator, fund accountant and custodian in accordance with certain fee arrangements. As administrator and fund accountant, BNYM is responsible for providing certain administrative and accounting services to the Funds, including maintaining the Funds' books of account, records of the Funds' securities transactions, and certain other books and records. As custodian, BNYM is responsible for custody of each Fund's assets. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Brown Brothers Harriman & Co. ("BBH") serves as First Trust Dorsey Wright's administrator, fund accountant and custodian. As custodian, BBH is responsible for custody of the Fund's assets. As administrator and fund accountant, BBH is responsible for providing certain administrative and accounting services to the Fund, including maintaining the Fund's books of account, records of the Fund's securities transactions, and certain other books and records. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. Page 72 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 4. CAPITAL SHARE TRANSACTIONS Capital transaction for First Trust Dow Jones were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 2019 DECEMBER 31, 2018 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 7,957,769 $112,219,129 10,329,682 $142,354,467 Class II 86,654 1,261,451 2,415 33,034 ------------ ------------ ------------ ------------ Total Sales 8,044,423 $113,480,580 10,332,097 $142,387,501 ============ ============ ============ ============ Dividend Reinvestment: Class I 3,366,237 $ 47,089,053 1,031,910 $ 13,489,067 Class II 1,463 20,974 68 882 ------------ ------------ ------------ ------------ Total Dividend Reinvestment 3,367,700 $ 47,110,027 1,031,978 $ 13,489,949 ============ ============ ============ ============ Redemptions: Class I (5,686,087) $(79,974,071) (5,216,581) $(70,989,205) Class II (1,932) (27,868) (13,771) (184,264) ------------ ------------ ------------ ------------ Total Redemptions (5,688,019) $(80,001,939) (5,230,352) $(71,173,469) ============ ============ ============ ============
Capital transactions for First Trust Multi Income were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 2019 DECEMBER 31, 2018 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 512,373 $ 5,725,331 935,128 $ 10,021,784 Class II 46 476 3,916 40,654 ------------ ------------ ------------ ------------ Total Sales 512,419 $ 5,725,807 939,044 $ 10,062,438 ============ ============ ============ ============ Dividend Reinvestment: Class I 63,416 $ 720,385 50,041 $ 516,531 Class II 89 1,007 30 296 ------------ ------------ ------------ ------------ Total Dividend Reinvestment 63,505 $ 721,392 50,071 $ 516,827 ============ ============ ============ ============ Redemptions: Class I (294,214) $ (3,278,342) (425,750) $ (4,546,268) Class II (1,157) (12,974) (4,510) (48,124) ------------ ------------ ------------ ------------ Total Redemptions (295,371) $ (3,291,316) (430,260) $ (4,594,392) ============ ============ ============ ============
Page 73 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 Capital transactions for First Trust Dorsey Wright were as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, 2019 DECEMBER 31, 2018 SHARES VALUE SHARES VALUE ------------ ------------ ------------ ------------ Sales: Class I 1,020,944 $ 11,962,787 2,028,796 $ 24,081,320 Class II 608 6,726 2,825 34,014 ------------ ------------ ------------ ------------ Total Sales 1,021,552 $ 11,969,513 2,031,621 $ 24,115,334 ============ ============ ============ ============ Dividend Reinvestment: Class I 86,854 $ 1,047,809 14,641 $ 155,085 Class II 204 2,466 57 618 ------------ ------------ ------------ ------------ Total Dividend Reinvestment 87,058 $ 1,050,275 14,698 $ 155,703 ============ ============ ============ ============ Redemptions: Class I (662,387) $ (7,860,803) (348,389) $ (4,020,869) Class II (40) (468) (20) (243) ------------ ------------ ------------ ------------ Total Redemptions (662,427) $ (7,861,271) (348,409) $ (4,021,112) ============ ============ ============ ============
5. PURCHASES AND SALES OF SECURITIES Cost of purchases and proceeds from sales of investment securities, excluding U.S. Government securities and short-term investments, for the fiscal year ended December 31, 2019, were as follows:
PURCHASES SALES --------------- --------------- First Trust Dow Jones $ 653,314,576 $ 611,645,135 First Trust Multi Income 9,999,596 7,490,262 First Trust Dorsey Wright 20,415,854 16,346,883
Cost of purchases and proceeds from sales of U.S. Government investment securities, excluding short-term investments, for the fiscal year ended December 31, 2019, were as follows:
PURCHASES SALES --------------- --------------- First Trust Dow Jones $ 167,714,936 $ 166,582,404 First Trust Multi Income 1,479,092 772,597 First Trust Dorsey Wright -- --
Page 74 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 6. DERIVATIVE TRANSACTIONS The following table presents the type of derivatives held by First Trust Dow Jones at December 31, 2019, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities. First Trust Multi Income and First Trust Dorsey Wright did not hold any derivative instruments as of December 31, 2019.
ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- ---------------------------------------- DERIVATIVE STATEMENTS OF ASSETS STATEMENTS OF ASSETS INSTRUMENT RISK EXPOSURE AND LIABILITIES LOCATION VALUE AND LIABILITIES LOCATION VALUE ---------- ------------------ --------------------------- ---------- --------------------------- ---------- Futures Interest Rate Risk Unrealized appreciation Unrealized depreciation on futures contracts* $ 149,827 on futures contracts* $ --
* Includes cumulative appreciation (depreciation) on futures contracts as reported in the Portfolio of Investments. The current day's variation margin is reported within the Statements of Assets and Liabilities. The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended December 31, 2019, on derivative instruments held by First Trust Dow Jones, as well as the primary underlying risk exposure associated with each instrument.
STATEMENTS OF OPERATIONS LOCATION ---------------------------------------------------------------------------------- INTEREST RATE RISK EXPOSURE Net realized gain (loss) on futures $ (1,817,823) Net change in unrealized appreciation (depreciation) on futures 566,382
During the fiscal year ended December 31, 2019, the notional value of futures contracts opened and closed were $79,439,863 and $81,480,980 respectively. First Trust Dow Jones does not have the right to offset financial assets and liabilities related to futures contracts on the Statements of Assets and Liabilities. 7. AFFILIATED TRANSACTIONS First Trust Multi Income and First Trust Dorsey Wright invest in securities of affiliated funds. Dividend income and realized gains and losses from affiliated funds are presented on the Statements of Operations. Each Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated funds. Amounts relating to these investments in First Trust Multi Income at December 31, 2019, and for the fiscal year then ended are:
CHANGE IN UNREALIZED SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND SECURITY NAME 12/31/2019 12/31/2018 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2019 INCOME ---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------ First Trust Institutional Preferred Securities and Income ETF 30,550 $ 430,829 $ 257,802 $ (133,903) $ 61,414 $ (3,309) $ 612,833 $ 31,640 First Trust Long Duration Opportunities ETF 500 -- 13,780 -- (230) -- 13,550 178 First Trust Low Duration Opportunities ETF 2,000 102,100 62,087 (61,576) 521 468 103,600 2,073 First Trust Preferred Securities and Income ETF 91,140 1,279,835 775,495 (427,373) 190,271 10,952 1,829,180 101,473 First Trust Senior Loan Fund 89,010 3,620,661 674,163 (217,134) 205,613 (17,944) 4,265,359 173,047 First Trust Tactical High Yield ETF 56,320 1,456,279 1,094,297 -- 197,277 -- 2,747,853 130,192 ----------- ----------- ------------ --------------- ----------- ----------- ------------ $ 6,889,704 $ 2,877,624 $ (839,986) $ 654,866 $ (9,833) $ 9,572,375 $ 438,603 =========== =========== ============ =============== =========== =========== ============
Page 75 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 Amounts relating to these investments in First Trust Dorsey Wright at December 31, 2019, and for the fiscal year then ended are:
CHANGE IN UNREALIZED SHARES AT VALUE AT APPRECIATION REALIZED VALUE AT DIVIDEND SECURITY NAME 12/31/2019 12/31/2018 PURCHASES SALES (DEPRECIATION) GAIN (LOSS) 12/31/2019 INCOME ---------------------- ----------- ----------- ----------- ------------ --------------- ----------- ----------- ------------ First Trust BICK Index Fund 8,495 $ 211,855 $ 33,224 $ (34,538) $ 38,051 $ 311 $ 248,903 $ 3,043 First Trust Brazil AlphaDEX(R) Fund 15,578 188,392 35,308 (13,439) 57,792 979 269,032 24,783 First Trust Developed Markets ex-US AlphaDEX(R) Fund 10,839 662,064 129,596 (266,198) 73,892 3,782 603,136 19,813 First Trust Dow Jones Internet Index Fund 30,872 3,274,413 736,827 (370,113) 495,959 157,827 4,294,913 -- First Trust Emerging Markets AlphaDEX(R) Fund 23,150 521,391 90,176 (77,175) 63,955 16,054 614,401 20,790 First Trust Financials AlphaDEX(R) Fund 115,181 -- 3,838,460 (120,607) 138,217 3,645 3,859,715 49,370 First Trust Germany AlphaDEX(R) Fund 5,618 178,425 47,224 (11,525) 32,646 1,827 248,597 5,836 First Trust Health Care AlphaDEX(R) Fund -- 3,280,760 721,616 (4,242,754) 463,689 (223,311) -- -- First Trust Large Cap Growth AlphaDEX(R) Fund 71,763 3,686,880 746,157 (294,846) 1,010,271 84,496 5,232,958 33,874 First Trust Latin America AlphaDEX(R) Fund 11,229 -- 238,483 (7,311) 24,278 122 255,572 756 First Trust Mid Cap Growth AlphaDEX(R) Fund 109,456 3,490,476 962,458 (466,929) 1,252,079 1,575 5,239,659 14,729 First Trust NASDAQ-100- Technology Sector Index Fund 52,750 3,430,728 603,711 (442,513) 1,510,016 178,333 5,280,275 36,642 First Trust NYSE Arca Biotechnology Index Fund -- 3,104,379 905,859 (4,129,096) 804,336 (685,478) -- -- First Trust Small Cap Growth AlphaDEX(R) Fund 101,876 3,417,640 1,013,629 (305,180) 560,229 68,235 4,754,553 18,980 First Trust Switzerland AlphaDEX(R) Fund 4,935 191,844 40,810 (14,946) 46,026 2,813 266,547 5,436 First Trust Technology AlphaDEX(R) Fund 67,682 3,351,271 657,688 (445,089) 1,257,013 90,800 4,911,683 18,336 First Trust Utilities AlphaDEX(R) Fund 142,781 -- 4,149,025 (128,028) 147,246 2,390 4,170,633 77,634 ----------- ----------- ------------ --------------- ----------- ----------- ------------ $28,990,518 $14,950,251 $(11,370,287) $ 7,975,695 $ (295,600) $40,250,577 $ 330,022 =========== =========== ============ =============== =========== =========== ============
Page 76 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 8. 12B-1 SERVICE PLAN The Trust has adopted a plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act, which provides that Class I shares of each of the Funds will be subject to an annual service fee. First Trust Portfolios L.P. ("FTP"), an affiliate of First Trust, serves as the selling agent and distributor of shares of the Funds. FTP uses the service fee to compensate each Participating Insurance Company for providing account services to contract owners. These services include establishing and maintaining Contract owners' accounts, supplying information to Contract owners, delivering Fund materials to Contract owners, answering inquiries, and providing other personal services to Contract owners. Each Fund may spend up to 0.25% per year of the average daily net assets of its Class I shares as a service fee under the Plan. In addition, the Plan permits First Trust to use a portion of its advisory fee to compensate FTP for expenses incurred in connection with the sale of a Fund's Class I shares including, without limitation, compensation of its sales force, expenses of printing and distributing the Prospectus to persons other than Contract owners, expenses of preparing, printing and distributing advertising and sales literature and reports to Contract owners used in connection with the sale of a Fund's Class I Shares, certain other expenses associated with the servicing of Class I shares of a Fund, and any service-related expenses that may be authorized from time to time by the Board. During the year ended December 31, 2019, all service fees received by FTP were paid to the Participating Insurance Companies, with no portion of such fees retained by FTP. The Plan may be renewed from year to year if approved by a vote of the Trust's Board and a vote of the Independent Trustees, who have no direct or indirect financial interest in the Plan, cast in person at a meeting called for the purpose of voting on the Plan. 9. BORROWINGS The Trust, on behalf of First Trust Dow Jones and First Trust Multi Income, along with First Trust Series Fund and First Trust Exchange-Traded Fund IV, has a $200 million Credit Agreement (the "BNYM Line of Credit") with BNYM to be a liquidity backstop during periods of high redemption volume. A commitment fee of 0.15% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans will be charged by BNYM, which First Trust will allocate amongst the funds that have access to the BNYM Line of Credit. These fees are reflected in the Statements of Operations in the "Commitment fees" line item. To the extent that either fund accesses the BNYM Line of Credit, there would also be an interest fee charged. Neither First Trust Dow Jones or First Trust Multi Income drew on the BNYM Line of Credit during the year ended December 31, 2019. 10. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 11. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events to the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 77 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST VARIABLE INSURANCE TRUST: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities of First Trust/Dow Jones Dividend & Income Allocation Portfolio, First Trust Multi Income Allocation Portfolio, and First Trust Dorsey Wright Tactical Core Portfolio (the "Funds"), each a series of the First Trust Variable Insurance Trust, including the portfolios of investments, as of December 31, 2019, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated in the table below for the Funds; and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2019, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America.
INDIVIDUAL FUND COMPRISING THE TRUST FINANCIAL HIGHLIGHTS First Trust/Dow Jones Dividend & Income For the years ended December 31, 2019, 2018, 2017, 2016, and 2015 Allocation Portfolio First Trust Multi Income Allocation Portfolio First Trust Dorsey Wright Tactical Core For the years ended December 31, 2019, 2018, 2017, 2016, and the Portfolio period from October 30, 2015 (commencement of operations) through December 31, 2015
BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers and agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 13, 2020 We have served as the auditor of one or more First Trust investment companies since 2001. Page 78 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that each Fund uses to determine how to vote proxies and information on how each Fund voted proxies relating to portfolio investments during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2019, the following percentages of income dividend paid by the Funds qualify for the dividends received deduction available to corporations:
DIVIDENDS RECEIVED DEDUCTION ------------------------------------- First Trust/Dow Jones Dividend & Income Allocation Portfolio 45.60% First Trust Multi Income Allocation Portfolio 20.22% First Trust Dorsey Wright Tactical Core Portfolio 78.98%
For the taxable year ended December 31, 2019, the amount of long-term capital gain distribution designated by the Funds which are taxable at the applicable taxable gains rates for federal income tax purposes were:
LONG-TERM CAPITAL GAIN DISTRIBUTIONS ------------------------------------- First Trust/Dow Jones Dividend & Income Allocation Portfolio $ 23,270,288 First Trust Multi Income Allocation Portfolio 16,411 First Trust Dorsey Wright Tactical Core Portfolio 737,450
LICENSING INFORMATION Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). The trademarks have been licensed to S&P Dow Jones Indices LLC and have been sublicensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE are products of S&P Dow Jones Indices LLC and has been licensed for use by First Trust. The First Trust/Dow Jones Dividend & Income Allocation Portfolio is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or any of their respective affiliates (collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor its affiliates make any representation or warranty, express or implied, to the owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or any member of the public regarding the advisability of investing in securities generally or in the First Trust/Dow Jones Dividend & Income Allocation Portfolio particularly or the ability of the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE to track general market performance. S&P Dow Jones Indices only relationship to First Trust with respect to the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices. The DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE is determined, composed and calculated by S&P Dow Jones Indices without regard to First Trust or the First Trust/Dow Jones Dividend & Income Allocation Portfolio. S&P Dow Jones Indices has no obligation to take the needs of First Trust or the owners of the First Trust/Dow Jones Dividend & Income Allocation Portfolio into consideration in determining, composing or calculating the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE. Neither S&P Dow Jones Indices nor its affiliates are responsible for and have not participated in the determination of the prices, and amount of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or the timing of the issuance or sale of the First Trust/Dow Jones Dividend & Income Allocation Portfolio or in the determination or calculation of the equation by which the First Trust/Dow Jones Dividend & Income Allocation Page 79 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) Portfolio is to be managed. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the First Trust/Dow Jones Dividend & Income Allocation Portfolio. There is no assurance that investment products based on the DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR ITS AFFILIATES GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES EQUAL WEIGHT U.S. ISSUED CORPORATE BOND INDEX(SM), DOW JONES U.S. TOTAL STOCK MARKET INDEX(SM) AND DOW JONES COMPOSITE AVERAGE OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND FIRST TRUST, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES. The First Trust Dorsey Wright Tactical Core Portfolio (the "Portfolio") is not sponsored, endorsed, sold or promoted by Dorsey Wright & Associates, LLC ("Licensor"). Licensor makes no representation or warranty, express or implied, to the owners of the Portfolio or any member of the public regarding the advisability of trading in the Portfolio. Licensor's only relationship to First Trust Advisors L.P. ("First Trust") is the licensing of certain trademarks and trade names of Licensor and of the Dorsey Wright Tactical Tilt Moderate Core Index which is determined, composed and calculated by Licensor without regard to First Trust or the Portfolio, Licensor has no obligation to take the needs of First Trust or the owners of the Portfolio into consideration in determining, composing or calculating Dorsey Wright Tactical Tilt Moderate Core Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Portfolio to be listed or in the determination or calculation of the equation by which the Portfolio are to be converted into cash. Licensor has no obligation or liability in connection with the administration, marketing or trading of the Portfolio. LICENSOR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN AND LICENSOR SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DORSEY WRIGHT TACTICAL TILT MODERATE CORE INDEX OR ANY DATA INCLUDED THEREIN, WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN LICENSOR AND FIRST TRUST. RISK CONSIDERATIONS Risks are inherent in all investing. The following summarizes some of the risks that should be considered for the Funds. For additional information about the risks associated with investing in the Funds, please see the Funds' prospectuses and statements of additional information, as well as other regulatory filings. BANK LOAN RISKS. Certain of the Funds invest in bank loans. An investment in bank loans subjects the Fund to credit risk, which is heightened for bank loans in which the Fund invests because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. Senior floating loans, in which the Fund may invest, are usually rated below investment grade but may also be unrated. As a result, the risks associated with these senior floating loans are similar to the risks of high yield fixed income instruments. An economic downturn would generally lead to a higher non-payment rate, and a senior floating rate loan Page 80 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a senior floating rate loan may decline in value or become illiquid, which would adversely affect the senior floating rate loan's value. Unlike the securities markets, there is no central clearinghouse for loan trades, and the loan market has not established enforceable settlement standards or remedies for failure to settle. Therefore, portfolio transactions in senior floating rate loan may have uncertain settlement time periods. Senior floating rate loans are subject to a number of risks elsewhere in this report, including liquidity risk and the risk of investing in below grade fixed income instruments. CALL RISK. If an issuer calls higher-yielding debt instruments held by the Funds, performance could be adversely impacted. CONVERTIBLE SECURITIES RISK. Certain of the ETFs in which certain of the Funds invest may invest in convertible securities. Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security's market value also tends to reflect the market price of the common stock of the issuing company, particularly when the stock price is greater than the convertible security's conversion price (i.e., the predetermined price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock). Convertible securities are also exposed to the risk that an issuer is unable to meet its obligation to make dividend or principal payments when due as a result of changing financial or market conditions. Convertible securities generally offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of their potential for capital appreciation. CREDIT RISK. The Funds are subject to credit risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CURRENCY EXCHANGE RATE RISK. Certain of the ETFs in which certain of the Funds invest may hold investments that are denominated in non-U.S. currencies, or in securities that provide exposure to such currencies, currency exchange rates or interest rates denominated in such currencies. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the Funds' investment and the value of your Fund shares. Currency exchange rates can be very volatile and can change quickly and unpredictably. As a result, the value of an investment in the Funds may change quickly and without warning and you may lose money. CYBER SECURITY RISK. As the use of Internet technology has become more prevalent in the course of business, the Funds have become more susceptible to potential operational risks through breaches in cybersecurity. A breach in cybersecurity refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to the Fund's digital information systems through "hacking" or malicious software coding, but may also result from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition, cyber security breaches of the Fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cybersecurity systems of issuers or third-party service providers. DEPOSITORY RECEIPTS RISK. Certain of the Funds invest in equity securities in the form of Depositary Receipts, which may be less liquid than the underlying securities in their primary trading market. Any distributions paid to the holders of Depositary Receipts are usually subject to a fee charged by the depositary. Holders of Depositary Receipts may have limited voting rights, and investment restrictions in certain countries may adversely impact the value of Depositary Receipts because such restrictions may limit the ability to convert the securities into Depositary Receipts and vice versa. Such restrictions may cause the securities of the underlying issuer to trade at a discount or premium to the market price of the Depositary Receipts. DIVIDEND RISK. Certain of the Funds are subject to dividend risk. There is no guarantee that the issuers of the Funds' equity securities will declare dividends in the future or that, if declared, they will either remain at current levels or increase over time. ENERGY INFRASTRUCTURE COMPANIES RISK. Certain of the Funds invest in energy infrastructure companies. These companies principally include publicly-traded MLPs and limited liability companies taxed as partnerships, MLP affiliates and their successor companies, pipeline companies, utilities, and other companies that derive at least 50% of their revenues from operating or providing services in support of infrastructure assets such as pipeline, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries. The Fund invests in energy infrastructure companies and is subject to certain risks inherent in investing in these types of securities. Energy infrastructure companies may be directly affected by energy commodity prices, especially those companies that own the underlying energy commodity. A decrease in the production or availability of natural gas, natural gas liquids, crude oil, coal or other energy commodities or a decrease in the volume of such commodities available for transportation, processing, storage or distribution may adversely impact the financial performance of energy infrastructure companies. Energy infrastructure companies are subject to significant federal, state and local government regulation in virtually every aspect of their Page 81 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) operations, including how facilities are constructed, maintained and operated, environmental and safety controls, and the prices they may charge for products and services. Various governmental authorities have the power to enforce compliance with these regulations and the permits issued under them and violators are subject to administrative, civil and criminal penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future which would likely increase compliance costs and may adversely affect the financial performance of energy infrastructure companies. Natural disasters, such as hurricanes in the Gulf of Mexico, also may impact energy infrastructure companies. Certain energy infrastructure companies in the utilities industry are subject to imposition of rate caps, increased competition due to deregulation, difficulty in obtaining an adequate return on invested capital or in financing large construction projects, limitations on operations and increased costs and delays attributable to environmental considerations, and the capital market's ability to absorb utility debt. In addition, taxes, government regulation, international politics, price and supply fluctuations, volatile interest rates and energy conservation may cause difficulties for these companies. Such issuers have been experiencing certain of these problems to varying degrees. EQUITY SECURITIES RISK. Certain of the Funds hold equity securities. The value of the Funds' shares will fluctuate with changes in the value of these equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. The equity markets have experienced recent volatility that may lead to sharp declines in the value of the underlying ETFs and the Funds. EXCHANGE-TRADED FUND ("ETF") RISK. An ETF trades like common stock and represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile. ETFs have management fees and other operating expenses that increase their costs. In general, as a shareholder in other investment companies, the Funds bear their ratable share of the underlying fund's expenses and are subject to duplicative expenses to the extent a Fund invests in other ETFs. EXTENSION RISK. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off by the issuer (or obligor) more slowly than anticipated, causing the value of these securities to fall. Rising interest rates tend to extend the duration of securities, making them more sensitive to changes in interest rates. The value of longer-term securities generally changes more in response to changes in interest rates than shorter-term securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value. FINANCIAL COMPANIES RISK. Financial companies are especially subject to the adverse effects of economic recession, currency exchange rates, government regulation, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business. FIXED INCOME SECURITIES RISK. An investment in the Funds involves risk associated with an investment in fixed income securities including the risk that certain of the securities in the Funds may not have the benefit of covenants that would prevent the issuer from engaging in capital restructurings or borrowing transactions in connection with corporate acquisitions, leveraged buyouts or restructurings. This limitation could reduce the ability of the issuer to meet its payment obligations and might result in increased credit risk. In addition, certain of the securities may be redeemed or prepaid by the issuer, resulting in lower interest payments by the Funds and reduced distributions to shareholders. FLOATING RATE LOAN RISK. Certain of the ETFs in which certain of the Funds invest may invest in floating rate loans, which may include high yield securities, or "junk" loans. An investment in floating rate loans subjects the Funds to credit risk, which is heightened for loans in which the Funds invest because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral and/or bankruptcy. The loans are usually rated below investment grade but may also be unrated. An economic downturn would generally lead to a higher non-payment rate, and a loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. Loans are subject to a number of risks described elsewhere in this annual report, including liquidity risk and the risk of investing in below investment grade debt instruments. Floating rate loans are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. Floating rate loans may also not be considered "securities" under the 1940 Act and therefore prevent the Funds from relying on the anti-fraud provisions of the Act. FUND OF FUNDS RISK. Certain of the Funds invest in securities of other ETFs, which involves additional expenses that would not be present in a direct investment in such ETFs. Furthermore, the Funds' investment performance and risks are directly related to the investment performance and risks of the underlying ETFs in which the Funds invest. Page 82 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) HIGH YIELD SECURITIES RISK. Certain of the Funds invest in high yield securities, or "junk" bonds, which are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. These securities are issued by companies that may have limited operating history, narrowly focused operations, and/or other impediments to the timely payment of periodic interest and principal at maturity. If the economy slows down or dips into recession, the issuers of high yield securities may not have sufficient resources to continue making timely payment of periodic interest and principal at maturity. The market for high yield securities is generally smaller and less liquid than that for investment grade securities. High yield securities are generally not listed on a national securities exchange but trade in the overthe-counter markets. Due to the smaller, less liquid market for high yield securities, the bid-offer spread on such securities is generally greater than it is for investment grade securities and the purchase or sale of such securities may take longer to complete. ILLIQUID SECURITIES RISK. Some of the securities held by certain of the Funds may be illiquid. Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by the Fund or at prices approximately the value at which the Fund is carrying the securities on its books. INCOME RISK. Income from the Funds' fixed income investments could decline during periods of falling interest rates. INDEX REBALANCE RISK. Pursuant to the methodology that First Trust Dorsey Wright Tactical Core Portfolio's index provider uses to calculate and maintain the Fund's underlying index, the Fund may own a significant portion of the First Trust ETFs included in the Fund. Such ETFs may be removed from the underlying index in the event that it does not comply with the eligibility requirements of the underlying index. As a result, the Fund may be forced to sell shares of certain First Trust ETFs at inopportune times or for prices other than at current market values or may elect not to sell such shares on the day that they are removed from the underlying index, due to market conditions or otherwise. Due to these factors, the variation between the Fund's annual return and the return of the underlying index may increase significantly. Apart from scheduled rebalances, the index provider may carry out additional ad hoc rebalances to the underlying index to, for example, correct an error in the selection of constituents. When the Fund in turn rebalances its portfolio, any transaction costs and market exposure arising from such portfolio rebalancing will be borne by the Fund and its shareholders. Unscheduled rebalances may also expose the Fund to additional tracking error risk. Therefore, errors and additional ad hoc rebalances carried out by the index provider may increase the Fund's costs and market exposure. INTEREST RATE RISK. Interest rate risk is the risk that the value of the fixed-income securities in the Funds will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term investments and higher for longer term investments. Mortgage-related securities are particularly subject to the risk that interest rate volatility may adversely impact the valuation and price of such securities. Additionally, the return on the floating rate loans in which the Funds may invest will decline during a period of falling interest rates. INVESTMENT COMPANIES RISK. The Funds may invest in the shares of other investment companies, and therefore, the Funds' investment performance and risks may be related to the investment performance and risks of the underlying funds. In general, as a shareholder in other investment companies, the Funds bear their ratable share of the underlying fund's expenses and would be subject to duplicative expenses to the extent the Funds invest in other investment companies. LIQUIDITY RISK. The Funds may be subject to the risks of investing in lower-quality debt issued by companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues tend to be less liquid than larger debt issues. If the economy experiences a sudden downturn, or if the debt markets for such companies become distressed, the Funds may have particular difficulty selling their assets in sufficient amounts, at reasonable prices and in a sufficiently timely manner to raise the cash necessary to meet any potentially heavy redemption requests by shareholders. LOAN PREPAYMENT RISK. Loans are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which the Funds derive interest income will be reduced. The Funds may not be able to reinvest the proceeds received on terms as favorable as the prepaid loan. MANAGEMENT RISK. Certain of the Funds are subject to management risk because they have actively managed portfolios. The Advisor will apply investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that the Funds will achieve their investment objectives. MARKET RISK. Market risk is the risk that a particular security owned by a Fund or shares of the Funds in general may fall in value. Shares are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Overall Fund share values could decline generally or could underperform other investments. MLP RISK. Certain of the Funds invest in Master Limited Partnerships ("MLP's). Investment in MLP units involves risks which differ from an investment in common stock of a corporation. Holders of MLP units have limited control and voting rights on matters affecting the partnership. In addition, there are certain tax risks associated with an investment in MLP units and conflicts of interest may Page 83 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) exist between common unit holders and the general partner, including those arising from incentive distribution payments. In addition, there is the risk that an MLP could be, contrary to its intention, taxed as a corporation, resulting in decreased returns from such MLP. On March 15, 2018, the Federal Energy Regulatory Commission ("FERC") changed its long-standing tax allowance policy which no longer permits MLPs to include in their cost of service an income tax allowance. This has had a negative impact on the performance of some MLPs affected by this decision. This policy change and any similar policy changes in the future could adversely impact an MLP's business, financial condition, results of operations and cash flows and ability to pay cash distributions or dividends. MORTGAGE SECURITIES RISK. Certain of the ETFs in which certain of the Funds invest may hold mortgage-related securities, including mortgage-backed securities, which may make the Funds more susceptible to adverse economic, political or regulatory events that affect the value of real estate. Changes in local, state and federal policies could negatively impact the mortgage-related securities market, which include various government initiated and sponsored homeowner assistance programs and eminent domain issues. Mortgage related securities may also face liquidity issues when a Fund seeks to sell such securities but is unable to find buyers at a bid-ask spread to make the transaction feasible. These securities are also subject to the risk that the underlying borrowers may default on their mortgages, resulting in a non-payment of principal and interest. Finally, the mortgage-related securities market may be negatively impacted by regulatory changes including those that are related to the mandate or existence of the government-sponsored enterprises, Fannie Mae, Freddie Mac and Ginnie Mae. Mortgage-related securities are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which a Fund derives interest income will be reduced. In declining interest rate environments, the extent to which borrowers prepay a mortgage generally increases, which increase reinvestment risk, or the risk that the proceeds received are not reinvested on terms as favorable as the prepaid loan. Conversely, mortgage-related securities are subject to the risk that the rate of mortgage prepayments decreases, which extends the average life of a security and increases the interest rate risk exposure. MUNICIPAL BONDS RISK. Certain of the ETFs in which certain of the Funds invest may invest in municipal bonds. In addition to being subject to credit, income and interest rate risk (as described in the prospectus), municipal bonds are subject to tax risk. Interest income from municipal bonds is normally not subject to regular federal income tax, but income from municipal bonds held by the underlying ETFs could be declared taxable because of, among other things, unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities or noncompliant conduct of a bond issuer. Consequently, the attractiveness of municipal bonds in relation to other investment alternatives is affected by changes in federal income tax rates or changes in the tax-exempt status of interest income from municipal bonds. NON-CORRELATION RISK. The Funds' returns may not match the return of an Index for a number of reasons. For example, the Funds incur operating expenses not applicable to the Indexes, and may incur costs in buying and selling securities, especially when rebalancing the Funds' portfolio holdings to reflect changes in the composition of the Indexes. In addition, the Funds' portfolio holdings may not exactly replicate the securities included in the Indexes or the ratios between the securities included in the Indexes. NON-DIVERSIFICATION RISK. The First Trust Dorsey Wright Tactical Core Portfolio is classified as "non-diversified" under the 1940 Act. As a result, the First Trust Dorsey Wright Tactical Core Portfolio is only limited as to the percentage of its assets that may be invested in the securities of any one issuer by the diversification requirements imposed by the Internal Revenue Code of 1986, as amended (the "Code"). The First Trust Dorsey Wright Tactical Core Portfolio may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the First Trust Dorsey Wright Tactical Core Portfolio may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers. NON-U.S. SECURITIES AND EMERGING MARKETS RISK. Certain of the Funds invest in securities of non-U.S. issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards and less government supervision and regulation of exchanges in foreign countries. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries. PREFERRED SECURITIES RISK. The Funds and certain of the ETFs in which certain of the Funds invest, invest in preferred securities. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt instruments in a company's capital structure in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Preferred securities are also subject to credit risk, interest rate risk and income risk. REIT RISK. Certain of the Funds invest in Real Estate Investment Trusts ("REITs"), and as a result, the Fund is subject to the risks associated with investing in real estate, which may include, but are not limited to, fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local operating expenses; and other economic, political or regulatory occurrences affecting companies in the real estate industry. In addition to risks related to investments in real estate generally, investing in REITs involves certain other risks related to their structure and focus, which include, but are not limited to, dependency upon Page 84 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) management skills, limited diversification, the risks of locating and managing financing for projects, heavy cash flow dependency, possible default by borrowers, the costs and potential losses of self-liquidation of one or more holdings, the risk of a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages, changes in neighborhood values and appeal to purchases, the possibility of failing to maintain exemptions from registration under the 1940 Act and, in many cases, relatively small market capitalization, which may result in less market liquidity and greater price volatility. REITs are also subject to the risk that the real estate market may experience an economic downturn generally, which may have a material effect on the real estate in which the REITs invest and their underlying portfolio securities. SMALL FUND RISK. Certain of the Funds currently have fewer assets than larger funds, and like other relatively smaller funds, large inflows and outflows may impact the Funds' market exposure for limited periods of time. This impact may be positive or negative, depending on the direction of market movement during the period affected. SMALLER COMPANY RISK. Certain of the Funds and certain of the ETFs in which certain of the Funds invest, invest in small- and mid-capitalization companies. Such companies may be more vulnerable to adverse general market or economic developments, and their securities may be less liquid and may experience greater price volatility than larger, more established companies as a result of several factors, including limited trading volumes, products or financial resources, management inexperience and less publicly available information. Accordingly, such companies are generally subject to greater market risk than larger, more established companies. TIPS RISK. Certain of the Funds invest in Treasury Inflation Protected Securities ("TIPs"). TIPS are inflation-indexed fixed-income securities issued by the U.S. Department of Treasury and are subject to the same risks as other fixed income investments. In a falling inflationary environment, both interest payments and the value of the TIPS will decline. Page 85 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.
NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Erickson, Trustee o Indefinite Term Physician; Officer, Wheaton Orthopedics; 169 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investor Services, Inc. 169 Director of ADM (1957) (Futures Commission Merchant) 169 Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial 169 Director of Trust (1956) and Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 169 None (1954) Managing Director and Chief Operating o Since Inception Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee o Indefinite Term Chief Executive Officer, First Trust 169 None and Chairman of the Board Advisors L.P. and First Trust Portfolios (1955) o Since Inception L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)
----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as CEO of First Trust Advisors L.P., investment advisor of the Trust. Page 86 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED)
POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer (1966) Executive Officer (January 2016 to Present), Controller (January 2011 o Since January 2016 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust\ Advisors L.P. and (1960) Legal Officer First Trust Portfolios L.P.; Secretary and General o Since Inception Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Fund Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P o Since Inception
----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 87 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST VARIABLE INSURANCE TRUST DECEMBER 31, 2019 (UNAUDITED) First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). March 2019 Page 88 FIRST TRUST INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 INVESTMENT SUB-ADVISORS FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO Energy Income Partners, LLC 10 Wright Street Westport, CT 06880 Stonebridge Advisors LLC 10 Westport Road, Suite C101 Wilton, CT 06897 ADMINISTRATOR, CUSTODIAN & FUND ACCOUNTANT FIRST TRUST DORSEY WRIGHT TACTICAL CORE PORTFOLIO Brown Brothers Harriman & Co. 50 Post Office Square Boston, MA 02110 FIRST TRUST/DOW JONES DIVIDEND & INCOME ALLOCATION PORTFOLIO FIRST TRUST MULTI INCOME ALLOCATION PORTFOLIO The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 TRANSFER AGENT BNY Mellon Investment Servicing (US) Inc. 301 Bellevue Parkway Wilmington, DE 19809 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 [BLANK BACK COVER] ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. (e) Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the Registrant's board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each is "independent," as defined by Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $90,750 for the fiscal year ended December 31, 2018 and $90,750 for the fiscal year ended December 31, 2019. (b) Audit-Related Fees (Registrant) -- The aggregate fees billed for each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. Audit-Related Fees (Investment Adviser) -- The aggregate fees billed for each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. Audit-Related Fees (Distributor) -- The aggregate fees billed for each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. Audit-Related Fees (Investment Sub-Advisor) -- The aggregate fees billed for each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. (c) Tax Fees (Registrant) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $12,175 for the fiscal year ended December 31, 2018 and $12,797 for the fiscal year ended December 31, 2019. Tax Fees (Investment Adviser) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. Tax Fees (Distributor) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. Tax Fees (Investment Sub-Adviser) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. (d) All Other Fees (Registrant) -- The aggregate fees for each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. All Other Fees (Investment Adviser) -- The aggregate fees billed for each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. All Other Fees (Distributor) -- The aggregate fees billed for each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. All Other Fees (Investment Sub-Adviser) -- The aggregate fees billed for each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2019. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the "Committee") is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee. The Committee is also responsible for the pre-approval of the independent auditor's engagements for non-audit services with the registrant's adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant's adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor's independence. (e)(2) The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant's investment adviser of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: (b) 0% (c) 0% (d) 0% (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal year ended December 31, 2018 were $12,175 for the registrant, $48,190 for the registrant's investment adviser, $80,310 for the registrant's distributor and $3,000 for the registrant's investment sub-adviser, and for the fiscal year ended December 31, 2019 were $12,797 for the registrant, $75,670 for the registrant's investment adviser, $104,730 for the registrant's distributor and $32,500 for the registrant's investment sub-adviser. (h) The registrant's audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a) Not applicable. (b) Not applicable. ITEM 13. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (a)(4) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) First Trust Variable Insurance Trust ----------------------------------------- By (Signature and Title) /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: February 21, 2020 ------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: February 21, 2020 ------------------- By (Signature and Title) /s/ Donald P. Swade ---------------------------------------- Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: February 21, 2020 -------------------