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 811-22245
First Trust Exchange-Traded Fund III
(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: October 31
Date of reporting period: April 30, 2024
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. § 3507.
Item 1. Report to Stockholders.
| (a) | | The registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: |
|
For the Six Months Ended
April 30, 2024 |
First Trust Exchange-Traded Fund III
First Trust Preferred Securities and Income ETF (FPE) |
First Trust Institutional Preferred Securities and Income ETF (FPEI) |
First Trust Exchange-Traded Fund III
Semi-Annual Report
April 30, 2024
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”) and/or Stonebridge Advisors LLC (“Stonebridge” or the “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 the series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (each such series is referred to as a “Fund” and collectively, as the “Funds”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective 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 Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund’s 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, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund’s webpage at www.ftportfolios.com.
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 and investment approach.
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 Sub-Advisor 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 its prospectus, statement of additional information, and other Fund regulatory filings.
First Trust Exchange-Traded Fund III
Semi-Annual Letter from the Chairman and CEO
April 30, 2024
First Trust is pleased to provide you with the semi-annual report for certain series of the First Trust Exchange-Traded Fund III (the “Funds”), which contains detailed information about the Funds for the six-month period ended April 30, 2024.
On March 16, 2022, the Federal Reserve (the “Fed”) initiated the first of what have been eleven increases to the Federal Funds target rate thus far in the current cycle. Given its potential impact, financial pundits have been debating the direction and timing of the Fed’s interest rate policy ever since. In December 2023, the Fed gave some guidance, announcing that it expected to implement up to three interest rate cuts totaling 75 basis points (“bps”) in 2024. Investors responded to the news with exuberance. In the U.S., the S&P 500® Index surged by 10.56% on a total return basis in the first quarter of 2024, adding to its already stunning 26.29% total return in 2023. For comparison, the yield on the 10-Year Treasury Note (“T-Note”) stood at 3.80% on December 27, 2023, down a stunning 119 bps from its most recent high of 4.99% set just months prior on October 19, 2023. Bond yields generally move in the opposite direction of prices. Given this relationship, the decline in the 10-Year T-Note’s yield is indicative of investor’s desire to lock in higher income payments prior to the Fed reducing its policy rate.
At this point, it makes sense to step back and highlight several ways the Fed’s interest rate policy has impacted the U.S. economy. We’ll start with the good news. On April 30, 2024, inflation, as measured by the trailing 12-month rate on the Consumer Price Index, stood at 3.4%, down significantly from its most recent peak of 9.1% set in June 2022. Additionally, the higher Federal Funds target rate has been a boon for those investors with assets in fixed income, money market, and other interest-bearing accounts. The total value of assets held in U.S. money market accounts stood at $6.0 trillion on May 1, 2024, nearly double where it stood just five years ago. Notably, the weekly yield on the benchmark U.S. Treasury 3-Month Money Market Index more than doubled from 2.40% to 5.32% between the end of April 2019 and April 2024.
Now for the not-so-good news. Higher interest rates often restrict the ability of consumers and businesses to spend and finance growth, respectively. While the consumer has remained relatively unscathed thus far, evidence that they are stretching their budgets is mounting. The Federal Reserve Bank of New York reported that the total balance of U.S. credit card debt stood at a record $1.13 trillion at the end of 2023, while the average annual percentage rate for all cards rose to a record 21.59% in the first quarter of 2024. Perhaps unsurprisingly, delinquency rates have been surging. Data from the Federal Reserve Bank of St. Louis revealed that the delinquency rate on credit card loans for all U.S. commercial banks rose to 3.10% in the fourth quarter of 2023, up from 2.62% in the fourth quarter of 2019 (pre-COVID-19). In April 2024, 43% of small and mid-sized U.S. businesses were unable to pay their rent on time and in full. In addition, higher interest rates are impacting economic growth. In the U.S., real gross domestic product growth was a tepid 1.6% in the first quarter of 2024, far below consensus expectations of 2.5%. Not even the U.S. government is immune to the impacts of higher interest rates. At the end of the first quarter of 2024, the interest payments paid by the Federal government stood at a record $1.06 trillion, nearly double their total of $0.56 trillion at the end of the fourth quarter of 2019.
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,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust Preferred Securities and Income ETF (FPE)
The First Trust Preferred Securities and Income ETF’s (the “Fund”) investment objective is to seek total return and to provide current income. Under normal market conditions, the Fund invests at least 80% of its net assets (including investment borrowings) in preferred securities (“Preferred Securities”) and income-producing debt securities (“Income Securities”). The Fund invests in securities that are traded over-the-counter or listed on an exchange. For purposes of the 80% test set forth above, securities of open-end funds, closed-end funds or other exchange-traded funds (“ETFs”) registered under the Investment Company Act of 1940, as amended, that invest primarily in Preferred Securities or Income Securities are deemed to be Preferred Securities or Income Securities.
Preferred Securities held by the Fund generally pay fixed or adjustable-rate distributions to investors and have preference over common stock in the payment of distributions and the liquidation of a company’s assets, but are generally junior to all forms of the company’s debt, including both senior and subordinated debt. Certain of the Preferred Securities may be issued by trusts or other special purpose entities created by companies specifically for the purpose of issuing such securities. Income Securities held by the Fund include corporate bonds, high yield securities (commonly referred to as “junk” bonds) and convertible securities. The broad category of corporate debt securities includes debt issued by U.S. and non-U.S. companies of all kinds, including those with small-, mid- and large-capitalizations. Corporate debt may carry fixed or floating rates of interest. The Fund may also invest in floating-rate and fixed-to-floating rate securities.
|
| | | Average Annual Total Returns | |
| | | | | Inception
(2/11/13)
to 4/30/24 | | | Inception
(2/11/13)
to 4/30/24 |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
ICE BofA US Investment Grade Institutional Capital Securities Index | | | | | | | | |
| | | | | | | | |
Bloomberg US Aggregate Bond Index | | | | | | | | |
(See Notes to Fund Performance Overview on page 9.)
| The Blended Benchmark consists of a 30/30/30/10 blend of the ICE BofA Core Plus Fixed Rate Preferred Securities Index, the ICE BofA US Investment Grade Institutional Capital Securities Index, the ICE USD Contingent Capital Index and the ICE BofA US High Yield Institutional Capital Securities Index. The Blended Benchmark is intended to reflect the proportional market cap of each segment of the preferred and hybrid securities market. The indices do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indices are unmanaged and an investor cannot invest directly in an index. The Blended Benchmark returns are calculated by using the monthly returns of the four indices during each period shown above. At the beginning of each month the four indices are rebalanced to a 30/30/30/10 ratio to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. |
| Since the ICE USD Contingent Capital Index had an inception date of December 31, 2013, the performance of the Blended Benchmark is not available for all of the periods disclosed. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Preferred Securities and Income ETF (FPE) (Continued)
| |
Wells Fargo & Co., Series L | |
| |
Highlands Holdings Bond Issuer Ltd. / Highlands Holdings Bond Co-Issuer, Inc. | |
JPMorgan Chase & Co., Series NN | |
| |
Algonquin Power & Utilities Corp. | |
Bank of America Corp., Series L | |
| |
| |
Toronto-Dominion Bank (The) | |
| |
| The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, 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 the 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. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Preferred Securities and Income ETF (FPE) (Continued)
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Fund Performance Overview (Unaudited) (Continued)
First Trust Institutional Preferred Securities and Income ETF (FPEI)
The First Trust Institutional Preferred Securities and Income ETF’s (the “Fund”) investment objective is to seek total return and to provide current income. Under normal market conditions, the Fund invests at least 80% of its net assets (including investment borrowings) in institutional preferred securities (“Preferred Securities”) and income-producing debt securities (“Income Securities”). Preferred Securities are a type of equity security that have preference over common stock in the payment of distributions and the liquidation of a company’s assets, but are generally junior to all forms of the company’s debt, including both senior and subordinated debt. The Fund’s investments in Preferred Securities will primarily be in institutional preferred securities. Institutional preferred securities are targeted to institutional, rather than retail, investors, are generally traded over-the-counter and may also be known as “$1,000 par preferred securities.” They are typically issued in large, institutional lot sizes by U.S. and non-U.S. financial services companies and other companies. While all income-producing debt securities will be categorized as “Income Securities” for purposes of the 80% test above, the Income Securities in which the Fund intends to invest as part of its principal investment strategy include hybrid capital securities, contingent capital securities, U.S. and non-U.S. corporate bonds and convertible securities.
|
| | | Average Annual Total Returns | |
| | | | Inception
(8/22/17)
to 4/30/24 | | Inception
(8/22/17)
to 4/30/24 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
ICE BofA US Investment Grade Institutional Capital Securities Index | | | | | | |
Bloomberg US Aggregate Bond Index | | | | | | |
(See Notes to Fund Performance Overview on page 9.)
| The Blended Benchmark consists of a 45/40/15 blend of the ICE BofA US Investment Grade Institutional Capital Securities Index, the ICE USD Contingent Capital Index and the ICE BofA US High Yield Institutional Capital Securities Index. The Blended Benchmark is intended to reflect the proportional market cap of each segment within the institutional market. The Blended Benchmark returns are calculated by using the monthly returns of the three indices during each period shown above. At the beginning of each month the three indices are rebalanced to a 45/40/15 ratio to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Institutional Preferred Securities and Income ETF (FPEI) (Continued)
| |
Toronto-Dominion Bank (The) | |
| |
| |
| |
| |
Bank of America Corp., Series TT | |
| |
JPMorgan Chase & Co., Series NN | |
Energy Transfer, L.P., Series G | |
| |
| |
| The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, 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 the 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. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Institutional Preferred Securities and Income ETF (FPEI) (Continued)
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Notes to Fund Performance Overview (Unaudited)
Total returns for the periods since inception are calculated from the inception date of each Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.
Each Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of each Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future performance.
First Trust Exchange-Traded Fund IIISemi-Annual ReportApril 30, 2024 (Unaudited) Advisor
First Trust Advisors L.P. (“First Trust”) serves as the investment advisor to the First Trust Preferred Securities and Income ETF and the First Trust Institutional Preferred Securities and Income ETF (each a “Fund” and collectively the “Funds”). First Trust is responsible for the ongoing monitoring of each Fund’s investment portfolio, managing each Fund’s business affairs and providing certain administrative services necessary for the management of each Fund.
Stonebridge Advisors LLC (“Stonebridge” or the “Sub-Advisor”) is the sub-advisor to the Funds and is a registered investment advisor based in Wilton, Connecticut. Stonebridge specializes in the management of preferred and hybrid securities.
Stonebridge Advisors LLC Portfolio Management Team
The following persons serve as portfolio managers of the Funds:
Robert Wolf - Chief Investment Officer, Executive Vice President and Senior Portfolio Manager
Eric Weaver - Executive Vice President, Chief Strategist and Portfolio Manager
Angelo Graci, CFA - Executive Vice President, Head of Credit Research and Portfolio Manager
The portfolio managers are primarily and jointly responsible for the day-to-day management of the Funds. Each portfolio manager has served as part of the portfolio management team of the Funds since 2013 for FPE and 2017 for FPEI, except for Eric Weaver and Angelo Graci, who have served as members of the portfolio management team since 2020 and 2022, respectively.
First Trust Exchange-Traded Fund IIIUnderstanding Your Fund ExpensesApril 30, 2024 (Unaudited) As a shareholder of First Trust Preferred Securities and Income ETF or First Trust Institutional Preferred Securities and Income ETF (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 of investing in the Funds and to compare these costs with the ongoing costs of investing in other 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 April 30, 2024.
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides 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 costs 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 brokerage commissions. Therefore, the second line in 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.
| Beginning
Account Value
November 1, 2023 | Ending
Account Value
April 30, 2024 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
First Trust Preferred Securities and Income ETF (FPE) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
First Trust Institutional Preferred Securities and Income ETF (FPEI) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
| Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 1, 2023 through April 30, 2024), multiplied by 182/366 (to reflect the six-month period). |
First Trust Preferred Securities and Income ETF (FPE)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | | | |
CAPITAL PREFERRED SECURITIES — 70.6% |
| | |
| Banco Bilbao Vizcaya Argentaria S.A. (a) (b) | | | |
| Banco Bilbao Vizcaya Argentaria S.A., Series 9 (a) (b) | | | |
| Banco de Credito e Inversiones S.A. (a) (b) (d) | | | |
| Banco de Credito e Inversiones S.A. (a) (b) (e) | | | |
| Banco del Estado de Chile (b) (d) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (d) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (d) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (d) | | | |
| Banco Santander S.A. (a) (b) | | | |
| Banco Santander S.A. (a) (b) | | | |
| Banco Santander S.A. (a) (b) | | | |
| Bank of America Corp., Series RR (b) | | | |
| Bank of America Corp., Series TT (b) | | | |
| | | | |
| Bank of Nova Scotia (The) (b) | | | |
| Bank of Nova Scotia (The) (b) | | | |
| | | | |
| | | | |
| | | | |
| BBVA Bancomer S.A. (a) (b) (d) | | | |
| BBVA Bancomer S.A. (a) (b) (d) | | | |
| BNP Paribas S.A. (a) (b) (d) | | | |
| BNP Paribas S.A. (a) (b) (d) | | | |
| BNP Paribas S.A. (a) (b) (d) | | | |
| BNP Paribas S.A. (a) (b) (d) | | | |
| BNP Paribas S.A. (a) (b) (d) | | | |
| Citigroup, Inc., Series AA (b) | | | |
| Citigroup, Inc., Series BB (b) | | | |
| Citigroup, Inc., Series M (b) | | | |
| Citigroup, Inc., Series P (b) | | | |
| Citigroup, Inc., Series W (b) | | | |
| Citigroup, Inc., Series X (b) | | | |
| Citigroup, Inc., Series Z (b) | | | |
| Citizens Financial Group, Inc., Series F (b) | | | |
| Citizens Financial Group, Inc., Series G (b) | | | |
| | | | |
| | | | |
| | | | |
| Commerzbank AG (a) (b) (e) | | | |
| Farm Credit Bank of Texas, Series 3 (b) (d) | | | |
| Farm Credit Bank of Texas, Series 4 (b) (d) | | | |
| Fifth Third Bancorp, Series L (b) | | | |
| HSBC Holdings PLC (a) (b) | | | |
| HSBC Holdings PLC (a) (b) | | | |
| Huntington Bancshares, Inc., Series G (b) | | | |
| | | | |
| | | | |
| ING Groep N.V. (a) (b) (e) | | | |
| ING Groep N.V. (a) (b) (e) | | | |
| Intesa Sanpaolo S.p.A. (a) (b) (d) | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| | |
| JPMorgan Chase & Co., Series NN (b) | | | |
| Lloyds Banking Group PLC (a) (b) | | | |
| Lloyds Banking Group PLC (a) (b) | | | |
| Lloyds Banking Group PLC (a) (b) | | | |
| NatWest Group PLC (a) (b) | | | |
| NatWest Group PLC (a) (b) | | | |
| PNC Financial Services Group (The), Inc., Series U (b) | | | |
| PNC Financial Services Group (The), Inc., Series V (b) | | | |
| PNC Financial Services Group (The), Inc., Series W (b) | | | |
| | | | |
| Societe Generale S.A. (a) (b) (d) | | | |
| Societe Generale S.A. (a) (b) (d) | | | |
| Societe Generale S.A. (a) (b) (d) | | | |
| Standard Chartered PLC (a) (b) (d) | | | |
| Standard Chartered PLC (a) (b) (d) | | | |
| Sumitomo Mitsui Financial Group, Inc. (a) (b) | | | |
| Svenska Handelsbanken AB (a) (b) (e) | | | |
| | | | |
| | | | |
| Texas Capital Bancshares, Inc. (b) | | | |
| Toronto-Dominion Bank (The) (b) | | | |
| | | | |
| | | | |
| Wells Fargo & Co., Series BB (b) | | | |
| | | | | |
| | |
| Apollo Management Holdings, L.P. (b) (d) | | | |
| Ares Finance Co. III LLC (b) (d) | | | |
| Charles Schwab (The) Corp., Series G (b) | | | |
| Charles Schwab (The) Corp., Series H (b) | | | |
| Charles Schwab (The) Corp., Series I (b) | | | |
| Charles Schwab (The) Corp., Series K (b) | | | |
| Credit Suisse Group AG, Claim (f) (g) | | | |
| Credit Suisse Group AG, Claim (f) (g) | | | |
| Credit Suisse Group AG, Claim (f) (g) | | | |
| Credit Suisse Group AG, Claim (f) (g) | | | |
| Credit Suisse Group AG, Claim (f) (g) | | | |
| Deutsche Bank AG, Series 2020 (a) (b) | | | |
| Goldman Sachs Group (The), Inc., Series R (b) | | | |
| Goldman Sachs Group (The), Inc., Series W (b) | | | |
| Goldman Sachs Group (The), Inc., Series X (b) | | | |
| State Street Corp., Series I (b) | | | |
| | | | | |
| Construction Materials — 0.4% | |
| Cemex S.A.B. de C.V. (b) (d) | | | |
| Electric Utilities — 1.2% | |
| Edison International, Series A (b) | | | |
| Emera, Inc., Series 16-A (b) | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| Electric Utilities (Continued) | |
| NextEra Energy Capital Holdings, Inc. (b) | | | |
| Southern California Edison Co., Series E, 3 Mo. CME Term SOFR + CSA + 4.20% (h) | | | |
| | | | | |
| Financial Services — 3.0% | |
| American AgCredit Corp. (b) (d) | | | |
| Capital Farm Credit ACA, Series 1 (b) (d) | | | |
| Compeer Financial ACA (b) (d) | | | |
| Corebridge Financial, Inc. (b) | | | |
| | | | | |
| | |
| Dairy Farmers of America, Inc. (i) | | | |
| Land O’ Lakes Capital Trust I (i) | | | |
| | | | |
| | | | |
| | | | |
| | | | | |
| | |
| | | | |
| Assured Guaranty Municipal Holdings, Inc. (b) (d) | | | |
| AXIS Specialty Finance LLC (b) | | | |
| CNP Assurances SACA (b) (e) | | | |
| | | | |
| | | | |
| Fortegra Financial Corp. (b) (i) | | | |
| Global Atlantic Fin Co. (b) (d) | | | |
| Hartford Financial Services Group (The), Inc., 3 Mo. CME Term SOFR + CSA + 2.13% (d) (h) | | | |
| Kuvare US Holdings, Inc. (b) (d) | | | |
| | | | |
| Lancashire Holdings Ltd. (b) (e) | | | |
| Liberty Mutual Group, Inc. (b) (d) | | | |
| Lincoln National Corp., Series C (b) | | | |
| Prudential Financial, Inc. (b) | | | |
| QBE Insurance Group Ltd. (b) (d) | | | |
| QBE Insurance Group Ltd. (b) (e) | | | |
| | | | | |
| | |
| Algonquin Power & Utilities Corp. (b) | | | |
| | | | |
| | | | |
| | | | | |
| Oil, Gas & Consumable Fuels — 6.7% | |
| | | | |
| | | | |
| | | | |
| Enbridge, Inc., Series 16-A (b) | | | |
| Enbridge, Inc., Series 20-A (b) | | | |
| Energy Transfer, L.P. (b) | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| Oil, Gas & Consumable Fuels (Continued) | |
| Energy Transfer, L.P., Series B (b) | | | |
| Energy Transfer, L.P., Series F (b) | | | |
| Energy Transfer, L.P., Series G (b) | | | |
| Energy Transfer, L.P., Series H (b) | | | |
| Enterprise Products Operating LLC (b) | | | |
| | | | |
| | | | |
| | | | | |
| | |
| Scentre Group Trust 2 (b) (d) | | | |
| Scentre Group Trust 2 (b) (d) | | | |
| | | | | |
| Trading Companies & Distributors — 0.6% | |
| | | | |
| Total Capital Preferred Securities | |
| | |
| | | | |
$25 PAR PREFERRED SECURITIES — 22.4% |
| | |
| | | | |
| | | | |
| | | | | |
| | |
| Bank of America Corp., Series KK | | | |
| Bank of America Corp., Series NN | | | |
| JPMorgan Chase & Co., Series DD | | | |
| JPMorgan Chase & Co., Series JJ | | | |
| JPMorgan Chase & Co., Series LL | | | |
| | | | |
| | | | |
| Pinnacle Financial Partners, Inc., Series B | | | |
| | | | |
| Wells Fargo & Co., Series Y | | | |
| Wintrust Financial Corp., Series E (b) | | | |
| | | | | |
| | |
| Affiliated Managers Group, Inc. | | | |
| Affiliated Managers Group, Inc. | | | |
| Affiliated Managers Group, Inc. (g) | | | |
| Affiliated Managers Group, Inc. | | | |
| Brookfield Oaktree Holdings, LLC, Series A | | | |
| Brookfield Oaktree Holdings, LLC, Series B | | | |
| | | | |
| KKR Group Finance Co. IX LLC | | | |
| TPG Operating Group II, L.P. | | | |
| | | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
$25 PAR PREFERRED SECURITIES (Continued) |
| | |
| Capital One Financial Corp., Series I | | | |
| Capital One Financial Corp., Series J | | | |
| | | | | |
| | |
| Global Net Lease, Inc., Series A | | | |
| Diversified Telecommunication Services — 0.5% | |
| | | | |
| | | | |
| | | | | |
| Electric Utilities — 1.3% | |
| Duke Energy Corp., Series A | | | |
| SCE Trust IV, Series J (b) | | | |
| SCE Trust V, Series K (b) | | | |
| | | | |
| | | | |
| | | | | |
| Financial Services — 0.9% | |
| Equitable Holdings, Inc., Series A | | | |
| Jackson Financial, Inc. (b) | | | |
| Voya Financial, Inc., Series B (b) | | | |
| | | | | |
| | |
| | | | |
| | |
| South Jersey Industries, Inc. (g) | | | |
| Independent Power and Renewable Electricity Producers — 0.5% | |
| Brookfield BRP Holdings Canada, Inc. | | | |
| Brookfield Renewable Partners, L.P., Series 17 | | | |
| | | | | |
| | |
| | | | |
| American Equity Investment Life Holding Co., Series A (b) | | | |
| American Equity Investment Life Holding Co., Series B (b) | | | |
| AmTrust Financial Services, Inc. | | | |
| AmTrust Financial Services, Inc. | | | |
| Arch Capital Group Ltd., Series F | | | |
| Arch Capital Group Ltd., Series G | | | |
| Argo Group International Holdings, Inc. (b) | | | |
| Aspen Insurance Holdings Ltd. | | | |
| Aspen Insurance Holdings Ltd. (g) | | | |
| Aspen Insurance Holdings Ltd. (b) | | | |
| | | | |
| | | | |
| Athene Holding Ltd., Series A (b) | | | |
| Athene Holding Ltd., Series C (b) | | | |
| Athene Holding Ltd., Series D | | | |
| Athene Holding Ltd., Series E (b) | | | |
| Axis Capital Holdings Ltd., Series E | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
$25 PAR PREFERRED SECURITIES (Continued) |
| | |
| CNO Financial Group, Inc. | | | |
| Delphi Financial Group Inc., 3 Mo. CME Term SOFR + CSA + 3.19% (h) | | | |
| F&G Annuities & Life, Inc. | | | |
| | | | |
| | | | |
| | | | |
| RenaissanceRe Holdings Ltd., Series F | | | |
| RenaissanceRe Holdings Ltd., Series G | | | |
| | | | |
| | | | | |
| | |
| AGNC Investment Corp., Series D, 3 Mo. CME Term SOFR + CSA + 4.33% (h) | | | |
| AGNC Investment Corp., Series E (b) | | | |
| AGNC Investment Corp., Series F (b) | | | |
| Annaly Capital Management, Inc., Series I (b) | | | |
| | | | | |
| | |
| Algonquin Power & Utilities Corp., Series 19-A (b) | | | |
| Brookfield Infrastructure Finance ULC | | | |
| Brookfield Infrastructure Partners, L.P., Series 13 | | | |
| Brookfield Infrastructure Partners, L.P., Series 14 | | | |
| | | | |
| | | | |
| CMS Energy Corp., Series C | | | |
| | | | |
| | | | |
| | | | |
| | | | | |
| Oil, Gas & Consumable Fuels — 0.3% | |
| Energy Transfer, L.P., Series E (b) | | | |
| NuStar Energy, L.P., Series A, 3 Mo. CME Term SOFR + CSA + 6.77% (h) | | | |
| | | | | |
| Real Estate Management & Development — 0.9% | |
| Brookfield Property Partners, L.P., Series A | | | |
| Brookfield Property Partners, L.P., Series A-1 | | | |
| Brookfield Property Partners, L.P., Series A2 | | | |
| Brookfield Property Preferred, L.P. | | | |
| DigitalBridge Group, Inc., Series I | | | |
| DigitalBridge Group, Inc., Series J | | | |
| | | | | |
| | |
| | | | |
| | | | |
| | | | |
| | | | | |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
$25 PAR PREFERRED SECURITIES (Continued) |
| Trading Companies & Distributors — 0.2% | |
| Air Lease Corp., Series A (b) | | | |
| Wireless Telecommunication Services — 0.9% | |
| United States Cellular Corp. | | | |
| United States Cellular Corp. | | | |
| United States Cellular Corp. | | | |
| | | | | |
| Total $25 Par Preferred Securities | |
| | |
$1,000 PAR PREFERRED SECURITIES — 3.9% |
| |
| Bank of America Corp., Series L | | | |
| Wells Fargo & Co., Series L | | | |
| Total $1,000 Par Preferred Securities | | |
| | | |
| | | | |
FOREIGN CORPORATE BONDS AND NOTES — 2.0% |
| | |
| Highlands Holdings Bond Issuer Ltd. / Highlands Holdings Bond Co-Issuer, Inc. (d) (j) | | | |
| | | | |
| | |
EXCHANGE-TRADED FUNDS — 0.1% |
| | |
| SPDR Bloomberg 1-3 Month T-Bill ETF, Class B | |
| | |
| | | | | |
$100 PAR PREFERRED SECURITIES — 0.0% |
| |
| Dairy Farmers of America, Inc. (d) | | | |
| | | | |
|
|
| Total Investments — 99.0% | |
| | |
| Net Other Assets and Liabilities — 1.0% | |
| | |
| This security is a contingent convertible capital security which may be subject to conversion into common stock of the issuer under certain circumstances. At April 30, 2024, securities noted as such amounted to $1,239,187,466 or 23.7% of net assets. Of these securities, 8.2% originated in emerging markets, and 91.8% originated in foreign markets. |
| Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at April 30, 2024. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. |
| |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “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 April 30, 2024, securities noted as such amounted to $1,179,880,388 or 22.6% of net assets. |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| Claim pending with the administrative court of Switzerland. |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
| Floating or variable rate security. |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2C - Restricted Securities in the Notes to Financial Statements). |
| These notes are Senior Payment-in-kind (“PIK”) Toggle Notes whereby the issuer may, at its option, elect to pay interest on the notes (1) entirely in cash or (2) entirely in PIK interest. Interest paid in cash will accrue on the notes at a rate of 7.63% per annum (“Cash Interest Rate”) and PIK interest will accrue on the notes at a rate per annum equal to the Cash Interest Rate plus 75 basis points. For the six months ended April 30, 2024 this security paid all of its interest in cash. |
Abbreviations throughout the Portfolio of Investments: |
| – Chicago Mercantile Exchange |
| – Credit Spread Adjustment |
| – Real Estate Investment Trusts |
| – Secured Overnight Financing Rate |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Net Other Assets and Liabilities | |
| |
See Notes to Financial Statements
First Trust Preferred Securities and Income ETF (FPE)Portfolio of Investments (Continued)April 30, 2024 (Unaudited)
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Capital Preferred Securities* | | | | |
$25 Par Preferred Securities: | | | | |
| | | | |
| | | | |
Other Industry Categories* | | | | |
$1,000 Par Preferred Securities* | | | | |
Foreign Corporate Bonds and Notes* | | | | |
| | | | |
$100 Par Preferred Securities* | | | | |
| | | | |
| See Portfolio of Investments for industry breakout. |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | | | |
CAPITAL PREFERRED SECURITIES — 95.1% |
| | |
| Australia & New Zealand Banking Group Ltd. (a) (b) (c) | | | |
| Australia & New Zealand Banking Group Ltd. (b) (c) (e) | | | |
| Banco Bilbao Vizcaya Argentaria S.A. (b) (c) | | | |
| Banco Bilbao Vizcaya Argentaria S.A., Series 9 (b) (c) | | | |
| Banco de Credito e Inversiones S.A. (a) (b) (c) | | | |
| Banco de Credito e Inversiones S.A. (b) (c) (e) | | | |
| Banco del Estado de Chile (a) (c) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (c) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (c) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (c) | | | |
| Banco Mercantil del Norte S.A. (a) (b) (c) | | | |
| Banco Santander S.A. (b) (c) | | | |
| Banco Santander S.A. (b) (c) | | | |
| Banco Santander S.A. (b) (c) | | | |
| Bank of America Corp., Series RR (c) | | | |
| Bank of America Corp., Series TT (c) | | | |
| Bank of America Corp., Series X (c) | | | |
| | | | |
| Bank of Nova Scotia (The) (c) | | | |
| Bank of Nova Scotia (The) (c) | | | |
| | | | |
| | | | |
| | | | |
| BBVA Bancomer S.A. (a) (b) (c) | | | |
| BBVA Bancomer S.A. (a) (b) (c) | | | |
| BNP Paribas S.A. (a) (b) (c) | | | |
| BNP Paribas S.A. (a) (b) (c) | | | |
| BNP Paribas S.A. (a) (b) (c) | | | |
| BNP Paribas S.A. (a) (b) (c) | | | |
| BNP Paribas S.A. (a) (b) (c) | | | |
| Citigroup, Inc., Series AA (c) | | | |
| Citigroup, Inc., Series BB (c) | | | |
| Citigroup, Inc., Series M (c) | | | |
| Citigroup, Inc., Series P (c) | | | |
| Citigroup, Inc., Series W (c) | | | |
| Citigroup, Inc., Series X (c) | | | |
| Citigroup, Inc., Series Y (c) | | | |
| Citizens Financial Group, Inc., Series F (c) | | | |
| Citizens Financial Group, Inc., Series G (c) | | | |
| | | | |
| | | | |
| | | | |
| Commerzbank AG (b) (c) (e) | | | |
| Corestates Capital III, 3 Mo. CME Term SOFR + CSA + 0.57% (a) (f) | | | |
| Danske Bank A/S (b) (c) (e) | | | |
| Farm Credit Bank of Texas, Series 3 (a) (c) | | | |
| Farm Credit Bank of Texas, Series 4 (a) (c) | | | |
| Fifth Third Bancorp, Series L (c) | | | |
| HSBC Holdings PLC (b) (c) | | | |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| | |
| HSBC Holdings PLC (b) (c) | | | |
| Huntington Bancshares, Inc., Series F (c) | | | |
| Huntington Bancshares, Inc., Series G (c) | | | |
| | | | |
| | | | |
| ING Groep N.V. (b) (c) (e) | | | |
| ING Groep N.V. (b) (c) (e) | | | |
| Intesa Sanpaolo S.p.A. (a) (b) (c) | | | |
| JPMorgan Chase & Co., Series KK (c) | | | |
| JPMorgan Chase & Co., Series NN (c) | | | |
| JPMorgan Chase & Co., Series Q, 3 Mo. CME Term SOFR + CSA + 3.25% (f) | | | |
| JPMorgan Chase & Co., Series S, 3 Mo. CME Term SOFR + CSA + 3.78% (f) | | | |
| Lloyds Banking Group PLC (b) (c) | | | |
| Lloyds Banking Group PLC (b) (c) | | | |
| Lloyds Banking Group PLC (b) (c) | | | |
| NatWest Group PLC (b) (c) | | | |
| NatWest Group PLC (b) (c) | | | |
| PNC Financial Services Group (The), Inc., Series U (c) | | | |
| PNC Financial Services Group (The), Inc., Series V (c) | | | |
| PNC Financial Services Group (The), Inc., Series W (c) | | | |
| | | | |
| Societe Generale S.A. (a) (b) (c) | | | |
| Societe Generale S.A. (a) (b) (c) | | | |
| Societe Generale S.A. (a) (b) (c) | | | |
| Standard Chartered PLC (a) (b) (c) | | | |
| Sumitomo Mitsui Financial Group, Inc. (b) (c) | | | |
| Svenska Handelsbanken AB (b) (c) (e) | | | |
| | | | |
| | | | |
| Texas Capital Bancshares, Inc. (c) | | | |
| Toronto-Dominion Bank (The) (c) | | | |
| | | | |
| UniCredit S.p.A. (b) (c) (e) | | | |
| | | | |
| Wells Fargo & Co., Series BB (c) | | | |
| | | | | |
| | |
| Apollo Management Holdings, L.P. (a) (c) | | | |
| Ares Finance Co. III LLC (a) (c) | | | |
| Charles Schwab (The) Corp., Series G (c) | | | |
| Charles Schwab (The) Corp., Series H (c) | | | |
| Charles Schwab (The) Corp., Series I (c) | | | |
| Charles Schwab (The) Corp., Series K (c) | | | |
| Credit Suisse Group AG, Claim (g) (h) | | | |
| Credit Suisse Group AG, Claim (g) (h) | | | |
| Credit Suisse Group AG, Claim (g) (h) | | | |
| Credit Suisse Group AG, Claim (g) (h) | | | |
| Credit Suisse Group AG, Claim (g) (h) | | | |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| Capital Markets (Continued) | |
| Deutsche Bank AG, Series 2020 (b) (c) | | | |
| Goldman Sachs Group (The), Inc., Series R (c) | | | |
| Goldman Sachs Group (The), Inc., Series T (c) | | | |
| Goldman Sachs Group (The), Inc., Series U (c) | | | |
| Goldman Sachs Group (The), Inc., Series W (c) | | | |
| Goldman Sachs Group (The), Inc., Series X (c) | | | |
| Macquarie Bank Ltd. (a) (b) (c) | | | |
| | | | |
| State Street Corp., Series I (c) | | | |
| | | | | |
| Construction Materials — 0.4% | |
| Cemex S.A.B. de C.V. (a) (c) | | | |
| Electric Utilities — 3.6% | |
| American Electric Power Co., Inc. (c) | | | |
| Edison International, Series A (c) | | | |
| Emera, Inc., Series 16-A (c) | | | |
| NextEra Energy Capital Holdings, Inc. (c) | | | |
| Southern California Edison Co., Series E, 3 Mo. CME Term SOFR + CSA + 4.20% (f) | | | |
| | | | | |
| Financial Services — 2.5% | |
| American AgCredit Corp. (a) (c) | | | |
| Capital Farm Credit ACA, Series 1 (a) (c) | | | |
| Compeer Financial ACA (a) (c) | | | |
| Corebridge Financial, Inc. (c) | | | |
| Equitable Holdings, Inc., Series B (c) | | | |
| Voya Financial, Inc., Series A (c) | | | |
| | | | | |
| | |
| Dairy Farmers of America, Inc. (i) | | | |
| Land O’ Lakes Capital Trust I (i) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | | |
| | |
| | | | |
| Assured Guaranty Municipal Holdings, Inc. (a) (c) | | | |
| Assured Guaranty Municipal Holdings, Inc. (c) (e) | | | |
| AXIS Specialty Finance LLC (c) | | | |
| CNP Assurances SACA (c) (e) | | | |
| | | | |
| | | | |
| Global Atlantic Fin Co. (a) (c) | | | |
| Hartford Financial Services Group (The), Inc., 3 Mo. CME Term SOFR + CSA + 2.13% (a) (f) | | | |
| Kuvare US Holdings, Inc. (a) (c) | | | |
| | | | |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
CAPITAL PREFERRED SECURITIES (Continued) |
| | |
| Lancashire Holdings Ltd. (c) (e) | | | |
| Liberty Mutual Group, Inc. (a) (c) | | | |
| Liberty Mutual Group, Inc. (a) | | | |
| Lincoln National Corp., Series C (c) | | | |
| | | | |
| MetLife Capital Trust IV (a) | | | |
| | | | |
| Prudential Financial, Inc. (c) | | | |
| QBE Insurance Group Ltd. (a) (c) | | | |
| QBE Insurance Group Ltd. (c) (e) | | | |
| | | | | |
| | |
| Algonquin Power & Utilities Corp. (c) | | | |
| Dominion Energy, Inc., Series B (c) | | | |
| Dominion Energy, Inc., Series C (c) | | | |
| | | | |
| | | | |
| | | | | |
| Oil, Gas & Consumable Fuels — 7.4% | |
| | | | |
| | | | |
| | | | |
| Enbridge, Inc., Series 16-A (c) | | | |
| Enbridge, Inc., Series 20-A (c) | | | |
| Energy Transfer, L.P. (c) | | | |
| Energy Transfer, L.P., Series B (c) | | | |
| Energy Transfer, L.P., Series F (c) | | | |
| Energy Transfer, L.P., Series G (c) | | | |
| Energy Transfer, L.P., Series H (c) | | | |
| Enterprise Products Operating LLC (c) | | | |
| | | | |
| | | | |
| | | | | |
| | |
| Scentre Group Trust 2 (a) (c) | | | |
| Scentre Group Trust 2 (a) (c) | | | |
| | | | | |
| Trading Companies & Distributors — 0.6% | |
| | | | |
| | | | |
| | | | | |
| Total Capital Preferred Securities | |
| | |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | | |
$1,000 PAR PREFERRED SECURITIES — 1.7% |
| |
| Bank of America Corp., Series L | | | |
| Wells Fargo & Co., Series L | | | |
| Total $1,000 Par Preferred Securities | | |
| | | |
| | | | |
FOREIGN CORPORATE BONDS AND NOTES — 1.5% |
| | |
| Highlands Holdings Bond Issuer Ltd. / Highlands Holdings Bond Co-Issuer, Inc. (a) (j) | | | |
| | | | |
|
|
| Total Investments — 98.3% | |
| | |
| Net Other Assets and Liabilities — 1.7% | |
| | |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “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 April 30, 2024, securities noted as such amounted to $299,637,047 or 23.9% of net assets. |
| This security is a contingent convertible capital security which may be subject to conversion into common stock of the issuer under certain circumstances. At April 30, 2024, securities noted as such amounted to $386,995,075 or 30.9% of net assets. Of these securities, 6.8% originated in emerging markets, and 93.2% originated in foreign markets. |
| Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at April 30, 2024. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. |
| |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| Floating or variable rate security. |
| Claim pending with the administrative court of Switzerland. |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2C - Restricted Securities in the Notes to Financial Statements). |
| These notes are Senior Payment-in-kind (“PIK”) Toggle Notes whereby the issuer may, at its option, elect to pay interest on the notes (1) entirely in cash or (2) entirely in PIK interest. Interest paid in cash will accrue on the notes at a rate of 7.63% per annum (“Cash Interest Rate”) and PIK interest will accrue on the notes at a rate per annum equal to the Cash Interest Rate plus 75 basis points. For the six months ended April 30, 2024 this security paid all of its interest in cash. |
Abbreviations throughout the Portfolio of Investments: |
| – Chicago Mercantile Exchange |
| – Credit Spread Adjustment |
| – Real Estate Investment Trusts |
| – Secured Overnight Financing Rate |
See Notes to Financial Statements
First Trust Institutional Preferred Securities and Income ETF (FPEI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
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| |
| |
| |
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Net Other Assets and Liabilities | |
| |
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Capital Preferred Securities* | | | | |
$1,000 Par Preferred Securities* | | | | |
Foreign Corporate Bonds and Notes* | | | | |
| | | | |
| See Portfolio of Investments for industry breakout. |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIStatements of Assets and Liabilities
April 30, 2024 (Unaudited)
| First Trust Preferred Securities and Income ETF
(FPE) | First Trust Institutional Preferred Securities and Income ETF
(FPEI) |
| | |
| | |
| | |
| | |
| | |
Investment securities sold | | |
| | |
| | |
| | |
| | |
|
| | |
| | |
Investment securities purchased | | |
| | |
| | |
| | |
|
| | |
| | |
| | |
Accumulated distributable earnings (loss) | | |
| | |
NET ASSET VALUE, per share | | |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | | |
| | |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIStatements of Operations
For the Six Months Ended April 30, 2024 (Unaudited)
| First Trust Preferred Securities and Income ETF
(FPE) | First Trust Institutional Preferred Securities and Income ETF
(FPEI) |
| | |
| | |
| | |
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| | |
|
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| | |
NET INVESTMENT INCOME (LOSS) | | |
|
NET REALIZED AND UNREALIZED GAIN (LOSS): | | |
Net realized gain (loss) on: | | |
| | |
| | |
| | |
Net change in unrealized appreciation (depreciation) on investments | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIStatements of Changes in Net Assets
| First Trust Preferred Securities and Income ETF (FPE) | First Trust Institutional Preferred Securities and Income ETF (FPEI) |
| Six Months
Ended
4/30/2024 (Unaudited) | | Six Months
Ended
4/30/2024 (Unaudited) | |
| | | | |
Net investment income (loss) | | | | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | | |
Net increase (decrease) in net assets resulting from operations | | | | |
|
DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | | |
| | | | |
| | | | |
Total distributions to shareholders | | | | |
|
SHAREHOLDER TRANSACTIONS: | | | | |
Proceeds from shares sold | | | | |
| | | | |
Net increase (decrease) in net assets resulting from shareholder transactions | | | | |
Total increase (decrease) in net assets | | | | |
|
| | | | |
| | | | |
| | | | |
|
CHANGES IN SHARES OUTSTANDING: | | | | |
Shares outstanding, beginning of period | | | | |
| | | | |
| | | | |
Shares outstanding, end of period | | | | |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIFinancial Highlights
For a share outstanding throughout each period First Trust Preferred Securities and Income ETF (FPE)
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
| | | | | | |
|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (d) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIFinancial Highlights (Continued)
For a share outstanding throughout each period First Trust Institutional Preferred Securities and Income ETF (FPEI)
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
| | | | | | |
|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (e) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| |
| Includes extraordinary legal fees. If the legal fees expense was not included, the expense ratio would have been 0.85%. |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
Notes to Financial Statements
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 1. Organization
First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of seventeen funds that are offering shares. This report covers the two funds (each a “Fund” and collectively, the “Funds”) listed below, each a diversified series of the Trust and listed and traded on NYSE Arca, Inc.
First Trust Preferred Securities and Income ETF – (ticker “FPE”) |
First Trust Institutional Preferred Securities and Income ETF – (ticker “FPEI”) |
Each Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”
Each Fund is an actively managed exchange-traded fund. The investment objective of each Fund is to seek total return and to provide current income.
Under normal market conditions, FPE seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in preferred securities and income-producing debt securities, including corporate bonds, high-yield securities (commonly referred to as “junk” bonds) and convertible securities.
Under normal market conditions, FPEI seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in institutional preferred securities and income-producing debt securities, including hybrid capital securities, contingent capital securities, U.S. and non-U.S. corporate bonds and convertible securities.
There can be no assurance that a Fund will achieve its investment objective. The Funds may not be appropriate for all investors.
2. Significant Accounting Policies
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of 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.
Each Fund’s NAV 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. Each Fund’s NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
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 readily available market quotations such as 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 Pricing Committee of the Funds’ investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. 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:
Preferred stocks, exchange-traded funds and other equity securities listed on any national or foreign exchange (excluding Nasdaq, Inc. (“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.
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 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 primary exchange for such securities.
Bonds, notes, capital preferred securities and other debt securities are fair valued on the basis of valuations provided by a third-party pricing service approved by the Advisor’s Pricing Committee, which may use the following valuation inputs when available:
7)
reference data including market research publications.
Securities trading on foreign exchanges or over-the-counter markets that close prior to the NYSE close may be valued using a systematic fair valuation model provided by a third-party pricing service. If these foreign securities meet certain criteria in relation to the valuation model, their valuation is systematically adjusted to reflect the impact of movement in the U.S. market after the close of the foreign markets.
Equity securities traded in an over-the-counter market are valued at the close price or the last trade price.
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 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 (the “1933 Act”)) 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, including, but not limited to, the following:
1)
the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price;
3)
the size of the holding;
4)
the initial cost of the security;
5)
transactions in comparable securities;
6)
price quotes from dealers and/or third-party pricing services;
7)
relationships among various securities;
8)
information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 9)
an analysis of the issuer’s financial statements;
10)
the existence of merger proposals or tender offers that might affect the value of the security; and
11)
other relevant factors.
If the securities in question are foreign securities, the following additional information may be considered:
1)
the last sale price on the exchange on which they are principally traded;
2)
the value of similar foreign securities traded on other foreign markets;
3)
ADR trading of similar securities;
4)
closed-end fund or exchange-traded fund trading of similar securities;
5)
foreign currency exchange activity;
6)
the trading prices of financial products that are tied to baskets of foreign securities;
7)
factors relating to the event that precipitated the pricing problem;
8)
whether the event is likely to recur;
9)
whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and
10)
other relevant factors.
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:
• 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.
• 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.
• 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 April 30, 2024, 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 real estate investment trusts (“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.
The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rates (“LIBOR”), ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. The overnight and 12-month USD LIBOR settings permanently ceased as of June 30, 2023. The FCA announced that the 1-, 3- and 6-month USD LIBOR settings will continue to be published using a synthetic methodology to serve as a fallback for non-U.S. contracts until September 2024. In response to the discontinuation of LIBOR, investors have added fallback provisions to existing contracts for investments
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) whose value is tied to LIBOR, with most fallback provisions requiring the adoption of the Secured Overnight Financing Rate (“SOFR”) as a replacement rate. There is no assurance that any alternative reference rate, including SOFR, will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. At this time, it is not possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments.
Each Fund invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of April 30, 2024, each Fund held restricted securities as shown in the following table that the Advisor has deemed illiquid pursuant to procedures adopted by the Trust’s Board of Trustees. 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. Each Fund does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security.
| | | | | | |
| | | | | | |
Dairy Farmers of America, Inc., 7.13% | | | | | | |
Fortegra Financial Corp., 8.50%, 10/15/57 | | | | | | |
Land O’ Lakes Capital Trust I, 7.45%, 03/15/28 | | | | | | |
| | | | | | |
| | | | | | |
Dairy Farmers of America, Inc., 7.13% | | | | | | |
Land O’ Lakes Capital Trust I, 7.45%, 03/15/28 | | | | | | |
| | | | | | |
D. Dividends and Distributions to Shareholders
Dividends from net investment income of each Fund, if any, are declared and paid monthly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by each Fund, if any, are distributed at least annually. Each Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2023 was as follows:
| Distributions
paid from
Ordinary
Income | Distributions
paid from
Capital
Gains | Distributions
paid from
Return of
Capital |
First Trust Preferred Securities and Income ETF | | | |
First Trust Institutional Preferred Securities and Income ETF | | | |
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) As of October 31, 2023, the components of distributable earnings on a tax basis for each Fund were as follows:
| Undistributed
Ordinary
Income | Accumulated
Capital and
Other
Gain (Loss) | Net
Unrealized
Appreciation
(Depreciation) |
First Trust Preferred Securities and Income ETF | | | |
First Trust Institutional Preferred Securities and Income ETF | | | |
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. The taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of April 30, 2024, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds’ financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2023, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the following table, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund’s shareholders.
| Non-Expiring
Capital Loss
Carryforwards |
First Trust Preferred Securities and Income ETF | |
First Trust Institutional Preferred Securities and Income ETF | |
As of April 30, 2024, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:
| | Gross Unrealized
Appreciation | Gross Unrealized
(Depreciation) | Net Unrealized
Appreciation
(Depreciation) |
First Trust Preferred Securities and Income ETF | | | | |
First Trust Institutional Preferred Securities and Income ETF | | | | |
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
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 is responsible for the ongoing monitoring of the securities in each Fund’s portfolio, managing the Funds’ business affairs and providing certain administrative services necessary for the management of the Funds.
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) Stonebridge Advisors LLC (“Stonebridge” or the “Sub-Advisor”), a majority-owned affiliate of First Trust, serves as each Fund’s sub-advisor and manages each Fund’s portfolio subject to First Trust’s supervision. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust will supervise Stonebridge and its management of the investment of each Fund’s assets and will pay Stonebridge for its services as each Fund’s sub-advisor. The Sub-Advisor receives a monthly portfolio management fee calculated at an annual rate of 0.425% of the average daily net assets of the Fund less the amount of Fund Expenses owed by the Sub-Advisor. During any period in which the Advisor’s management fee is reduced in accordance with the breakpoints described below, the investment sub-advisory fee (which is based on the Advisor’s management fee) paid to Stonebridge will be reduced to reflect the reduction in the Advisor’s management fee. First Trust is responsible for each Fund’s expenses, including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a 12b-1 plan, if any, and extraordinary expenses.
The annual unitary management fee payable by each Fund to First Trust for these services will be reduced at certain levels of the Fund’s net assets (“breakpoints”) and calculated pursuant to the schedule below:
| |
Fund net assets up to and including $2.5 billion | |
Fund net assets greater than $2.5 billion up to and including $5 billion | |
Fund net assets greater than $5 billion up to and including $7.5 billion | |
Fund net assets greater than $7.5 billion up to and including $10 billion | |
Fund net assets greater than $10 billion | |
Prior to November 6, 2023, First Trust also provided fund reporting services to the Fund for a flat annual fee in the amount of $9,250 per Fund, which was covered under the annual unitary management fee.
First Trust Capital Partners, LLC (“FTCP”), an affiliate of First Trust, owns a 51% ownership interest in Stonebridge.
Effective November 6, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNYM”). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund’s assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to November 6, 2023, the Trust had multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performed custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BBH was responsible for custody of each Fund’s assets. As fund accountant and administrator, BBH was responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BBH was responsible for maintaining shareholder records for each Fund.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.
Additionally, the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee, the Vice Chair of the Audit Committee, the Lead Independent Trustee and the Vice Lead Independent Trustee 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 Committee Chairs, the Audit Committee Vice Chair, the Lead Independent Trustee and the Vice Lead Independent Trustee rotate periodically in serving in such capacities. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 4. Purchases and Sales of Securities
For the six months ended April 30, 2024, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
| | |
First Trust Preferred Securities and Income ETF | | |
First Trust Institutional Preferred Securities and Income ETF | | |
For the six months ended April 30, 2024, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
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First Trust Preferred Securities and Income ETF | | |
First Trust Institutional Preferred Securities and Income ETF | | |
Effective February 28, 2024, the Trust, on behalf of the First Trust Preferred Securities and Income ETF, along with First Trust Exchange-Traded Fund IV, First Trust Series Fund and First Trust Variable Insurance Trust, entered into a new Credit Agreement with BNYM as administrative agent for a group of lenders. The borrowing rate is the higher of the federal funds effective rate and the adjusted daily simple SOFR rate plus 1.00%. The commitment amount under the credit agreement is $620 million and such commitment amount may be increased up to $700 million with the consent of one or more lenders. BNYM charges on behalf of the lenders a commitment fee of 0.20% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. Prior to February 28, 2024, the Trust, on behalf of the First Trust Preferred Securities and Income ETF, along with First Trust Exchange-Traded Fund IV and First Trust Series Fund, had a $550 million Credit Agreement with The Bank of Nova Scotia (“Scotia”) as administrative agent for a group of lenders. Scotia charged a commitment fee of 0.25% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. First Trust allocates the commitment fee and agency fee amongst the funds that have access to the credit line. To the extent that the Fund accesses the credit line, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the six months ended April 30, 2024.
6. Creations, Redemptions and Transaction Fees
Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with a Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in Creation Units. Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of a Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund’s shares at or close to the NAV per share of the Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2025.
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.
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
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.
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.
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.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a 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 a fund to many of the same risks associated with direct cyber security breaches.
Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the 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. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in 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 and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021.
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.
Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Funds and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 25, 2024 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 23, 2023 through the Liquidity Committee’s annual meeting held on March 14, 2024 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Funds primarily hold assets that are highly liquid investments, the Funds have not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum during the reporting period and no fund was required to file a Form N-RN during the reporting period. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
First Trust Exchange-Traded Fund III
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
Stonebridge Advisors LLC
10 Westport Road, Suite C101
Wilton, CT 06897
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
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For the Six Months Ended
April 30, 2024 |
First Trust Exchange-Traded Fund III
First Trust Managed Municipal ETF (FMB) |
First Trust Managed Municipal ETF (FMB)
Semi-Annual Report
April 30, 2024
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”) and its 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 the series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (First Trust Managed Municipal ETF; hereinafter referred to as the “Fund”) 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 the Fund will achieve its investment objectives. The 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’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
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, net asset value and share price 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 the Fund’s webpage at www.ftportfolios.com.
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund’s performance and investment approach.
The statistical information that follows may help you understand the Fund’s performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor 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 the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
First Trust Managed Municipal ETF (FMB)
Semi-Annual Letter from the Chairman and CEO
April 30, 2024
First Trust is pleased to provide you with the semi-annual report for the First Trust Managed Municipal ETF (the “Fund”), which contains detailed information about the Fund for the six-month period ended April 30, 2024.
On March 16, 2022, the Federal Reserve (the “Fed”) initiated the first of what have been eleven increases to the Federal Funds target rate thus far in the current cycle. Given its potential impact, financial pundits have been debating the direction and timing of the Fed’s interest rate policy ever since. In December 2023, the Fed gave some guidance, announcing that it expected to implement up to three interest rate cuts totaling 75 basis points (“bps”) in 2024. Investors responded to the news with exuberance. In the U.S., the S&P 500® Index surged by 10.56% on a total return basis in the first quarter of 2024, adding to its already stunning 26.29% total return in 2023. For comparison, the yield on the 10-Year Treasury Note (“T-Note”) stood at 3.80% on December 27, 2023, down a stunning 119 bps from its most recent high of 4.99% set just months prior on October 19, 2023. Bond yields generally move in the opposite direction of prices. Given this relationship, the decline in the 10-Year T-Note’s yield is indicative of investor’s desire to lock in higher income payments prior to the Fed reducing its policy rate.
At this point, it makes sense to step back and highlight several ways the Fed’s interest rate policy has impacted the U.S. economy. We’ll start with the good news. On April 30, 2024, inflation, as measured by the trailing 12-month rate on the Consumer Price Index, stood at 3.4%, down significantly from its most recent peak of 9.1% set in June 2022. Additionally, the higher Federal Funds target rate has been a boon for those investors with assets in fixed income, money market, and other interest-bearing accounts. The total value of assets held in U.S. money market accounts stood at $6.0 trillion on May 1, 2024, nearly double where it stood just five years ago. Notably, the weekly yield on the benchmark U.S. Treasury 3-Month Money Market Index more than doubled from 2.40% to 5.32% between the end of April 2019 and April 2024.
Now for the not-so-good news. Higher interest rates often restrict the ability of consumers and businesses to spend and finance growth, respectively. While the consumer has remained relatively unscathed thus far, evidence that they are stretching their budgets is mounting. The Federal Reserve Bank of New York reported that the total balance of U.S. credit card debt stood at a record $1.13 trillion at the end of 2023, while the average annual percentage rate for all cards rose to a record 21.59% in the first quarter of 2024. Perhaps unsurprisingly, delinquency rates have been surging. Data from the Federal Reserve Bank of St. Louis revealed that the delinquency rate on credit card loans for all U.S. commercial banks rose to 3.10% in the fourth quarter of 2023, up from 2.62% in the fourth quarter of 2019 (pre-COVID-19). In April 2024, 43% of small and mid-sized U.S. businesses were unable to pay their rent on time and in full. In addition, higher interest rates are impacting economic growth. In the U.S., real gross domestic product growth was a tepid 1.6% in the first quarter of 2024, far below consensus expectations of 2.5%. Not even the U.S. government is immune to the impacts of higher interest rates. At the end of the first quarter of 2024, the interest payments paid by the Federal government stood at a record $1.06 trillion, nearly double their total of $0.56 trillion at the end of the fourth quarter of 2019.
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 Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust Managed Municipal ETF (FMB)
The First Trust Managed Municipal ETF’s (the “Fund”) primary investment objective is to generate current income that is exempt from regular federal income taxes and its secondary objective is long term capital appreciation. The Fund lists and principally trades its shares on Nasdaq, Inc. under the ticker symbol “FMB.” Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes.
|
| | | Average Annual Total Returns | |
| | | | Inception
(5/13/14)
to 4/30/24 | | Inception
(5/13/14)
to 4/30/24 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Bloomberg Revenue 10 Year (8-12) Index | | | | | | |
Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived by the Advisor.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust Managed Municipal ETF (FMB) (Continued)
| % of Total
Investments
(including cash) |
| |
| |
Government Obligation Bond - Unlimited | |
| |
| |
| |
| |
| |
Industrial Development Bond | |
Certificates of Participation | |
| |
| |
Continuing Care Retirement Communities | |
| |
| |
Government Obligation Bond - Limited | |
| |
| |
| |
Pre-refunded/Escrowed-to-maturity | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| % of Total
Investments
(including cash) |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Net Other Assets and Liabilities(2) | |
| |
| The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, 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 the 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. |
| Includes variation margin on futures contracts. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Managed Municipal ETF (FMB) (Continued)
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Performance in municipal bond investment strategies can be impacted from the benefits of purchasing odd lot positions. The impact of these investments can be particularly meaningful when funds have limited assets under management and may not be a sustainable source of performance as a fund grows in size. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
First Trust Managed Municipal ETF (FMB)Semi-Annual ReportApril 30, 2024 (Unaudited) Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”) serves as the investment advisor to the First Trust Managed Municipal ETF (the “Fund”). First Trust is responsible for the ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Portfolio Management Team
The following persons serve as portfolio managers of the Fund:
Johnathan N. Wilhelm, Senior Vice President, Senior Portfolio Manager
Tom Byron, Senior Vice President, Senior Portfolio Manager
Shawn P. O’Leary, Senior Vice President, Senior Portfolio Manager
The portfolio managers are primarily and jointly responsible for the day-to-day management of the Fund. Johnathan N. Wilhelm has served as portfolio manager since 2014, Tom Byron has served as portfolio manager since 2022 and Shawn P. O’Leary has served as portfolio manager since April 2024.
First Trust Managed Municipal ETF (FMB)Understanding Your Fund ExpensesApril 30, 2024 (Unaudited) As a shareholder of First Trust Managed Municipal ETF (the “Fund”), 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 of investing in the Fund and to compare these costs with the ongoing costs of investing in other 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 April 30, 2024.
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the 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 costs of investing in the Fund 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 brokerage commissions. Therefore, the second line in 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.
| Beginning
Account Value
November 1, 2023 | Ending
Account Value
April 30, 2024 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
First Trust Managed Municipal ETF (FMB) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
| Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 1, 2023 through April 30, 2024), multiplied by 182/366 (to reflect the six-month period). |
First Trust Managed Municipal ETF (FMB)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | | | |
|
| | |
| AL Cmnty Clg Sys Brd of Trustees Rev Bishop St Cmnty Clg, BAM | | | |
| AL St Port Auth Docks Facs Rev Ref Docks Facs Rev, Ser A, AGM, AMT | | | |
| Black Belt Energy Gas Dist AL Gas Proj Rev Bonds Proj No. 7, Ser C-1 (Mandatory put 12/01/26) | | | |
| Black Belt Energy Gas Dist AL Gas Proj Rev Proj No. 6, Ser B (Mandatory put 12/01/26) | | | |
| Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C-1 (Mandatory put 06/01/29) | | | |
| Black Belt Energy Gas Dist AL Gas Proj Rev, Ser E | | | |
| Black Belt Energy Gas Dist AL Gas Proj Rev, Ser F (Mandatory put 12/01/28) | | | |
| Energy SE AL A Cooperative Dist Energy Sply Rev, Ser A-1 (Mandatory put 01/01/31) | | | |
| Energy SE AL A Cooperative Dist Energy Sply Rev, Ser B-1 (Mandatory put 11/01/31) | | | |
| Gulf Shores AL Ref Warrants, Ser A | | | |
| Gulf Shores AL Ref Warrants, Ser A | | | |
| Homewood AL Eductnl Bldg Auth Rev Ref Samford Univ Proj,
Ser A | | | |
| Homewood AL Eductnl Bldg Auth Rev Ref Samford Univ Proj,
Ser A | | | |
| Infirmary Hlth Sys AL Spl Care Facs Fing Auth Rev Infirmary Hlth Sys Inc, Ser A | | | |
| Jefferson Cnty AL Swr Rev Warrants Ref Warrants | | | |
| Jefferson Cnty AL Swr Rev Warrants Ref Warrants | | | |
| Jefferson Cnty AL Swr Rev Warrants Ref Warrants | | | |
| Leeds AL Pub Eductnl Bldg Auth Eductnl Facs Rev Ref Edu, AGM | | | |
| Lower AL Gas Dist Gas Proj Rev Bonds Proj 2 (Mandatory put 12/01/25) | | | |
| Midcity Impt Dist AL Spl Assmnt Rev | | | |
| Mobile AL Impt Dist Sales Tax Rev Mcgowin Park Proj, Ser A | | | |
| Mobile Cnty AL Impt Warrants (Pre-refunded maturity 08/01/25) | | | |
| Prichard AL Wtrwks & Swr Brd Wtr & Swr Rev Ref (a) | | | |
| Prichard AL Wtrwks & Swr Brd Wtr & Swr Rev Ref (a) | | | |
| Prichard AL Wtrwks & Swr Brd Wtr & Swr Rev Ref (a) | | | |
| SE AL St Gas Sply Dist Gas Sply Rev Proj #2, Ser A (Mandatory put 06/01/24) | | | |
| SE Energy Auth AL Cmdy Sply Rev Proj #1, Ser A (Mandatory put 10/01/28) | | | |
| SE Energy Auth AL Cmdy Sply Rev Proj #6, Ser B (Mandatory put 06/01/30) | | | |
| SE Energy Auth AL Cmdy Sply Rev Var Proj No 3, Ser A-1 (Mandatory put 12/01/29) | | | |
| UAB Medicine Fin Auth AL Rev Ref UAB Medicine, Ser B | | | |
| Univ of AL at Birmingham General Rev Brd of Trustees, Ser B | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| W Jefferson AL Indl Dev Brd Sol Wst Disp Rev Var AL Pwr Miller Plt Var Remk (b) | | | |
| Walker Cnty AL Econ & Indl Dev Auth Sol Wst Disp Rev Var AL Pwr Co Plant Gorgas Proj, AMT (b) | | | |
| | |
| | |
| AK St Indl Dev & Export Auth Pwr Rev Ref Snettisham Hydroelectric Proj, AMT | | | |
| Nthrn AK Tobacco Securitization Corp Tobacco Stlmt Rev Ref Sr, Ser A, Class 1 | | | |
| | |
| | |
| AZ St Indl Dev Auth Edu Rev Acads of Math & Science Proj (c) | | | |
| AZ St Indl Dev Auth Edu Rev Cadence Cmps Proj, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Cadence Cmps Proj, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Doral Acdmy NV Fire Mesa & Red Rock Cmps Proj, Ser A | | | |
| AZ St Indl Dev Auth Edu Rev Doral Acdmy NV Pebble, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Macombs Fac Proj Sustainable Bonds, Ser A | | | |
| AZ St Indl Dev Auth Edu Rev Ref Basis Sch Projs, Ser D (c) | | | |
| AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser G (c) | | | |
| AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (c) | | | |
| AZ St Indl Dev Auth Edu Rev Somerset Acdmy of LV Aliante & Skye Canyon Cmps Proj, Ser A (c) | | | |
| AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Sustainable Bond Equitable Sch Revolving Fund, Ser A | | | |
| AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Sustainable Bond Equitable Sch Revolving Fund, Ser A | | | |
| AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Sustainable Bonds Equitable Sch Revolving Fund, Ser A | | | |
| AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Sustainable Bonds Equitable Sch Revolving Fund, Ser A | | | |
| AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Sustainable Bonds Equitable Sch Revolving Fund, Ser A | | | |
| Chandler AZ Indl Dev Auth Indl Dev Rev Var Intel Corp Proj, Ser 2022-2, AMT (Mandatory put 09/01/27) | | | |
| Glendale AZ Indl Dev Auth Sr Living Facs Rev Ref Sun Hlth Svcs, Ser A | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Greathearts AZ Projs, Ser C | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Legacy Trad Schs Proj | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Horizon Cmnty Learning Ctr Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Legacy Trad Sch Proj | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Legacy Trad Schs Proj Auth, Ser B (c) | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Legacy Trad Schs Proj Auth, Ser B (c) | | | |
| Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Paradise Schs Projs Paragon Mgmt Inc (c) | | | |
| Maricopa Cnty AZ Indl Dev Auth Ref Banner Hlth Oblig Grp,
Ser A | | | |
| Maricopa Cnty AZ Spl Hlth Care Dist Aka Maricopa Integrated Hlth Sys, Ser C | | | |
| Phoenix AZ Indl Dev Auth Edu Rev Fac Legacy Trad Schs Projs, Ser A (c) | | | |
| Phoenix AZ Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser A (c) | | | |
| Phoenix AZ Indl Dev Auth Hotel Rev Sr Falcon Properties LLC Proj, Ser A (c) | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Downtown Phoenix Stdt Hsg II LLC AZ St Univ Proj, Ser A | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Downtown Phoenix Stdt Hsg II LLC AZ St Univ Proj, Ser A | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Downtown Phoenix Stdt Hsg II LLC AZ St Univ Proj, Ser A | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Downtown Phoenix Stdt Hsg II LLC AZ St Univ Proj, Ser A | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Downtown Phoenix Stdt Hsg II LLC AZ St Univ Proj, Ser A | | | |
| Phoenix AZ Indl Dev Auth Stdt Hsg Rev Ref Downtown Phoenix Stdt Hsg LLC AZ St Univ Proj, Ser A | | | |
| Tempe AZ Indl Dev Auth Rev Ref Friendship Vlg of Tempe Proj, Ser A | | | |
| | |
| | |
| Univ of Central AR Rev, Ser A, AGM | | | |
| | |
| Burbank CA Wtr & Pwr Elec Rev | | | |
| CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser A-1 (Mandatory put 08/01/28) | | | |
| CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser B-1 (Mandatory put 08/01/31) | | | |
| CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser B-1 (Mandatory put 08/01/29) | | | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | | | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | | | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | | | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | | | |
| CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A | | | |
| CA Sch Fin Auth Sch Fac Rev Alliance Clg Ready Pub Schs Proj, Ser C (c) | | | |
| CA Sch Fin Auth Sch Fac Rev Granada Hills Chrt Oblig Grp (c) | | | |
| CA Sch Fin Auth Sch Fac Rev Granada Hills Chrt Oblig Grp (c) | | | |
| CA Sch Fin Auth Sch Fac Rev Ref Hth Learning Proj, Ser A (c) | | | |
| CA Sch Fin Auth Sch Fac Rev Ref Hth Learning Proj, Ser A (c) | | | |
| CA Sch Fin Auth Sch Fac Rev, Ser A (c) | | | |
| CA St Enterprise Dev Auth Lease Rev Riverside Cnty Library Fac Proj | | | |
| CA St Hlth Facs Fing Auth Rev Ref Sutter Hlth, Ser B | | | |
| CA St Hlth Facs Fing Auth Rev Sutter Hlth, Ser A | | | |
| CA St Infra & Econ Dev Bank Rev Brightline W Passenger Rail Proj Remk, Ser A, AMT (Mandatory put 01/30/25) (b) (c) | | | |
| CA St Muni Fin Auth Chrt Sch Lease Rev Vista Chrt Middle Sch Proj (a) | | | |
| CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj (c) | | | |
| CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj, Ser A (c) | | | |
| CA St Muni Fin Auth Mobile Home Park Rev Sr Caritas Affordable Hsg Inc Projs, Ser A | | | |
| CA St Muni Fin Auth Mobile Home Park Rev Sr Caritas Affordable Hsg Inc Projs, Ser A | | | |
| CA St Muni Fin Auth Ref Palomar Hlth, Ser A, AGM, COPS | | | |
| CA St Muni Fin Auth Rev Channing House Proj, Ser B | | | |
| CA St Muni Fin Auth Rev Cmnty Hlth Sys, Ser A, AGM | | | |
| CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Ref Retmnt Hsg Fdtn Oblig Grp, Ser A | | | |
| CA St Muni Fin Auth Rev Sr Lien Linxs APM Proj, Ser A-P3 Proj, AMT | | | |
| CA St Muni Fin Auth Spl Fac Rev United Airls Inc Proj, AMT | | | |
| CA St Muni Fin Auth Stdt Hsg Rev Sustainable Bond Orchard Park Stdt Hsg Proj, BAM | | | |
| CA St Poll Control Fin Auth Sol Wst Disp Rev Ref Wst Mgmt Inc, Ser A1, AMT | | | |
| CA St Poll Control Fin Auth Sol Wst Disp Rev Var Rep Svcs Inc Proj Remk, AMT (Mandatory put 08/15/24) (b) (c) | | | |
| CA St Poll Control Fin Auth Sol Wst Disp Rev Var Rep Svcs Inc Proj Remk, Ser A2, AMT (Mandatory put 07/15/24) (b) (c) | | | |
| CA St Poll Control Fin Auth Sol Wst Disp Rev Var Rep Svcs Inc Proj, Ser A-1, AMT (Mandatory put 07/15/24) (b) (c) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| CA St Poll Control Fing Auth Wtr Furnishing Rev Plant Bonds, AMT (c) | | | |
| CA St Pub Wks Brd Lease Rev Various Capital Proj, Ser B | | | |
| | | | |
| | | | |
| CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr,
Ser A (c) | | | |
| CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr,
Ser A (c) | | | |
| CA Stwd Cmntys Dev Auth Rev Ref CA Baptist Univ, Ser A (c) | | | |
| CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | | | |
| CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | | | |
| Chino CA Cmnty Facs Dist Spl Tax #2003-3 Impt Area #7 | | | |
| Chino Vly CA Unif Sch Dist Cibs Election of 2016, Ser D | | | |
| Chino Vly CA Unif Sch Dist, Ser B | | | |
| Chino Vly CA Unif Sch Dist, Ser B | | | |
| CSCDA Cmnty Impt Auth CA Essential Hsg Rev The Link Glendale Sustainable Bonds, Ser A-2 (c) | | | |
| CSCDA Cmnty Impt Auth CA Essential Hsg Rev Union S Bay Sustainable Bonds, Ser A-2 (c) | | | |
| Etiwanda CA Sch Dist Cmnty Facs Dist #9 Spl Tax Ref | | | |
| Folsom Ranch CA Fing Auth Spl Tax Rev Cmnty Facs Dist No 19 Mangini | | | |
| Folsom Ranch CA Fing Auth Spl Tax Rev Cmnty Facs Dist No 19 Mangini | | | |
| Folsom Ranch CA Fing Auth Spl Tax Rev White Rock Springs Ranch | | | |
| Folsom Ranch CA Fing Auth Spl Tax Rev White Rock Springs Ranch | | | |
| Folsom Ranch CA Fing Auth Spl Tax Rev White Rock Springs Ranch | | | |
| Fontana CA Spl Tax Spl Tax The Meadows | | | |
| Fontana CA Spl Tax Spl Tax The Meadows | | | |
| Fontana CA Spl Tax Spl Tax The Meadows | | | |
| Fontana CA Spl Tax Spl Tax The Meadows | | | |
| Foothill-De Anza CA Cmnty Clg Dist Ref, COPS (Pre-refunded maturity 10/01/24) | | | |
| Gilroy CA Unif Sch Dist Election 2016 | | | |
| Hawthorne CA Cmnty Redev Agy Successor Agy Tax Allocation Ref Sub, AGM | | | |
| Irvine CA Facs Fing Auth Lease Rev Gateway Preserve Land Acq Proj, Ser A | | | |
| Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist No 09-1, Ser A | | | |
| Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist No 09-1, Ser A | | | |
| Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist No 09-1, Ser A | | | |
| Kern CA Cmnty Clg Dist, Ser D | | | |
| Lammersville CA Jt Unif Sch Dist Spl Tax Cmnty Facs Dist #2014-1 Impt Area #1 Mountain House Sch Facs | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Lammersville CA Jt Unif Sch Dist Spl Tax Cmnty Facs Dist #2014-1 Mountain House Sch Facs | | | |
| Long Beach CA Unif Sch Dist Ref | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Prerefunded Subord Ref, Ser D, AMT (Pre-refunded maturity 11/15/31) | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Ref Sub Priv Activity, Ser A, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Sr Bonds Priv Activity, Ser H, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Sr Bonds Sustainable Bond Priv Activity, Ser G, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Sr Bonds Sustainable Bond Priv Activity, Ser G, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Sub Los Angeles Intl Arpt, Ser B, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Subord Los Angeles Intl Arpt, Ser F, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Sustainable Bond Ref Subord Priv Activity, Ser A, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Unrefunded Subord Ref, Ser D, AMT | | | |
| Los Angeles CA Dept of Arpts Arpt Rev Unrefunded Subord Ref, Ser D, AMT | | | |
| Madera CA Unif Sch Dist Ref 2018 School Fac Proj, AGM, COPS | | | |
| Marina CA Redev Agy Successor Agy Tax Allocation Hsg, Ser B | | | |
| Menifee CA Union Sch Dist Pub Fing Auth Spl Tax Rev Ref, Ser A | | | |
| Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1 | | | |
| Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1 | | | |
| Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1 | | | |
| Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1 | | | |
| Met Wtr Dist of Sthrn CA Wtrwks Rev, Ser A | | | |
| Oceanside CA Unif Sch Dist Unrefunded 2022 Cap Apprec, Ser A, AGC | | | |
| Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208 | | | |
| Rancho Cordova CA Cmnty Facs Dist Spl Tax Rev Grantline 208 Cmnty Fac Dt #2018-1 | | | |
| River Islands CA Pub Fing Auth Spl Tax Cmnty Facs Dist #2003- 1, Ser A | | | |
| River Islands CA Pub Fing Auth Spl Tax Cmnty Facs Dist #2019-1 Phase 2 Pub Impts | | | |
| Riverside CA Unif Sch Dist Cmnty Facs Dt #33 Citrus Heights II Spl Tax | | | |
| Riverside CA Unif Sch Dist Cmnty Facs Dt #33 Citrus Heights II Spl Tax | | | |
| Riverside CA Unif Sch Dist Impt Area No 2 | | | |
| Riverside CA Unif Sch Dist Impt Area No 2 | | | |
| Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | | | |
| Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | | | |
| Roseville CA Spl Tax Svsp Westpark Federico Cmnty Facs Dt
No 1 | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Roseville CA Spl Tax Svsp Westpark Federico Cmnty Facs Dt
No 1 | | | |
| Roseville CA Spl Tax Vlg CFD #1 | | | |
| Roseville CA Spl Tax Vlg CFD #1 | | | |
| Roseville CA Spl Tax Vlg CFD #1 | | | |
| Roseville CA Spl Tax Vlg CFD #1 | | | |
| Sacramento CA Spl Tax Greenbriar Cmnty Facs Dist #2018-03 Impt Area #1 | | | |
| Sacramento CA Spl Tax Greenbriar Cmnty Facs Dist #2018-03 Impt Area #1 | | | |
| Sacramento CA Spl Tax Greenbriar Cmnty Facs Dist #2018-03 Impt Area #1 | | | |
| Sacramento CA Spl Tax Greenbriar Cmnty Facs Dist #2018-03 Impt Area #1 | | | |
| Sacramento CA Spl Tax Greenbriar Cmnty Facs Dist #2018-03 Impt Area #1 | | | |
| Sacramento CA Transient Occupancy Tax Rev Sub Convention Ctr Complex, Ser C | | | |
| San Diego Cnty CA Regl Arpt Auth Arpt Rev Sr Priv Activity, Ser B, AMT | | | |
| San Diego Cnty CA Regl Arpt Auth Arpt Rev Subord, Ser B, AMT | | | |
| San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev Ref, Ser A, AMT | | | |
| San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev, Ser A, AMT | | | |
| San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev, Ser E, AMT | | | |
| San Francisco CA City & Cnty Dev Spl Tax Dist No Mission Rock Fac & Svcs, Ser A (c) | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Cmnty Facs Dist #2016-1 | | | |
| San Francisco City & Cnty CA Redev Agy Successor Agy Tax Ref Mission Bay N Redev Proj, Ser A | | | |
| San Luis Obispo CA Cmnty Facs Dist #2019-1 Spl Tax | | | |
| San Luis Obispo Cnty CA Fing Auth Lease Rev Multiple Capital Projs Ref, Ser A | | | |
| San Luis Obispo Cnty CA Fing Auth Lease Rev Multiple Capital Projs Ref, Ser A | | | |
| Santa Margarita CA Wtr Dist Spl Tax Ref, Ser A, BAM | | | |
| Simi Vly CA Unif Sch Dist, Ser B | | | |
| Simi Vly CA Unif Sch Dist, Ser B | | | |
| Tahoe Truckee CA Unif Sch Dist, BAM, COPS | | | |
| Tahoe Truckee CA Unif Sch Dist, BAM, COPS | | | |
| Temecula Vly Unif Sch Dist Fing Auth CA Spl Tax Rev, BAM | | | |
| Tobacco Securitization Auth Nthrn CA Tobacco Stlmt Rev Ref Sr Bonds Sacramento CO Tocacco Secur Corp Class 1, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev Ref San Diego Co Asset Securitization Corp, Class 1, Ser A | | | |
| Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev Ref San Diego CO Asset Securitization Corp, Class 1, Ser A | | | |
| Tustin CA Cmnty Fac Dist Spl Tax Ref #06-1 Legacy Columbus Vlgs, Ser A | | | |
| Vacaville CA Unif Sch Dist, Ser D | | | |
| Victor CA Elem Sch Dist Cmnty Facs Dist Spl Tax Ref 2005-1, BAM | | | |
| | |
| | |
| Adams & Weld Cntys Co Sch Dist #27J Brighton | | | |
| Allison Vly Met Dist #2 CO Ref | | | |
| Bennett Ranch Met Dist #1 Co, Ser A (a) | | | |
| Breckenridge CO Ref, Ser B, COPS | | | |
| Brighton Crossing Met Dist #6 CO, Ser A | | | |
| Buffalo Ridge CO Met Dist Ref & Impt Sr, Ser A, BAM | | | |
| Buffalo Ridge CO Met Dist Ref & Impt Sr, Ser A, BAM | | | |
| Cascade Ridge Met Dist CO | | | |
| Cathedral Pines CO Met Dist Ref | | | |
| Centrl Weld Cnty CO Wtr Dist Rev, AGM | | | |
| CO Eductnl & Cultural Auth Rev Ref W Ridge Acdmy Chrt Sch Proj, Ser A | | | |
| CO Springs Co Pikes Peak Americas Mountain Enterprise Pikes Peak | | | |
| CO Springs Co Pikes Peak Americas Mountain Enterprise Pikes Peak | | | |
| CO St Eductnl & Cultural Facs Auth Rev Chrt Sch Loveland Classical Schs Proj (c) | | | |
| CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Univ Lab Bldg Corp (c) | | | |
| CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Univ Lab Bldg Corp (c) | | | |
| CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Univ Lab Bldg Corp (c) | | | |
| CO St Hlth Facs Auth Rev Ref Adventhealth Oblig, Ser A | | | |
| CO St Hlth Facs Auth Rev Ref Christian Living Neighborhoods Proj | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-1 | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-1 | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-2 | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-2 | | | |
| CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-2 | | | |
| CO St Hlth Facs Auth Rev Ref Frasier Meadows Retmnt Cmnty Proj, Ser A | | | |
| CO St Hlth Facs Auth Rev Ref Frasier Meadows Retmnt Cmnty Proj, Ser A | | | |
| CO St Hlth Facs Auth Rev Ref Scl Hlth Sys, Ser B | | | |
| CO St Hlth Facs Auth Rev Sr Living Ralston Creek Arvada Proj, Ser A (a) (e) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| | | | |
| | | | |
| | | | |
| Crystal Vly CO Met Dist #2 Ref, Ser A, AGM | | | |
| Crystal Vly CO Met Dist #2 Ref, Ser A, AGM | | | |
| Crystal Vly CO Met Dist #2 Ref, Ser A, AGM | | | |
| Crystal Vly CO Met Dist #2 Ref, Ser A, AGM | | | |
| Crystal Vly CO Met Dist #2 Ref, Ser A, AGM | | | |
| Denver City & Cnty CO Arpt Rev Ref Sub Sys, Ser A, AMT | | | |
| Denver City & Cnty CO Arpt Rev Ref Sub Sys, Ser A, AMT | | | |
| Denver City & Cnty CO Arpt Rev Ref Subord, Ser B, AMT | | | |
| Denver City & Cnty CO Arpt Rev Ref Subord, Ser B, AMT | | | |
| Denver City & Cnty CO Arpt Rev Ref, Ser D, AMT | | | |
| Denver City & Cnty CO Arpt Rev Ref, Ser D, AMT | | | |
| Denver City & Cnty CO Arpt Rev, Ser A, AMT | | | |
| Denver City & Cnty CO Arpt Rev, Ser A, AMT | | | |
| Denver City & Cnty CO Arpt Rev, Ser A, AMT | | | |
| Denver City & Cnty CO Sch Dist #1 Ref, Ser B | | | |
| Denver CO Hlth & Hosp Auth 550 Acoma Inc, COPS | | | |
| Denver CO Intl Busn Ctr CO Met Dist #1 Subord, Ser B | | | |
| Elbert & Hwy 86 CO Comml Spl Rev & Tax Supported Ref Sr Bonds, Ser A (c) | | | |
| Firestone CO Wtr Enterprise Rev Ref, BAM | | | |
| Flying Horse CO Met Dist #2 Ref, Ser A, AGM | | | |
| Flying Horse CO Met Dist #2 Ref, Ser A, AGM | | | |
| Flying Horse CO Met Dist #2 Ref, Ser A, AGM | | | |
| Hunters Overlook Metro Dist #5 CO Sr Bonds, Ser A | | | |
| Jefferson Ctr CO Met Dist #1 Spl Rev, Ser A-2 | | | |
| Lakes at Centerra Met Dist No 2 CO Impt, Ser A | | | |
| Lanterns Met Dist #1 CO Sr, Ser A | | | |
| Lanterns Met Dist #1 CO Sr, Ser A | | | |
| Larimer Weld & Boulder Cnty Co Sch Dist #R-2J Thompson | | | |
| Lorson Ranch Met Dist #2 CO | | | |
| Lorson Ranch Met Dist #2 CO | | | |
| Mirabelle Met Dist #2 CO Sr, Ser A | | | |
| Mirabelle Met Dist #2 CO Sr, Ser A | | | |
| Nexus N at Dia Met Dist CO | | | |
| Park Creek CO Met Dist Rev Ref Sr Ltd Property Tax Supported, Ser A | | | |
| Park Creek CO Met Dist Rev Ref Sr Ltd Property Tax Supported, Ser A | | | |
| Park Creek CO Met Dist Rev Ref Sr Ltd Property Tax Supported, Ser A | | | |
| Park Creek CO Met Dist Rev Sr Lien, Ser A, AGM | | | |
| Park Creek CO Met Dist Rev Sr, Ser A, NATL-RE | | | |
| Park Creek CO Met Dist Rev Sr, Ser A | | | |
| Park Creek Met Dist Ltd Property Tax Supported Rev, Ser A, AGM | | | |
| Peak Met Dist #1 CO, Ser A (c) | | | |
| Pinon Pines Met Dist #2 CO MDD | | | |
| Pinon Pines Met Dist #2 CO MDD | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Prairie Ctr CO Met Dist #3 Ltd Property Tax Supported Pri Ref,
Ser A (c) | | | |
| Prairie Ctr CO Met Dist #3 Ltd Property Tax Supported Pri Ref,
Ser A (c) | | | |
| Prairie Ctr Met Dist #7 CO | | | |
| Rampart Range CO Met Dist #1 Ltd Tax Supported & Spl Rev Ref & Impt, AGM | | | |
| Ravenna CO Met Dist Ref, AGM | | | |
| Riverwalk Metro Dist #2 CO, Ser A | | | |
| Sagebrush Farm Met Dist #1 CO Sr Bonds, Ser A | | | |
| Sand Creek CO Met Dist, AGM | | | |
| Sand Creek CO Met Dist, AGM | | | |
| Sand Creek CO Met Dist, AGM | | | |
| Sterling Hills CO W Met Dist Ref | | | |
| Sterling Ranch Cmnty Auth Brd CO Spl Assmnt Rev Spl Impt Dist No. 1 | | | |
| | | | |
| | | | |
| Third Creek Met Dist #1 CO Sr Bonds, Ser A-1 | | | |
| Third Creek Met Dist #1 CO Sr Bonds, Ser A-1 | | | |
| Thompson Crossing Met Dist #4 CO Ref | | | |
| Trails at Crowfoot Met Dist #3 CO Sr Ser, Ser A | | | |
| Westerly Met Dist #4 CO Sr, Ser A | | | |
| | |
| | |
| CT St Hlth & Eductnl Facs Auth Rev Covenant Home Inc, Ser B | | | |
| CT St Hlth & Eductnl Facs Auth Rev Hartford Hlthcare, Ser A | | | |
| CT St Hlth & Eductnl Facs Auth Rev Hartford Hlthcare, Ser A | | | |
| CT St Hlth & Eductnl Facs Auth Rev Quinnipiac Univ Ref, Ser M | | | |
| CT St Hlth & Eductnl Facs Auth Rev Ref Fairfield Univ, Ser R | | | |
| CT St Hlth & Eductnl Facs Auth Rev Ref Fairfield Univ, Ser R | | | |
| CT St Hlth & Eductnl Facs Auth Rev Ref Fairfield Univ, Ser S | | | |
| CT St Hlth & Eductnl Facs Auth Rev Ref Quinnipiac Univ, Ser L | | | |
| CT St Hlth & Eductnl Facs Auth Rev Ref Quinnipiac Univ, Ser L | | | |
| CT St Muni Elec Energy Coop Pwr Sply Sys Rev Ref, Ser A | | | |
| CT St Spl Tax Oblig Rev, Ser A | | | |
| CT St Spl Tax Oblig Rev, Ser A | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Harbor Point CT Infra Impt Dist Spl Oblig Rev Ref Harbor Point Proj Ltd (c) | | | |
| Univ of Connecticut CT, Ser A | | | |
| Univ of Connecticut CT, Ser A | | | |
| | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| DE St Econ Dev Auth Retmnt Cmntys Rev Acts Retmnt Life Cmntys Inc, Ser B | | | |
| DE St Hlth Facs Auth Rev Beebe Med Ctr | | | |
| DE St Hlth Facs Auth Rev Ref Christiana Hlth Care Sys Oblig Grp, Ser A | | | |
| DE St Hlth Facs Auth Rev Ref Christiana Hlth Care Sys Oblig Grp, Ser A | | | |
| Millsboro DE Spl Oblig Ref Plantation Lakes Spl Dev Dist (c) | | | |
| | |
| District of Columbia — 0.4% | |
| Met WA DC Arpts Auth Arpt Sys Rev Ref, AMT | | | |
| Met WA DC Arpts Auth Arpt Sys Rev Ref, Ser A, AMT | | | |
| Met WA DC Arpts Auth Arpt Sys Rev Ref, Ser A, AMT | | | |
| Met WA DC Arpts Auth Arpt Sys Rev Ref, Ser A, AMT | | | |
| | |
| | |
| Academical Vlg CDD FL Spl Assmnt Rev CDD | | | |
| Academical Vlg CDD FL Spl Assmnt Rev CDD | | | |
| Alachua Cnty FL Hlth Facs Auth CCRC Ref Oak Hammock at the Univ of FL Inc Proj | | | |
| Alachua Cnty FL Hlth Facs Auth Ref Shands Teaching Hosp & Clinics Inc, Ser B-1 | | | |
| Ave Maria FL Stewardship Cmnty Dist Capital Impt Rev Phase 4 Master Impt Proj (c) | | | |
| Berry Bay CDD FL Spl Assmnt Rev Assmnt Area One | | | |
| Berry Bay CDD FL Spl Assmnt Rev Assmnt Area One | | | |
| Bexley CDD FL Spl Assmnt Rev | | | |
| Broward Cnty FL Arpt Sys Rev, Ser A, AMT | | | |
| Broward Cnty FL Convention Ctr Hotel Rev First Tier | | | |
| Buckhead Trails CDD FL Spl Assmnt | | | |
| Charlotte Cnty FL Indl Dev Auth Util Sys Rev Town & Country Utils Proj (c) | | | |
| Citizens Property Insurance Corp FL, Ser A1 (Pre-refunded maturity 12/01/24) | | | |
| Coco Palms FL CDD Spl Assmnt | | | |
| Collier Cnty FL Indl Dev Auth Nch Hlthcare Sys Projs, Ser A, AGM | | | |
| Collier Cnty FL Indl Dev Auth Nch Hlthcare Sys Projs, Ser A, AGM | | | |
| Creekview CDD FL Spl Assmnt Rev Phase I Proj | | | |
| Cross Creek N CDD FL Spl Assmnt, Ser 2022 | | | |
| Cypress Mill CDD FL Spl Assmnt CDD Assmnt Area Two Proj | | | |
| Edgewater E CDD FL Spl Assmnt Rev Assmnt Area One | | | |
| Edgewater E CDD FL Spl Assmnt Rev Assmnt Area One | | | |
| Edgewater E CDD FL Spl Assmnt Rev Assmnt Area Two | | | |
| Epperson N CDD FL Capital Impt Rev Assmnt Area #2 | | | |
| Epperson N CDD FL Capital Impt Rev Assmnt Area 1, Ser A-1 (c) | | | |
| Epperson N CDD FL Capital Impt Rev Assmnt Area 1, Ser A-1 (c) | | | |
| Epperson N CDD FL Capital Impt Rev Assmnt Area Three, Ser A | | | |
| Fallschase Cmnty Dev Dist FL Spl Assmnt | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| FL Dev Fin Corp Hlthcare Facs Rev Tampa General Hosp Proj, Ser A | | | |
| FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | | | |
| FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | | | |
| FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | | | |
| FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | | | |
| FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | | | |
| FL St Dev Fin Corp Ref Brightline FL Passenger Rail Proj, AGM, AMT (f) | | | |
| FL St Dev Fin Corp Ref Brightline FL Passenger Rail Proj, AGM, AMT (f) | | | |
| Fort Pierce FL Utils Auth Ref, Ser A, AGM | | | |
| Gtr Orlando FL Aviation Auth Arpt Facs Rev, Ser A, AMT | | | |
| Halifax FL Hosp Med Ctr Ref | | | |
| Harmony FL CDD Capital Impt Rev Ref, Ser 2015 | | | |
| Heritage Harbour FL N CDD Capital Impt Rev Ref Sr Lien, Ser A-1, AGM | | | |
| Jacksonville FL Hlth Care Facs Rev Ref Baptist Hlth | | | |
| JEA FL Elec Sys Rev Ref Sub, Ser III B | | | |
| Lakeland FL Energy Sys Rev Ref | | | |
| Lakeland FL Hosp Sys Rev Lakeland Regl Hlth (Pre-refunded maturity 11/15/24) | | | |
| Lakewood Ranch FL Stewardship Dist Util Rev Sys Acq Proj, AGM | | | |
| Lee Cnty FL Indl Dev Auth Hlthcr Facs Rev Shell Point Oblig Grp | | | |
| Lee Cnty FL Loc Optional Gas Tax Rev | | | |
| Lee Cnty FL Loc Optional Gas Tax Rev | | | |
| Lee Memorial Hlth Sys FL Hosp Rev Ref, Ser A-1 | | | |
| Miami FL Spl Oblg Ref Street & Sidewalk Impt Prog, Ser A, AGM (c) | | | |
| Miami World Ctr CDD FL Spl Assmnt | | | |
| Miami World Ctr CDD FL Spl Assmnt | | | |
| Miami-Dade Cnty FL Aviation Rev Ref, Ser A | | | |
| Miami-Dade Cnty FL Aviation Rev Ref, Ser A, AMT | | | |
| Miami-Dade Cnty FL Aviation Rev Ref, Ser B, AMT | | | |
| Miami-Dade Cnty FL Indl Dev Auth Doral Acdmy Proj | | | |
| Miami-Dade Cnty FL Indl Dev Auth Doral Acdmy Proj | | | |
| Miami-Dade Cnty FL Indl Dev Auth Doral Acdmy Proj | | | |
| Miami-Dade Cnty FL Seaport Rev Ref Sr Bonds, Ser A, AMT | | | |
| Miami-Dade Cnty FL Spl Oblig Sub Ref | | | |
| N Park Isle Cmnty Dev Dist FL Spl Assmnt Rev Assmnt Area One | | | |
| N Park Isle Cmnty Dev Dist FL Spl Assmnt Rev Assmnt Area One | | | |
| N Park Isle Cmnty Dev Dist FL Spl Assmnt Rev Assmnt Area One | | | |
| N River Ranch Cdd FL Capital Impt Rev Phase 1 Proj, Ser A-1 | | | |
| N Sumter Cnty FL Util Dependent Dist Util Rev Sumter Wtr Conservation Auth Proj, AGM | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Nthrn Palm Beach Cnty FL Impt Dist | | | |
| Orange Cnty FL Hlth Facs Auth Rev Orlando Hlth Oblig Grp,
Ser A | | | |
| Orange Cnty FL Hlth Facs Auth Rev Orlando Hlth Oblig Grp,
Ser A | | | |
| Orange Cnty FL Hlth Facs Auth Rev Orlando Hlth Oblig Grp,
Ser A | | | |
| Orange Cnty FL Hlth Facs Auth Rev Presbyterian Retmnt Cmntys Proj | | | |
| Orange Cnty FL Hlth Facs Auth Rev Presbyterian Retmnt Cmntys Proj | | | |
| Panama City Beach FL Capital Impt Rev Front Beach Road Proj | | | |
| Panama City Beach FL Capital Impt Rev Front Beach Road Proj | | | |
| Pasco Cnty FL Sch Brd, Ser C, AGM, COPS | | | |
| Polk Cnty FL Indl Dev Auth Mineral Dev LLC Secondary Phosphate Tailings Recovery Proj (c) (g) | | | |
| Pompano Beach FL Rev John Knox Vlg Proj, Ser A | | | |
| Putnam Cnty FL Dev Auth Ref Seminole Proj, Ser A | | | |
| Rhodine Road N CDD FL Spl Assmnt 2019 Assmnt Area | | | |
| Rhodine Road N CDD FL Spl Assmnt 2019 Assmnt Area | | | |
| Ridge at Apopka CDD FL Spl Assmnt, Ser 22 | | | |
| Rivington CDD FL Spl Assmnt Rev 2022 Assmnt Area | | | |
| Rivington CDD FL Spl Assmnt Rev Assmnt Area | | | |
| S Broward FL Hosp Dist Ref | | | |
| Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | | | |
| Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | | | |
| Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | | | |
| Saint Johns Cnty FL Sch Brd, Ser A, AGM, COPS | | | |
| Saltleaf CDD FL Capital Impt Rev | | | |
| San Simeon Cmnty Dev Dist FL Spl Assmnt (c) | | | |
| Sarasota Natl FL CDD Spl Assmnt Ref | | | |
| Sarasota Natl FL CDD Spl Assmnt Ref | | | |
| Sawyers Landing CDD FL Spl Assmnt Rev | | | |
| Sawyers Landing CDD FL Spl Assmnt Rev | | | |
| SE Overtown Park W Cmnty Redev Agy FL Tax, Ser A-1 (c) | | | |
| Shell Point Cmnty Dev Dist FL Spl Assmnt (c) | | | |
| Stoneybrook FL S CDD Spl Assmnt Rev Assmnt Area Two A Proj | | | |
| Summer Woods CDD FL Spl Assmnt Assmnt Area Two 2020 Proj | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Hosp Rev H Lee Moffitt Cancer Ctr Proj, Ser B | | | |
| Tampa FL Rev Ref The Univ of Tampa Proj, Ser A | | | |
| Tern Bay CDD FL Spl Assmnt | | | |
| Tern Bay CDD FL Spl Assmnt | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| The Heights CDD FL Spl Assmnt Rev CDD | | | |
| Timber Creek CDD FL Spl Assmnt Rev (c) | | | |
| Tolomato FL CDD Ref 2022A Assmnt Area, Ser A, AGM | | | |
| Tolomato FL CDD Ref 2022A Assmnt Area, Ser A, AGM | | | |
| Veranda CDD II FL Spl Assmnt Rev Ref Assmt Area 3 Preserve E Proj | | | |
| Villamar CDD FL Spl Assmnt | | | |
| Villamar CDD FL Spl Assmnt Area Six Proj | | | |
| Vlg FL CDD #6 Spl Assmnt Rev Ref | | | |
| Volusia Cnty FL Eductnl Fac Auth Ref Embry Riddle Aeronautical Univ Inc Proj, Ser A | | | |
| Westside FL CDD Spl Assmnt Rev Ref (c) | | | |
| Westview S CDD FL Spl Assmnt Area One 2023 Proj Area | | | |
| Wildblue CDD FL Spl Assmnt (c) | | | |
| | |
| | |
| Atlanta GA Arpt Passenger Fac Charge Rev Arpt Rev Subord, Ser D, AMT | | | |
| Atlanta GA Arpt Rev Ref, Ser C, AMT | | | |
| Atlanta GA Arpt Rev, Ser A | | | |
| Atlanta GA Tax Allocation Ref Eastside Proj (Pre-refunded maturity 01/01/26) | | | |
| Bartow Cnty GA Dev Auth Var Ref GA Pwr Co Plt Bowen Proj Remk, First Ser (Mandatory put 03/08/28) | | | |
| Brookhaven Dev Auth GA Children’s Hlthcare of Atlanta, Ser A | | | |
| Burke Cnty GA Dev Auth Poll Control Rev Adjustable GA Pwr Co Plant Vogtle Proj Remk (b) | | | |
| Burke Cnty GA Dev Auth Poll Control Rev Var GA Pwr Co Plant Vogtle Proj Remk, 2nd Ser (Mandatory put 03/12/27) | | | |
| Burke Cnty GA Dev Auth Poll Control Rev Var Ref GA Pwr Co Plant Vogtle Proj (b) | | | |
| Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser B | | | |
| Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser B | | | |
| Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser B | | | |
| Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser B | | | |
| Coweta Cnty GA Dev Auth Var Yates Proj 1st Rmkt (b) | | | |
| De Kalb GA Priv Hosp Auth Children’s Hlthcare of Atlanta, Ser B | | | |
| Etowah GA Wtr & Swr Auth Rev Ref, BAM | | | |
| Etowah GA Wtr & Swr Auth Rev Ref, BAM | | | |
| Fulton Cnty GA Rsdl Care Facs Elderly Auth Retmnt Fac Rev Ref Lenbrook Sq Fdtn Inc | | | |
| GA St Hgr Edu Facs Auth Rev Ref USG Real Estate Fdtn II LLC Projs | | | |
| GA St Hgr Edu Facs Auth Rev Ref USG Real Estate Fdtn II LLC Projs | | | |
| GA St Hsg & Fin Auth Rev Sf Mtge, Ser C | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Gainesville & Hall Cnty GA Hosp Auth Ref NE GA Hlth Sys Inc Proj, Ser A | | | |
| Geo L Smith II GA Congress Ctr Auth Convention Ctr Hotel First Tier, Ser A | | | |
| Geo L Smith II GA Congress Ctr Auth Convention Ctr Hotel First Tier, Ser A | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser A | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 09/01/27) | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 12/01/29) | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 06/01/30) | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 09/01/31) | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser B (Mandatory put 03/01/30) | | | |
| Main Street Nat Gas Inc GA Gas Sply Rev, Ser D (Mandatory put 12/01/30) | | | |
| Main Street Natural Gas Inc GA Gas Supply Rev, Ser B (Mandatory put 03/01/32) | | | |
| Monroe Cnty GA Dev Auth Poll Control Rev Var Ref GA Pwr Co Plant Scherer Proj 2nd Ser Remk (Mandatory put 03/06/26) | | | |
| Muni Elec Auth of GA Plant Vogtle Units 3&4 Proj J Bonds, Ser A, AGM | | | |
| Muni Elec Auth of GA Ref Plant Vogtle Units 3&4 Proj J, Ser A, AGM | | | |
| Muni Elec Auth of GA Ref Plant Vogtle Units 3&4 Proj J, Ser A, AGM | | | |
| Muni Elec Auth of GA Ref Proj One Subord Bonds, Ser A, BAM | | | |
| Priv Clgs & Univs Auth GA Ref Mercer Univ Proj | | | |
| | |
| | |
| Guam Govt Wtrwks Auth Wtr & Wstwtr Sys Rev, Ser A | | | |
| Guam Port Auth Port Rev, Ser B, AMT | | | |
| | |
| | |
| HI St Arpts Sys Rev, Ser A, AMT | | | |
| HI St Arpts Sys Rev, Ser A, AMT | | | |
| Honolulu City & Cnty HI Wstwtr Sys Rev Ref First Bond Resolution, Ser B | | | |
| Honolulu City & Cnty HI Wstwtr Sys Rev Ref Sr First Bd Resolution, Ser B | | | |
| | |
| | |
| ID St Hlth Facs Auth Rev Ref Madison Memorial Hosp | | | |
| ID St Hlth Facs Auth Rev Ref Madison Memorial Hosp | | | |
| ID St Hlth Facs Auth Rev Ref Madison Memorial Hosp | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| ID St Hlth Facs Auth Rev Ref St Luke’s Hlth Sys Proj, Ser A | | | |
| ID St Hsg & Fin Assn Sales Tax Rev Transprtn Expansion & Congestion Mitigation Fund, Ser A | | | |
| | |
| | |
| Bolingbrook IL Ref, Ser A, AGM | | | |
| Bolingbrook IL Ref, Ser A, AGM | | | |
| Bolingbrook IL Ref, Ser A | | | |
| Chicago IL Brd of Edu Dedicated Capital Impt Tax | | | |
| Chicago IL Brd of Edu Dedicated Capital Impt Tax | | | |
| Chicago IL Brd of Edu Ref Dedicated, Ser C | | | |
| Chicago IL Brd of Edu Ref, Ser B | | | |
| Chicago IL Brd of Edu, Ser A | | | |
| Chicago IL Brd of Edu, Ser A | | | |
| Chicago IL Chicago Wks, Ser A | | | |
| Chicago IL Chicago Wks, Ser A | | | |
| | | | |
| Chicago IL Midway Arpt Rev Sr Lien Ref, Ser A, AMT, BAM | | | |
| Chicago IL Midway Arpt Rev Sr Lien Ref, Ser A, AMT, BAM | | | |
| Chicago IL O’Hare Intl Arpt Rev Ref Gen Sr Lien, Ser A, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev Ref Sr Lien O’Hare Intl Arpt, Ser C, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev Ref Sr Lien, Ser A, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev Ref Sr Lien, Ser A, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev Ref, Ser A, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev, Ser C, AMT | | | |
| Chicago IL O’Hare Intl Arpt Rev, Ser C, AMT | | | |
| Chicago IL Park Dist Ref, Ser A, BAM | | | |
| Chicago IL Park Dist Ref, Ser A, BAM | | | |
| Chicago IL Ref 2003B Remk | | | |
| | | | |
| Chicago IL Ref, Ser C, CABS | | | |
| | | | |
| | | | |
| | | | |
| Chicago IL Unrefunded, Ser A | | | |
| DuPage & Cook Cntys IL Twp High Sch Dist #86 Hinsdale | | | |
| Hampshire IL Spl Svc Area #14 Spl Tax Ref Lakewood Crossing, BAM | | | |
| | | | |
| | | | |
| IL St Fin Auth Acad Facs Lease Rev Univ of IL at Urbana Champaign Proj, Ser A | | | |
| IL St Fin Auth Acad Facs Lease Rev Univ of IL at Urbana Champaign Proj, Ser A | | | |
| IL St Fin Auth Acad Facs Lease Rev Univ of IL at Urbana Champaign Proj, Ser A | | | |
| IL St Fin Auth Acad Facs Lease Rev Univ of IL at Urbana Champaign Proj, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| IL St Fin Auth Rev Centegra Hlth Sys, Ser A (Pre-refunded maturity 09/01/24) | | | |
| IL St Fin Auth Rev Loc Govt Prog E Prairie Sch Dist #73 Proj, BAM | | | |
| IL St Fin Auth Rev Ref Mercy Hlth Sys Oblig Grp | | | |
| IL St Fin Auth Rev Ref Presbyterian Homes Oblig Grp, Ser A | | | |
| IL St Fin Auth Rev Township High Sch Dist #207 Proj | | | |
| IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | | | |
| IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | | | |
| IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | | | |
| IL St Hsg Dev Auth Mf Hsg Rev Var S Shore Hhdc (Mandatory put 02/01/26) | | | |
| | | | |
| IL St Sales Tax Rev Junior Oblig, Ser A, BAM | | | |
| IL St Sales Tax Rev Ref Junior Oblig Build IL Bonds, Ser C | | | |
| IL St Toll Hwy Auth Ref Sr, Ser A | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Lincolnwood IL Tax Incr Allocation Rev Nts Dist 1860 Dev Proj, Ser A, COPS (c) | | | |
| Madison Bond Etc Cntys IL Cmnty Unit Sch Dist #5, Ser B, AGM | | | |
| Madison Bond Etc Cntys IL Cmnty Unit Sch Dist #5, Ser B, AGM | | | |
| Morton Grove Niles Wtr Commn IL Wtr, Ser A | | | |
| Moultrie Shelby & Coles Cntys IL Cmnty Unit Sch Dist #300, BAM | | | |
| Moultrie Shelby & Coles Cntys IL Cmnty Unit Sch Dist #300, BAM | | | |
| Peoria IL Ref, Ser C, AGM | | | |
| Piatt Champaign & DE Witt Cntys IL Cmnty Unit Sch Dist # 25 Ref, Ser B, BAM | | | |
| Rockford IL Ref Wtrwks Sys, Ser B, BAM | | | |
| Romeoville IL Rev Ref Lewis Univ Proj | | | |
| Romeoville IL Rev Ref Lewis Univ Proj | | | |
| Sales Tax Securitization Corp IL Ref, Ser C | | | |
| Sales Tax Securitization Corp IL Ref, Ser C | | | |
| Skokie IL Park Dist, Ser A | | | |
| Skokie IL Park Dist, Ser A | | | |
| Tender Option Bond Trust Receipts Ctfs Putters Xm1038, Ser 2022, AGM (b) (c) | | | |
| Woodford Mclean & Livingston Cntys IL Cmnty United Sch Dist, Ser B, BAM | | | |
| | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Avon IN Cmnty Sch Bldg Corp | | | |
| Borden Henryville Multi Sch Bldg Corp IN | | | |
| Fort Wayne IN Mf Hsg Rev Silver Birch at Cook Road (c) | | | |
| IN Fin Auth Midwestern Disaster Relief Rev OH Vly Elec Corp Proj Remk, Ser A | | | |
| IN St Fin Auth Envrnmntl Rev Ref Var Duke Energy IN Inc Proj Remk, Ser A-1, AMT (Mandatory put 06/01/32) | | | |
| IN St Fin Auth Hlth Fac Rev Margaret Mary Hlth Proj, Ser A | | | |
| IN St Fin Auth Hlth Fac Rev Margaret Mary Hlth Proj, Ser A | | | |
| IN St Fin Auth Hlth Sys Rev IN Univ Hlth, Ser A | | | |
| IN St Fin Auth Hosp Rev Goshen Hlth, Ser A | | | |
| IN St Fin Auth Hosp Rev Goshen Hlth, Ser A | | | |
| IN St Fin Auth Hosp Rev Reid Hlth, AGM | | | |
| IN St Fin Auth Rev Eductnl Facs Rock Creek Cmnty Acdmy Proj, Ser A (c) (g) | | | |
| IN St Fin Auth Rev Marian Univ Proj, Ser A | | | |
| IN St Fin Auth Rev Ref Rev Cmnty Fdtn of NW IN | | | |
| IN St Muni Pwr Agy Ref, Ser A | | | |
| Msd Warren Twp IN Vision 2005 Sch Bldg Corp Rev | | | |
| Whiting IN Envrnmntl Facs Rev Ref BP Products N America Inc Proj, Ser A, AMT (Mandatory put 06/05/26) | | | |
| | |
| | |
| Altoona IA, Ser A, BAM, COPS | | | |
| Altoona IA, Ser A, BAM, COPS | | | |
| | | | |
| IA St Fin Auth Midwstrn Disaster Area Rev Ref IA Fertilizer Company Proj (Mandatory put 12/01/42) | | | |
| Pefa Inc IA Gas Proj Rev (Mandatory put 09/01/26) | | | |
| Tobacco Stlmt Auth IA Tobacco Stlmt Rev Ref Sr, Ser A-2, Class 1 | | | |
| Tobacco Stlmt Auth IA Tobacco Stlmt Rev Ref Sr, Ser A-2, Class 1 | | | |
| Tobacco Stlmt Auth IA Tobacco Stlmt Rev Ref Sr, Ser A-2, Class 1 | | | |
| Tobacco Stlmt Auth IA Tobacco Stlmt Rev Ref Sr, Ser A-2, Class 1 | | | |
| | |
| | |
| Goddard KS Sales Tax Spl Oblg Rev Ref Olympic Park Star Bond Proj | | | |
| KS Muni Energy Agy Pwr Proj Rev Dogwood Proj, Ser A, BAM | | | |
| KS Muni Energy Agy Pwr Proj Rev Dogwood Proj, Ser A, BAM | | | |
| KS St Dept of Transprtn Hwy Rev | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Leavenworth Cnty KS Unif Sch Dist #464 Ref, Ser A | | | |
| Lenexa KS Hlth Care Fac Rev Ref Lakeview Vlg Inc, Ser A | | | |
| Wyandotte Cnty KS Kansas City Unif Govt Spl Oblg Rev Ref Vlg E Proj Areas 2B 3 5 (c) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Wyandotte Cnty KS Kansas City Unif Govt Util Sys Rev Impt, Ser A | | | |
| Wyandotte Cnty KS Kansas City Unif Govt Util Sys Rev Ref & Impt, Ser A | | | |
| Wyandotte Cnty KS Unif Sch Dist #202, Ser A, AGM (Pre- refunded maturity 09/01/27) | | | |
| | |
| | |
| Boyle Cnty KY Eductnl Facs Rev Ref Centre Clg, Ser A | | | |
| KY St Econ Dev Fin Auth Baptist Hlthcare System, Ser B | | | |
| KY St Econ Dev Fin Auth Baptist Hlthcare System, Ser B | | | |
| KY St Econ Dev Fin Auth Baptist Hlthcare System, Ser B | | | |
| KY St Econ Dev Fin Auth Hlth Sys Rev Norton Hlthcare Inc, Ser B, CABS, NATL-RE | | | |
| KY St Econ Dev Fin Auth Ref Commonspirit Hlth, Ser A-1 | | | |
| KY St Econ Dev Fin Auth Ref Commonspirit Hlth, Ser A-1 | | | |
| KY St Econ Dev Fin Auth Ref Commonspirit Hlth, Ser A-2 | | | |
| KY St Econ Dev Fin Auth Ref Commonspirit Hlth, Ser A-2 | | | |
| KY St Pub Energy Auth Gas Sply Rev Ref, Ser A-1 (Mandatory put 02/01/32) | | | |
| KY St Pub Energy Auth Gas Sply Rev Var, Ser C (Mandatory put 02/01/28) | | | |
| KY St Univ Proj, BAM, COPS | | | |
| Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Norton Hlthcare Inc, Ser A | | | |
| Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Ref Norton Hlthcare Inc, Ser A | | | |
| Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Ref Norton Hlthcare Inc, Ser A | | | |
| Louisville & Jefferson Cnty KY Met Swr Dist Swr & Drain Sys Sustainable Bond, Ser A | | | |
| Meade Cnty KY Indl Bldg Rev Var Nucor Steel Brandenburg Proj Sustainable Bond, Ser B-1 (b) | | | |
| Trimble Cnty KY Envrnmntl Facs Rev Var Louisville Gas & Elec Co Proj, Ser A, AMT (Mandatory put 06/01/27) | | | |
| | |
| | |
| E Baton Rouge Parish LA Capital Impts Dist MOVEBR Sales,
Ser T | | | |
| E Baton Rouge Parish LA Capital Impts Dist MOVEBR Sales,
Ser T | | | |
| E Baton Rouge Parish LA Swr Commn Rev Ref, Ser A | | | |
| LA Pub Facs Auth Rev Ref Ochsner Clinic Fdtn Proj | | | |
| LA St Loc Govt Envrnmntl Facs & Cmnty Dev Auth Rev Ascension Psh Courthouse Proj | | | |
| LA St Loc Govt Envrnmntl Facs & Cmnty Dev Auth Rev Ref Hosp Womans Fdtn Proj, Ser A | | | |
| LA St Loc Govt Envrnmntl Facs & Cmnty Dev Auth Rev Ref Westlake Chemical Corp Proj Remk | | | |
| LA St Pub Facs Auth Sol Wst Disp Fac Rev Var Elementus Minerals LLC Proj (Mandatory put 11/01/25) (c) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| New Orleans LA Aviation Brd Gen Arpt N Term, Ser B, AMT | | | |
| New Orleans LA Aviation Brd Gen Arpt N Term, Ser B, AMT | | | |
| New Orleans LA Aviation Brd Gen Arpt N Term, Ser B, AMT | | | |
| New Orleans LA Wtr Rev (Pre-refunded maturity 12/01/25) | | | |
| New Orleans LA Wtr Rev Ref (Pre-refunded maturity 12/01/24) | | | |
| Saint John the Baptist Parish LA Rev Var Ref Marathon Oil Corp Proj Remk, Subser 2017B-1 (Mandatory put 07/01/24) | | | |
| Shreveport LA Wtr & Swr Rev, Ser B, BAM | | | |
| | |
| | |
| Baltimore Cnty MD Rev Ref Oak Crest Vlg Inc Fac | | | |
| Baltimore Cnty MD Rev Ref Oak Crest Vlg Inc Fac | | | |
| Baltimore Cnty MD Rev Ref Riderwood Vlg Inc Proj | | | |
| Baltimore Cnty MD Rev Ref Riderwood Vlg Inc Proj | | | |
| Baltimore Cnty MD Rev Ref Riderwood Vlg Inc Proj | | | |
| Baltimore MD Spl Oblig Ref E Baltimore Rsrch Park Proj, Ser A | | | |
| Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (c) | | | |
| Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (c) | | | |
| Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (c) | | | |
| Harford Cnty MD Spl Oblg Ref Beechtree Estates Proj | | | |
| MD St Econ Dev Corp Stdt Hsg Rev Bowie St Univ Proj | | | |
| MD St Econ Dev Corp Stdt Hsg Rev Ref Sr Univ MD Proj | | | |
| MD St Econ Dev Corp Stdt Hsg Rev Ref Univ MD Clg Park Projs, AGM | | | |
| | | | |
| MD St Hlth & Hgr Eductnl Facs Auth Rev Ref Anne Arundel Hlth Sys, Ser A | | | |
| MD St Hlth & Hgr Eductnl Facs Auth Rev Ref Stevenson Univ Proj, Ser A | | | |
| MD St Hlth & Hgr Eductnl Facs Auth Rev Ref Stevenson Univ Proj, Ser A | | | |
| MD St Hlth & Hgr Eductnl Facs Auth Rev Ref Stevenson Univ Proj, Ser A | | | |
| MD St Stadium Auth Rev Football Stadium Issue, Ser A | | | |
| Univ Sys of MD Auxilary Fac & Tuition Rev, Ser A | | | |
| | |
| | |
| MA St Bay Transprtn Auth Sales Tax Rev Ref Sr, Ser B | | | |
| MA St Bay Transprtn Auth Sales Tax Rev Sr, Ser A | | | |
| MA St Consolidated Loan, Ser A | | | |
| MA St Dev Fin Agy Rev Linden Ponds Inc Fac (c) | | | |
| MA St Port Auth Ref, Ser A, AMT | | | |
| MA St Port Auth, Ser C, AMT | | | |
| MA St Transprtn Fund Rev Rail Enhancement Prog, Ser A | | | |
| | |
| | |
| Detroit MI Downtown Dev Auth Tax Incr Rev Ref Catalyst Dev Proj, Ser A, AGM | | | |
| Detroit MI Downtown Dev Auth Tax Incr Rev Ref Catalyst Dev Proj, Ser A, AGM | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Genesee Cnty MI Swr Disp Sys Rev, Ser A, BAM | | | |
| Genesee Cnty MI Swr Disp Sys Rev, Ser A, BAM | | | |
| Genesee Cnty MI Swr Disp Sys Rev, Ser A, BAM | | | |
| Genesee Cnty MI Swr Disp Sys Rev, Ser A, BAM | | | |
| Grand Rapids MI Santn Swr Sys Rev | | | |
| Great Lakes MI Wtr Auth Sewage Disposal Sys Rev Ref Sr Lien, Ser A | | | |
| Great Lakes MI Wtr Auth Wtr Sply Sys Rev Ref Sr Lien, Ser C | | | |
| Kalamazoo MI Hosp Fin Auth Unrefunded Ref Bronson Hlthcare Grp | | | |
| Kentwood MI Pub Schs, Ser II, AGM | | | |
| Lake Shore MI Pub Schs, Ser I | | | |
| Marquette MI Brd of Light & Pwr Elec Util Sys Rev Ref, Ser A | | | |
| MI St Bldg Auth Rev Var Facs Prog Multi-Modal, Ser I (b) | | | |
| MI St Fin Auth Act 38 Facs Sr Rev Sustainable Bonds Henry Ford Hlth Detroit Util Plant Proj | | | |
| MI St Fin Auth Ltd Oblig Rev Ref Clg for Creative Studies Proj | | | |
| MI St Fin Auth Rev Henry Ford Hlth Sys, Ser A | | | |
| MI St Fin Auth Rev Loc Govt Loan Pgm Great Lakes Wtr Auth Ref 2nd Lien, Ser C | | | |
| MI St Fin Auth Rev Multi Modal McLaren Hlth Care, Ser A | | | |
| MI St Fin Auth Rev Prerefunded CHE Trinity Hlth Credit Grp Ref, Ser 2013-5 (Pre-refunded maturity 12/01/29) | | | |
| MI St Fin Auth Rev Ref 2nd Lien Great Lakes Wtr Auth, Ser C-7, NATL-RE | | | |
| MI St Fin Auth Rev Ref Beaumont Spectrum Consolidation, Ser A | | | |
| MI St Fin Auth Rev Ref CHE Trinity Hlth Credit Grp, Ser 2013-2 Remk 12/18/19 | | | |
| MI St Fin Auth Rev Ref Henry Ford Hlth Sys | | | |
| MI St Fin Auth Rev Ref Henry Ford Hlth Sys | | | |
| MI St Fin Auth Rev Ref Hosp McLaren Hlth Care, Ser B | | | |
| MI St Fin Auth Rev Ref Loc Govt Loan Prog Great Lakes Wtr Auth, Ser D-1 | | | |
| MI St Fin Auth Rev Ref Loc Govt Loan Prog Great Lakes Wtr Auth, Ser D4 | | | |
| MI St Fin Auth Rev Ref Loc Govt Loan Prog Great Lakes Wtr Auth, Ser D4 | | | |
| MI St Fin Auth Rev Ref Sr Lien Great Lakes Wtr Auth, Ser C-6 | | | |
| MI St Fin Auth Rev Ref Sr Turbo, Ser A-2 | | | |
| MI St Hosp Fin Auth Ref Ascenion Sr Credit Remk, Ser F7 | | | |
| Midland MI Pub Schs Sch Bldg & Site, Ser II | | | |
| Univ of Michigan MI, Ser A | | | |
| | |
| | |
| Duluth MN Indep Sch Dist #709 Ref, Ser B, COPS | | | |
| Minneapolis Saint Paul MN Met Arpts Commn Arpt Rev Ref Sub, Ser B, AMT | | | |
| MN Muni Gas Agy Cmdy Sply Rev, Ser A | | | |
| MN St Agric & Econ Devbrd HealthPartners Oblig Grp | | | |
| MN St Agric & Econ Devbrd HealthPartners Oblig Grp | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Saint Paul MN Hsg & Redev Auth Hlth Care Fac Rev Ref HealthPartners Oblig Grp, Ser A | | | |
| Saint Paul MN Hsg & Redev Auth Hlth Care Fac Rev Ref HealthPartners Oblig Grp, Ser A | | | |
| | |
| | |
| MS St Busn Fin Corp Sol Wst Disp Rev Adj Ref MS Pwr Co Proj Remk, AMT (b) | | | |
| MS St Hosp Equipment & Facs Auth Baptist Memorial Hlth Care, Ser A | | | |
| MS St, Ser A (Pre-refunded maturity 11/01/26) | | | |
| W Rankin MS Util Auth Rev, AGM (Pre-refunded maturity 01/01/25) | | | |
| Warren Cnty MS Lease Pur Jail Proj, BAM, COPS | | | |
| | |
| | |
| Bridgeton MO Spl Oblig Rev Ref, Ser A | | | |
| Bridgeton MO Spl Oblig Rev Ref, Ser A | | | |
| Jackson Cnty MO Consol Sch Dist #4 | | | |
| Jackson Cnty MO Consol Sch Dist #4 | | | |
| Jackson Cnty MO Spl Oblig Ref Truman Sports Complex Proj | | | |
| Kansas City MO Indl Dev Auth Arpt Spl Oblig Kansas City Intl Arpt Terminal Mod Proj, Ser B, AMT | | | |
| Kansas City MO Indl Dev Auth Arpt Spl Oblig Kansas City Intl Arpt Terminal Mod Proj, Ser B, AMT | | | |
| Kansas City MO Indl Dev Auth Arpt Spl Oblig Kansas City Intl Arpt Terminal Modernization, Ser A, AMT | | | |
| Kansas City MO Indl Dev Auth Arpt Spl Oblig Kansas City Intl Arpt, Ser A, AMT | | | |
| Lincoln Cnty MO Pub Wtr Sply Dist #1 Ref, COPS | | | |
| Lincoln Cnty MO Pub Wtr Sply Dist #1 Ref, COPS | | | |
| Lincoln Cnty MO Pub Wtr Sply Dist #1 Ref, COPS | | | |
| MO St Hlth & Eductnl Facs Auth Hlth Facs Rev CoxHealth & Oblig Grp, Ser A | | | |
| MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Mercy Hlth | | | |
| MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Ref Mosaic Hlth Sys, Ser A | | | |
| MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Ref, Ser C (Mandatory put 05/01/28) | | | |
| MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs | | | |
| MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | | | |
| MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | | | |
| MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | | | |
| MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | | | |
| MO St Hlth & Eductnl Facs Auth Med Rsrch Lutheran Svcs, Ser A | | | |
| St Louis Cnty MO Pattonville Sch Dist #R-3 | | | |
| St Louis Cnty MO Pattonville Sch Dist #R-3 | | | |
| St Louis Cnty MO Spl Oblig Convention Ctr, Ser A | | | |
| St Louis MO Muni Library Dist Ref, BAM, COPS | | | |
| | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Centrl Plains Energy Proj NE Gas Proj Rev Ref Proj #3, Ser A | | | |
| Centrl Plains Energy Proj NE Gas Proj Rev Var Ref Proj #4, Ser A (Mandatory put 11/01/29) | | | |
| NE St Pub Pwr Dist Rev Gen, Ser C | | | |
| | |
| | |
| Carson City NV Hosp Rev Ref Carson Tahoe Regl Med Ctr, Ser A | | | |
| Clark Cnty NV Arpt Rev Ref, Ser B | | | |
| Clark Cnty NV Poll Control Rev Var Ref NV Pwr CO Proj Remk (Mandatory put 03/31/26) | | | |
| Clark Cnty NV Sch Dist, Ser A | | | |
| Las Vegas NV Spl Impt Dist #816 Spl Impt District No 816 Summerlin Vlg 22 | | | |
| Las Vegas NV Spl Impt Dist #816 Spl Impt District No 816 Summerlin Vlg 22 | | | |
| Las Vegas Vly NV Wtr Dist Ref Wtr Impt, Ser A | | | |
| N Las Vegas NV Loc Impt Vly Vista Spl Impt Dist #64 | | | |
| N Las Vegas NV Loc Impt Vly Vista Spl Impt Dist #64 | | | |
| N Las Vegas NV Loc Impt Vly Vista Spl Impt Dist #64 | | | |
| N Las Vegas NV Loc Impt Vly Vista Spl Impt Dist #64 | | | |
| NV Dept of Busn & Industry NV Doral Academy, Ser A | | | |
| Reno NV Capital Impt Rev Ref, Ser A-1, AGM | | | |
| Reno NV Capital Impt Rev Ref, Ser A-1, AGM | | | |
| Reno NV Capital Impt Rev Ref, Ser A-1, AGM | | | |
| Washoe Cnty NV Hwy Rev Ref Fuel Tax | | | |
| | |
| | |
| Gloucester Twp NJ, Ser A, BANS | | | |
| NJ St Econ Dev Auth Mtr Vehcl Sur Rev, Ser A, NATL-RE | | | |
| NJ St Econ Dev Auth Mtr Vehcl Surcharge Rev Ref Sub, Ser A, BAM | | | |
| NJ St Econ Dev Auth Rev Portal N Bridge Proj NJ Transit Transprtn Proj Bond, Ser A | | | |
| NJ St Econ Dev Auth Rev Sch Facs Constr Prog, Ser LLL | | | |
| NJ St Econ Dev Auth Rev Sch Facs Constr Prog, Ser LLL | | | |
| NJ St Econ Dev Auth Rev Sustainable Bonds, Ser QQQ | | | |
| NJ St Econ Dev Auth Rev Sustainable Bonds, Ser QQQ | | | |
| NJ St Econ Dev Auth Spl Fac Rev Ref Port Newark Container Terminal LLC Proj, AMT | | | |
| NJ St Econ Dev Auth Wtr Facs Rev Var Ref NJ American Wtr Co Inc Proj Remk, Ser B, AMT (Mandatory put 06/01/28) | | | |
| NJ St Transprtn Trust Fund Auth Cap Apprec Transprtn Sys, Ser C, AMBAC | | | |
| NJ St Transprtn Trust Fund Auth Fed Hwy Reimb Nts, Ser A-1, GARVEE | | | |
| NJ St Transprtn Trust Fund Auth Fun Auth Transprtn Prog Bonds, Ser CC | | | |
| NJ St Transprtn Trust Fund Auth Ref Transprtn Sys Bonds, Ser A | | | |
| NJ St Transprtn Trust Fund Auth Ref Transprtn Sys Bonds, Ser A | | | |
| NJ St Transprtn Trust Fund Auth Ref Transprtn Sys, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| NJ St Transprtn Trust Fund Auth Ref Transprtn Sys, Ser A | | | |
| NJ St Transprtn Trust Fund Auth Transprtn Prog Bonds, Ser AA | | | |
| NJ St Transprtn Trust Fund Auth Transprtn Prog Bonds, Ser AA | | | |
| NJ St Transprtn Trust Fund Auth Transprtn Sys, Ser D | | | |
| NJ St Transprtn Trust Fund Auth, Ser BB | | | |
| NJ St Transprtn Trust Fund Auth, Ser BB | | | |
| NJ St Turnpike Auth Turnpike Rev, Ser A | | | |
| NJ St Turnpike Auth Turnpike Rev, Ser B | | | |
| Tobacco Stlmt Fing Corp NJ Ref Sub, Ser B | | | |
| Tobacco Stlmt Fing Corp NJ Ref, Ser A | | | |
| Tobacco Stlmt Fing Corp NJ Ref, Ser A | | | |
| Tobacco Stlmt Fing Corp NJ Ref, Ser A | | | |
| | |
| | |
| Albuquerque NM Muni Sch Dist #12, Ser A | | | |
| Albuquerque NM Refuse Removal & Disp Rev | | | |
| Albuquerque NM Refuse Removal & Disp Rev | | | |
| Farmington NM Poll Control Rev Var Ref Pub Svc Co NM San Juan Proj Remk, Ser D (Mandatory put 06/01/28) | | | |
| Los Ranchos De Albuquerque NM Eductnl Facs Rev Ref Albuquerque Acdmy Proj | | | |
| Los Ranchos De Albuquerque NM Eductnl Facs Rev Ref Albuquerque Acdmy Proj | | | |
| Los Ranchos De Albuquerque NM Eductnl Facs Rev Ref Albuquerque Acdmy Proj | | | |
| Lower Petroglyphs Pub Impt Dist NM Spl Levy Rev Ref | | | |
| Lower Petroglyphs Pub Impt Dist NM Spl Levy Rev Ref | | | |
| Lower Petroglyphs Pub Impt Dist NM Spl Levy Rev Ref | | | |
| Lower Petroglyphs Pub Impt Dist NM Spl Levy Rev Ref | | | |
| Lower Petroglyphs Pub Impt Dist NM Spl Levy Rev Ref | | | |
| NM St Hosp Equipment Loan Council Hosp Rev Ref | | | |
| NM St Hosp Equipment Loan Council Hosp Rev Ref | | | |
| NM St Hosp Equipment Loan Council Hosp Rev Ref | | | |
| | |
| | |
| | | | |
| Buffalo NY Muni Wtr Fin Auth, Ser A, AGM | | | |
| Build NYC Res Corp NY Rev Sustainable Bond Kipp NYC Pub Sch Facs Canal W Proj | | | |
| Build NYC Res Corp NY Rev Sustainable Bond Kipp NYC Pub Sch Facs Canal W Proj | | | |
| Chautauqua Cnty NY Capital Res Corp Exempt Facs Rev Var Ref NRG Energy Proj Remk (Mandatory put 04/03/28) | | | |
| Hudson Yards Infra Corp NY 2nd Indenture Rev Ref, Ser A | | | |
| Hudson Yards Infra Corp NY 2nd Indenture Rev Ref, Ser A | | | |
| Long Island NY Pwr Auth Elec Sys Rev Elec Sys Rev Gen, Ser A, BAM | | | |
| Long Island NY Pwr Auth Elec Sys Rev Ref, Ser A | | | |
| New York City NY Hsg Dev Corp Mf Hsg Rev Sustainable Dev Bonds, Ser F-2A (Mandatory put 12/22/26) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Ref 2nd Gen Resolution, Ser DD | | | |
| New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Ref 2nd Gen Resolution, Subser EE-2 | | | |
| New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Var Ref Sub 2nd General Resolution, Ser DD (b) | | | |
| New York City NY Transitional Fin Auth Bldg Aid Rev Subord Ref, Ser S-2A | | | |
| New York City NY Transitional Fin Auth Rev Future Tax Sec Sub, Subser D-1 | | | |
| New York City NY Transitional Fin Auth Rev Sub Multi Modal, Ser F-1 | | | |
| New York City NY Transitional Fin Auth Rev Sub, Ser B-1 | | | |
| New York City NY Transitional Fin Auth Rev Sub, Ser B-1 | | | |
| New York City NY Transitional Fin Auth Rev Subord, Ser A-1 | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| NY St Dorm Auth Revs Non St Supported Debt Pratt Institute Ref | | | |
| NY St Dorm Auth Revs Non St Supported Debt Ref New Sch,
Ser A | | | |
| NY St Dorm Auth Revs Non St Supported Debt Ref Northwell Hlth Oblig Grp, Ser A | | | |
| NY St Dorm Auth Sales Tax Rev Ref Grp 3, Ser E | | | |
| NY St Dorm Auth St Personal Income Tax Rev Ref, Ser A | | | |
| NY St Dorm Auth St Personal Income Tax Rev Ref, Ser A | | | |
| NY St Thruway Auth Gen Rev Jr Indebtedness Obl Subord, Ser B | | | |
| NY St Thruway Auth Personal Income Tax Rev Ref Bidding Grp 3 | | | |
| NY St Thruway Auth Personal Income Tax Rev Ref Bidding Grp 3 | | | |
| NY St Transprtn Dev Corp Spl Fac Rev Delta Airls Inc LaGuardia Arpt Terminals C&D Redev, AMT | | | |
| NY St Transprtn Dev Corp Spl Fac Rev Delta Airls Inc LaGuardia Arpt Terminals C&D Redev, AMT | | | |
| NY St Transprtn Dev Corp Spl Fac Rev LaGuardia Arpt Terminal C&D Redev Proj, AMT | | | |
| NY St Transprtn Dev Corp Spl Fac Rev Sustainable Bond JFK Intl Arpt Terminal One Prj, AGM, AMT | | | |
| NY St Transprtn Dev Corp Spl Fac Rev Sustainable Bond JFK Intl Arpt Terminal One Prj, AGM, AMT | | | |
| NY St Transprtn Dev Corp Spl Fac Rev Sustainable Bond JFK Intl Arpt Terminal One Prj, AGM, AMT | | | |
| Port Auth of NY & NJ NY Ref Consol, Ser 186, AMT | | | |
| Port Auth of NY & NJ NY Ref, 194th Ser | | | |
| Suffolk Regl Off Track Betting Corp NY Rev | | | |
| Syracuse Regl Arpt Auth NY Sr Arpt Rev Ref, AMT | | | |
| Tsasc Inc NY Tsasc Inc Rev Ref Turbo Sub, Ser B | | | |
| Util Debt Securitization Auth NY Ref Restructuring Bonds,
Ser TE-1 | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Westchester Cnty NY Loc Dev Corp Rev Westchester Med Ctr Oblig Grp Proj, AGM | | | |
| Westchester Cnty NY Loc Dev Corp Rev Westchester Med Ctr Oblig Grp Proj, AGM | | | |
| Westchester Cnty NY Loc Dev Corp Rev Westchester Med Ctr Oblig Grp Proj, AGM | | | |
| Yonkers NY Econ Dev Corp Eductnl Rev Chrt Sch Edu Excellence Proj, Ser A | | | |
| | | | |
| | | | |
| | |
| | |
| Buncombe Cnty NC Ltd Oblig Ref Rev, Ser A | | | |
| Charlotte Mecklenburg NC Hosp Auth Hlth Care Sys Rev Ref Carolinas Hlthcare Sys, Ser A | | | |
| Charlotte NC Arpt Rev Charlotte Douglas Intl Arpt, Ser B, AMT | | | |
| Charlotte NC Arpt Rev, Ser A | | | |
| Charlotte NC Arpt Rev, Ser B, AMT | | | |
| Greenville NC Comb Enterprise Sys Rev Ref | | | |
| Monroe NC Comb Enterprise Sys Rev Ref | | | |
| NC St Agric & Tech Univ Ref Gen, Ser A | | | |
| NC St Capital Facs Fin Agy Stdt Rev Ref Hsg NC A&T Univ Fdtn Proj, Ser A, AGC | | | |
| NC St Med Care Commn Hosp Rev Caromont Hlth, Ser A | | | |
| NC St Med Care Commn Hosp Rev Caromont Hlth, Ser B (Mandatory put 02/01/26) | | | |
| NC St Med Care Commn Retmnt Facs Rev Pennybyrn at Maryfield Proj, Ser A | | | |
| NC St Med Care Commn Retmnt Facs Rev Pennybyrn at Maryfield Proj, Ser A | | | |
| NC St Med Care Commn Retmnt Facs Rev The United Methodist Retmnt Homes Proj, Ser A | | | |
| | | | |
| | |
| | |
| Akron Bath Copley Jt Twp OH Hosp Dist Ref Summa Hlth Oblig Grp Hosp Facs Rev | | | |
| Akron Bath Copley Jt Twp OH Hosp Dist Ref Summa Hlth Oblig Grp Hosp Facs Rev | | | |
| Bowling Green OH St Univ Ref, Ser A | | | |
| Bowling Green OH St Univ Ref, Ser A | | | |
| Brunswick OH City Sch Dist, BAM | | | |
| Buckeye OH Tobacco Stlmt Fing Auth Ref Sr, Class 1, Ser A-2 | | | |
| Buckeye OH Tobacco Stlmt Fing Auth Ref Sr, Class 1, Ser A-2 | | | |
| Buckeye OH Tobacco Stlmt Fing Auth Ref Sr, Class 2, Ser B-2 | | | |
| Butler Cnty OH Port Auth Econ Dev Lease Rev Ref Cmnty First Solutions Oblg Grp Proj, Ser A | | | |
| Chillicothe OH City Sch Dist Ref, AGM | | | |
| Cleveland OH Pub Pwr Sys Rev Prerefunded Ref, Ser A, AGM | | | |
| Cleveland OH Pub Pwr Sys Rev Unrefunded Ref, Ser A, AGM | | | |
| | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Hamilton Cnty OH Hosp Facs Rev Ref Trihealth Inc Oblig Grp Proj, Ser A | | | |
| Hamilton Cnty OH Hosp Facs Rev Ref Trihealth Inc Oblig Grp Proj, Ser A | | | |
| Hamilton Cnty OH Hosp Facs Rev Ref Trihealth Inc Oblig Grp Proj, Ser A | | | |
| Hamilton Cnty OH Hosp Facs Rev UC Hlth | | | |
| Miami Cnty OH Hosp Facs Rev Ref & Impt Kettering Hlth Network Oblig Grp | | | |
| Miami Cnty OH Hosp Facs Rev Ref & Impt Kettering Hlth Network Oblig Grp | | | |
| Miami Cnty OH Hosp Facs Rev Ref & Impt Kettering Hlth Network Oblig Grp | | | |
| Miamisburg OH City Sch Dist Ref (Pre-refunded maturity 12/01/25) | | | |
| Montgomery Cnty OH Hosp Rev Ref Kettering Hlth Network Oblig Grp Proj | | | |
| Montgomery Cnty OH Hosp Rev Ref Kettering Hlth Network Oblig Grp Proj | | | |
| NE OH Med Univ Gen Recpts Ref, Ser A | | | |
| OH St Air Quality Dev Auth American Elec Pwr Co Proj Remk, Ser A (Mandatory put 10/01/29) | | | |
| OH St Air Quality Dev Auth Exempt Facs Rev AMG Vanadium Proj, AMT (c) | | | |
| OH St Air Quality Dev Auth OH Vly Electric Corp Proj Remk, Ser B, AMT (Mandatory put 10/01/29) | | | |
| OH St Air Quality Dev Auth Ref American Elec Pwr Company Proj Remk, Ser B, AMT (Mandatory put 10/01/24) | | | |
| OH St Air Quality Dev Auth Ref OH Vly Elec Corp Proj, Ser A | | | |
| OH St Air Quality Dev Auth Var Ref Duke Energy Corp Proj, Ser A, AMT (Mandatory put 06/01/27) | | | |
| OH St Air Quality Dev Auth Var Ref Duke Energy Corp Proj, Ser B (Mandatory put 06/01/27) | | | |
| OH St Hgr Eductnl Fac Commn Ref Rev Judson Oblig Grp 2020 Proj, Ser A | | | |
| OH St Hosp Rev Ref Var Univ Hosps Hlth Sys Inc, Ser C (b) | | | |
| OH St Hosp Rev Ref, Ser A | | | |
| OH St Hosp Rev Ref, Ser A | | | |
| OH St Hosp Rev Var Ref Hosps Hlth Sys Inc, Ser B (b) | | | |
| | | | |
| OH St Wtr Dev Auth Rev Sustainable Bond, Ser A | | | |
| OH St Wtr Dev Auth Rev Sustainable Bond, Ser A | | | |
| OH St Wtr Dev Auth Rev Sustainable Bond, Ser A | | | |
| | | | |
| | | | |
| Sharonville OH Spl Oblg Rev | | | |
| Sharonville OH Spl Oblg Rev | | | |
| Upper Arlington OH Spl Oblig Non Tax Rev Kingsdale Mixed Use Dev, Ser A | | | |
| | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Catoosa OK Indl Auth Sales Tax Rev | | | |
| OK St Dev Fin Auth Sr OK Proton Ctr, Ser A1 (c) | | | |
| Oklahoma Cnty OK Fin Auth Eductnl Facs Lease Rev Midwest City De City Pub Schs Proj | | | |
| Oklahoma Cnty OK Fin Auth Eductnl Facs Lease Rev Midwest City Del City Pub Schs Proj, BAM | | | |
| Tulsa Cnty OK Indl Auth Sr Living Cmnty Rev Ref Montereau Inc Proj | | | |
| Tulsa Cnty OK Indl Auth Sr Living Cmnty Rev Ref Montereau Inc Proj | | | |
| Weatherford OK Indl Trust Eductnl Facs Lease Rev Weatherford Pub Schs Proj | | | |
| | |
| | |
| Clackamas Cnty OR Hosp Fac Auth Rev Ref Rose Villa Proj, Ser A | | | |
| Clackamas Cnty OR Hosp Fac Auth Rev Ref Sr Living Willamette View Proj, Ser A | | | |
| Clackamas Cnty OR Hosp Fac Auth Rev Ref Sr Living Willamette View Proj, Ser A | | | |
| Clackamas Cnty OR Sch Dist #12 N Clackamas Ref (Pre-refunded maturity 06/15/24) | | | |
| Medford OR Hosp Facs Auth Rev Ref Asante Proj, Ser A | | | |
| OR St Facs Auth Rev Ref Univ Portland, Ser A | | | |
| Port of Portland OR Arpt Rev Portland Intl Arpt, Ser 25B, AMT | | | |
| Port of Portland OR Arpt Rev Portland Intl Arpt, Ser 25B, AMT | | | |
| Tri Cnty Met Transprtn Dist OR Rev, Ser A, GARVEE | | | |
| Union Cnty OR Hosp Fac Auth Grande Ronde Hosp | | | |
| | |
| | |
| Allegheny Cnty PA Arpt Auth Arpt Rev Pittsburgh Arpt, Ser A, AGM, AMT | | | |
| Allegheny Cnty PA Arpt Auth Arpt Rev Pittsburgh Arpt, Ser A, AGM, AMT | | | |
| Allegheny Cnty PA Hosp Dev Auth Ref Allegheny Hlth Network Obligted Grp Issue, Ser A | | | |
| Allegheny Cnty PA Hosp Dev Auth Ref Univ Pittsburgh Med Ctr, Ser A | | | |
| Allegheny Cnty PA Hosp Dev Auth Ref Univ Pittsburgh Med Ctr, Ser A | | | |
| Allegheny Cnty PA Hosp Dev Auth Ref Univ Pittsburgh Med Ctr, Ser A | | | |
| Armstrong PA Sch Dist Ref, Ser A, BAM | | | |
| Berks Cnty PA Indl Dev Auth Hlthcare Facs Rev Ref Highlands at Wyomissing, Ser A | | | |
| Bucks Cnty PA Indl Dev Auth Hosp Rev St Luke’s Univ Hlth Network Proj | | | |
| Bucks Cnty PA Indl Dev Auth Hosp Rev St Luke’s Univ Hlth Network Proj | | | |
| Bucks Cnty PA Indl Dev Auth Ref Pennswood Vlg Proj, Ser A | | | |
| Bucks Cnty PA Indl Dev Auth Ref Pennswood Vlg Proj, Ser A | | | |
| Chester Cnty PA Indl Dev Auth Nts Avon Grove Chrt Sch | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Chester Cnty PA Indl Dev Auth Renaissance Acdmy Chrt Sch | | | |
| Cmwlth Fing Auth PA Tobacco Master Stlmt Payment Rev Bonds | | | |
| Cmwlth Fing Auth PA Tobacco Master Stlmt Payment Rev Bonds | | | |
| Cmwlth Fing Auth PA Tobacco Master Stlmt Payment Rev Bonds, AGM | | | |
| | | | |
| Colonial PA Sch Dist, Ser A | | | |
| Conestoga Vly PA Sch Dist | | | |
| Cumberland Cnty PA Muni Auth Prerefunded Ref Diakon Lutheran Ministries Proj (Pre-refunded maturity 01/01/25) | | | |
| Cumberland Cnty PA Muni Auth Prerefunded Ref Diakon Lutheran Ministries Proj (Pre-refunded maturity 01/01/25) | | | |
| Cumberland Cnty PA Muni Auth Prerefunded Ref Diakon Lutheran Ministries Proj (Pre-refunded maturity 01/01/25) | | | |
| Cumberland Cnty PA Muni Auth Prerefunded Ref Diakon Lutheran Ministries Proj (Pre-refunded maturity 01/01/25) | | | |
| Cumberland Cnty PA Muni Auth Ref Diakon Lutheran Social Ministries | | | |
| Cumberland Cnty PA Muni Auth Ref Diakon Lutheran Social Ministries | | | |
| Cumberland Cnty PA Muni Auth Ref Messiah Vlg Proj | | | |
| Cumberland Cnty PA Muni Auth Unrefunded Ref Diakon Lutheran Ministries Proj | | | |
| Cumberland Cnty PA Muni Auth Unrefunded Ref Diakon Lutheran Ministries Proj | | | |
| Deer Creek PA Drain Basin Allegheny Cnty Swr Rev Ref, AGM | | | |
| Deer Creek PA Drain Basin Allegheny Cnty Swr Rev Ref, AGM | | | |
| Dover PA Area Sch Dist, BAM | | | |
| Dubois PA Hosp Auth Penn Highlands Hlthcare | | | |
| Dubois PA Hosp Auth Penn Highlands Hlthcare | | | |
| E Hempfield Twp PA Indl Dev Auth Ref Willow Vly Cmntys Proj | | | |
| E Hempfield Twp PA Indl Dev Auth Ref Willow Vly Cmntys Proj | | | |
| Kiski Vly PA Wtr Poll Control Auth Ref, AGM | | | |
| Lancaster Cnty PA Hosp Auth Hlthcare Facs Rev Moravian Manors Inc Proj, Ser A | | | |
| Lancaster Cnty PA Hosp Auth Penn St Hlth | | | |
| Lancaster Cnty PA Hosp Auth Penn St Hlth | | | |
| Latrobe PA Indl Dev Auth Univ Rev Ref Seton Hill Univ | | | |
| Latrobe PA Indl Dev Auth Univ Rev Ref Seton Hill Univ | | | |
| Lebanon PA Auth Swr Rev Ref Sustainable Bond, BAM | | | |
| Lebanon PA Auth Swr Rev Ref Sustainable Bond, BAM | | | |
| Lehigh Cnty PA Indl Dev Auth Ref Ppl Elec Util Corp Proj Remk, Ser A | | | |
| Maxatawny Twp PA Muni Auth Rev Diakon Lutheran Social Ministries Proj, Ser A | | | |
| Mifflinburg PA Area Sch Dist Ref, Ser A | | | |
| Mifflinburg PA Area Sch Dist Ref, Ser A | | | |
| Montgomery Cnty PA Hgr Edu & Hlth Auth Ref Thomas Jefferson Univ Proj | | | |
| Montgomery Cnty PA Hgr Edu & Hlth Auth Ref Thomas Jefferson Univ Proj | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Montgomery Cnty PA Hgr Edu & Hlth Auth Ref Thomas Jefferson Univ Proj | | | |
| Montgomery Cnty PA Indl Dev Auth Exempt Facs Rev Var Constellation Energy Genration LLC Proj Ref, Ser A (Mandatory put 04/03/28) | | | |
| Montgomery Cnty PA Indl Dev Auth Ref Meadowood Sr Living Proj, Ser A | | | |
| Montgomery Cnty PA Indl Dev Auth Ref Waverly Heights Ltd Proj | | | |
| Montgomery Cnty PA Indl Dev Auth Ref Waverly Heights Ltd Proj | | | |
| Montgomery Cnty PA Indl Dev Auth Ref Waverly Heights Ltd Proj | | | |
| Northampton Cnty PA Gen Purp Auth Clg Rev Ref Moravian Clg | | | |
| Northampton Cnty PA Gen Purp Auth Clg Rev Ref Moravian Clg | | | |
| Northampton Cnty PA Gen Purp Auth Hosp Rev Ref St Luke’s Univ Hlth Network Proj, Ser A | | | |
| PA St Econ Dev Fing Auth Pkg Sys Rev Ref Sr Insured Capitol Region Parking Sys, Ser A, AGM | | | |
| PA St Econ Dev Fing Auth Pkg Sys Rev Ref Sr Insured Capitol Region Parking Sys, Ser A, AGM | | | |
| PA St Econ Dev Fing Auth Pkg Sys Rev Ref Sr Insured Capitol Region Parking Sys, Ser A, AGM | | | |
| PA St Econ Dev Fing Auth Rev PA Bridges Finco LP P3 Proj | | | |
| PA St Econ Dev Fing Auth Rev Ref Presbyterian Sr Living Prj,
Ser B-2 | | | |
| PA St Econ Dev Fing Auth Rev UPMC Rev, Ser B | | | |
| PA St Econ Dev Fing Auth Solid Wst Disposal Rev Var Rep Svcs Inc Proj Remk, Ser B-1, AMT (Mandatory put 07/15/24) (b) | | | |
| PA St Econ Dev Fing Auth T/E Priv Activity Rev The Penndot Major Bridges Package One Proj P3 Proj, AMT | | | |
| PA St Econ Dev Fing Auth T/E Priv Activity Rev The Penndot Major Bridges Package One Proj P3 Proj, AMT | | | |
| PA St Hgr Eductnl Facs Auth Rev Ref Drexel Univ | | | |
| PA St Hsg Fin Agy Sf Mtge Rev Non Ace, Ser 123B | | | |
| PA St Hsg Fin Agy Sf Mtge Rev Non Ace, Ser 125B, AMT | | | |
| PA St Hsg Fin Agy Sf Mtge Rev, Ser 127B | | | |
| PA St Turnpike Commn Turnpike Rev Ref (Forward refunding maturity 12/01/24) | | | |
| PA St Turnpike Commn Turnpike Rev Ref Subord, First Ser | | | |
| PA St Turnpike Commn Turnpike Rev Ref Subord, Ser 2017-3 | | | |
| PA St Turnpike Commn Turnpike Rev Ref, Ser B | | | |
| PA St Turnpike Commn Turnpike Rev Ref, Ser B | | | |
| PA St Turnpike Commn Turnpike Rev Ref, Ser B | | | |
| PA St Turnpike Commn Turnpike Rev Sub, Ser A, BAM | | | |
| PA St Turnpike Commn Turnpike Rev Subord, Ser A | | | |
| PA St Turnpike Commn Turnpike Rev Subord, Ser A-1 | | | |
| PA St Turnpike Commn Turnpike Rev, Ser B | | | |
| | | | |
| Parkland PA Sch Dist, Ser B | | | |
| Parkland PA Sch Dist, Ser B | | | |
| Philadelphia PA Arpt Rev Ref Priv Activity, AMT, AGM | | | |
| Philadelphia PA Arpt Rev Ref Priv Activity, AGM, AMT | | | |
| Philadelphia PA Arpt Rev Ref, Ser B, AMT | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Philadelphia PA Auth for Indl Dev Chrt Sch Rev Mast Chrt Sch Proj | | | |
| Philadelphia PA Auth for Indl Dev Chrt Sch Rev Mast Chrt Sch Proj | | | |
| Philadelphia PA Auth for Indl Dev Chrt Sch Rev Philadelphia E&T Chrt High Sch, Ser A | | | |
| Philadelphia PA Energy Auth Sustainable Bonds Philadelphia Street Lighting Proj, Ser A | | | |
| Philadelphia PA Energy Auth Sustainable Bonds Philadelphia Street Lighting Proj, Ser A | | | |
| Philadelphia PA Gas Wks Rev Ref | | | |
| Philadelphia PA Sch Dist Sustainable Bond, Ser B | | | |
| | | | |
| Pittsburgh PA Wtr & Swr Auth, Ser B, AGM | | | |
| Pittsburgh PA Wtr & Swr Auth, Ser B, AGM | | | |
| S Estrn PA Transprtn Auth Asset Impt Progr | | | |
| S Estrn PA Transprtn Auth Asset Impt Progr | | | |
| S Wayne Cnty PA Wtr & Swr Auth Wtr & Swr Rev Ref, BAM | | | |
| S Wayne Cnty PA Wtr & Swr Auth Wtr & Swr Rev Ref, BAM | | | |
| S Wayne Cnty PA Wtr & Swr Auth Wtr & Swr Rev Ref, BAM | | | |
| Upper Darby PA Sch Dist, AGM | | | |
| Upper Darby PA Sch Dist, AGM | | | |
| Upper Darby PA Sch Dist, AGM | | | |
| Upper Darby PA Sch Dist, Ser A, BAM | | | |
| Upper Darby PA Sch Dist, Ser A, BAM | | | |
| W Cornwall Twp PA Muni Auth Ref Lebanon Vly Brethren Home Proj, Ser A | | | |
| W Cornwall Twp PA Muni Auth Ref Lebanon Vly Brethren Home Proj, Ser A | | | |
| W Cornwall Twp PA Muni Auth Ref Lebanon Vly Brethren Home Proj, Ser A | | | |
| | |
| | |
| Puerto Rico Cmwlth Restructured, Ser A1 | | | |
| Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured,
Ser A-1, CABS | | | |
| Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured,
Ser A-1, CABS | | | |
| Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured,
Ser A-1 | | | |
| Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured,
Ser A-2 | | | |
| | |
| | |
| Providence RI Pub Bldgs Auth Rev, Ser B, AGM | | | |
| Providence RI Pub Bldgs Auth Rev, Ser B, AGM | | | |
| Providence RI Pub Bldgs Auth Rev, Ser B, AGM | | | |
| RI St Hlth & Eductnl Bldg Corp Rev Ref Hosp Fing Lifespan Oblig Grp | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| RI St Hlth & Eductnl Bldg Corp Rev Ref Hosp Fing Lifespan Oblig Grp | | | |
| RI St Hlth & Eductnl Bldg Corp Rev Ref Hosp Fing Lifespan Oblig Grp | | | |
| | |
| | |
| Berkeley Cnty SC Assmnt Rev Nexton Impt Dist | | | |
| Greenville Cnty SC Sch Dist Installment Pur Rev Ref SC Proj | | | |
| Greenville SC Hosp Sys Brd Hosp Facs Rev, Ser B | | | |
| Lancaster Cnty SC Assmnt Rev Ref Walnut Creek Impt Dist,
Ser A-1 | | | |
| Lancaster Cnty SC Assmnt Rev Ref Walnut Creek Impt Dist,
Ser A-1 | | | |
| SC St Jobs Econ Dev Auth Econ Dev Rev Ref The Woodlands at Furman | | | |
| SC St Jobs Econ Dev Auth Econ Dev Rev Woodlands at Furman Proj, Ser A | | | |
| SC St Pub Svc Auth Rev Ref Santee Cooper, Ser C, AGM | | | |
| SC St Pub Svc Auth Rev Ref Santee Cooper, Ser C, AGM | | | |
| SC St Pub Svc Auth Rev Ref Santee Cooper, Ser C, AGM | | | |
| SC St Pub Svc Auth Rev Ref, Ser A | | | |
| | |
| | |
| Lincoln Cnty SD Econ Dev Rev Ref Augustana Clg Assoc Proj,
Ser A | | | |
| SD St Hlth & Eductnl Facs Auth Ref Sanford Oblig Grp | | | |
| SD St Hlth & Eductnl Facs Auth Ref Westhills Vlg Retmnt Cmnty Issue | | | |
| SD St Hlth & Eductnl Facs Auth Ref Westhills Vlg Retmnt Cmnty Issue | | | |
| | |
| | |
| Chattanooga TN Hlth Eductnl & Hsg Fac Brd Rev Ref Commonspirit Hlth, Ser A-1 | | | |
| Chattanooga TN Hlth Eductnl & Hsg Fac Brd Rev Ref Commonspirit Hlth, Ser A-1 | | | |
| Chattanooga TN Hlth Eductnl & Hsg Fac Brd Rev Ref Commonspirit Hlth, Ser A-2 | | | |
| Chattanooga TN Hlth Eductnl & Hsg Fac Brd Rev Ref Commonspirit Hlth, Ser A-2 | | | |
| Knox Cnty TN Hlth Eductnl & Hsg Fac Brd Stdt Hsg Rev Univ of TN Proj, Ser A-1, BAM | | | |
| Met Govt Nashville & Davidson Cnty TN Hlth & Eductnl Fac Brd Belmont Univ | | | |
| Met Govt Nashville & Davidson Cnty TN Hlth & Eductnl Fac Brd Belmont Univ | | | |
| Met Govt Nashville & Davidson Cnty TN Hlth & Eductnl Fac Brd Ref Lipscomb Univ Proj, Ser A | | | |
| Met Nashville TN Arpt Auth Arpt Rev Subord, Ser B, AMT | | | |
| Met Nashville TN Arpt Auth Arpt Rev, Ser B, AMT | | | |
| Met Nashville TN Arpt Auth Arpt Rev, Ser B, AMT | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Tennergy Corp TN Gas Rev, Ser A (Mandatory put 10/01/24) | | | |
| TN Energy Acq Corp Cmdy Proj Rev, Ser A (Mandatory put 11/01/31) | | | |
| TN St Energy Acq Corp Gas Rev Var Ref Gas Proj, Ser A-1 (Mandatory put 05/01/28) | | | |
| | |
| | |
| Arlington TX Hgr Edu Fin Corp Edu Rev | | | |
| Arlington TX Hgr Edu Fin Corp Edu Rev | | | |
| Arlington TX Hgr Edu Fin Corp Edu Rev | | | |
| Arlington TX Hgr Edu Fin Corp Edu Rev Ref Legacy Trad Schs TX Proj, Ser A | | | |
| Arlington TX Hsg Fin Corp Mf Hsg Rev Var 6900 Matlok Road (Mandatory put 04/01/27) | | | |
| Aubrey TX Spl Assmnt Ref Jackson Ridge Pub Impt Dt Phase #1 & #2 Assmnts, BAM | | | |
| Austin TX Arpt Sys Rev, AMT | | | |
| Austin TX Arpt Sys Rev, AMT | | | |
| Austin TX Arpt Sys Rev, AMT | | | |
| Austin TX Arpt Sys Rev, Ser B, AMT | | | |
| | | | |
| Austin TX Wtr & Wstwtr Sys Rev Ref | | | |
| Barbers Hill TX Indep Sch Dist Sch Bldg | | | |
| Bexar Cnty TX Rev Ref Tax Exempt Venue Proj | | | |
| Celina TX Spl Assmnt Rev Ref The Lakes at Mustang Ranch Pub Impt Dist Phase #1 Proj, BAM | | | |
| Centrl TX Regl Mobility Auth Rev Sr Lien, Ser A (Pre-refunded maturity 07/01/25) | | | |
| Centrl TX Regl Mobility Auth Rev, Ser B | | | |
| Centrl TX Regl Mobility Auth Rev, Ser B | | | |
| Centrl TX Regl Mobility Auth Rev, Ser B | | | |
| Clear Creek TX Indep Sch Dist Ref, Ser A | | | |
| Clifton TX Hgr Edu Fin Corp Edu Rev Idea Pub Schs | | | |
| Clifton TX Hgr Edu Fin Corp Edu Rev Uplift Edu, Ser A | | | |
| Corpus Christi TX Util Sys Rev Junior Lien, Ser B | | | |
| Dallas Fort Worth TX Intl Arpt Rev Ref, Ser B | | | |
| Dallas TX Area Rapid Transit Sales Tax Rev Ref, Ser A | | | |
| Dallas TX Hotel Occupancy Tax Rev Ref | | | |
| Gainesville TX Ctfs Oblig | | | |
| Gainesville TX Ctfs Oblig | | | |
| Galveston Cnty TX Muni Util Dist #54 Ref | | | |
| Garland TX Wtr & Swr Rev Ref | | | |
| Harris Cnty TX Cultural Edu Facs Fin Corp Med Facs Rev Ref Baylor Clg of Med | | | |
| Harris Cnty TX Ref Sr Lien Toll Road, Ser B | | | |
| Harris Cnty TX Ref Sr Lien, Ser A | | | |
| Harris Cnty TX Toll Road Rev Ref, Ser A | | | |
| Hidalgo Cnty TX Ctfs Oblig | | | |
| Hidalgo Cnty TX Regl Mobility Auth Toll & Vehcl Registration Sr Lien, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Houston TX Arpt Sys Rev Ref Subord Lien, Ser A, AGM, AMT | | | |
| Houston TX Arpt Sys Rev Ref Subord Lien, Ser A, AGM, AMT | | | |
| Houston TX Arpt Sys Rev Ref United Airls Inc Terminal E Proj, Ser A, AMT | | | |
| Houston TX Arpt Sys Rev Ref United Airls Inc Terminal Impt Proj, Ser B-2, AMT | | | |
| Houston TX Arpt Sys Rev Sub, Ser A, AMT | | | |
| Houston TX Arpt Sys Rev Sub, Ser A, AMT | | | |
| Houston TX Arpt Sys Rev Sub, Ser A, AMT | | | |
| Houston TX Arpt Sys Rev United Airls Inc Terminal E Proj, Ser A, AMT | | | |
| Houston TX Arpt Sys Rev United Airls Inc Terminal Impt Proj, Ser B-1, AMT | | | |
| Houston TX Hotel Occupancy Tax & Spl Rev Ref Convention & Entertainment Facs Dept | | | |
| Houston TX Util Sys Rev Ref Subord First Lien, Ser B | | | |
| | | | |
| Justin TX Spl Assmnt Rev Timberbrook Pub Imp Dt #1 Imp Area #2 Proj (c) | | | |
| Kyle TX Spl Assmnt Rev 6 Creeks Pub Impt Dist Impt Area #1 (c) | | | |
| La Vernia TX Hgr Edu Fin Corp Edu Rev Meridian World Sch (c) | | | |
| La Vernia TX Hgr Edu Fin Corp Edu Rev Meridian World Sch, Ser A (c) | | | |
| Leander TX Spl Assmnt Rev Crystal Springs Pub Impt Dist Proj Accd Inv (c) | | | |
| Leonard TX Indep Sch Dist, BAM | | | |
| Liberty Hill TX Indep Sch Dist Ref | | | |
| Liberty Hill TX Indep Sch Dist Ref, Ser A | | | |
| Lindsay TX Indep Sch Dist | | | |
| Lower CO River TX Auth Trans Contract Rev Ref LCRA Trans Svcs Corp Proj | | | |
| Lower CO River TX Auth Trans Contract Rev Ref LCRA Trans Svcs Corp Proj | | | |
| Mission TX Ctfs Oblig, AGM | | | |
| Mission TX Econ Dev Corp Sol Wst Disp Rev Var Ref Wst Mgmt Inc Proj Remk, Ser B, AMT (Mandatory put 06/03/24) (b) | | | |
| Mission TX Econ Dev Corp Sol Wst Disp Rev Var Rep Svcs Inc Proj Remk, Ser A, AMT (Mandatory put 08/01/24) (b) | | | |
| Mission TX Econ Dev Corp Sol Wst Disp Rev Var Wst Mgmt Inc Proj Remk, Ser A, AMT (Mandatory put 06/03/24) (b) | | | |
| N Fort Bend TX Wtr Auth Wtr Sys Rev Ref, BAM | | | |
| N Parkway Muni Mgmt Dist #1 TX Contract Rev Legacy Hills Pub Impt Dt Phase #1A-1B Impts (c) | | | |
| N Parkway Muni Mgmt Dist #1 TX Spl Assmnt Rev Major Impt Proj (c) | | | |
| N TX Tollway Auth Rev Ref 1st Tier, Ser A | | | |
| N TX Tollway Auth Rev Ref 2nd Tier, Ser A | | | |
| N TX Tollway Auth Rev Ref 2nd Tier, Ser B | | | |
| N TX Tollway Auth Rev Ref First Tier Bonds, Ser A | | | |
| N TX Tollway Auth Rev Ref First Tier Bonds, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| New Hope Cultural Edu Facs Fin Corp TX Edu Rev Ref Jubilee Acad Ctr (c) | | | |
| New Hope Cultural Edu Facs Fin Corp TX Hosp Rev Ref Childrens Hlth Sys of TX Proj, Ser A | | | |
| New Hope Cultural Edu Facs Fin Corp TX Retmnt Fac Rev Ref Longhorn Vlg Proj | | | |
| New Hope Cultural Edu Facs Fin Corp TX Retmnt Fac Rev Ref Longhorn Vlg Proj | | | |
| Newark Hgr Edu Fin Corp TX Edu Rev Hughen Ctr Inc Proj, Ser A | | | |
| Northside TX Indep Sch Dist Ref, Ser A | | | |
| Pecos Barstow Toyah TX Indep Sch Dist | | | |
| Pecos Barstow Toyah TX Indep Sch Dist | | | |
| Princeton TX Spl Assmnt Rev Winchester Pub Impr Dist #2 Proj (c) | | | |
| Quinlan TX Indep Sch Dist | | | |
| Quinlan TX Indep Sch Dist | | | |
| Quinlan TX Indep Sch Dist | | | |
| | | | |
| | | | |
| | | | |
| Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Methodist Hosp of Dallas Proj | | | |
| Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Ref Baylor Scott & White Hlth Proj, Ser A | | | |
| Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Ref Baylor Scott & White Hlth Proj, Ser A | | | |
| Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Var Baylor Scott & White Hlth Proj, Ser F (Mandatory put 11/15/30) | | | |
| Tarrant Cnty TX Hosp Dist | | | |
| TX St Dept of Hsg & Cmnty Affairs Mf Hsg Rev Var Nts Aspen Park (Mandatory put 03/01/26) | | | |
| TX St Muni Gas Acq & Sply Corp IV, Ser A (Mandatory put 01/01/30) | | | |
| TX St Muni Gas Acq & Sply Corp IV, Ser B | | | |
| TX St Muni Gas Acq & Sply Corp IV, Ser B | | | |
| TX St Muni Gas Acq & Sply Corp IV, Ser B (Mandatory put 01/01/34) | | | |
| TX St Priv Activity Bond Surface Transprtn Corp Rev Ref Sr Lien Bond Surface Transprtn Corp, AMT | | | |
| TX St Priv Activity Bond Surface Transprtn Corp Rev Ref Sr Lien Bond Surface Transprtn Corp, AMT | | | |
| TX St Priv Activity Bond Surface Transprtn Corp Rev Ref Sr N Tarrant Express Managed Lanes Proj, Ser A | | | |
| TX St Priv Activity Bond Surface Transprtn Corp Rev Ref Sr N Tarrant Express Managed Lanes Proj, Ser A | | | |
| TX St Transprtn Commn Central TX Turnpike Sys Rev Ref, Ser A | | | |
| TX St Transprtn Commn Central TX Turnpike Sys Rev Ref, Ser B | | | |
| TX St Wtr Dev Brd St Wtr Implementation Fund, Ser A | | | |
| TX St Wtr Dev Brd St Wtr Implementation Rev Fund for TX | | | |
| TX Wtr Dev Brd St Wtr Implementation Rev Fund Master Trust | | | |
| TX Wtr Dev Brd St Wtr Implementation Rev Fund Master Trust | | | |
| TX Wtr Dev Brd St Wtr Implementation Rev Fund, Ser A | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| Univ of Houston TX Univ Revs Ref, Ser A | | | |
| Univ of N TX Univ Rev Ref, Ser A | | | |
| Univ of TX Permanent Univ Fnd Ref, Ser A | | | |
| Uptown Dev Auth TX Incr Contract Rev, Ser A | | | |
| Viridian TX Muni Mgmt Dist Ref Util Impt, BAM | | | |
| Viridian TX Muni Mgmt Dist Road Impt, BAM | | | |
| Viridian TX Muni Mgmt Dist Util Impt, BAM | | | |
| W Harris Cnty TX Regl Wtr Auth Wtr Sys Rev Ref, BAM | | | |
| Walnut Creek Spl Util Dist TX Wtr Sys Rev, AGM | | | |
| Walnut Creek Spl Util Dist TX Wtr Sys Rev, AGM | | | |
| Woodsboro TX Indep Sch Dist | | | |
| | |
| | |
| Black Desert Pub Infra Dist Sr Bonds, Ser A (c) | | | |
| Firefly Pub Infra Dist #1 UT Spl Assmnt Firefly Assmnt Area #1, Ser A-2 (c) | | | |
| Grand Cnty Sch Dist Loc Bldg Auth UT, AGM | | | |
| Grand Cnty Sch Dist Loc Bldg Auth UT, AGM | | | |
| Grand Cnty Sch Dist Loc Bldg Auth UT, AGM | | | |
| Intermountain Pwr Agy UT Pwr Sply Rev Ref, Ser A | | | |
| Intermountain Pwr Agy UT Pwr Sply Rev, Ser A | | | |
| Jordan UT Sch Dist Sch Bldg, Ser B | | | |
| Military Installation Dev Auth UT Tax Allocation Rev, Ser A-1 | | | |
| Military Installation Dev Auth UT Tax Allocation Rev, Ser A-2 | | | |
| Ogden City UT Muni Bldg Auth Lease Rev, Ser A | | | |
| Salt Lake City UT Arpt Rev, Ser A, AMT | | | |
| Salt Lake City UT Arpt Rev, Ser A, AMT | | | |
| UT St Chrt Sch Fin Auth Chrt Sch Rev Ref Quest Acdmy | | | |
| UT St Chrt Sch Fin Auth Chrt Sch Rev Ref Quest Acdmy | | | |
| UT St Chrt Sch Fin Auth Chrt Sch Rev Wallace Stegner Acdmy Proj, Ser A (c) | | | |
| UT St Telecommunication Open Infra Agy Sales Tax Ref | | | |
| UT St Transit Auth Sales Tax Rev Ref Sub, Ser A (Pre-refunded maturity 06/15/25) | | | |
| | |
| | |
| Burlington VT Ref Lakeview Garage Proj, Ser A, COPS | | | |
| VT St Econ Dev Auth Mtge Rev Ref Wake Robin Corp Proj, Ser A | | | |
| VT St Econ Dev Auth Mtge Rev Ref Wake Robin Corp Proj, Ser A | | | |
| VT St Econ Dev Auth Solid Wst Disp Rev Var Casella Wst Sys Inc Remk, AMT (Mandatory put 04/03/28) (c) | | | |
| VT St Eductnl & Hlth Bldgs Fing Agy Rev Ref Univ of VT Med Ctr, Ser A | | | |
| | |
| | |
| Botetourt Cnty VA Rsdl Care Fac Rev Ref Glebe Inc, Ser A | | | |
| Fairfax Cnty VA Econ Dev Auth Fac Rev Sustainable Bond Cnty Fac Proj, Ser A | | | |
| Isle of Wight Cnty VA Econ Dev Auth Riverside Hlth Sys, AGM | | | |
| | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| VA Clg Bldg Auth Eductnl Facs Rev Ref Regent Univ Proj | | | |
| VA Clg Bldg Auth Eductnl Facs Rev Ref Regent Univ Proj | | | |
| VA St Pub Bldg Auth Pub Facs Rev, Ser C, AMT | | | |
| VA St Res Auth Infra Rev Ref Infra VA Pooled Fing Prog, Ser C | | | |
| VA St Small Busn Fing Auth Rev Ref Sr Lien 95 Express Lanes LLC Proj, AMT | | | |
| VA St Small Busn Fing Auth Rsdl Fac Care Rev Ref Lifespire of VA | | | |
| Virginia Beach VA Dev Auth Rsdl Care Fac Rev Ref Westminster Canterbury on Chesapeake Bay | | | |
| Virginia Beach VA Dev Auth Rsdl Care Fac Rev Ref Westminster Canterbury on Chesapeake Bay | | | |
| Virginia Beach VA Dev Auth Rsdl Care Fac Rev Ref Westminster Canterbury on Chesapeake Bay | | | |
| Virginia Beach VA Dev Auth Rsdl Care Fac Rev Westminster Canterbury on Chesapeake Bay, Ser A | | | |
| Williamsburg VA Econ Dev Auth Stdt Hsg Rev William & Mary Proj, Ser A, AGM | | | |
| Wstrn VA Regl Jail Auth Regl Jail Facs Rev Prerefunded Ref (Pre- refunded maturity 12/01/26) | | | |
| Wstrn VA Regl Jail Auth Regl Jail Facs Rev Unrefunded Ref | | | |
| | |
| | |
| Benton Cnty WA Pub Util Dist #1 Ref | | | |
| Centrl Puget Sound WA Regl Transit Auth Sales & Use Tax Sustainable Bond Ref & Impt, Ser S-1 (Pre-refunded maturity 11/01/25) | | | |
| Centrl Puget Sound WA Regl Transit Auth Sales Tax & Mtr Ve Sustainable Bond, Ser S-1 | | | |
| Energy NW WA Elec Rev Ref Columbia Generating Sys, Ser A | | | |
| FYI Properties WA Lease Rev Ref Sustainable Bond WA Dis Proj | | | |
| Pierce Cnty WA Sch Dist #403 Bethel | | | |
| Port of Seattle WA Rev Intermediate Lien, Ser C, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien Priv Activity, Ser C, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien Priv Activity, Ser C, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien Priv Activity, Ser C, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien, Ser B, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien, Ser B, AMT | | | |
| Port of Seattle WA Rev Ref Intermediate Lien, Ser B, AMT | | | |
| Port of Seattle WA Rev, Ser A, AMT | | | |
| Seattle WA Muni Light & Pwr Rev Sustainable Bond, Ser A | | | |
| Skagit Cnty WA Pub Hosp Dist #1 | | | |
| Skagit Cnty WA Pub Hosp Dist #1 | | | |
| Snohomish Cnty WA Hsg Auth | | | |
| WA St Bid Grp 2, Ser 2024-A | | | |
| WA St Convention Ctr Pub Facs Dist Sub | | | |
| WA St Convention Ctr Pub Facs Dist Sub For Exchange Pur Sustainable Bd 2021 1St Priority, Ser B | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| WA St Hgr Edu Facs Auth Seattle Univ Proj Rev | | | |
| WA St Hlth Care Facs Auth Seattle Cancer Care Alliance (c) | | | |
| WA St Hlth Care Facs Auth Seattle Cancer Care Alliance (c) | | | |
| WA St Hsg Fin Commn Nonprofit Hsg Rev Heron’s Key, Ser A (Pre-refunded maturity 07/01/25) (c) | | | |
| WA St Hsg Fin Commn Nonprofit Hsg Rev Ref Emerald Heights Proj, Ser A | | | |
| WA St Hsg Fin Commn Nonprofit Rev Radford Court & Nordheim Court Portfolio (f) | | | |
| WA St Hsg Fin Commn Sustainable Ctf, Ser A-1 | | | |
| | | | |
| | | | |
| | | | |
| | |
| | |
| S Charleston WV Spl Dist Excise Tax Ref S Charleston Park Place Proj, Ser A (c) (g) | | | |
| WV St Econ Dev Auth Sol Wst Disp Facs Var Sr Arch Res Proj, AMT (Mandatory put 07/01/25) | | | |
| | |
| | |
| Fond Du Lac WI Sch Dist, Ser A, BAM | | | |
| Pub Fin Auth WI Chrt Sch Rev Eno River Acdmy Proj, Ser A (c) | | | |
| Pub Fin Auth WI Chrt Sch Rev Founders of Acdmy Las Vegas Proj, Ser A (c) | | | |
| Pub Fin Auth WI Chrt Sch Rev Ltd American Prep Acdmy Las Vegas Proj, Ser A (c) | | | |
| Pub Fin Auth WI Chrt Sch Rev Ltd American Prep Acdmy Las Vegas Proj, Ser A (c) | | | |
| Pub Fin Auth WI Edu Rev Coral Acdmy of Science Las Vegas,
Ser A | | | |
| Pub Fin Auth WI Edu Rev Ref Mountain Island Chrt Sch Ltd | | | |
| Pub Fin Auth WI Edu Rev Ref Mountain Island Chrt Sch Ltd | | | |
| Pub Fin Auth WI Edu Rev Ref Mountain Island Chrt Sch Ltd | | | |
| Pub Fin Auth WI Edu Rev Triad Eductnl Svcs Inc, Ser A | | | |
| Pub Fin Auth WI Eductnl Rev Piedmont Cmnty Chrt Sch | | | |
| Pub Fin Auth WI Exempt Facs Rev Ref Celanese Proj, Ser B, AMT | | | |
| Pub Fin Auth WI Hosp Rev Ref Renown Regl Med Ctr Proj, Ser A | | | |
| Pub Fin Auth WI Retmnt Cmntys Rev Acts Retmnt Life Cmntys Inc Oblig Grp, Ser A | | | |
| Pub Fin Auth WI Retmnt Fac Rev Southminster (c) | | | |
| Pub Fin Auth WI Rev Sr Proton Intl AR LLC, Ser A (c) (g) | | | |
| Pub Fin Auth WI Rev Sustainable Fargo Moorhead Met Area Flood Mgmnt, AMT | | | |
| Pub Fin Auth WI Rev TX Biomedical Rsrch Institute Proj, Ser A | | | |
| Pub Fin Auth WI Rev TX Biomedical Rsrch Institute Proj, Ser A | | | |
| Pub Fin Auth WI Sol Wst Disp Rev Ref Wst Mgmt Inc Proj Remk, Ser A-2, AMT (Mandatory put 08/01/24) (b) | | | |
| Pub Fin Auth WI Stdt Hsg Rev NC A&T Real Estate Fdtn LLC Proj, Ser B | | | |
| Pub Fin Auth WI Tax Incr Rev Miami World Ctr Proj, Ser A (c) | | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
MUNICIPAL BONDS (Continued) |
| | |
| WI St Hlth & Eductnl Facs Auth Rev Bellin Memorial Hosp Inc, Ser A | | | |
| WI St Hlth & Eductnl Facs Auth Rev Fort Hlthcare Inc, Ser A | | | |
| WI St Hlth & Eductnl Facs Auth Rev Ref Ascension Hlth Credit Grp, Ser A | | | |
| WI St Hlth & Eductnl Facs Auth Rev Ref ProHlth Care Oblig Grp | | | |
| WI St Hlth & Eductnl Facs Auth Rev Ref ProHlth Care Oblig Grp | | | |
| WI St Hlth & Eductnl Facs Auth Rev Ref Rogers Memorial Hosp Inc, Ser A | | | |
| WI St Hlth & Eductnl Facs Auth Rev Var Fort Hlthcare Inc, Ser B (Mandatory put 10/03/34) | | | |
| | | | |
| | |
| | |
| Consol Muni Elec Pwr Sys Wy Jt Pwrs Brd Sys Jt Pwrs Brd Ref Electrical Sys Proj | | | |
| Consol Muni Elec Pwr Sys Wy Jt Pwrs Brd Sys Jt Pwrs Brd Ref Electrical Sys Proj | | | |
| | |
|
|
| Total Investments — 98.1% | |
| | |
| Net Other Assets and Liabilities — 1.9% | |
| | |
Futures Contracts at April 30, 2024 (See Note 2C - Futures Contracts in the Notes to Financial Statements):
| | | | | Unrealized
Appreciation
(Depreciation)/
Value |
U.S. 10-Year Treasury Notes | | | | | |
Ultra 10-Year U.S. Treasury Notes | | | | | |
| | | | | |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by First Trust Advisors L.P., the Fund’s advisor (the “Advisor”). |
| Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by 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 April 30, 2024, securities noted as such amounted to $120,394,344 or 6.2% of net assets. |
| |
| This issuer is in default and interest is not being accrued by the Fund. |
| When-issued security. The interest rate shown reflects the rate in effect at April 30, 2024. Interest will begin accruing on the security’s first settlement date. |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2D - Restricted Securities in the Notes to Financial Statements). |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) Abbreviations throughout the Portfolio of Investments: |
| |
| – Assured Guaranty Municipal Corp. |
| – American Municipal Bond Assurance Corp. |
| – Alternative Minimum Tax |
| |
| – Bond Anticipation Notes |
| – Capital Appreciation Bonds |
| – Certificates of Participation |
| – Grant Anticipation Revenue Vehicle |
| – National Public Finance Guarantee Corp. |
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
| | | | |
| | | | |
| | | | |
| See Portfolio of Investments for state and territory breakout. |
| Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day’s variation margin is presented on the Statement of Assets and Liabilities. |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Statement of Assets and Liabilities
April 30, 2024 (Unaudited)
| |
| |
| |
Cash segregated as collateral for open futures contracts | |
| |
| |
Investment securities sold | |
| |
| |
|
| |
| |
Investment securities purchased | |
| |
| |
| |
|
| |
| |
| |
Accumulated distributable earnings (loss) | |
| |
NET ASSET VALUE, per share | |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | |
| |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Statement of Operations
For the Six Months Ended April 30, 2024 (Unaudited)
| |
| |
| |
|
| |
| |
| |
NET INVESTMENT INCOME (LOSS) | |
|
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
| |
| |
| |
Net change in unrealized appreciation (depreciation) on: | |
| |
| |
Net change in unrealized appreciation (depreciation) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Statements of Changes in Net Assets
| Six Months
Ended
4/30/2024 (Unaudited) | |
| | |
Net investment income (loss) | | |
| | |
Net change in unrealized appreciation (depreciation) | | |
Net increase (decrease) in net assets resulting from operations | | |
|
DISTRIBUTIONS TO SHAREHOLDERS FROM: | | |
| | |
| | |
Total distributions to shareholders | | |
|
SHAREHOLDER TRANSACTIONS: | | |
Proceeds from shares sold | | |
| | |
Net increase (decrease) in net assets resulting from shareholder transactions | | |
Total increase (decrease) in net assets | | |
|
| | |
| | |
| | |
|
CHANGES IN SHARES OUTSTANDING: | | |
Shares outstanding, beginning of period | | |
| | |
| | |
Shares outstanding, end of period | | |
See Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)Financial Highlights
For a share outstanding throughout each period
| Six Months
Ended
4/30/2024
(Unaudited) | |
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Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
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| | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
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Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (e) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. For some periods, the total returns would have been lower if certain fees had not been waived by the advisor. |
| During the fiscal years ended October 31, 2022 and 2021, the Fund received reimbursements from the advisor in the amounts of $5,130 and $4,688, respectively, each representing less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
Notes to Financial Statements
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) 1. Organization
First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of seventeen funds that are offering shares. This report covers the First Trust Managed Municipal ETF (the “Fund”), a diversified series of the Trust, which trades under the ticker “FMB” on Nasdaq, Inc. The Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”
The primary investment objective of the Fund is to generate current income that is exempt from regular federal income taxes and its secondary objective is long term capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes. There can be no assurance that the Fund will achieve its investment objectives. The Fund may not be appropriate for all investors.
2. Significant Accounting Policies
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Fund 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.
The Fund’s NAV 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 are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The 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 readily available market quotations such as 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 Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Municipal securities and other debt securities are fair valued on the basis of fair valuations provided by a third-party pricing service approved by the Advisor’s Pricing Committee, which may use the following valuation inputs when available:
7)
reference data including market research publications.
Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a Fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots.
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) Exchange-traded futures contracts are valued at the end of the day settlement price.
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 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 (the “1933 Act”)) 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 the 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, including, but not limited to, the following:
1)
the most recent price provided by a pricing service;
2)
available market prices for the fixed-income security;
3)
the fundamental business data relating to the issuer;
4)
an evaluation of the forces which influence the market in which these securities are purchased and sold;
5)
the type, size and cost of the security;
6)
the financial statements of the issuer;
7)
the credit quality and cash flow of the issuer, based on the Advisor’s or external analysis;
8)
the information as to any transactions in or offers for the security;
9)
the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies;
11)
the quality, value and salability of collateral, if any, securing the security; and
12)
other relevant factors.
The Fund is 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:
• 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.
• 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).
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
• 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 the Fund’s investments as of April 30, 2024, is included with the 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 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.
Securities purchased or sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. The Fund maintains liquid assets with a current value at least equal to the amount of its when-issued, delayed-delivery or forward purchase commitments until payment is made. At April 30, 2024, the Fund held $5,837,350 of when-issued or delayed-delivery securities. At April 30, 2024, the Fund had no forward purchase commitments.
The Fund may purchase or sell (i.e., is long or short) exchange-listed 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 contracts” on the Statement 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 contracts” on the Statement of Operations. This daily fluctuation in the value of the contract is also known as variation margin and is included in “Variation margin” payable or receivable on the Statement 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.
Restricted cash segregated as collateral for futures contracts in the amount of $1,305,500 is shown as “Cash segregated as collateral for open futures contracts” on the Statement of Assets and Liabilities.
The Fund invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of April 30, 2024, the Fund held restricted securities as shown in the following table that the Advisor has deemed illiquid pursuant to procedures adopted by the Trust’s Board of Trustees. 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. The Fund does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security.
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) | | | | | | |
IN St Fin Auth Rev Eductnl Facs Rock Creek Cmnty Acdmy Proj, Ser A, 5.25%, 07/01/28 | | | | | | |
Polk Cnty FL Indl Dev Auth Mineral Dev LLC Secondary Phosphate Tailings Recovery Proj, 5.88%, 01/01/33 | | | | | | |
Pub Fin Auth WI Rev Sr Proton Intl AR LLC, Ser A, 6.50%, 01/01/41 | | | | | | |
S Charleston WV Spl Dist Excise Tax Ref S Charleston Park Place Proj, Ser A, 4.25%, 06/01/42 | | | | | | |
| | | | | | |
E. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid monthly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized 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 Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31, 2023 was as follows:
As of October 31, 2023, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income | |
Accumulated capital and other gain (loss) | |
Net unrealized appreciation (depreciation) | |
The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
In addition, the Fund intends to invest in municipal securities to allow it to pay shareholders “exempt dividends” as defined in the Code.
The Fund is 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. The taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of April 30, 2024, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) The Fund intends to utilize provisions of the federal income tax laws, which allow it 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 Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2023, for federal income tax purposes, the Fund had $154,532,423 of non-expiring capital loss carryforwards available, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to the Fund’s shareholders.
As of April 30, 2024, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:
| Gross Unrealized
Appreciation | Gross Unrealized
(Depreciation) | Net Unrealized
Appreciation
(Depreciation) |
| | | |
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. Investment Advisory Fee, Affiliated Transactions and Other Fee Arrangements
First Trust, the investment advisor to the Fund, 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 is responsible for the selection and ongoing monitoring of the securities in the Fund’s portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund’s assets and is responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit, and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Prior to November 6, 2023, First Trust also provided fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which was covered under the annual unitary management fee. The annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund’s net assets (“breakpoints”) and calculated pursuant to the following schedule:
| |
Fund net assets up to and including $2.5 billion | |
Fund net assets greater than $2.5 billion up to and including $5 billion | |
Fund net assets greater than $5 billion up to and including $7.5 billion | |
Fund net assets greater than $7.5 billion up to and including $10 billion | |
Fund net assets greater than $10 billion | |
Effective November 6, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNYM”). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund’s assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to November 6, 2023, the Trust had multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performed custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BBH was responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH was responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH was responsible for maintaining shareholder records for the Fund.
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.
Additionally, the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee, the Vice Chair of the Audit Committee, the Lead Independent Trustee and the Vice Lead Independent Trustee 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 Committee Chairs, the Audit Committee Vice Chair, the Lead Independent Trustee and the Vice Lead Independent Trustee rotate periodically in serving in such capacities. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
For the six months ended April 30, 2024, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $300,206,704 and $260,630,678, respectively.
For the six months ended April 30, 2024, the Fund had no in-kind transactions.
Effective February 28, 2024, the Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund IV, First Trust Series Fund and First Trust Variable Insurance Trust, entered into a new Credit Agreement with BNYM as administrative agent for a group of lenders. The borrowing rate is the higher of the federal funds effective rate and the adjusted daily simple SOFR rate plus 1.00%. The commitment amount under the credit agreement is $620 million and such commitment amount may be increased up to $700 million with the consent of one or more lenders. BNYM charges on behalf of the lenders a commitment fee of 0.20% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. Prior to February 28, 2024, the Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund IV and First Trust Series Fund, had a $550 million Credit Agreement with The Bank of Nova Scotia (“Scotia”) as administrative agent for a group of lenders. Scotia charged a commitment fee of 0.25% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. First Trust allocates the commitment fee and agency fee amongst the funds that have access to the credit line. To the extent that the Fund accesses the credit line, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the six months ended April 30, 2024.
6. Derivative Transactions
The following table presents the types of derivatives held by the Fund at April 30, 2024, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities.
| | | |
| | Statement of Assets and
Liabilities Location | | Statement of Assets and
Liabilities Location | |
| | Unrealized appreciation on futures contracts* | | Unrealized depreciation on futures contracts* | |
| Includes cumulative appreciation/depreciation on futures contracts as reported in the Fund’s Portfolio of Investments. Only the current day’s variation margin is presented on the Statement of Assets and Liabilities. |
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended April 30, 2024, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
Statement of Operations Location | |
Interest Rate Risk Exposure | |
Net realized gain (loss) on futures contracts | |
Net change in unrealized appreciation (depreciation) on futures contracts | |
During the six months ended April 30, 2024, the notional value of futures contracts opened and closed were $302,768,989 and $399,262,059, respectively.
The Fund does not have the right to offset financial assets and financial liabilities related to futures contracts on the Statement of Assets and Liabilities.
7. Creations, Redemptions and Transaction Fees
The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with the Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in Creation Units. Prior to the start of trading on every business day, the Fund publishes through the National Securities Clearing Corporation the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of the Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of the Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in the Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund’s shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
Notes to Financial Statements (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2025.
The Trust, on behalf of the Fund, 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.
Management has evaluated the impact of all subsequent events on the Fund 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.
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The 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. The 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 the Fund is available to investors within 60 days after the period to which it relates. The Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.
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.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a 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 a fund to many of the same risks associated with direct cyber security breaches.
Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.
Additional Information (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the 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. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in 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 and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021.
Additional Information (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer
Additional Information (Continued)
First Trust Managed Municipal ETF (FMB)April 30, 2024 (Unaudited) payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.
Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 25, 2024 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 23, 2023 through the Liquidity Committee’s annual meeting held on March 14, 2024 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum during the reporting period and no fund was required to file a Form N-RN during the reporting period. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
First Trust Exchange-Traded Fund III
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
|
For the Six Months Ended
April 30, 2024 |
First Trust Exchange-Traded Fund III
First Trust Long/Short Equity ETF (FTLS) |
First Trust Long/Short Equity ETF (FTLS)
Semi-Annual Report
April 30, 2024
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”) and its 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 the series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (First Trust Long/Short Equity ETF; hereinafter referred to as the “Fund”) 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 the Fund will achieve its investment objective. The 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’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
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, net asset value and share price 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 the Fund’s webpage at www.ftportfolios.com.
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund’s performance and investment approach.
The statistical information that follows may help you understand the Fund’s performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor 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 the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
First Trust Long/Short Equity ETF (FTLS)
Semi-Annual Letter from the Chairman and CEO
April 30, 2024
First Trust is pleased to provide you with the semi-annual report for the First Trust Long/Short Equity ETF (the “Fund”), which contains detailed information about the Fund for the six-month period ended April 30, 2024.
On March 16, 2022, the Federal Reserve (the “Fed”) initiated the first of what have been eleven increases to the Federal Funds target rate thus far in the current cycle. Given its potential impact, financial pundits have been debating the direction and timing of the Fed’s interest rate policy ever since. In December 2023, the Fed gave some guidance, announcing that it expected to implement up to three interest rate cuts totaling 75 basis points (“bps”) in 2024. Investors responded to the news with exuberance. In the U.S., the S&P 500® Index surged by 10.56% on a total return basis in the first quarter of 2024, adding to its already stunning 26.29% total return in 2023. For comparison, the yield on the 10-Year Treasury Note (“T-Note”) stood at 3.80% on December 27, 2023, down a stunning 119 bps from its most recent high of 4.99% set just months prior on October 19, 2023. Bond yields generally move in the opposite direction of prices. Given this relationship, the decline in the 10-Year T-Note’s yield is indicative of investor’s desire to lock in higher income payments prior to the Fed reducing its policy rate.
At this point, it makes sense to step back and highlight several ways the Fed’s interest rate policy has impacted the U.S. economy. We’ll start with the good news. On April 30, 2024, inflation, as measured by the trailing 12-month rate on the Consumer Price Index, stood at 3.4%, down significantly from its most recent peak of 9.1% set in June 2022. Additionally, the higher Federal Funds target rate has been a boon for those investors with assets in fixed income, money market, and other interest-bearing accounts. The total value of assets held in U.S. money market accounts stood at $6.0 trillion on May 1, 2024, nearly double where it stood just five years ago. Notably, the weekly yield on the benchmark U.S. Treasury 3-Month Money Market Index more than doubled from 2.40% to 5.32% between the end of April 2019 and April 2024.
Now for the not-so-good news. Higher interest rates often restrict the ability of consumers and businesses to spend and finance growth, respectively. While the consumer has remained relatively unscathed thus far, evidence that they are stretching their budgets is mounting. The Federal Reserve Bank of New York reported that the total balance of U.S. credit card debt stood at a record $1.13 trillion at the end of 2023, while the average annual percentage rate for all cards rose to a record 21.59% in the first quarter of 2024. Perhaps unsurprisingly, delinquency rates have been surging. Data from the Federal Reserve Bank of St. Louis revealed that the delinquency rate on credit card loans for all U.S. commercial banks rose to 3.10% in the fourth quarter of 2023, up from 2.62% in the fourth quarter of 2019 (pre-COVID-19). In April 2024, 43% of small and mid-sized U.S. businesses were unable to pay their rent on time and in full. In addition, higher interest rates are impacting economic growth. In the U.S., real gross domestic product growth was a tepid 1.6% in the first quarter of 2024, far below consensus expectations of 2.5%. Not even the U.S. government is immune to the impacts of higher interest rates. At the end of the first quarter of 2024, the interest payments paid by the Federal government stood at a record $1.06 trillion, nearly double their total of $0.56 trillion at the end of the fourth quarter of 2019.
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 Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust Long/Short Equity ETF (FTLS)
The First Trust Long/Short Equity ETF’s (the “Fund”) investment objective is to seek to provide investors with long-term total return. Under normal conditions, the Fund will expose at least 80% of its net assets (including investment borrowings) to U.S. exchange-listed equity securities and/or U.S. exchange-traded funds (“ETFs”) that provide exposure to U.S. exchange-listed equity securities. The Fund pursues its investment objective by establishing long and short positions in its portfolio of U.S. exchange-listed equity securities and ETFs. The Fund’s portfolio may include U.S. exchange-listed equity securities of non-U.S. issuers, including the securities of non-U.S. issuers traded on U.S. exchanges in the form of depositary receipts.
The Fund’s portfolio is composed of both long and short positions in equity securities and ETFs. As opposed to taking long positions in which an investor seeks to profit from increases in the price of a security, short selling is a technique that will be used by the Fund to try and profit from the falling price of a security. Short selling involves selling a security that has been borrowed from a third party with the intention of buying an identical security back at a later date to return to that third party.
Having both long and short positions in an equity security portfolio is a common way to create returns that are independent of market moves. One advantage of a long and short portfolio is that the long and short positions may offset one another in a manner that results in a lower net exposure to the direction of the market. In addition, cash balances arising from the use of short selling typically will be held in money market instruments.
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| | | Average Annual Total Returns | |
| | | | Inception
(9/8/14)
to 4/30/24 | | Inception
(9/8/14)
to 4/30/24 |
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Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust Long/Short Equity ETF (FTLS) (Continued)
Portfolio Sector Allocation | % of
Long-Term
Investments -
Long Positions |
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Portfolio Sector Allocation | % of Total
Investments
Sold Short |
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Top Ten Investments - Long Positions | |
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Microchip Technology, Inc. | |
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Top Ten Investments Sold Short | |
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Thermo Fisher Scientific, Inc. | |
Verizon Communications Inc. | |
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Net Other Assets and Liabilities* | |
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| Includes variation margin on futures contracts. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Long/Short Equity ETF (FTLS) (Continued)
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
First Trust Long/Short Equity ETF (FTLS)Semi-Annual ReportApril 30, 2024 (Unaudited) Investment Advisor
First Trust Advisors L.P. (“First Trust”) is the investment advisor to First Trust Long/Short Equity ETF (“FTLS” or the “Fund”). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the investments in the Fund’s portfolio and certain other services necessary for the management of the portfolio.
Portfolio Management Team
The following persons serve as the portfolio managers of the Fund:
John Gambla – CFA, Senior Portfolio Manager of First Trust, Alternatives Investment Team
Rob A. Guttschow – CFA, Senior Portfolio Manager of First Trust, Alternatives Investment Team
The portfolio managers are primarily and jointly responsible for the day to day management of the Fund. Each portfolio manager has served in such capacity for the Fund since 2014.
First Trust Long/Short Equity ETF (FTLS)Understanding Your Fund ExpensesApril 30, 2024 (Unaudited) As a shareholder of First Trust Long/Short Equity ETF (the “Fund”), 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 of investing in the Fund and to compare these costs with the ongoing costs of investing in other 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 April 30, 2024.
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the 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 costs of investing in the Fund 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 brokerage commissions. Therefore, the second line in 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.
| Beginning
Account Value
November 1, 2023 | Ending
Account Value
April 30, 2024 | Annualized
Expense Ratio
Based on the
Six-Month
Period (a) | Expenses Paid
During the
Six-Month
Period (a) (b) |
First Trust Long/Short Equity ETF (FTLS) |
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Hypothetical (5% return before expenses) | | | | |
| Annualized expense ratio and expenses paid during the period do not include fees and expenses of the underlying funds in which the Fund invests. |
| Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 1, 2023 through April 30, 2024), multiplied by 182/366 (to reflect the six-month period). |
First Trust Long/Short Equity ETF (FTLS)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
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| Aerospace & Defense — 0.8% | |
| | |
| | |
| | |
| Automobile Components — 0.1% | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Columbia Banking System, Inc. | |
| Commerce Bancshares, Inc. | |
| Cullen/Frost Bankers, Inc. | |
| Customers Bancorp, Inc. (a) | |
| | |
| First Citizens BancShares, Inc., Class A | |
| | |
| | |
| | |
| | |
| NU Holdings Ltd., Class A (a) (b) | |
| | |
| | |
| Vita Coco (The) Co., Inc. (a) | |
| | |
| 4D Molecular Therapeutics, Inc. (a) | |
| | |
| ACADIA Pharmaceuticals, Inc. (a) | |
| Alnylam Pharmaceuticals, Inc. (a) | |
| Alpine Immune Sciences, Inc. (a) | |
| Amicus Therapeutics, Inc. (a) | |
| | |
| BioCryst Pharmaceuticals, Inc. (a) | |
| | |
| | |
| Gilead Sciences, Inc. (b) | |
| Halozyme Therapeutics, Inc. (a) | |
| | |
| Intellia Therapeutics, Inc. (a) | |
| Ionis Pharmaceuticals, Inc. (a) | |
| Protagonist Therapeutics, Inc. (a) | |
| | |
| | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| Broadline Retail (Continued) | |
| | |
| PDD Holdings, Inc., ADR (a) | |
| | |
| | |
| | |
| Advanced Drainage Systems, Inc. | |
| | |
| | |
| | |
| Johnson Controls International PLC | |
| | |
| | |
| Zurn Elkay Water Solutions Corp. | |
| | |
| | |
| Goldman Sachs Group (The), Inc. | |
| | |
| | |
| | |
| | |
| | |
| Axalta Coating Systems Ltd. (a) | |
| | |
| International Flavors & Fragrances, Inc. | |
| | |
| | |
| | |
| | |
| | |
| Commercial Services & Supplies — 0.4% | |
| | |
| | |
| | |
| | |
| Communications Equipment — 0.4% | |
| Arista Networks, Inc. (a) | |
| NetScout Systems, Inc. (a) | |
| Telefonaktiebolaget LM Ericsson, ADR | |
| | |
| Construction & Engineering — 0.4% | |
| | |
| | |
| | |
| Construction Materials — 0.5% | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| Construction Materials (Continued) | |
| Martin Marietta Materials, Inc. | |
| Summit Materials, Inc., Class A (a) | |
| | |
| | |
| | |
| Capital One Financial Corp. (b) | |
| | |
| | |
| Consumer Staples Distribution & Retail — 0.2% | |
| Performance Food Group Co. (a) | |
| Containers & Packaging — 0.8% | |
| | |
| | |
| | |
| | |
| | |
| | |
| Diversified Consumer Services — 0.8% | |
| | |
| Grand Canyon Education, Inc. (a) | |
| New Oriental Education & Technology Group, Inc., ADR (a) | |
| TAL Education Group, ADR (a) | |
| | |
| Diversified Telecommunication Services — 0.2% | |
| Iridium Communications, Inc. | |
| | |
| | |
| Electric Utilities — 0.3% | |
| | |
| | |
| | |
| Electrical Equipment — 1.2% | |
| | |
| Generac Holdings, Inc. (a) | |
| NEXTracker, Inc., Class A (a) | |
| | |
| Rockwell Automation, Inc. | |
| Vertiv Holdings Co., Class A | |
| | |
| Electronic Equipment, Instruments & Components — 0.3% | |
| | |
| | |
| | |
| | |
| Energy Equipment & Services — 0.1% | |
| | |
| | |
| Electronic Arts, Inc. (b) | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| Entertainment (Continued) | |
| Live Nation Entertainment, Inc. (a) | |
| | |
| Spotify Technology S.A. (a) (b) | |
| | |
| | |
| Warner Bros Discovery, Inc. (a) (b) | |
| | |
| Financial Services — 2.4% | |
| Berkshire Hathaway, Inc., Class B (a) (b) | |
| Corebridge Financial, Inc. | |
| | |
| Mastercard, Inc., Class A | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Tyson Foods, Inc., Class A | |
| | |
| Health Care Equipment & Supplies — 0.1% | |
| | |
| | |
| | |
| Health Care Providers & Services — 2.2% | |
| | |
| | |
| | |
| | |
| | |
| | |
| Hims & Hers Health, Inc. (a) | |
| | |
| Molina Healthcare, Inc. (a) | |
| | |
| Universal Health Services, Inc., Class B | |
| | |
| | |
| | |
| Hotels, Restaurants & Leisure — 5.9% | |
| | |
| Booking Holdings, Inc. (b) | |
| Cracker Barrel Old Country Store, Inc. | |
| DoorDash, Inc., Class A (a) (b) | |
| DraftKings, Inc., Class A (a) (b) | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| Hotels, Restaurants & Leisure (Continued) | |
| | |
| | |
| | |
| Household Durables — 1.4% | |
| | |
| Lennar Corp., Class A (b) | |
| | |
| | |
| Independent Power and Renewable Electricity Producers — 0.2% | |
| | |
| | |
| First Industrial Realty Trust, Inc. | |
| | |
| | |
| Brighthouse Financial, Inc. (a) | |
| | |
| | |
| Oscar Health, Inc., Class A (a) | |
| Prudential Financial, Inc. | |
| Reinsurance Group of America, Inc. | |
| Selective Insurance Group, Inc. | |
| | |
| Interactive Media & Services — 4.7% | |
| Alphabet, Inc., Class A (a) (b) | |
| Alphabet, Inc., Class C (a) (b) | |
| Meta Platforms, Inc., Class A (b) | |
| Pinterest, Inc., Class A (a) (b) | |
| | |
| | |
| | |
| | |
| Cognizant Technology Solutions Corp., Class A | |
| Fastly, Inc., Class A (a) | |
| International Business Machines Corp. | |
| Twilio, Inc., Class A (a) | |
| | |
| | |
| | |
| | |
| | |
| Life Sciences Tools & Services — 0.5% | |
| 10X Genomics, Inc., Class A (a) | |
| | |
| Medpace Holdings, Inc. (a) | |
| | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| | |
| | |
| | |
| Franklin Electric Co., Inc. | |
| | |
| | |
| | |
| | |
| | |
| SPX Technologies, Inc. (a) | |
| | |
| Watts Water Technologies, Inc., Class A | |
| | |
| Marine Transportation — 0.1% | |
| | |
| | |
| | |
| Cleveland-Cliffs, Inc. (a) | |
| | |
| | |
| | |
| Oil, Gas & Consumable Fuels — 6.4% | |
| | |
| Antero Resources Corp. (a) | |
| Canadian Natural Resources Ltd. | |
| | |
| Cheniere Energy, Inc. (b) | |
| | |
| | |
| | |
| | |
| Hess Midstream, L.P., Class A (c) | |
| Magnolia Oil & Gas Corp., Class A | |
| | |
| | |
| | |
| PBF Energy, Inc., Class A | |
| Petroleo Brasileiro S.A., ADR (b) | |
| | |
| Plains All American Pipeline, L.P. (d) | |
| | |
| | |
| | |
| | |
| | |
| Paper & Forest Products — 0.1% | |
| | |
| Passenger Airlines — 0.1% | |
| Copa Holdings SA, Class A | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| Personal Care Products — 0.3% | |
| BellRing Brands, Inc. (a) | |
| | |
| | |
| | |
| Amylyx Pharmaceuticals, Inc. (a) | |
| | |
| Axsome Therapeutics, Inc. (a) | |
| Bristol-Myers Squibb Co. (b) | |
| Corcept Therapeutics, Inc. (a) | |
| | |
| | |
| Intra-Cellular Therapies, Inc. (a) | |
| Pacira BioSciences, Inc. (a) | |
| Teva Pharmaceutical Industries Ltd., ADR (a) | |
| | |
| Professional Services — 0.6% | |
| Broadridge Financial Solutions, Inc. | |
| | |
| | |
| | |
| | |
| | |
| Real Estate Management & Development — 0.1% | |
| DigitalBridge Group, Inc. | |
| Semiconductors & Semiconductor Equipment — 7.4% | |
| Advanced Micro Devices, Inc. (a) | |
| | |
| | |
| | |
| Microchip Technology, Inc. (b) | |
| | |
| | |
| | |
| | |
| | |
| Atlassian Corp., Class A (a) (b) | |
| | |
| Clear Secure, Inc., Class A | |
| | |
| Dropbox, Inc., Class A (a) | |
| | |
| | |
| | |
| Klaviyo, Inc., Class A (a) | |
| Marathon Digital Holdings, Inc. (a) | |
| | |
| | |
| Palantir Technologies, Inc., Class A (a) | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (Continued) |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Boot Barn Holdings, Inc. (a) | |
| | |
| Wayfair, Inc., Class A (a) (b) | |
| | |
| Technology Hardware, Storage & Peripherals — 4.0% | |
| | |
| Logitech International S.A. | |
| | |
| Super Micro Computer, Inc. (a) | |
| | |
| | |
| Textiles, Apparel & Luxury Goods — 2.8% | |
| Canada Goose Holdings, Inc. (a) | |
| | |
| | |
| | |
| Deckers Outdoor Corp. (a) (b) | |
| | |
| | |
| Skechers U.S.A., Inc., Class A (a) | |
| | |
| | |
| | |
| | |
| | |
| | |
| Trading Companies & Distributors — 1.2% | |
| Beacon Roofing Supply, Inc. (a) | |
| Core & Main, Inc., Class A (a) | |
| SiteOne Landscape Supply, Inc. (a) | |
| | |
| | |
| Transportation Infrastructure — 0.1% | |
| Grupo Aeroportuario del Sureste SAB de CV, ADR | |
| | |
| | |
EXCHANGE-TRADED FUNDS — 1.0% |
| | |
| Invesco QQQ Trust Series 1 | |
| Technology Select Sector SPDR Fund | |
| Total Exchange-Traded Funds | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
MONEY MARKET FUNDS — 6.1% |
| Dreyfus Government Cash Management Fund, Institutional Shares - 5.19% (e) | |
| | |
| Total Investments — 97.9% | |
| | |
COMMON STOCKS SOLD SHORT — (25.7)% |
| Aerospace & Defense — (1.7)% | |
| | |
| | |
| L3Harris Technologies, Inc. | |
| | |
| | |
| Spirit AeroSystems Holdings, Inc., Class A (a) | |
| | |
| | | | | |
| Air Freight & Logistics — (0.8)% | |
| C.H. Robinson Worldwide, Inc. | |
| Expeditors International of Washington, Inc. | |
| | |
| United Parcel Service Inc., Class B | |
| | | | | |
| Automobile Components — (0.1)% | |
| Goodyear Tire & Rubber (The) Co. (a) | |
| Mobileye Global, Inc., Class A (a) | |
| | |
| | | | | |
| | |
| Rivian Automotive, Inc., Class A (a) | |
| | |
| | | | | |
| | |
| | |
| | |
| | |
| | | | | |
| | |
| Constellation Brands, Inc., Class A | |
| | |
| | |
| | | | | |
| Broadline Retail — (0.1)% | |
| | |
| | |
| Ollie’s Bargain Outlet Holdings, Inc. (a) | |
| | | | | |
| Building Products — (0.2)% | |
| | |
| Fortune Brands Innovations, Inc. | |
| | | | | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| | |
| | |
| Charles Schwab (The) Corp. | |
| | |
| | |
| MarketAxess Holdings, Inc. | |
| | |
| | | | | |
| | |
| Air Products and Chemicals, Inc. | |
| | |
| | |
| | |
| | |
| | | | | |
| Communications Equipment — (0.3)% | |
| | |
| | |
| | |
| Lumentum Holdings, Inc. (a) | |
| | |
| | | | | |
| Construction & Engineering — (0.0)% | |
| | |
| Consumer Finance — (0.0)% | |
| | |
| Consumer Staples Distribution & Retail — (0.2)% | |
| | |
| | |
| | | | | |
| Containers & Packaging — (0.2)% | |
| | |
| | |
| | |
| | | | | |
| | |
| | |
| Diversified REITs — (0.1)% | |
| | |
| Diversified Telecommunication Services — (0.8)% | |
| | |
| Verizon Communications, Inc. | |
| | | | | |
| Electric Utilities — (0.7)% | |
| Constellation Energy Corp. | |
| | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| Electric Utilities (Continued) | |
| | |
| Pinnacle West Capital Corp. | |
| | |
| | |
| | |
| | | | | |
| Electrical Equipment — (0.4)% | |
| Bloom Energy Corp., Class A (a) | |
| | |
| | |
| | |
| | |
| | |
| | | | | |
| Electronic Equipment, Instruments & Components — (0.4)% | |
| | |
| | |
| | |
| Insight Enterprises, Inc. (a) | |
| Keysight Technologies, Inc. (a) | |
| | |
| Zebra Technologies Corp., Class A (a) | |
| | | | | |
| Energy Equipment & Services — (0.3)% | |
| | |
| | |
| | |
| | |
| | | | | |
| | |
| | |
| Take-Two Interactive Software, Inc. (a) | |
| | | | | |
| Financial Services — (0.3)% | |
| Fidelity National Information Services, Inc. | |
| | |
| Marqeta, Inc., Class A (a) | |
| | | | | |
| | |
| Archer-Daniels-Midland Co. | |
| | |
| | |
| | |
| | |
| | | | | |
| Ground Transportation — (0.5)% | |
| | |
| JB Hunt Transport Services, Inc. | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| Ground Transportation (Continued) | |
| Knight-Swift Transportation Holdings, Inc. | |
| | |
| | |
| | |
| | | | | |
| Health Care Equipment & Supplies — (0.9)% | |
| | |
| | |
| Envista Holdings Corp. (a) | |
| GE HealthCare Technologies, Inc. | |
| | |
| | |
| | |
| Inspire Medical Systems, Inc. (a) | |
| | |
| Intuitive Surgical, Inc. (a) | |
| | |
| | |
| | |
| | |
| | |
| | |
| TransMedics Group, Inc. (a) | |
| | | | | |
| Health Care Providers & Services — (0.6)% | |
| | |
| | |
| | |
| Laboratory Corp. of America Holdings | |
| | |
| | | | | |
| Health Care REITs — (0.3)% | |
| Healthpeak Properties, Inc. | |
| | |
| | |
| | | | | |
| Health Care Technology — (0.1)% | |
| | |
| Veeva Systems, Inc., Class A (a) | |
| | | | | |
| Hotels, Restaurants & Leisure — (0.3)% | |
| | |
| Choice Hotels International, Inc. | |
| | |
| Penn Entertainment, Inc. (a) | |
| | | | | |
| Household Durables — (0.0)% | |
| Mohawk Industries, Inc. (a) | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| Household Products — (0.2)% | |
| Church & Dwight Co., Inc. | |
| | |
| | | | | |
| Independent Power and Renewable Electricity Producers — (0.1)% | |
| | |
| NextEra Energy Partners, L.P. | |
| | | | | |
| Industrial Conglomerates — (0.2)% | |
| | |
| Industrial REITs — (0.1)% | |
| Americold Realty Trust, Inc. | |
| EastGroup Properties, Inc. | |
| | | | | |
| | |
| | |
| Arthur J. Gallagher & Co. | |
| | |
| Fidelity National Financial, Inc. | |
| | |
| | |
| | |
| | |
| | | | | |
| | |
| Akamai Technologies, Inc. (a) | |
| | |
| | | | | |
| Leisure Products — (0.1)% | |
| | |
| Topgolf Callaway Brands Corp. (a) | |
| | | | | |
| Life Sciences Tools & Services — (1.6)% | |
| Agilent Technologies, Inc. | |
| | |
| Bio-Rad Laboratories, Inc., Class A (a) | |
| | |
| Charles River Laboratories International, Inc. (a) | |
| | |
| | |
| Mettler-Toledo International, Inc. (a) | |
| | |
| Thermo Fisher Scientific, Inc. | |
| | |
| West Pharmaceutical Services, Inc. | |
| | | | | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| | |
| | |
| | |
| | | | | |
| | |
| Charter Communications, Inc., Class A (a) | |
| | |
| | | | | |
| | |
| | |
| | |
| | |
| | | | | |
| Mortgage Real Estate Investment Trusts (REITs) — (0.1)% | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | | |
| | |
| Alexandria Real Estate Equities, Inc. | |
| | |
| | |
| | |
| | | | | |
| Oil, Gas & Consumable Fuels — (0.5)% | |
| | |
| | |
| | |
| | |
| Occidental Petroleum Corp. | |
| | |
| | |
| | |
| | | | | |
| Personal Care Products — (0.2)% | |
| | |
| Estee Lauder (The) Cos., Inc., Class A | |
| | | | | |
| Professional Services — (0.3)% | |
| Alight, Inc., Class A (a) | |
| | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| Professional Services (Continued) | |
| | |
| | |
| | | | | |
| Real Estate Management & Development — (0.3)% | |
| CBRE Group, Inc., Class A (a) | |
| | |
| Zillow Group, Inc., Class C (a) | |
| | | | | |
| Residential REITs — (0.6)% | |
| American Homes 4 Rent, Class A | |
| AvalonBay Communities, Inc. | |
| Equity LifeStyle Properties, Inc. | |
| | |
| Essex Property Trust, Inc. | |
| | |
| Mid-America Apartment Communities, Inc. | |
| | |
| | |
| | | | | |
| | |
| | |
| Brixmor Property Group, Inc. | |
| Federal Realty Investment Trust | |
| | |
| | |
| | | | | |
| Semiconductors & Semiconductor Equipment — (2.0)% | |
| | |
| | |
| | |
| | |
| | |
| Onto Innovation, Inc. (a) | |
| | |
| | |
| SolarEdge Technologies, Inc. (a) | |
| | |
| | |
| | |
| | | | | |
| | |
| | |
| Bentley Systems, Inc., Class B | |
| DoubleVerify Holdings, Inc. (a) | |
| | |
| | |
| Freshworks, Inc., Class A (a) | |
| | |
| Guidewire Software, Inc. (a) | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS SOLD SHORT (Continued) |
| | |
| | |
| | |
| Smartsheet, Inc., Class A (a) | |
| Sprout Social, Inc., Class A (a) | |
| | |
| | |
| | | | | |
| Specialized REITs — (0.8)% | |
| | |
| | |
| Digital Realty Trust, Inc. | |
| | |
| | |
| | | | | |
| Specialty Retail — (0.8)% | |
| | |
| | |
| | |
| | |
| | |
| O’Reilly Automotive, Inc. (a) | |
| | |
| | |
| Victoria’s Secret & Co. (a) | |
| | | | | |
| Technology Hardware, Storage & Peripherals — (0.7)% | |
| Dell Technologies, Inc., Class C | |
| Hewlett Packard Enterprise Co. | |
| Pure Storage, Inc., Class A (a) | |
| Seagate Technology Holdings PLC | |
| Western Digital Corp. (a) | |
| | | | | |
| | |
| Essential Utilities, Inc. | |
| Wireless Telecommunication Services — (0.4)% | |
| | |
| Total Investments Sold Short — (25.7)% | |
| | |
| Net Other Assets and Liabilities — 27.8% | |
| | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) Futures Contracts at April 30, 2024 (See Note 2D - Futures Contracts in the Notes to Financial Statements):
| | | | | Unrealized
Appreciation
(Depreciation)/
Value |
Russell 2000 E-mini Futures | | | | | |
| | | | | |
| | | | | |
| Non-income producing security. |
| This security or a portion of this security is segregated as collateral for investments sold short. At April 30, 2024, the segregated value of these securities amounts to $276,703,935. |
| This security is taxed as a “C” corporation for federal income tax purposes. |
| Security is a Master Limited Partnership (“MLP”). |
| Rate shown reflects yield as of April 30, 2024. |
Abbreviations throughout the Portfolio of Investments: |
| – American Depositary Receipt |
| – Real Estate Investment Trusts |
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
|
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Common Stocks Sold Short* | | | | |
| See Portfolio of Investments for industry breakout. |
| Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day’s variation margin is presented on the Statement of Assets and Liabilities. |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Statement of Assets and Liabilities
April 30, 2024 (Unaudited)
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Cash segregated as collateral for open futures contracts | |
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Investment securities sold | |
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Investments sold short, at value | |
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Investment securities purchased | |
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Dividends on investments sold short | |
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Accumulated distributable earnings (loss) | |
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NET ASSET VALUE, per share | |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | |
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Investments sold short, proceeds | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Statement of Operations
For the Six Months Ended April 30, 2024 (Unaudited)
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Dividend expense on investments sold short | |
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NET INVESTMENT INCOME (LOSS) | |
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NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
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Foreign currency transactions | |
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Net change in unrealized appreciation (depreciation) on: | |
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Foreign currency translation | |
Net change in unrealized appreciation (depreciation) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Statements of Changes in Net Assets
| Six Months
Ended
4/30/2024 (Unaudited) | |
| | |
Net investment income (loss) | | |
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Net change in unrealized appreciation (depreciation) | | |
Net increase (decrease) in net assets resulting from operations | | |
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DISTRIBUTIONS TO SHAREHOLDERS FROM: | | |
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SHAREHOLDER TRANSACTIONS: | | |
Proceeds from shares sold | | |
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Net increase (decrease) in net assets resulting from shareholder transactions | | |
Total increase (decrease) in net assets | | |
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CHANGES IN SHARES OUTSTANDING: | | |
Shares outstanding, beginning of period | | |
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Shares outstanding, end of period | | |
See Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)Financial Highlights
For a share outstanding throughout each period
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
| | | | | | |
|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets (c) | | | | | | |
Ratio of total expenses to average net assets excluding dividend expense and margin interest expense (c) | | | | | | |
Ratio of net investment income (loss) to average net assets (c) | | | | | | |
Portfolio turnover rate (e) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| Ratios of expenses to average net assets and ratio of net investment income (loss) to average net assets do not reflect the Fund’s proportionate share of expenses and income of underlying investment companies in which the Fund invests. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
Notes to Financial Statements
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) 1. Organization
First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of seventeen funds that are offering shares. This report covers the First Trust Long/Short Equity ETF (the “Fund”), a diversified series of the Trust, which trades under the ticker “FTLS” on NYSE Arca, Inc. The Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”
The investment objective of the Fund is to seek to provide investors with long-term total return. Under normal conditions, the Fund will expose at least 80% of its net assets (including investment borrowings) to U.S. exchange-listed equity securities and/or U.S. exchange-traded funds (“ETFs”) that provide exposure to U.S. exchange-listed equity securities. The Fund pursues its investment objective by establishing long and short positions in its portfolio of U.S. exchange-listed equity securities and ETFs. The Fund’s portfolio may include U.S. exchange-listed equity securities of non-U.S. issuers, including the securities of non-U.S. issuers traded on U.S. exchanges in the form of depositary receipts. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors.
2. Significant Accounting Policies
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Fund 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.
The Fund’s NAV 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. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The 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 readily available market quotations such as 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 Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Common stocks, exchange-traded funds and other equity securities listed on any national or foreign exchange (excluding Nasdaq, Inc. (“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 primary exchange for such securities.
Equity securities traded in an over-the-counter market are valued at the close price or the last trade price.
Exchange-traded futures contracts are valued at the end of the day settlement price.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by 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
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) 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 the 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, including, but not limited to, the following:
1)
the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price;
3)
the size of the holding;
4)
the initial cost of the security;
5)
transactions in comparable securities;
6)
price quotes from dealers and/or third-party pricing services;
7)
relationships among various securities;
8)
information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
9)
an analysis of the issuer’s financial statements;
10)
the existence of merger proposals or tender offers that might affect the value of the security; and
11)
other relevant factors.
The Fund is 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:
• 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.
• 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.
• 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 the Fund’s investments as of April 30, 2024, is included with the 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, if any, is recorded daily on the accrual basis.
Distributions received from the Fund’s investments in real estate investment trusts (“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. The Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by the Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude.
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) Distributions received from the Fund’s investments in master limited partnerships (“MLPs”) generally are comprised of return of capital and investment income. The 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.
Short sales are utilized for investment and risk management purposes and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold by the Fund, but are not currently owned in the Fund’s portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The Fund will pay a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is affected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund’s portfolio. The Fund is subject to the risk that it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund.
The Fund has established an account with Pershing, LLC for the purpose of borrowing securities that the Fund intends to sell short. The Fund is charged interest on debit margin balances at a rate equal to the Overnight Bank Funding Rate (“OBFR”) plus 40 basis points and earns interest on credit margin balances at a rate equal to the OBFR less 30 basis points. With regard to securities held short, the Fund is credited a rebate equal to the market value of its short positions at a rate equal to the OBFR less 25 basis points. This rebate rate applies to easy to borrow securities. Securities that are hard to borrow may earn a rebate that is less than the foregoing or may be subject to a premium charge on a security by security basis. The different rebate rate is determined at the time of a short sale request. For the six months ended April 30, 2024, the Fund had margin interest income of $161,570 and margin interest expense of $30,515, as shown on the Statement of Operations. Restricted cash in the amount of $308,053,671, as shown on the Statement of Assets and Liabilities, is associated with collateral at the broker as of April 30, 2024.
The Fund may purchase or sell (i.e., is long or short) exchange-listed futures contracts to gain long or short exposure to broad based equity indexes. 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 contracts” on the Statement 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 contracts” on the Statement of Operations. This daily fluctuation in the value of the contract is also known as variation margin and is included in “Variation margin” payable or receivable on the Statement 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.
Restricted cash segregated as collateral for futures contracts in the amount of $5,380,684 is shown as “Cash segregated as collateral for open futures contracts” on the Statement of Assets and Liabilities.
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) E. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized 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 Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31, 2023 was as follows:
As of October 31, 2023, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income | |
Accumulated capital and other gain (loss) | |
Net unrealized appreciation (depreciation) | |
The 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, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
The Fund is 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. The taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of April 30, 2024, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which allow it 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 Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2023, for federal income tax purposes, the Fund had $70,054,634 of non-expiring capital loss carryforwards available, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to the Fund’s shareholders.
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2023, the Fund had no net late year ordinary or capital losses.
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) As of April 30, 2024, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:
| Gross Unrealized
Appreciation | Gross Unrealized
(Depreciation) | Net Unrealized
Appreciation
(Depreciation) |
| | | |
Expenses, other than the investment advisory fee, dividend and interest expense on investments sold short and other excluded expenses, are paid by the Advisor (see Note 3).
3. Investment Advisory Fee, Affiliated Transactions and Other Fee Arrangements
First Trust, the investment advisor to the Fund, 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 is responsible for the selection and ongoing monitoring of the securities in the Fund’s portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund’s assets and is responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit, and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, acquired fund fees and expenses, dividend expenses on investments sold short, and extraordinary expenses. The annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund’s net assets (“breakpoints”) and calculated pursuant to the following schedule:
| |
Fund net assets up to and including $2.5 billion | |
Fund net assets greater than $2.5 billion up to and including $5 billion | |
Fund net assets greater than $5 billion up to and including $7.5 billion | |
Fund net assets greater than $7.5 billion up to and including $10 billion | |
Fund net assets greater than $10 billion | |
Prior to November 6, 2023, First Trust also provided fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which was covered under the annual unitary management fee. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund’s total annual operating expenses.
Effective November 6, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNYM”). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund’s assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to November 6, 2023, the Trust had multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performed custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BBH was responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH was responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH was responsible for maintaining shareholder records for the Fund.
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.
Additionally, the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee, the Vice Chair of the Audit Committee, the Lead Independent Trustee and the Vice Lead Independent Trustee 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 Committee Chairs, the Audit Committee Vice Chair, the Lead Independent Trustee and the Vice Lead Independent Trustee rotate periodically in serving in such capacities. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
For the six months ended April 30, 2024, the cost of purchases and proceeds from sales of investments, excluding short-term investments, investments sold short, and in-kind transactions, were $875,676,583 and $952,674,614, respectively. The cost of purchases to cover short sales and the proceeds of short sales were $408,348,820 and $437,326,865, respectively.
For the six months ended April 30, 2024, the cost of in-kind purchases and proceeds from in-kind sales were $916,913,618 and $597,252,041, respectively. For the six months ended April 30, 2024, the Fund had no in-kind transactions in investments sold short.
5. Derivative Transactions
The following table presents the types of derivatives held by the Fund at April 30, 2024, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities.
| | | |
| | Statement of Assets and
Liabilities Location | | Statement of Assets and
Liabilities Location | |
| | Unrealized appreciation on futures contracts* | | Unrealized depreciation on futures contracts* | |
| Includes cumulative appreciation/depreciation on futures contracts as reported in the Fund’s Portfolio of Investments. Only the current day’s variation margin is presented on the Statement 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 six months ended April 30, 2024, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
Statement of Operations Location | |
| |
Net realized gain (loss) on futures contracts | |
Net change in unrealized appreciation (depreciation) on futures contracts | |
During the six months ended April 30, 2024, the notional value of futures contracts opened and closed were $449,539,227 and $415,172,669, respectively.
The Fund does not have the right to offset financial assets and financial liabilities related to futures contracts on the Statement of Assets and Liabilities.
6. Creations, Redemptions and Transaction Fees
The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with the Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in Creation Units. Prior to the start of trading on every business day, the Fund publishes through the National Securities Clearing Corporation the
Notes to Financial Statements (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of the Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of the Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in the Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund’s shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2025.
The Trust, on behalf of the Fund, 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.
Management has evaluated the impact of all subsequent events on the Fund 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.
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The 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. The 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 the Fund is available to investors within 60 days after the period to which it relates. The Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.
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.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a 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 a fund to many of the same risks associated with direct cyber security breaches.
Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.
Additional Information (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the 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. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in 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 and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021.
Additional Information (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer
Additional Information (Continued)
First Trust Long/Short Equity ETF (FTLS)April 30, 2024 (Unaudited) payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.
Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 25, 2024 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 23, 2023 through the Liquidity Committee’s annual meeting held on March 14, 2024 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum during the reporting period and no fund was required to file a Form N-RN during the reporting period. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
First Trust Exchange-Traded Fund III
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
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For the Six Months Ended
April 30, 2024 |
First Trust Exchange-Traded Fund III
First Trust Emerging Markets Local Currency Bond ETF (FEMB) |
First Trust Emerging Markets Local Currency Bond ETF (FEMB)
Semi-Annual Report
April 30, 2024
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”) and/or First Trust Global Portfolios Limited (“FTGP” or the “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 the series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (First Trust Emerging Markets Local Currency Bond ETF; hereinafter referred to as the “Fund”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective 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 the Fund will achieve its investment objective. The 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’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
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, net asset value and share price 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 the Fund’s webpage at www.ftportfolios.com.
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund’s performance and investment approach.
The statistical information that follows may help you understand the 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 Sub-Advisor 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 the Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings.
First Trust Emerging Markets Local Currency Bond ETF (FEMB)
Semi-Annual Letter from the Chairman and CEO
April 30, 2024
First Trust is pleased to provide you with the semi-annual report for the First Trust Emerging Markets Local Currency Bond ETF (the “Fund”), which contains detailed information about the Fund for the six-month period ended April 30, 2024.
On March 16, 2022, the Federal Reserve (the “Fed”) initiated the first of what have been eleven increases to the Federal Funds target rate thus far in the current cycle. Given its potential impact, financial pundits have been debating the direction and timing of the Fed’s interest rate policy ever since. In December 2023, the Fed gave some guidance, announcing that it expected to implement up to three interest rate cuts totaling 75 basis points (“bps”) in 2024. Investors responded to the news with exuberance. In the U.S., the S&P 500® Index surged by 10.56% on a total return basis in the first quarter of 2024, adding to its already stunning 26.29% total return in 2023. For comparison, the yield on the 10-Year Treasury Note (“T-Note”) stood at 3.80% on December 27, 2023, down a stunning 119 bps from its most recent high of 4.99% set just months prior on October 19, 2023. Bond yields generally move in the opposite direction of prices. Given this relationship, the decline in the 10-Year T-Note’s yield is indicative of investor’s desire to lock in higher income payments prior to the Fed reducing its policy rate.
At this point, it makes sense to step back and highlight several ways the Fed’s interest rate policy has impacted the U.S. economy. We’ll start with the good news. On April 30, 2024, inflation, as measured by the trailing 12-month rate on the Consumer Price Index, stood at 3.4%, down significantly from its most recent peak of 9.1% set in June 2022. Additionally, the higher Federal Funds target rate has been a boon for those investors with assets in fixed income, money market, and other interest-bearing accounts. The total value of assets held in U.S. money market accounts stood at $6.0 trillion on May 1, 2024, nearly double where it stood just five years ago. Notably, the weekly yield on the benchmark U.S. Treasury 3-Month Money Market Index more than doubled from 2.40% to 5.32% between the end of April 2019 and April 2024.
Now for the not-so-good news. Higher interest rates often restrict the ability of consumers and businesses to spend and finance growth, respectively. While the consumer has remained relatively unscathed thus far, evidence that they are stretching their budgets is mounting. The Federal Reserve Bank of New York reported that the total balance of U.S. credit card debt stood at a record $1.13 trillion at the end of 2023, while the average annual percentage rate for all cards rose to a record 21.59% in the first quarter of 2024. Perhaps unsurprisingly, delinquency rates have been surging. Data from the Federal Reserve Bank of St. Louis revealed that the delinquency rate on credit card loans for all U.S. commercial banks rose to 3.10% in the fourth quarter of 2023, up from 2.62% in the fourth quarter of 2019 (pre-COVID-19). In April 2024, 43% of small and mid-sized U.S. businesses were unable to pay their rent on time and in full. In addition, higher interest rates are impacting economic growth. In the U.S., real gross domestic product growth was a tepid 1.6% in the first quarter of 2024, far below consensus expectations of 2.5%. Not even the U.S. government is immune to the impacts of higher interest rates. At the end of the first quarter of 2024, the interest payments paid by the Federal government stood at a record $1.06 trillion, nearly double their total of $0.56 trillion at the end of the fourth quarter of 2019.
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 Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)
The First Trust Emerging Markets Local Currency Bond ETF’s (the “Fund”) investment objective is to seek maximum total return and current income. The Fund lists and principally trades its shares on Nasdaq, Inc. (“Nasdaq”) under the ticker symbol “FEMB.” Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in bonds, notes and bills issued or guaranteed by entities incorporated or domiciled in emerging market countries that are denominated in the local currency of the issuer. In implementing the Fund’s investment strategy, First Trust Global Portfolios Limited (the “Sub-Advisor”) seeks to provide current income and enhance capital, while minimizing volatility.
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| | | Average Annual Total Returns | |
| | | | Inception
(11/4/14)
to 4/30/24 | | Inception
(11/4/14)
to 4/30/24 |
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Bloomberg Emerging Markets Local Currency Government - 10% Country Capped Index | | | | | | |
JP Morgan GBI-EM Global Diversified Index | | | | | | |
Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB) (Continued)
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Foreign Sovereign Bonds and Notes | |
Net Other Assets and Liabilities(1) | |
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| % of Total
Investments
(including cash) |
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Republic of South Africa Government Bond, 10.50%, 12/21/26 | |
Indonesia Treasury Bond, 9.00%, 03/15/29 | |
Malaysia Government Bond, 3.89%, 08/15/29 | |
Indonesia Treasury Bond, 8.38%, 09/15/26 | |
Romania Government Bond, 6.70%, 02/25/32 | |
Brazil Notas do Tesouro Nacional, Series F, 10.00%, 01/01/31 | |
Republic of South Africa Government Bond, 8.25%, 03/31/32 | |
Thailand Government Bond, 3.35%, 06/17/33 | |
Brazil Notas do Tesouro Nacional, Series F, 10.00%, 01/01/29 | |
Indonesia Treasury Bond, 7.00%, 09/15/30 | |
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| Includes forward foreign currency contracts. |
| The ratings are by S&P Global Ratings. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. “NR” indicates no rating. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. |
Fund Performance Overview (Unaudited) (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB) (Continued)
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Semi-Annual ReportApril 30, 2024 (Unaudited) Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”) is the investment advisor to the First Trust Emerging Markets Local Currency Bond ETF (the “Fund”). First Trust is responsible for the ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
First Trust Global Portfolios Limited (“FTGP”), an affiliate of First Trust, serves as investment sub-advisor to the Fund. Derek Fulton and Leonardo Da Costa are the Fund’s portfolio managers and are jointly and primarily responsible for the day-to-day management of the Fund’s investment portfolio. Established in December 2011, FTGP is an SEC-registered investment advisor based in London. FTGP was established as a United Kingdom-based distributor, advisor and affiliate of First Trust and First Trust Portfolios L.P. and advises on global fixed income and currency portfolios. The global fixed income team at FTGP has experience in managing developing and emerging market fixed income portfolios for high profile European institutions.
Portfolio Management Team
Derek Fulton, Chief Executive Officer, FTGP
Leonardo Da Costa, Portfolio Manager, FTGP
The portfolio managers are primarily responsible for the day-to-day management of the Fund. Each portfolio manager has managed the Fund since 2014.
Anthony Beevers, who has served as a member of the portfolio management team since 2019, has relocated to Singapore to become an employee of First Trust Portfolios Asia Pte. Ltd. (“FTP Asia”). FTP Asia and First Trust Global Portfolios Limited (“FTGP”) are in the process of entering into a memorandum of understanding (the “MOU”) pursuant to which certain investment professionals from FTP Asia may render portfolio management, research, trading and related services to U.S. clients of FTGP, including the Fund, as associated persons of FTGP.
During the period before the MOU is executed, Mr. Beevers may, at times, serve in a research and/or advisory role to the Fund versus a portfolio management role. Mr. Beevers is expected to return to his full duties with respect to the portfolio in the third quarter of 2024 through the MOU. Derek Fulton and Leonardo Da Costa, portfolio managers of the Fund, will continue to serve as portfolio managers, and will be primarily responsible for the day-to-day management of the Fund’s portfolio during this period. The Fund does not expect any changes to its investment process or strategies during this period.
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Understanding Your Fund ExpensesApril 30, 2024 (Unaudited) As a shareholder of First Trust Emerging Markets Local Currency Bond ETF (the “Fund”), 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 of investing in the Fund and to compare these costs with the ongoing costs of investing in other 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 April 30, 2024.
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the 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 costs of investing in the Fund 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 brokerage commissions. Therefore, the second line in 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.
| Beginning
Account Value
November 1, 2023 | Ending
Account Value
April 30, 2024 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
First Trust Emerging Markets Local Currency Bond ETF (FEMB) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
| Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 1, 2023 through April 30, 2024), multiplied by 182/366 (to reflect the six-month period). |
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
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FOREIGN SOVEREIGN BONDS AND NOTES (a) — 93.5% |
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| Brazil Notas do Tesouro Nacional, Series F (BRL) | | | |
| Brazil Notas do Tesouro Nacional, Series F (BRL) | | | |
| Brazil Notas do Tesouro Nacional, Series F (BRL) | | | |
| Brazil Notas do Tesouro Nacional, Series F (BRL) | | | |
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| Bonos de la Tesoreria de la Republica en pesos (CLP) | | | |
| Bonos de la Tesoreria de la Republica en pesos (CLP) (b) (c) | | | |
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| Colombian TES, Series B (COP) | | | |
| Colombian TES, Series B (COP) | | | |
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| Czech Republic Government Bond (CZK) (c) | | | |
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| Hungary Government Bond (HUF) | | | |
| Hungary Government Bond (HUF) | | | |
| Hungary Government Bond (HUF) | | | |
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| India Government Bond (INR) | | | |
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| Indonesia Treasury Bond (IDR) | | | |
| Indonesia Treasury Bond (IDR) | | | |
| Indonesia Treasury Bond (IDR) | | | |
| Indonesia Treasury Bond (IDR) | | | |
| Indonesia Treasury Bond (IDR) | | | |
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| Israel Government Bond - Fixed (ILS) | | | |
| Israel Government Bond - Fixed (ILS) | | | |
| Israel Government Bond - Fixed (ILS) | | | |
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| Malaysia Government Bond (MYR) | | | |
| Malaysia Government Bond (MYR) | | | |
| Malaysia Government Bond (MYR) | | | |
| Malaysia Government Bond (MYR) | | | |
| Malaysia Government Bond (MYR) | | | |
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| Mexican Bonos, Series M (MXN) | | | |
| Mexican Bonos, Series M (MXN) | | | |
| Mexican Bonos, Series M (MXN) | | | |
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See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | | | |
FOREIGN SOVEREIGN BONDS AND NOTES (a) (Continued) |
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| Peru Government Bond (PEN) | | | |
| Peru Government Bond (PEN) | | | |
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| Philippine Government International Bond (PHP) | | | |
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| Republic of Poland Government Bond (PLN) | | | |
| Republic of Poland Government Bond (PLN) | | | |
| Republic of Poland Government Bond (PLN) | | | |
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| Romania Government Bond (RON) | | | |
| Romania Government Bond (RON) | | | |
| Romania Government Bond (RON) | | | |
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| Republic of South Africa Government Bond (ZAR) | | | |
| Republic of South Africa Government Bond (ZAR) | | | |
| Republic of South Africa Government Bond (ZAR) | | | |
| Republic of South Africa Government Bond (ZAR) | | | |
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| African Development Bank (ZAR) | | | |
| Asian Development Bank (INR) | | | |
| European Bank for Reconstruction & Development (INR) | | | |
| Inter-American Development Bank (INR) | | | |
| International Bank for Reconstruction & Development (INR) | | | |
| International Finance Corp. (INR) | | | |
| International Finance Corp. (MXN) | | | |
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| Thailand Government Bond (THB) | | | |
| Thailand Government Bond (THB) | | | |
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| Turkiye Government Bond (TRY) | | | |
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| Total Investments — 93.5% | |
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| Net Other Assets and Liabilities — 6.5% | |
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See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) Forward Foreign Currency Contracts at April 30, 2024 (See Note 2C - Forward Foreign Currency Contracts in the Notes to Financial Statements):
| | | | Purchase Value
as of
4/30/2024 | | Unrealized
Appreciation
(Depreciation) |
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Net Unrealized Appreciation (Depreciation) | |
| Principal Value is in local currency in the security description. |
| This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund’s advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2024, securities noted as such amounted to $2,972,560 or 1.9% of net assets. |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
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See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) Abbreviations throughout the Portfolio of Investments: |
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Currency Exposure Diversification | % of Total
Investments (including cash)‡ |
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| The weightings include the impact of currency forwards. |
| Amount is less than 0.1%. |
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
|
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Foreign Sovereign Bonds and Notes* | | | | |
Forward Foreign Currency Contracts | | | | |
| | | | |
|
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Forward Foreign Currency Contracts | | | | |
| See Portfolio of Investments for country breakout. |
See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Statement of Assets and Liabilities
April 30, 2024 (Unaudited)
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Foreign currency, at value | |
Unrealized appreciation on forward foreign currency contracts | |
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Investment securities sold | |
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Unrealized depreciation on forward foreign currency contracts | |
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Deferred foreign capital gains tax | |
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Accumulated distributable earnings (loss) | |
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NET ASSET VALUE, per share | |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | |
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Foreign currency, at cost (proceeds) | |
See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Statement of Operations
For the Six Months Ended April 30, 2024 (Unaudited)
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NET INVESTMENT INCOME (LOSS) | |
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NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
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Forward foreign currency contracts | |
Foreign currency transactions | |
Foreign capital gains tax | |
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Net change in unrealized appreciation (depreciation) on: | |
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Forward foreign currency contracts | |
Foreign currency translation | |
Deferred foreign capital gains tax | |
Net change in unrealized appreciation (depreciation) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | |
See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Statements of Changes in Net Assets
| Six Months
Ended
4/30/2024 (Unaudited) | |
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Net investment income (loss) | | |
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Net change in unrealized appreciation (depreciation) | | |
Net increase (decrease) in net assets resulting from operations | | |
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DISTRIBUTIONS TO SHAREHOLDERS FROM: | | |
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Total distributions to shareholders | | |
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SHAREHOLDER TRANSACTIONS: | | |
Proceeds from shares sold | | |
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Net increase (decrease) in net assets resulting from shareholder transactions | | |
Total increase (decrease) in net assets | | |
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CHANGES IN SHARES OUTSTANDING: | | |
Shares outstanding, beginning of period | | |
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Shares outstanding, end of period | | |
See Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)Financial Highlights
For a share outstanding throughout each period
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
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Net asset value, end of period | | | | | | |
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Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (e) | | | | | | |
| Based on average shares outstanding. |
| The per share amount does not correlate with the aggregate realized and unrealized gain (loss) due to the timing of the Fund share sales and repurchases in relation to market value fluctuation of the underlying investments. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
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| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
Notes to Financial Statements
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) 1. Organization
First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of seventeen funds that are offering shares. This report covers the First Trust Emerging Markets Local Currency Bond ETF (the “Fund”), a non-diversified series of the Trust, which trades under the ticker “FEMB” on Nasdaq, Inc. (“Nasdaq”). The Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”
The Fund is an actively managed exchange-traded fund. The investment objective of the Fund is to seek maximum total return and current income. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in bonds, notes and bills issued or guaranteed by entities incorporated or domiciled in emerging market countries that are denominated in the local currency of the issuer. There can be no assurance the Fund will achieve its investment objective. The Fund may not be appropriate for all investors.
2. Significant Accounting Policies
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Fund 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.
The Fund’s NAV 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 Fund’s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The 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 readily available market quotations such as 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 Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Corporate bonds, corporate notes and other debt securities are fair valued on the basis of valuations provided by a third-party pricing service approved by the Advisor’s Pricing Committee, which may use the following valuation inputs when available:
7)
reference data including market research publications.
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
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) 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.
Forward foreign currency contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s spot rate, and the thirty, sixty, ninety, and one-hundred eighty day forward rates provided by a third-party pricing service.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by 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 the 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, including, but not limited to, the following:
1)
the most recent price provided by a pricing service;
2)
available market prices for the fixed-income security, or economic data relating to the country of issue;
3)
the fundamental business data relating to the borrower/issuer;
4)
an evaluation of the forces which influence the market in which these securities are purchased and sold;
5)
the type, size and cost of a security;
6)
the financial statements of the borrower/issuer or the financial condition of the country of issue;
7)
the credit quality and cash flow of the borrower/issuer, or country of issue, based on the Pricing Committee’s, sub-advisor’s or portfolio manager’s analysis, as applicable, or external analysis;
8)
the information as to any transactions in or offers for the security;
9)
the price and extent of public trading in similar securities of the borrower/issuer, or comparable companies;
11)
the quality, value and salability of collateral, if any, securing the security;
12)
the business prospects of the borrower/issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower’s/issuer’s management (for corporate debt only);
13)
the economic, political and social prospects/developments of the country of issue and the assessment of the country’s government leaders/officials (for sovereign debt only);
14)
the prospects for the borrower’s/issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and
15)
other relevant factors.
The Fund is 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:
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) • 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.
• 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.
• 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 the Fund’s investments as of April 30, 2024, is included with the 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.
C. Forward Foreign Currency Contracts
The Fund is subject to foreign currency risk in the normal course of pursuing its investment objective. Forward foreign currency contracts are agreements between two parties (“Counterparties”) to exchange one currency for another at a future date and at a specified price. The Fund uses forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund’s foreign currency exposure. These contracts are valued daily, and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in “Unrealized appreciation on forward foreign currency contracts” and “Unrealized depreciation on forward foreign currency contracts” on the Statement of Assets and Liabilities. The change in unrealized appreciation/(depreciation) is included in “Net change in unrealized appreciation (depreciation) on forward foreign currency contracts” on the Statements of Operations. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or the cost of) the closing transaction and the Fund’s basis in the contract. This realized gain or loss is included in “Net realized gain (loss) on forward foreign currency contracts” on the Statements of Operations. Risks arise from the possible inability of Counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Due to the risks, the Fund could incur losses in excess of the net unrealized value shown on the Forward Foreign Currency Contracts table in the Fund’s Portfolio of Investments. In the event of default by the Counterparty, the Fund will provide notice to the Counterparty of the Fund’s intent to convert the currency held by the Fund into the currency that the Counterparty agreed to exchange with the Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
The books and records of the Fund 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 Statement of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in “Net change in unrealized appreciation (depreciation) on investments” on the Statement 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
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) in “Net realized gain (loss) on foreign currency transactions” on the Statement 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 Statement of Operations.
E. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid monthly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually. The Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized 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 Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31, 2023 was as follows:
As of October 31, 2023, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income | |
Accumulated capital and other gain (loss) | |
Net unrealized appreciation (depreciation) | |
The 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, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
The Fund is 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. The taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of April 30, 2024, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which allow it 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 Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2023, for federal income tax purposes, the Fund had $37,534,045 of non-expiring capital loss carryforwards available, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to the Fund’s shareholders.
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) As of April 30, 2024, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:
| Gross Unrealized
Appreciation | Gross Unrealized
(Depreciation) | Net Unrealized
Appreciation
(Depreciation) |
| | | |
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. Investment Advisory Fee, Affiliated Transactions and Other Fee Arrangements
First Trust, the investment advisor to the Fund, 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 is responsible for the selection and ongoing monitoring of the securities in the Fund’s portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
First Trust is responsible for the expenses of the Fund including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, Rule 12b-1 distribution and service fees, if any, brokerage expenses, taxes, interest, acquired fund fees and expenses, and extraordinary expenses. The annual unitary management fee payable by the Fund to First Trust for these services will be reduced at certain levels of the Fund’s net assets (“breakpoints”) and calculated pursuant to the following schedule:
| |
Fund net assets up to and including $2.5 billion | |
Fund net assets greater than $2.5 billion up to and including $5 billion | |
Fund net assets greater than $5 billion up to and including $7.5 billion | |
Fund net assets greater than $7.5 billion up to and including $10 billion | |
Fund net assets greater than $10 billion | |
Prior to November 6, 2023, First Trust also provided fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which is covered under the annual unitary management fee.
The Trust, on behalf of the Fund, and First Trust have retained First Trust Global Portfolios Limited (“FTGP” or the “Sub-Advisor”), an affiliate of First Trust, to serve as investment sub-advisor. In this capacity, FTGP is responsible for the selection and ongoing monitoring of the securities in the Fund’s investment portfolio. FTGP receives a sub-advisory fee equal to 40% of any remaining monthly unitary fee paid to the Advisor after the Fund’s average expenses accrued during the most recent twelve months are subtracted from the unitary fee for that month.
Effective November 6, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNYM”). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund’s assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to November 6, 2023, the Trust had multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performed custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BBH was responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH was responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH was responsible for maintaining shareholder records for the Fund.
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.
Additionally, the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee, the Vice Chair of the Audit Committee, the Lead Independent Trustee and the Vice Lead Independent Trustee 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 Committee Chairs, the Audit Committee Vice Chair, the Lead Independent Trustee and the Vice Lead Independent Trustee rotate periodically in serving in such capacities. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
For the six months ended April 30, 2024, the cost of purchases and proceeds from sales of investments, excluding short-term investments, derivatives, and in-kind transactions, were $58,347,812 and $31,715,608, respectively.
For the six months ended April 30, 2024, the Fund had no in-kind transactions.
Effective February 28, 2024, the Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund IV, First Trust Series Fund and First Trust Variable Insurance Trust, entered into a new Credit Agreement with BNYM as administrative agent for a group of lenders. The borrowing rate is the higher of the federal funds effective rate and the adjusted daily simple SOFR rate plus 1.00%. The commitment amount under the credit agreement is $620 million and such commitment amount may be increased up to $700 million with the consent of one or more lenders. BNYM charges on behalf of the lenders a commitment fee of 0.20% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. Prior to February 28, 2024, the Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund IV and First Trust Series Fund, had a $550 million Credit Agreement with The Bank of Nova Scotia (“Scotia”) as administrative agent for a group of lenders. Scotia charged a commitment fee of 0.25% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans, and an agency fee. First Trust allocates the commitment fee and agency fee amongst the funds that have access to the credit line. To the extent that the Fund accesses the credit line, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the six months ended April 30, 2024.
6. Derivative Transactions
The following table presents the types of derivatives held by the Fund at April 30, 2024, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities.
| | | |
| | Statement of Assets and
Liabilities Location | | Statement of Assets and
Liabilities Location | |
Forward foreign currency contracts | | Unrealized appreciation on forward foreign currency contracts | | Unrealized depreciation on forward foreign currency contracts | |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended April 30, 2024, on derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
Statement of Operations Location | |
| |
Net realized gain (loss) on forward foreign currency contracts | |
Net change in unrealized appreciation (depreciation) on forward foreign currency contracts | |
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) During the six months ended April 30, 2024, the notional value of forward foreign currency contracts opened and closed were $320,190,893 and $317,103,764, respectively.
7. Offsetting on the Statement of Assets and Liabilities
Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statement of Assets and Liabilities and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund’s financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions.
For financial reporting purposes, the Fund does not offset financial assets and financial liabilities that are subject to master netting arrangements (“MNAs”) or similar agreements on the Statement of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral.
At April 30, 2024, derivative assets and liabilities (by type) on a gross basis are as follows:
| | | | Gross Amount Not Offset
in the Statement of
Assets and Liabilities | |
| Gross
Amount of
Recognized
Assets | Gross Amount
Offset in the
Statement of
Assets and
Liabilities | Net Amount
of Assets
Presented in the
Statement of
Assets and
Liabilities | | | |
Forward Foreign Currency Contracts* | | | | | | |
|
| | | | Gross Amount Not Offset
in the Statement of
Assets and Liabilities | |
| Gross
Amount of
Recognized
Liabilities | Gross Amount
Offset in the
Statement of
Assets and
Liabilities | Net Amount
of Liabilities
Presented in the
Statement of
Assets and
Liabilities | | | |
Forward Foreign Currency Contracts* | | | | | | |
| The respective Counterparties for each contract are disclosed in the Forward Foreign Currency Contracts table in the Portfolio of Investments. |
8. Creations, Redemptions and Transaction Fees
The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with the Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in Creation Units. Prior to the start of trading on every business day, the Fund publishes through the National Securities Clearing Corporation the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of the Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of the Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market
Notes to Financial Statements (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) trading in the Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund’s shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2025.
The Trust, on behalf of the Fund, 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.
Management has evaluated the impact of all subsequent events on the Fund 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.
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
The 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. The 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 the Fund is available to investors within 60 days after the period to which it relates. The Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.
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.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a 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 a fund to many of the same risks associated with direct cyber security breaches.
Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.
Additional Information (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the 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. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in 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 and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021.
Additional Information (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer
Additional Information (Continued)
First Trust Emerging Markets Local Currency Bond ETF (FEMB)April 30, 2024 (Unaudited) payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.
Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 25, 2024 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 23, 2023 through the Liquidity Committee’s annual meeting held on March 14, 2024 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum during the reporting period and no fund was required to file a Form N-RN during the reporting period. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
First Trust Exchange-Traded Fund III
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
First Trust Global Portfolios Limited
Floor 2
8 Angel Court
London EC2R 7HJ
England
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
|
For the Six Months Ended
April 30, 2024 |
First Trust Exchange-Traded Fund III
First Trust RiverFront Dynamic Developed International ETF (RFDI) |
First Trust RiverFront Dynamic Europe ETF (RFEU) |
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) |
First Trust Exchange-Traded Fund III
Semi-Annual Report
April 30, 2024
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”) and/or RiverFront Investment Group, LLC (“RIG” or the “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 the series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (each such series is referred to as a “Fund” and collectively, as the “Funds”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective 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 Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund’s 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, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund’s webpage at www.ftportfolios.com.
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 and investment approach.
The statistical information that follows may help you understand each Fund’s performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor 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 its prospectus, statement of additional information, and other Fund regulatory filings.
First Trust Exchange-Traded Fund III
Semi-Annual Letter from the Chairman and CEO
April 30, 2024
First Trust is pleased to provide you with the semi-annual report for the First Trust RiverFront Dynamic International ETFs (the “Funds”), which contains detailed information about the Funds for the six-month period ended April 30, 2024.
On March 16, 2022, the Federal Reserve (the “Fed”) initiated the first of what have been eleven increases to the Federal Funds target rate thus far in the current cycle. Given its potential impact, financial pundits have been debating the direction and timing of the Fed’s interest rate policy ever since. In December 2023, the Fed gave some guidance, announcing that it expected to implement up to three interest rate cuts totaling 75 basis points (“bps”) in 2024. Investors responded to the news with exuberance. In the U.S., the S&P 500® Index surged by 10.56% on a total return basis in the first quarter of 2024, adding to its already stunning 26.29% total return in 2023. For comparison, the yield on the 10-Year Treasury Note (“T-Note”) stood at 3.80% on December 27, 2023, down a stunning 119 bps from its most recent high of 4.99% set just months prior on October 19, 2023. Bond yields generally move in the opposite direction of prices. Given this relationship, the decline in the 10-Year T-Note’s yield is indicative of investor’s desire to lock in higher income payments prior to the Fed reducing its policy rate.
At this point, it makes sense to step back and highlight several ways the Fed’s interest rate policy has impacted the U.S. economy. We’ll start with the good news. On April 30, 2024, inflation, as measured by the trailing 12-month rate on the Consumer Price Index, stood at 3.4%, down significantly from its most recent peak of 9.1% set in June 2022. Additionally, the higher Federal Funds target rate has been a boon for those investors with assets in fixed income, money market, and other interest-bearing accounts. The total value of assets held in U.S. money market accounts stood at $6.0 trillion on May 1, 2024, nearly double where it stood just five years ago. Notably, the weekly yield on the benchmark U.S. Treasury 3-Month Money Market Index more than doubled from 2.40% to 5.32% between the end of April 2019 and April 2024.
Now for the not-so-good news. Higher interest rates often restrict the ability of consumers and businesses to spend and finance growth, respectively. While the consumer has remained relatively unscathed thus far, evidence that they are stretching their budgets is mounting. The Federal Reserve Bank of New York reported that the total balance of U.S. credit card debt stood at a record $1.13 trillion at the end of 2023, while the average annual percentage rate for all cards rose to a record 21.59% in the first quarter of 2024. Perhaps unsurprisingly, delinquency rates have been surging. Data from the Federal Reserve Bank of St. Louis revealed that the delinquency rate on credit card loans for all U.S. commercial banks rose to 3.10% in the fourth quarter of 2023, up from 2.62% in the fourth quarter of 2019 (pre-COVID-19). In April 2024, 43% of small and mid-sized U.S. businesses were unable to pay their rent on time and in full. In addition, higher interest rates are impacting economic growth. In the U.S., real gross domestic product growth was a tepid 1.6% in the first quarter of 2024, far below consensus expectations of 2.5%. Not even the U.S. government is immune to the impacts of higher interest rates. At the end of the first quarter of 2024, the interest payments paid by the Federal government stood at a record $1.06 trillion, nearly double their total of $0.56 trillion at the end of the fourth quarter of 2019.
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,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust RiverFront Dynamic Developed International ETF (RFDI)
The investment objective of First Trust RiverFront Dynamic Developed International ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of developed market companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such developed market companies are denominated (each, a “Developed Market currency” and, collectively, the “Developed Market currencies”). Developed market companies are those companies (i) whose securities are traded principally on a stock exchange in a developed market country, (ii) that have a primary business office in a developed market country, or (iii) that have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, a developed market country. Developed market countries currently include the countries comprising the Morgan Stanley Capital International World Index or countries considered to be developed by the World Bank, the International Finance Corporation or the United Nations. Under normal market conditions, the Fund invests in at least three countries and at least 40% of its net assets in countries other than the United States. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFDI.”
The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to Developed Market currencies.
|
| | | Average Annual Total Returns | |
| | | | Inception
(4/13/16)
to 4/30/24 | | Inception
(4/13/16)
to 4/30/24 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(See Notes to Fund Performance Overview on page 9.)
Fund Performance Overview (Unaudited) (Continued)
First Trust RiverFront Dynamic Developed International ETF (RFDI) (Continued)
| % of Total
Long-Term
Investments |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| % of Total
Long-Term
Investments |
| |
| |
| |
Novo Nordisk A/S, Class B | |
Mitsubishi UFJ Financial Group, Inc. | |
| |
| |
| |
| |
| |
| |
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Fund Performance Overview (Unaudited) (Continued)
First Trust RiverFront Dynamic Europe ETF (RFEU)
The investment objective of First Trust RiverFront Dynamic Europe ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of European companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such European companies are denominated (each, a “European currency” and, collectively, the “European currencies”). European companies are those companies (i) whose securities are traded principally on a stock exchange in a European country, (ii) that have a primary business office in a European country, or (iii) that have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, a European country. The Fund considers a European country to be any member country of the European Union or any country included in the MSCI Europe Index. The Fund generally focuses its European company investments in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and/or the United Kingdom. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFEU.”
The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to European currencies.
|
| | | Average Annual Total Returns | |
| | | | Inception
(4/13/16)
to 4/30/24 | | Inception
(4/13/16)
to 4/30/24 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
(See Notes to Fund Performance Overview on page 9.)
Fund Performance Overview (Unaudited) (Continued)
First Trust RiverFront Dynamic Europe ETF (RFEU) (Continued)
| % of Total
Long-Term
Investments |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| % of Total
Long-Term
Investments |
Novo Nordisk A/S, Class B | |
| |
| |
LVMH Moet Hennessy Louis Vuitton SE | |
| |
| |
| |
| |
| |
| |
| |
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Fund Performance Overview (Unaudited) (Continued)
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
The investment objective of First Trust RiverFront Dynamic Emerging Markets ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of emerging market companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such emerging market companies are denominated (each, an “Emerging Market currency” and, collectively, the “Emerging Market currencies”). The Fund considers an emerging market company to be one (i) domiciled or with a principal place of business or primary securities trading market in an emerging market country, or (ii) that derives a substantial portion of its total revenues or profits from emerging market countries. The Fund considers an emerging market country to be any country whose issuers are included in the Morgan Stanley Capital International Emerging Markets Index and/or those countries considered to be developing by the World Bank, the International Finance Corporation or the United Nations. The Fund generally focuses its emerging market company investments in Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Nigeria, Peru, the Philippines, Poland, Qatar, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey and/or the United Arab Emirates. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFEM.”
The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to Emerging Market currencies.
|
| | | Average Annual Total Returns | |
| | | | Inception
(6/14/16)
to 4/30/24 | | Inception
(6/14/16)
to 4/30/24 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
MSCI Emerging Markets Index | | | | | | |
(See Notes to Fund Performance Overview on page 9.)
Fund Performance Overview (Unaudited) (Continued)
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) (Continued)
| % of Total
Long-Term
Investments |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Net Other Assets and Liabilities* | |
| |
| Includes forward foreign currency contracts. |
| % of Total
Long-Term
Investments |
Taiwan Semiconductor Manufacturing Co., Ltd. | |
| |
Samsung Electronics Co., Ltd. | |
| |
| |
Alibaba Group Holding Ltd. | |
| |
Power Finance Corp., Ltd. | |
Tata Consultancy Services Ltd. | |
| |
| |
| Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance. |
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter) is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Notes to Fund Performance Overview (Unaudited)
Total returns for the periods since inception are calculated from the inception date of each Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.
Each Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of each Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future performance.
First Trust Exchange-Traded Fund IIISemi-Annual ReportApril 30, 2024 (Unaudited) Advisor
First Trust Advisors L.P. (“First Trust”) serves as the investment advisor to the First Trust RiverFront Dynamic Developed International ETF (“RFDI”), the First Trust RiverFront Dynamic Europe ETF (“RFEU”), and the First Trust RiverFront Dynamic Emerging Markets ETF (“RFEM”) (each a “Fund” and collectively, the “Funds”). First Trust is responsible for the ongoing monitoring of each Fund’s investment portfolio, managing each Fund’s business affairs and providing certain administrative services necessary for the management of each Fund.
RiverFront Investment Group, LLC
RiverFront Investment Group, LLC (“RIG”) is an SEC-registered investment advisor located in Richmond, Virginia. It is majority owned by its employees, and Baird Financial Corporation is a minority owner of RiverFront Investment Holding Group, LLC. The firm provides asset management services to a series of global tactical asset allocation portfolios and registered investment companies, including mutual funds and exchange-traded products.
Portfolio Management Team
The following persons serve as portfolio managers of the Funds:
Adam Grossman, CFA, Portfolio Manager of RIG
Chris Konstantinos, CFA, Portfolio Manager of RIG
Each of the portfolio managers is primarily and jointly responsible for the day-to-day management of the Funds. Adam Grossman and Chris Konstantinos have managed the Funds since 2016.
First Trust Exchange-Traded Fund IIIUnderstanding Your Fund ExpensesApril 30, 2024 (Unaudited) As a shareholder of First Trust RiverFront Dynamic Developed International ETF, First Trust RiverFront Dynamic Europe ETF or First Trust RiverFront Dynamic Emerging Markets ETF (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 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 April 30, 2024.
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides 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 costs 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 brokerage commissions. Therefore, the second line in 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.
| Beginning
Account Value
November 1, 2023 | Ending
Account Value
April 30, 2024 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
First Trust RiverFront Dynamic Developed International ETF (RFDI) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
First Trust RiverFront Dynamic Europe ETF (RFEU) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) |
| | | | |
Hypothetical (5% return before expenses) | | | | |
| Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 1, 2023 through April 30, 2024), multiplied by 182/366 (to reflect the six-month period). |
First Trust RiverFront Dynamic Developed International ETF (RFDI)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | |
COMMON STOCKS (a) (b) — 98.5% |
| | |
| | |
| | |
| Charter Hall Group (AUD) (c) | |
| Charter Hall Long Wale REIT (AUD) (c) | |
| Coles Group Ltd. (AUD) (c) | |
| Commonwealth Bank of Australia (AUD) (c) | |
| | |
| | |
| Harvey Norman Holdings Ltd. (AUD) (c) | |
| Iluka Resources Ltd. (AUD) (c) | |
| Incitec Pivot Ltd. (AUD) (c) | |
| | |
| Medibank Pvt Ltd. (AUD) (c) | |
| | |
| Nine Entertainment Co. Holdings Ltd. (AUD) (c) | |
| | |
| Sonic Healthcare Ltd. (AUD) (c) | |
| | |
| | |
| | |
| Viva Energy Group Ltd. (AUD) (c) (d) (e) | |
| Wesfarmers Ltd. (AUD) (c) | |
| Woodside Energy Group Ltd. (AUD) (c) | |
| | |
| | |
| | |
| UNIQA Insurance Group AG (EUR) (c) | |
| Wienerberger AG (EUR) (c) | |
| | |
| | |
| | |
| | |
| Orient Overseas International Ltd. (HKD) (c) | |
| | |
| | |
| | |
| Canadian Natural Resources Ltd. (CAD) | |
| | |
| | |
| Northland Power, Inc. (CAD) | |
| Pembina Pipeline Corp. (CAD) | |
| | |
|
| | |
| Suncor Energy, Inc. (CAD) | |
| West Fraser Timber Co., Ltd. (CAD) | |
| | |
| | |
| CK Hutchison Holdings Ltd. (HKD) (c) | |
| | |
| AP Moller - Maersk A/S, Class A (DKK) (c) | |
| AP Moller - Maersk A/S, Class B (DKK) (c) | |
| Novo Nordisk A/S, Class B (DKK) (c) | |
| | |
| | |
| | |
| | |
| Orion Oyj, Class B (EUR) (c) | |
| | |
| | |
| | |
| | |
| Christian Dior SE (EUR) (c) | |
| | |
| Credit Agricole S.A. (EUR) (c) | |
| Hermes International SCA (EUR) (c) | |
| La Francaise des Jeux SAEM (EUR) (c) (d) (e) | |
| LVMH Moet Hennessy Louis Vuitton SE (EUR) (c) | |
| Metropole Television S.A. (EUR) (c) | |
| | |
| TotalEnergies SE (EUR) (c) | |
| | |
| | |
| | |
| | |
| | |
| Bayerische Motoren Werke AG (EUR) (c) | |
| Deutsche Bank AG (EUR) (c) | |
| Deutsche Post AG (EUR) (c) | |
| Deutsche Telekom AG (EUR) (c) | |
| | |
| Fresenius SE & Co. KGaA (EUR) (c) | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Developed International ETF (RFDI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (a) (b) (Continued) |
| | |
| Hapag-Lloyd AG (EUR) (c) (d) (e) | |
| Mercedes-Benz Group AG (EUR) (c) | |
| | |
| | |
| | |
| | |
| Eurobank Ergasias Services and Holdings S.A. (EUR) (c) (f) | |
| Hellenic Telecommunications Organization S.A. (EUR) (c) | |
| | |
| | |
| | |
| Shurgard Self Storage Ltd. (EUR) (c) | |
| | |
| | |
| | |
| First International Bank Of Israel Ltd. (ILS) (c) | |
| | |
| | |
| | |
| | |
| Azimut Holding S.p.A. (EUR) (c) | |
| Banca Mediolanum S.p.A (EUR) (c) | |
| Banca Popolare di Sondrio S.p.A. (EUR) (c) | |
| | |
| Pirelli & C S.p.A. (EUR) (c) (d) (e) | |
| Poste Italiane S.p.A. (EUR) (c) (d) (e) | |
| Unipol Gruppo S.p.A. (EUR) (c) | |
| | |
| | |
| Advantest Corp. (JPY) (c) | |
| Bandai Namco Holdings, Inc. (JPY) (c) | |
| Chugai Pharmaceutical Co., Ltd. (JPY) (c) | |
| | |
| Fast Retailing Co., Ltd. (JPY) (c) | |
| Honda Motor Co., Ltd. (JPY) (c) | |
| | |
| | |
| | |
|
| | |
| Japan Metropolitan Fund Invest (JPY) (c) | |
| Japan Tobacco, Inc. (JPY) (c) | |
| | |
| KDX Realty Investment Corp. (JPY) (c) | |
| | |
| Mitsubishi Corp. (JPY) (c) | |
| Mitsubishi UFJ Financial Group, Inc. (JPY) (c) | |
| Mitsui OSK Lines Ltd. (JPY) (c) | |
| Mizuho Financial Group, Inc. (JPY) (c) | |
| MS&AD Insurance Group Holdings, Inc. (JPY) (c) | |
| Nintendo Co., Ltd. (JPY) (c) | |
| Nippon Telegraph & Telephone Corp. (JPY) (c) | |
| Nippon Yusen KK (JPY) (c) | |
| Nissan Chemical Corp. (JPY) (c) | |
| Niterra Co., Ltd. (JPY) (c) | |
| Nitto Denko Corp. (JPY) (c) | |
| | |
| Oracle Corp Japan (JPY) (c) | |
| | |
| Recruit Holdings Co., Ltd. (JPY) (c) | |
| SCREEN Holdings Co., Ltd. (JPY) (c) | |
| Sega Sammy Holdings, Inc. (JPY) (c) | |
| Sekisui House Ltd. (JPY) (c) | |
| Shinko Electric Industries Co., Ltd. (JPY) (c) | |
| Shionogi & Co., Ltd. (JPY) (c) | |
| | |
| | |
| Takeda Pharmaceutical Co., Ltd. (JPY) (c) | |
| Tokyo Gas Co., Ltd. (JPY) (c) | |
| | |
| | |
| | |
| | |
| | |
| | |
| B&M European Value Retail S.A. (GBP) (c) | |
| | |
| ASML Holding N.V. (EUR) (c) | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Developed International ETF (RFDI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (a) (b) (Continued) |
| | |
| | |
| Koninklijke KPN N.V. (EUR) (c) | |
| | |
| | |
| Genesis Energy Ltd. (NZD) (c) | |
| Spark New Zealand Ltd. (NZD) | |
| | |
| | |
| | |
| Yara International ASA (NOK) (c) | |
| | |
| | |
| Navigator (The) Co., S.A. (EUR) (c) | |
| | |
| | |
| | |
| | |
| Singapore Airlines Ltd. (SGD) (c) | |
| | |
| | |
| Banco Bilbao Vizcaya Argentaria S.A. (EUR) (c) | |
| Cia de Distribucion Integral Logista Holdings S.A. (EUR) (c) | |
| | |
| Inmobiliaria Colonial Socimi S.A. (EUR) (c) | |
| Redeia Corp. S.A. (EUR) (c) | |
| | |
| | |
| | |
| Telefonaktiebolaget LM Ericsson, Class B (SEK) (c) | |
| | |
| | |
| | |
| EFG International AG (CHF) (c) | |
| Kuehne + Nagel International AG (CHF) (c) | |
| | |
| | |
| Roche Holding AG (CHF) (c) | |
| | |
|
| | |
| Sandoz Group AG (CHF) (c) (f) | |
| | |
| | |
| | |
| | |
| Admiral Group PLC (GBP) (c) | |
| Airtel Africa PLC (GBP) (c) (d) (e) | |
| AstraZeneca PLC (GBP) (c) | |
| | |
| Barratt Developments PLC (GBP) (c) | |
| Big Yellow Group PLC (GBP) (c) | |
| | |
| British American Tobacco PLC (GBP) (c) | |
| | |
| Evraz PLC (GBP) (c) (f) (g) (h) | |
| Hargreaves Lansdown PLC (GBP) (c) | |
| HSBC Holdings PLC (GBP) (c) | |
| IG Group Holdings PLC (GBP) (c) | |
| Imperial Brands PLC (GBP) (c) | |
| | |
| | |
| J Sainsbury PLC (GBP) (c) | |
| Legal & General Group PLC (GBP) (c) | |
| | |
| National Grid PLC (GBP) (c) | |
| NatWest Group PLC (GBP) (c) | |
| | |
| | |
| Safestore Holdings PLC (GBP) (c) | |
| | |
| Taylor Wimpey PLC (GBP) (c) | |
| | |
| Virgin Money UK PLC (GBP) (c) | |
| Vistry Group PLC (GBP) (c) (f) | |
| | |
| | |
| | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Developed International ETF (RFDI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
MONEY MARKET FUNDS — 0.6% |
| Dreyfus Government Cash Management Fund, Institutional Shares - 5.19% (i) | |
| | |
|
|
| Total Investments — 99.1% | |
| | |
| Net Other Assets and Liabilities — 0.9% | |
| | |
| Portfolio securities are categorized based upon their country of incorporation. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview. |
| Securities are issued in U.S. dollars unless otherwise indicated in the security description. |
| This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2024, securities noted as such are valued at $115,027,652 or 93.3% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets’ close and the New York Stock Exchange close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded. |
| This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”) and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| Non-income producing security. |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by First Trust Advisors L.P., the Fund’s advisor. |
| This security’s value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). |
| Rate shown reflects yield as of April 30, 2024. |
Abbreviations throughout the Portfolio of Investments: |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Currency Exposure Diversification | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
See Notes to Financial Statements
First Trust RiverFront Dynamic Developed International ETF (RFDI)Portfolio of Investments (Continued)April 30, 2024 (Unaudited)
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| See Portfolio of Investments for country breakout. |
| Investment is valued at $0. |
Level 3 investments are fair valued by the Advisor’s Pricing Committee and are footnoted in the Portfolio of Investments. All Level 3 values are based on unobservable inputs.
See Notes to Financial Statements
First Trust RiverFront Dynamic Europe ETF (RFEU)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | |
COMMON STOCKS (a) (b) — 99.8% |
| | |
| | |
| | |
| | |
| Raiffeisen Bank International AG (EUR) (c) | |
| | |
| | |
| | |
| | |
| | |
| AP Moller - Maersk A/S, Class A (DKK) (c) | |
| AP Moller - Maersk A/S, Class B (DKK) (c) | |
| | |
| | |
| Novo Nordisk A/S, Class B (DKK) (c) | |
| | |
| | |
| | |
| Orion Oyj, Class B (EUR) (c) | |
| | |
| | |
| | |
| Amundi S.A. (EUR) (c) (e) (f) | |
| | |
| Christian Dior SE (EUR) (c) | |
| Cie de Saint-Gobain S.A. (EUR) (c) | |
| | |
| Dassault Aviation S.A. (EUR) (c) | |
| Hermes International SCA (EUR) (c) | |
| | |
| La Francaise des Jeux SAEM (EUR) (c) (e) (f) | |
| LVMH Moet Hennessy Louis Vuitton SE (EUR) (c) | |
| | |
| | |
| | |
| Sartorius Stedim Biotech (EUR) (c) | |
| TotalEnergies SE (EUR) (c) | |
| | |
| | |
| | |
|
| | |
| | |
| Bayerische Motoren Werke AG (EUR) (c) | |
| Bayerische Motoren Werke AG, (Preference Shares) (EUR) (c) | |
| | |
| Deutsche Post AG (EUR) (c) | |
| Deutsche Telekom AG (EUR) (c) | |
| Mercedes-Benz Group AG (EUR) (c) | |
| | |
| | |
| Sartorius AG, (Preference Shares) (EUR) (c) | |
| | |
| | |
| Telefonica Deutschland Holding AG (EUR) | |
| Volkswagen AG, (Preference Shares) (EUR) (c) | |
| Wacker Chemie AG (EUR) (c) | |
| | |
| | |
| National Bank of Greece S.A. (EUR) (c) (d) | |
| | |
| | |
| | |
| First International Bank Of Israel Ltd. (ILS) (c) | |
| | |
| | |
| Azimut Holding S.p.A. (EUR) (c) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| B&M European Value Retail S.A. (GBP) (c) | |
| | |
| ASML Holding N.V. (EUR) (c) | |
| | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Europe ETF (RFEU)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (a) (b) (Continued) |
| | |
| | |
| Wolters Kluwer N.V. (EUR) (c) | |
| | |
| | |
| | |
| Yara International ASA (NOK) (c) | |
| | |
| | |
| Galp Energia SGPS S.A. (EUR) (c) | |
| Navigator (The) Co., S.A. (EUR) (c) | |
| | |
| | |
| | |
| Banco Bilbao Vizcaya Argentaria S.A. (EUR) (c) | |
| Cia de Distribucion Integral Logista Holdings S.A. (EUR) (c) | |
| | |
| Grupo Catalana Occidente S.A. (EUR) (c) | |
| NH Hotel Group S.A. (EUR) (d) | |
| Redeia Corp. S.A. (EUR) (c) | |
| Telefonica S.A. (EUR) (c) | |
| | |
| | |
| Evolution AB (SEK) (c) (e) (f) | |
| Telefonaktiebolaget LM Ericsson, Class B (SEK) (c) | |
| | |
| | |
| Kuehne + Nagel International AG (CHF) (c) | |
| | |
| | |
| Partners Group Holding AG (CHF) (c) | |
| Roche Holding AG (CHF) (c) | |
| Roche Holding AG (CHF) (c) | |
| Sandoz Group AG (CHF) (c) (d) | |
| | |
| Swiss Life Holding AG (CHF) (c) | |
| | |
| | |
| | |
|
| | |
| | |
| Admiral Group PLC (GBP) (c) | |
| AstraZeneca PLC (GBP) (c) | |
| Auto Trader Group PLC (GBP) (c) (e) (f) | |
| Barratt Developments PLC (GBP) (c) | |
| | |
| British American Tobacco PLC (GBP) (c) | |
| | |
| | |
| Dunelm Group PLC (GBP) (c) | |
| Evraz PLC (GBP) (c) (d) (g) (h) | |
| | |
| Hargreaves Lansdown PLC (GBP) (c) | |
| HSBC Holdings PLC (GBP) (c) | |
| Intermediate Capital Group PLC (GBP) (c) | |
| Intertek Group PLC (GBP) (c) | |
| National Grid PLC (GBP) (c) | |
| | |
| | |
| | |
| | |
| Taylor Wimpey PLC (GBP) (c) | |
| | |
| | |
| | |
| | |
| | |
MONEY MARKET FUNDS — 0.5% |
| Dreyfus Government Cash Management Fund, Institutional Shares - 5.19% (i) | |
| | |
|
|
| Total Investments — 100.3% | |
| | |
| Net Other Assets and Liabilities — (0.3)% | |
| | |
| Portfolio securities are categorized based upon their country of incorporation. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview. |
| Securities are issued in U.S. dollars unless otherwise indicated in the security description. |
See Notes to Financial Statements
First Trust RiverFront Dynamic Europe ETF (RFEU)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2024, securities noted as such are valued at $9,256,372 or 97.7% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets’ close and the New York Stock Exchange close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded. |
| Non-income producing security. |
| This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”) and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by First Trust Advisors L.P., the Fund’s advisor. |
| This security’s value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). |
| Rate shown reflects yield as of April 30, 2024. |
Abbreviations throughout the Portfolio of Investments: |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Currency Exposure Diversification | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| See Portfolio of Investments for country breakout. |
| Investment is valued at $0. |
Level 3 investments are fair valued by the Advisor’s Pricing Committee and are footnoted in the Portfolio of Investments. All Level 3 values are based on unobservable inputs.
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)Portfolio of InvestmentsApril 30, 2024 (Unaudited)
| | |
COMMON STOCKS (a) (b) — 99.7% |
| | |
| COSCO SHIPPING Ports Ltd. (HKD) (c) | |
| Luye Pharma Group Ltd. (HKD) (c) (d) (e) (f) | |
| Orient Overseas International Ltd. (HKD) (c) | |
| Skyworth Group Ltd. (HKD) (c) | |
| | |
| | |
| | |
| Banco do Brasil S.A. (BRL) | |
| BB Seguridade Participacoes S.A. (BRL) | |
| | |
| | |
| | |
| | |
| Petroleo Brasileiro S.A. (BRL) | |
| Petroleo Brasileiro S.A., ADR | |
| Petroleo Brasileiro S.A., ADR | |
| | |
| | |
| | |
| | |
| | |
| Alibaba Group Holding Ltd. (HKD) (c) | |
| ANTA Sports Products Ltd. (HKD) (c) | |
| China Feihe Ltd. (HKD) (c) (d) (f) | |
| China Medical System Holdings Ltd. (HKD) (c) | |
| CIMC Enric Holdings Ltd. (HKD) (c) | |
| Dongyue Group Ltd. (HKD) (c) | |
| Fufeng Group Ltd. (HKD) (c) | |
| Meituan, Class B (HKD) (c) (d) (e) (f) | |
| PDD Holdings, Inc., ADR (e) | |
| Pop Mart International Group Ltd. (HKD) (c) (d) (f) | |
| Tencent Holdings Ltd. (HKD) (c) | |
| Topsports International Holdings, Ltd. (HKD) (c) (d) (f) | |
| Wisdom Marine Lines Co., Ltd. (TWD) (c) | |
| | |
| | |
|
| | |
| | |
| Cia Sud Americana de Vapores S.A. (CLP) | |
| | |
| | |
| | |
| Sociedad Quimica y Minera de Chile S.A., ADR | |
| | |
| | |
| Eurobank Ergasias Services and Holdings S.A. (EUR) (c) (e) | |
| Motor Oil Hellas Corinth Refineries S.A. (EUR) (c) | |
| | |
| | |
| | |
| China Merchants Port Holdings Co., Ltd. (HKD) (c) | |
| China Resources Pharmaceutical Group Ltd. (HKD) (c) (d) (f) | |
| Lenovo Group Ltd. (HKD) (c) | |
| | |
| | |
| Adani Power Ltd. (INR) (c) (e) | |
| Bajaj Finance Ltd. (INR) (c) | |
| | |
| Britannia Industries Ltd. (INR) (c) | |
| CG Power & Industrial Solutions Ltd. (INR) (c) | |
| HCL Technologies Ltd. (INR) (c) | |
| Hindustan Unilever Ltd. (INR) (c) | |
| ICICI Bank Ltd. (INR) (c) | |
| | |
| Indian Railway Catering & Tourism Corp., Ltd. (INR) (c) | |
| | |
| | |
| Jio Financial Services Ltd. (INR) (c) (e) | |
| LIC Housing Finance Ltd. (INR) (c) | |
| LTIMindtree Ltd. (INR) (c) (d) (f) | |
| Power Finance Corp., Ltd. (INR) (c) | |
| | |
| Reliance Industries Ltd. (INR) (c) | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (a) (b) (Continued) |
| | |
| Shriram Finance Ltd. (INR) (c) | |
| State Bank of India (INR) (c) | |
| Sun Pharmaceutical Industries Ltd. (INR) (c) | |
| Tata Consultancy Services Ltd. (INR) (c) | |
| Titan Co., Ltd. (INR) (c) | |
| | |
| | |
| | |
| Adaro Energy Indonesia Tbk PT (IDR) (c) | |
| Indofood Sukses Makmur Tbk PT (IDR) (c) | |
| | |
| | |
| Bank Hapoalim BM (ILS) (c) | |
| | |
| | |
| | |
| Alliance Bank Malaysia Bhd (MYR) (c) | |
| | |
| IOI Properties Group Bhd (MYR) (c) | |
| Sunway Real Estate Investment Trust (MYR) | |
| TIME dotCom Bhd (MYR) (c) | |
| | |
| | |
| Alsea SAB de C.V. (MXN) (e) | |
| Banco del Bajio S.A. (MXN) (d) (f) | |
| | |
| | |
| International Container Terminal Services, Inc. (PHP) (c) | |
| | |
| Asseco Poland S.A. (PLN) (c) | |
| Bank Handlowy w Warszawie S.A. (PLN) (c) | |
| | |
| PGE Polska Grupa Energetyczna S.A. (PLN) (c) (e) | |
| | |
| | |
|
| | |
| Rosneft Oil Co. PJSC (RUB) (c) (e) (g) (h) | |
| Severstal PAO (RUB) (c) (e) (g) (h) | |
| | |
| | |
| SABIC Agri-Nutrients Co. (SAR) (c) | |
| Sahara International Petrochemical Co. (SAR) (c) | |
| | |
| | |
| Sembcorp Industries Ltd. (SGD) (c) | |
| | |
| Absa Group Ltd. (ZAR) (c) | |
| Exxaro Resources Ltd. (ZAR) (c) | |
| Impala Platinum Holdings Ltd. (ZAR) (c) | |
| Kumba Iron Ore Ltd. (ZAR) | |
| | |
| | |
| GS Holdings Corp. (KRW) (c) | |
| | |
| Hyundai Motor Co. (KRW) (c) | |
| | |
| | |
| Meritz Financial Group, Inc. (KRW) (c) | |
| Mirae Asset Securities Co., Ltd. (KRW) (c) | |
| Samsung Biologics Co., Ltd. (KRW) (c) (d) (e) (f) | |
| Samsung Electronics Co., Ltd. (KRW) (c) | |
| Samsung SDS Co., Ltd. (KRW) (c) | |
| SK Square Co., Ltd. (KRW) (c) (e) | |
| | |
| | |
| Bora Pharmaceuticals Co., Ltd. (TWD) (c) | |
| Chicony Electronics Co., Ltd. (TWD) (c) | |
| Evergreen Marine Corp. Taiwan Ltd. (TWD) (c) | |
| Global Unichip Corp. (TWD) (c) | |
| International Games System Co. Ltd. (TWD) (c) | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | | |
COMMON STOCKS (a) (b) (Continued) |
| | |
| Jentech Precision Industrial Co., Ltd. (TWD) (c) | |
| | |
| Micro-Star International Co., Ltd. (TWD) (c) | |
| Nan Ya Printed Circuit Board Corp. (TWD) (c) | |
| Ruentex Industries Ltd. (TWD) (c) | |
| Sino-American Silicon Products, Inc. (TWD) (c) | |
| Taiwan Semiconductor Manufacturing Co., Ltd. (TWD) (c) | |
| Taiwan Semiconductor Manufacturing Co., Ltd., ADR | |
| Tripod Technology Corp. (TWD) (c) | |
| Unimicron Technology Corp. (TWD) (c) | |
| Wan Hai Lines Ltd. (TWD) (c) | |
| | |
| WPG Holdings Ltd. (TWD) (c) | |
| Yang Ming Marine Transport Corp. (TWD) (c) | |
| | |
| | |
|
| | |
| Aksa Enerji Uretim A/S (TRY) | |
| Enerjisa Enerji A/S (TRY) (c) (d) (f) | |
| Haci Omer Sabanci Holding A/S (TRY) (c) | |
| | |
| | |
| | |
MONEY MARKET FUNDS — 0.1% |
| Dreyfus Government Cash Management Fund, Institutional Shares - 5.19% (i) | |
| | |
|
|
| Total Investments — 99.8% | |
| | |
| Net Other Assets and Liabilities — 0.2% | |
| | |
Forward Foreign Currency Contracts at April 30, 2024 (See Note 2C - Forward Foreign Currency Contracts in the Notes to Financial Statements):
| | | | Purchase Value
as of
4/30/2024 | | Unrealized
Appreciation
(Depreciation) |
| | | | | | | | |
| Portfolio securities are categorized based upon their country of incorporation. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview. |
| Securities are issued in U.S. dollars unless otherwise indicated in the security description. |
| This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At April 30, 2024, securities noted as such are valued at $25,348,707 or 82.0% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets’ close and the New York Stock Exchange close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded. |
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)Portfolio of Investments (Continued)April 30, 2024 (Unaudited) | This security is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”) and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. |
| Non-income producing security. |
| This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by First Trust Advisors L.P., the Fund’s advisor. |
| This security’s value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). |
| Rate shown reflects yield as of April 30, 2024. |
Abbreviations throughout the Portfolio of Investments: |
| – American Depositary Receipt |
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Currency Exposure Diversification | |
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| The weightings include the impact of currency forwards. |
| Investments are valued at $0. |
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)Portfolio of Investments (Continued)April 30, 2024 (Unaudited)
Valuation InputsA summary of the inputs used to value the Fund’s investments as of April 30, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
|
| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
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| | | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Forward Foreign Currency Contracts | | | | |
| See Portfolio of Investments for country breakout. |
| Investments are valued at $0. |
Level 3 investments are fair valued by the Advisor’s Pricing Committee and are footnoted in the Portfolio of Investments. All Level 3 values are based on unobservable inputs.
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIStatements of Assets and Liabilities
April 30, 2024 (Unaudited)
| First Trust RiverFront Dynamic Developed International ETF
(RFDI) | First Trust RiverFront Dynamic Europe ETF
(RFEU) | First Trust RiverFront Dynamic Emerging Markets ETF
(RFEM) |
| | | |
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| | | |
Foreign currency, at value | | | |
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Investment securities sold | | | |
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Unrealized depreciation on forward foreign currency contracts | | | |
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Deferred foreign capital gains tax | | | |
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Accumulated distributable earnings (loss) | | | |
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NET ASSET VALUE, per share | | | |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | | | |
| | | |
Foreign currency, at cost (proceeds) | | | |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIStatements of Operations
For the Six Months Ended April 30, 2024 (Unaudited)
| First Trust RiverFront Dynamic Developed International ETF
(RFDI) | First Trust RiverFront Dynamic Europe ETF
(RFEU) | First Trust RiverFront Dynamic Emerging Markets ETF
(RFEM) |
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NET INVESTMENT INCOME (LOSS) | | | |
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NET REALIZED AND UNREALIZED GAIN (LOSS): | | | |
Net realized gain (loss) on: | | | |
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Forward foreign currency contracts | | | |
Foreign currency transactions | | | |
Foreign capital gains tax | | | |
| | | |
Net change in unrealized appreciation (depreciation) on: | | | |
| | | |
Forward foreign currency contracts | | | |
Foreign currency translation | | | |
Deferred foreign capital gains tax | | | |
Net change in unrealized appreciation (depreciation) | | | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | | | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | | | |
See Notes to Financial Statements
This page intentionally left blank.
First Trust Exchange-Traded Fund IIIStatements of Changes in Net Assets
| First Trust RiverFront Dynamic Developed International ETF (RFDI) | First Trust RiverFront Dynamic Europe ETF (RFEU) |
| Six Months
Ended
4/30/2024 (Unaudited) | | Six Months
Ended
4/30/2024 (Unaudited) | |
| | | | |
Net investment income (loss) | | | | |
| | | | |
Net change in unrealized appreciation (depreciation) | | | | |
Net increase (decrease) in net assets resulting from operations | | | | |
|
DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | | |
| | | | |
|
SHAREHOLDER TRANSACTIONS: | | | | |
Proceeds from shares sold | | | | |
| | | | |
Net increase (decrease) in net assets resulting from shareholder transactions | | | | |
Total increase (decrease) in net assets | | | | |
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CHANGES IN SHARES OUTSTANDING: | | | | |
Shares outstanding, beginning of period | | | | |
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Shares outstanding, end of period | | | | |
See Notes to Financial Statements
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) |
Six Months
Ended
4/30/2024 (Unaudited) | |
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See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIFinancial Highlights
For a share outstanding throughout each period First Trust RiverFront Dynamic Developed International ETF (RFDI)
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
| | | | | | |
|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (d) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIFinancial Highlights (Continued)
For a share outstanding throughout each period First Trust RiverFront Dynamic Europe ETF (RFEU)
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
Net asset value, end of period | | | | | | |
| | | | | | |
|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (d) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
First Trust Exchange-Traded Fund IIIFinancial Highlights (Continued)
For a share outstanding throughout each period First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
| Six Months
Ended
4/30/2024
(Unaudited) | |
| | | | | |
Net asset value, beginning of period | | | | | | |
Income from investment operations: | | | | | | |
Net investment income (loss) | | | | | | |
Net realized and unrealized gain (loss) | | | | | | |
Total from investment operations | | | | | | |
Distributions paid to shareholders from: | | | | | | |
| | | | | | |
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Net asset value, end of period | | | | | | |
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|
Ratios to average net assets/supplemental data: | | | | | | |
Net assets, end of period (in 000’s) | | | | | | |
Ratio of total expenses to average net assets | | | | | | |
Ratio of net investment income (loss) to average net assets | | | | | | |
Portfolio turnover rate (d) | | | | | | |
| Based on average shares outstanding. |
| Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
| |
| Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
See Notes to Financial Statements
Notes to Financial Statements
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 1. Organization
First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of seventeen funds that are offering shares. This report covers the three funds (each a “Fund” and collectively, the “Funds”) listed below, each a diversified series of the Trust. The shares of each Fund are listed and traded on Nasdaq, Inc. (“Nasdaq”).
First Trust RiverFront Dynamic Developed International ETF – (ticker “RFDI”) |
First Trust RiverFront Dynamic Europe ETF – (ticker “RFEU”) |
First Trust RiverFront Dynamic Emerging Markets ETF – (ticker “RFEM”) |
Each Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”
Each Fund is an actively-managed exchange-traded fund. The investment objective of each Fund is to provide capital appreciation.
Under normal market conditions, RFDI seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of developed market companies, including through investments in common stocks, depositary receipts, common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such developed market companies are denominated.
Under normal market conditions, RFEU seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of European companies, including through investments in common stocks, depositary receipts, common and preferred shares of REITs, and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such European companies are denominated.
Under normal market conditions, RFEM seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of emerging market companies, including through investments in common stocks, depositary receipts, common and preferred shares of REITs, and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such emerging market companies are denominated.
There can be no assurance that a Fund will achieve its investment objective. The Funds may not be appropriate for all investors.
2. Significant Accounting Policies
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of 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.
Each Fund’s NAV 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. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund’s NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
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 readily available market quotations such as last sale or official closing prices from a national
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 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 Pricing Committee of the Funds’ investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. 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 and other equity securities listed on any national or foreign exchange (excluding 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 primary exchange for such securities.
Securities trading on foreign exchanges or over-the-counter markets that close prior to the NYSE close may be valued using a systematic fair valuation model provided by a third-party pricing service. If these foreign securities meet certain criteria in relation to the valuation model, their valuation is systematically adjusted to reflect the impact of movement in the U.S. market after the close of the foreign markets.
Shares of open-end funds are valued based on NAV per share.
Forward foreign currency contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s spot rate, and the thirty, sixty, ninety, and one-hundred eighty day forward rates provided by a third-party pricing service.
Equity securities traded in an over-the-counter market are valued at the close price or the last trade price.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by 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, including, but not limited to, the following:
1)
the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price;
3)
the size of the holding;
4)
the initial cost of the security;
5)
transactions in comparable securities;
6)
price quotes from dealers and/or third-party pricing services;
7)
relationships among various securities;
8)
information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
9)
an analysis of the issuer’s financial statements;
10)
the existence of merger proposals or tender offers that might affect the value of the security; and
11)
other relevant factors.
If the securities in question are foreign securities, the following additional information may be considered:
1)
the last sale price on the exchange on which they are principally traded;
2)
the value of similar foreign securities traded on other foreign markets;
3)
ADR trading of similar securities;
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) 4)
closed-end fund or exchange-traded fund trading of similar securities;
5)
foreign currency exchange activity;
6)
the trading prices of financial products that are tied to baskets of foreign securities;
7)
factors relating to the event that precipitated the pricing problem;
8)
whether the event is likely to recur;
9)
whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and
10)
other relevant factors.
Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund’s securities may change on the days when investors are not able to transact in the shares of the Fund. The value of the securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE.
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:
• 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.
• 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.
• 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 April 30, 2024, 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 except that certain dividends from foreign securities are recorded as soon as the information becomes available after the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund’s understanding of the applicable country’s tax rules and rates.
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.
C. Forward Foreign Currency Contracts
Each Fund is subject to foreign currency risk in the normal course of pursuing its investment objective. Forward foreign currency contracts are agreements between two parties (“Counterparties”) to exchange one currency for another at a future date and at a specified price. Each Fund uses forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund’s foreign currency exposure. These contracts are valued daily, and a Fund’s net equity therein, representing unrealized gain or
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in “Unrealized appreciation on forward foreign currency contracts” and “Unrealized depreciation on forward foreign currency contracts” on the Statements of Assets and Liabilities. The change in unrealized appreciation/(depreciation) is included in “Net change in unrealized appreciation (depreciation) on forward foreign currency contracts” on the Statements of Operations. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or the cost of) the closing transaction and the Fund’s basis in the contract. This realized gain or loss is included in “Net realized gain (loss) on forward foreign currency contracts” on the Statements of Operations. Risks arise from the possible inability of Counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Due to the risks, a Fund could incur losses in excess of the net unrealized value shown on the Forward Foreign Currency Contracts table in the Fund’s Portfolio of Investments. In the event of default by the Counterparty, a Fund will provide notice to the Counterparty of the Fund’s intent to convert the currency held by the Fund into the currency that the Counterparty agreed to exchange with the Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, a Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in “Net change in unrealized appreciation (depreciation) on investments” on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are 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. Dividends and Distributions to Shareholders
Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by each Fund, if any, are distributed at least annually. Each Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2023 was as follows:
| Distributions
paid from
Ordinary
Income | Distributions
paid from
Capital
Gains | Distributions
paid from
Return of
Capital |
First Trust RiverFront Dynamic Developed International ETF | | | |
First Trust RiverFront Dynamic Europe ETF | | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | | |
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) As of October 31, 2023, the components of distributable earnings on a tax basis for each Fund were as follows:
| Undistributed
Ordinary
Income | Accumulated
Capital and
Other
Gain (Loss) | Net
Unrealized
Appreciation
(Depreciation) |
First Trust RiverFront Dynamic Developed International ETF | | | |
First Trust RiverFront Dynamic Europe ETF | | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | | |
F. Income and Other 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.
Certain countries assess a capital gains tax on securities sold in their local markets. This tax is accrued as the securities in these foreign markets appreciate in value and is paid at the time of sale to the extent a capital gain is realized. Taxes accrued on securities in an unrealized appreciation position are included in “Net change in unrealized appreciation (depreciation) on deferred foreign capital gains tax” on the Statements of Operations. The capital gains tax paid on securities sold, if any, is included in “Net realized gain (loss) on foreign capital gains tax” on the Statements of Operations.
India’s Finance Bill, 2018 (“Finance Bill, 2018”) was enacted into law on March 29, 2018 and amongst other provisions, it introduced a long-term capital gains tax beginning April 1, 2018. Long-term capital gains on the sale of listed shares in excess of INR 0.1 million are taxed at the rate of 10% (plus applicable surcharge and cess (which is a type of tax)) subject to satisfaction of certain conditions. Long-term capital gains accruing as of January 31, 2018 are considered exempt due to a grandfather clause in the provision. The aforesaid exemption from long-term capital gains tax is available with respect to shares acquired between October 1, 2004 and March 31, 2018 only if on such acquisitions Securities Transaction Tax (“STT”) was chargeable. Certain exceptions in this regard, such as acquisition of shares in a public offer, bonus, rights issued, etc. for which the condition of chargeability of STT on acquisition is not applicable, have been notified.
In the case of the sale of listed shares held by a Fund for one year or less, the income is classified as short-term capital gains and is taxable at 15% (plus applicable surcharge and cess) provided the shares are sold on the stock exchange and subjected to STT. For above purposes, the applicable rate of surcharge is 2% or 5% (depending on the level of income of the Fund). The Finance Bill, 2018 increases the cess imposed on the sum of tax and surcharge from 3% to 4%. The cess 4% rate is applied to the capital gains tax, resulting in a higher effective rate of capital gains tax.
Where the sale of shares is outside the stock exchange and not subject to STT, the long-term capital gains are taxed at 10% (plus applicable surcharge and cess) and short-term capital gains are taxed at 30% (plus applicable surcharge and cess). The Finance Bill, 2018, approves the carry forward of long-term capital losses to be offset against long-term capital gains. Short-term losses can be netted against both short-term gains and long-term gains.
Until March 31, 2020, dividends received by a Fund from Indian companies were exempt from tax in India because Indian companies were required to pay dividend distribution tax. The Indian Finance Act, 2020 has amended the dividend taxation framework effective April 1, 2020 and accordingly dividends would now be taxable in the hands of the shareholders at 20%, plus applicable surcharge and cess. Subsequent to the Indian Finance Act, 2020, “The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020” (the “Bill”) was enacted into law and is effective retroactively to April 1, 2020. The Bill caps the maximum surcharge at 15% of the tax on dividend income earned by the Fund. The highest effective tax rate proposed for non-corporate entities on dividends will be 23.92%. Note the Fund will not obtain relief under the US-India tax treaty as the treaty rate of 25% is higher than the domestic rate. Any excess taxes withheld can be offset against capital gains tax liability during the year or claimed as a refund in the annual tax return.
Please note that the above description is based on current provisions of Indian law, and any change or modification made by subsequent legislation, regulation, or administrative or judicial decision could increase the Indian tax liability of a Fund and thus reduce the return to a Fund’s shareholders. There can be no assurance that the Indian tax authorities and/or regulators will not take a
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) position contrary to the views expressed herein. If the Indian tax authorities and/or regulators take a position contrary to the views expressed herein, adverse unpredictable consequences may follow.
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. The taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of April 30, 2024, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds’ financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2023, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the following table, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund’s shareholders.
| Non-Expiring
Capital Loss
Carryforwards |
First Trust RiverFront Dynamic Developed International ETF | |
First Trust RiverFront Dynamic Europe ETF | |
First Trust RiverFront Dynamic Emerging Markets ETF | |
As of April 30, 2024, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:
| | Gross Unrealized
Appreciation | Gross Unrealized
(Depreciation) | Net Unrealized
Appreciation
(Depreciation) |
First Trust RiverFront Dynamic Developed International ETF | | | | |
First Trust RiverFront Dynamic Europe ETF | | | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | | | |
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
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 is responsible for supervising the selection and ongoing monitoring of the securities in each Fund’s portfolio, managing the Funds’ business affairs and providing certain administrative services necessary for the management of the Funds.
Pursuant to the Investment Management Agreement between First Trust and the Trust, First Trust supervises the investment of the Funds’ assets and is responsible for the expenses of each Fund including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, brokerage commissions, acquired fund fees and expenses, if any, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, expenses associated with the execution of portfolio transactions, and extraordinary expenses, which are paid by each respective Fund. Prior to November 6, 2023, First Trust also provided fund reporting services to the Funds for a flat annual fee in the amount of $9,250 per Fund, which was covered under the annual unitary management fee. The annual unitary management fee payable by each Fund to First Trust for these services will be reduced at certain levels of each Fund’s net assets (“breakpoints”) and calculated pursuant to the following schedules:
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) | | | |
Fund net assets up to and including $2.5 billion | | | |
Fund net assets greater than $2.5 billion up to and including $5 billion | | | |
Fund net assets greater than $5 billion up to and including $7.5 billion | | | |
Fund net assets greater than $7.5 billion up to and including $10 billion | | | |
Fund net assets greater than $10 billion | | | |
RiverFront Investment Group, LLC (“RIG” or the “Sub-Advisor”) serves as the Funds’ sub-advisor and manages each Fund’s portfolio subject to First Trust’s supervision. The sub-advisory fee payable to the Sub-Advisor by First Trust out of its annual unitary management fee is reduced at certain breakpoints and calculated pursuant to the following schedule:
| |
Fund net assets up to and including $2.5 billion | |
Fund net assets greater than $2.5 billion up to and including $5 billion | |
Fund net assets greater than $5 billion up to and including $7.5 billion | |
Fund net assets greater than $7.5 billion up to and including $10 billion | |
Fund net assets greater than $10 billion | |
Effective November 6, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNYM”). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund’s assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to November 6, 2023, the Trust had multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performed custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BBH was responsible for custody of each Fund’s assets. As fund accountant and administrator, BBH was responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BBH was responsible for maintaining shareholder records for each Fund.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.
Additionally, the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee, the Vice Chair of the Audit Committee, the Lead Independent Trustee and the Vice Lead Independent Trustee 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 Committee Chairs, the Audit Committee Vice Chair, the Lead Independent Trustee and the Vice Lead Independent Trustee rotate periodically in serving in such capacities. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
For the six months ended April 30, 2024, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
| | |
First Trust RiverFront Dynamic Developed International ETF | | |
First Trust RiverFront Dynamic Europe ETF | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | |
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) For the six months ended April 30, 2024, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
| | |
First Trust RiverFront Dynamic Developed International ETF | | |
First Trust RiverFront Dynamic Europe ETF | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | |
5. Derivative Transactions
The following table presents the types of derivatives held by each Fund at April 30, 2024, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities.
| | | |
| | Statements of Assets and
Liabilities Location | | Statements of Assets and
Liabilities Location | |
| | | | | |
Forward foreign currency contracts | | Unrealized appreciation on forward foreign currency contracts | | Unrealized depreciation on forward foreign currency contracts | |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended April 30, 2024, on each Fund’s derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
|
Statements of Operations Location | | | |
| | | |
Net realized gain (loss) on forward foreign currency contracts | | | |
Net change in unrealized appreciation (depreciation) on forward foreign currency contracts | | | |
During the six months ended April 30, 2024, the notional values of forward foreign currency contracts opened and closed were as follows:
| | |
First Trust RiverFront Dynamic Developed International ETF | | |
First Trust RiverFront Dynamic Europe ETF | | |
First Trust RiverFront Dynamic Emerging Markets ETF | | |
| | |
| | |
The Funds do not have the right to offset financial assets and financial liabilities related to forward foreign currency contracts on the Statements of Assets and Liabilities.
6. Creations, Redemptions and Transaction Fees
Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with a Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in Creation Units. Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of a Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund’s shares for a basket of securities, cash
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) or other assets. The combination of the creation and redemption process with secondary market trading in a Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund’s shares at or close to the NAV per share of the Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2025.
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.
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
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.
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.
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.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a 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 a fund to many of the same risks associated with direct cyber security breaches.
Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the 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. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in 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 and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021.
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic 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; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer
Additional Information (Continued)
First Trust Exchange-Traded Fund IIIApril 30, 2024 (Unaudited) payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.
Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Funds and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee.
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 25, 2024 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 23, 2023 through the Liquidity Committee’s annual meeting held on March 14, 2024 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Funds primarily hold assets that are highly liquid investments, the Funds have not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum during the reporting period and no fund was required to file a Form N-RN during the reporting period. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
First Trust Exchange-Traded Fund III
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
RiverFront Investment Group, LLC
1214 East Cary Street
Richmond, VA 23219
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 South Wacker Drive
Chicago, IL 60606
Chapman and Cutler LLP
320 South Canal Street
Chicago, IL 60606
(b) Not applicable.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedules of Investments in securities of unaffiliated issuers as of the close of the reporting period are included as part of the reports to shareholders filed under Item 1 of this form. |
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 have materially affected, or are 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.
Item [18]. Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 14. Exhibits.
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 Exchange-Traded Fund III |
| By (Signature and Title)* | | /s/ James M. Dykas |
| | | James M. Dykas, President and Chief Executive Officer
(principal executive officer) |
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) |
| By (Signature and Title)* | | /s/ Derek D. Maltbie |
| | | Derek D. Maltbie, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer) |
* Print the name and title of each signing officer under his or her signature.
