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:
July 31
Date of reporting period:
July 31, 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. Reports to Shareolders.
(a) Following is a copy of the annual reports transmitted to shareholders pursuant to Rule 30e-1 under the Act.
First Trust Municipal High Income ETF
FMHI | NASDAQ, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Municipal High Income ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/FMHI. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Municipal High Income ETF | $73 | 0.70% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 7.77% for the 12 months ended July 31, 2024. The Fund outperformed its blended benchmark, which consists of the following two indexes: 50% of the Bloomberg High Yield 10-Year Municipal Index (8-12 years), and 50% of the Bloomberg Revenue 10-Year Municipal Index (8-12 years). The blended benchmark returned 4.72% for the same Period.
The following key Fund factors impacted Fund performance relative to the blended benchmark during the Period:
- Credit Rating: The Fund’s selection and allocation of non-rated, B, BB, BBB and AA rated bonds were the primary contributors to Fund outperformance relative to the blended benchmark. Conversely, the Fund’s underweight allocations to CCC and C rated bonds were the primary detractors to Fund performance.
- Yield Curve Positioning/Duration: Relative to the blended benchmark, the Fund’s allocation to bonds with a stated maturity of 18+ years, 12-18 years and 8-10 years were the dominant factors contributing to Fund outperformance relative to the blended benchmark. Conversely, the Fund’s selection of bonds in the 0-2 years maturity range was the primary detractor to Fund performance relative to the blended benchmark. Examining effective duration, the Fund’s selection of bonds with an effective duration of 7-10 years and 3-5 years were the leading contributors to Fund performance while the Fund’s selection of bonds with an effective duration of 0-1 years was a modest detractor to Fund performance.
- Interest Rate Hedge: During the year ended July 31, 2024, the use of Treasury futures to hedge interest rate risk was a modest detractor to Fund performance.
- Sector/Industry: The Fund’s selection and allocation of bonds in the special tax, health care and education sectors were the leading contributors to Fund outperformance. Contrarywise, the Fund’s allocation and selection of general obligation and cash holdings were modest detractors to Fund performance relative to the blended benchmark.
- U.S. Treasury Rate Trends: 10-Year and 30-Year U.S. Treasury yields increased by approximately 7 basis points (“bps”) and 29 bps, respectively, to 4.02% and 4.30%.
- Industry Fund Flows: According to data collected by the Investment Company Institute, fund outflows totaled approximately $11.8 billion; however, for the seven-month period ended July 31, 2024, fund flows turned positive at $13.0 billion.
- New Issue Supply: Primary market supply increased 25.7% to $445.5 billion compared with $354.3 billion a year ago (SIFMA, Bloomberg, Barclays Research).
- Municipal Credit Yields: According to Municipal Market Data, AAA yield curve data, 10-Year and 30-Year municipal yields increased 25 bps and 17 bps, respectively, to 2.82% and 3.68%.
- Municipal Credit Spreads: Credit spreads for high yield, BBB, and A rated bonds all compressed.
FUND PERFORMANCE (November 1, 2017 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (11/1/17) |
| First Trust Municipal High Income ETF | 7.77% | 1.97% | 3.07% |
| Bloomberg Municipal Bond Index | 3.74% | 1.18% | 2.01% |
| Blended Benchmark(1) | 4.72% | 2.02% | 3.02% |
| (1) | The Blended Benchmark consists of the following two indexes: 50% of the Bloomberg High Yield 10-Year Municipal Index (8-12 years) which is comprised of bonds with a final maturity between 8 and 12 years that are part of the Bloomberg Municipal Bond High Yield Index; and 50% of the Bloomberg Revenue 10-Year Municipal Index (8-12 years), which is comprised of revenue bonds that have a final maturity between 8 and 12 years that are part of the Bloomberg Municipal Bond Index. |
Visit www.ftportfolios.com/etf/FMHI for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
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.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $645,209,367% |
| Total number of portfolio holdings | $521% |
| Total advisory fee paid | $3,715,659% |
| Portfolio turnover rate | $22% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Sector Allocation
| Special Assessment | 17.5% |
| Industrial Development Bond | 13.2% |
| Continuing Care Retirement Communities | 11.8% |
| Education | 9.4% |
| Hospital | 6.3% |
| Government Obligation Bond - Unlimited Tax | 5.0% |
| Gas | 4.7% |
| Utility | 4.7% |
| Dedicated Tax | 4.2% |
| All Other | 23.2% |
Credit Quality(1)
(1) 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.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/FMHI to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Horizon
Managed Volatility Domestic ETF
Managed Volatility Domestic ETF
HUSV | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Horizon Managed Volatility Domestic ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/HUSV. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the Period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Horizon Managed Volatility Domestic ETF | $74 | 0.70% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 12.74% for the 12 months ended July 31, 2024. The Fund underperformed its benchmark, the S&P 500® Index, which returned 22.15% for the same Period.
The Fund’s portfolio allocation process is to overweight or underweight stocks within each sector based on future expected volatility of each sector’s component stocks. An overweight allocation indicates that we expect that sector to be relatively low risk, while an underweight allocation indicates that we expect that sector to be relatively high risk. This underperformance was primarily driven by the defensive objective of the strategy capturing less of the return of the benchmark in a period of large gains for the benchmark.
Additionally, during the Period, a concentrated subset of the largest stocks within the benchmark primarily drove returns. The Fund’s systematic strategy avoided holding these companies due to their higher volatility and the inherent risks associated with them. This resulted in underweights to some of the sectors experiencing the most gains such as the Information Technology and Communication Services sectors, and overweights to less volatile sectors such as the Consumer Staples and Industrials sectors.
FUND PERFORMANCE (August 24, 2016 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (8/24/16) |
| First Trust Horizon Managed Volatility Domestic ETF | 12.74% | 8.14% | 9.49% |
| S&P 500® Index | 22.15% | 15.00% | 14.46% |
Visit www.ftportfolios.com/etf/HUSV for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $87,643,635% |
| Total number of portfolio holdings | $76% |
| Total advisory fee paid | $602,266% |
| Portfolio turnover rate | $100% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Top Ten Holdings
| Cognizant Technology Solutions Corp., Class A | 2.7% |
| Berkshire Hathaway, Inc., Class B | 2.6% |
| Cisco Systems, Inc. | 2.6% |
| Coca-Cola (The) Co. | 2.5% |
| Colgate-Palmolive Co. | 2.5% |
| Republic Services, Inc. | 2.5% |
| TE Connectivity Ltd. | 2.4% |
| PTC, Inc. | 2.4% |
| Roper Technologies, Inc. | 2.3% |
| Amphenol Corp., Class A | 2.2% |
Sector Allocation
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/HUSV or upon request at 1-800-621-1675 or info@ftportfolios.com.
The Fund may have significant investments in various jurisdictions or investment sectors from time to time, making the Fund subject to the risks of such jurisdictions or investment sectors.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/HUSV to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Horizon Managed
Volatility Developed International ETF
Volatility Developed International ETF
HDMV | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Horizon Managed Volatility Developed International ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/HDMV. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the Period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Horizon Managed Volatility Developed International ETF | $83 | 0.80% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 6.33% for the 12 months ended July 31, 2024. The Fund underperformed its benchmark, the MSCI EAFE Index, which returned 11.21% for the same Period.
The Fund’s portfolio allocation process is to overweight or underweight stocks in each region based on future expected volatility of each region’s component stocks. An overweight allocation indicates that we expect that region to be relatively low risk, while an underweight allocation indicates that we expect that region to be relatively high risk. This underperformance was primarily driven by the defensive objective of the strategy capturing less of the return of the benchmark in a period of large gains for the benchmark. The Fund’s underweight to Western Europe due to volatility in those stocks detracted from performance. Denmark stocks were particularly volatile but had a strong quarter. An underweight allocation to this country resulted in a negative attribution effect.
FUND PERFORMANCE (August 24, 2016 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (8/24/16) |
| First Trust Horizon Managed Volatility Developed International ETF | 6.33% | 1.15% | 2.97% |
| MSCI EAFE Index | 11.21% | 7.36% | 7.04% |
Visit www.ftportfolios.com/etf/HDMV for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $32,897,380% |
| Total number of portfolio holdings | $151% |
| Total advisory fee paid | $284,244% |
| Portfolio turnover rate | $79% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Top Ten Holdings
| United Overseas Bank Ltd. | 2.0% |
| Oversea-Chinese Banking Corp., Ltd. | 2.0% |
| Singapore Exchange Ltd. | 2.0% |
| Koninklijke KPN N.V. | 2.0% |
| Danone S.A. | 1.8% |
| Swisscom AG | 1.7% |
| Zurich Insurance Group AG | 1.6% |
| Swiss Prime Site AG | 1.5% |
| Unilever PLC | 1.5% |
| Deutsche Telekom AG | 1.5% |
Sector Allocation
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/HDMV or upon request at 1-800-621-1675 or info@ftportfolios.com.
The Fund may have significant investments in various jurisdictions or investment sectors from time to time, making the Fund subject to the risks of such jurisdictions or investment sectors.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/HDMV to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Horizon
Managed Volatility Small/Mid ETF
Managed Volatility Small/Mid ETF
HSMV | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Horizon Managed Volatility Small/Mid ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/HSMV. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the Period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Horizon Managed Volatility Small/Mid ETF | $86 | 0.80% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 14.48% for the 12 months ended July 31, 2024. The Fund underperformed its benchmark, the S&P 1000® Index, which returned 15.08% for the same Period.
The Fund’s portfolio allocation process is to overweight or underweight stocks within each sector based on future expected volatility of each sector’s component stocks. An overweight allocation indicates that we expect that sector to be relatively low risk, while an underweight allocation indicates that we expect that sector to be relatively high risk.
Small and mid-sized stocks in the U.S. generally lagged larger cap stocks over the Period as these companies have exhibited characteristics more sensitive to the higher interest rate regime. Therefore, in spite of the Fund’s more defensive profile, the lower risk nature of the selected stocks captured a majority of the return of the benchmark during a period of large gains for the benchmark. Weights in companies in the Industrials and Financials sectors had particularly high contributions to Fund returns due to their rate sensitivity. Small and mid-sized Energy stocks were strong during the Period but were not held in size due to their volatility as a result of ongoing geopolitical tensions.
FUND PERFORMANCE (April 6, 2020 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | Since Inception (4/6/20) |
| First Trust Horizon Managed Volatility Small/Mid ETF | 14.48% | 14.41% |
| S&P 1000® Index | 15.08% | 21.13% |
| Russell 3000® Index | 21.07% | 20.09% |
Visit www.ftportfolios.com/etf/HSMV for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $19,767,104% |
| Total number of portfolio holdings | $201% |
| Total advisory fee paid | $144,853% |
| Portfolio turnover rate | $53% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Top Ten Holdings
| LXP Industrial Trust | 0.7% |
| CommVault Systems, Inc. | 0.7% |
| Evercore, Inc., Class A | 0.7% |
| CubeSmart | 0.7% |
| Plexus Corp. | 0.7% |
| Globus Medical, Inc., Class A | 0.7% |
| InterDigital, Inc. | 0.6% |
| Chesapeake Utilities Corp. | 0.6% |
| Jefferies Financial Group, Inc. | 0.6% |
| Sprouts Farmers Market, Inc. | 0.6% |
Sector Allocation
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/HSMV or upon request at 1-800-621-1675 or info@ftportfolios.com.
The Fund may have significant investments in various jurisdictions or investment sectors from time to time, making the Fund subject to the risks of such jurisdictions or investment sectors.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/HSMV to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Merger Arbitrage ETF
MARB | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Merger Arbitrage ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/MARB. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the Period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment(1) | Costs paid as a percentage of a $10,000 investment(1) |
| First Trust Merger Arbitrage ETF | $172 | 1.70% |
(1) | Includes margin interest expense and dividend expense on investments sold short. |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 2.26% for the 12 months ended July 31, 2024. The Fund underperformed its benchmark, the S&P Merger Arbitrage Total Return Index, which returned 9.14% for the same Period.
This underperformance was driven by three negative events in the portfolio. Under normal market conditions, the Fund seeks to achieve its investment objective by establishing long and short positions in the equity securities of companies that are involved in a publicly-announced significant corporate event, such as a merger or acquisition. The primary event was the termination of the proposed merger between iRobot and Amazon in January 2024. We had seen antitrust deal risk as substantively low and manageable, but that was ultimately wrong. For the Fund, it was a disappointing outcome but one that is the risk of a merger arbitrage strategy – a deal termination. The second challenging event during the Period related to our investment in the Albertsons/Kroger merger. The Federal Trade Commission (“FTC”) filed suit to block the deal on February 26, 2024. Our thesis remains that the companies have a strong shot at defeating the FTC case, and therefore, we continue to hold the position within the Fund. Finally, April 2024 also brought an unexpected turn with the FTC suing to block Tapestry, Inc.’s acquisition of Capri Holdings. The companies intend to defend the merger through litigation, and we continue to hold the position within the Fund.
FUND PERFORMANCE (February 4, 2020 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | Since Inception (2/4/20) |
| First Trust Merger Arbitrage ETF | 2.26% | 0.77% |
| S&P Merger Arbitrage Total Return Index(1) | 9.14% | 2.97% |
| S&P 500® Index | 22.15% | 14.00% |
(1) Effective as of August 1, 2024, the S&P Merger Arbitrage Total Return Index replaced the Credit Suisse Merger Arbitrage Liquid Index, which is no longer available for use by the Fund.
Visit www.ftportfolios.com/etf/MARB for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $30,981,937% |
| Total number of portfolio holdings | $42% |
| Total advisory fee paid | $669,122% |
| Portfolio turnover rate | $301% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of net assets and total investments of the Fund, respectively.
Fund Allocation
| Common Stocks | 89.8%) |
| Rights | 0.0%) |
| Money Market Funds | 7.4%) |
| Common Stocks Sold Short | (26.7%) |
| Net Other Assets and Liabilities | 29.5%) |
| Total | 100.0%) |
Sector Allocation
Any amount shown as 0.0% represents less than 0.1%.
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/MARB or upon request at 1-800-621-1675 or info@ftportfolios.com.
The Fund may have significant investments in various jurisdictions or investment sectors from time to time, making the Fund subject to the risks of such jurisdictions or investment sectors.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/MARB to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust California Municipal
High Income ETF
High Income ETF
FCAL | NASDAQ, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust California Municipal High Income ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/FCAL. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust California Municipal High Income ETF | $67 | 0.65% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 4.62%, based on net asset value, for the 12 months ended July 31, 2024. The Fund outperformed its benchmark, the Bloomberg 10 Year California Exempt Index, which returned 1.92% for the same Period.
The following key Fund factors impacted Fund performance relative to its benchmark during the Period:
- Credit Rating: The Fund’s selection of non-rated, BB, BBB, A, and AA were the primary contributors to the Fund’s outperformance relative to its benchmark. No credit rating category was a material negative contributor to Fund performance relative to its benchmark.
- Yield Curve Positioning/Duration: Relative to its benchmark, the Fund’s allocation to bonds with a stated maturity of 18+ years, 16-18 years and 12-16 years were the dominant factors contributing to the Fund’s outperformance relative to its benchmark. Conversely, the Fund’s selection of bonds in the 0-2 years maturity range was the primary detractor to Fund performance relative to its benchmark. Examining effective duration, bonds with an effective duration of 10+ years, 7-10 years, 5-7 years, and 3-5 years were all positive contributors to Fund performance. Bonds with an effective duration of 0-1 years were detractors to Fund performance relative to its benchmark.
- Interest Rate Hedge: The use of Treasury futures to hedge interest rate risk was a modest detractor to Fund performance.
- Sector/Industry: The Fund’s allocation and selection of bonds in the special tax, education, transportation, and utilities sectors were the leading contributors to Fund performance relative to its benchmark. Conversely, the Fund’s selection of industrial development bonds was a modest negative contributor to Fund performance relative to its benchmark.
- U.S. Treasury Rate Trends: 10-Year and 30-Year U.S. Treasury yields increased by approximately 7 basis points (“bps”) and 29 bps, respectively, to 4.02% and 4.30%.
- Industry Fund Flows: According to data collected by the Investment Company Institute, fund outflows totaled approximately $11.8 billion; however, for the seven months ended July 31, 2024, fund flows turned positive at $13.0 billion.
- New Issue Supply: Primary market supply increased approximately 25.7% to $445.5 billion compared with $354.3 billion a year ago (SIFMA, Bloomberg, Barclays Research).
- Municipal Credit Yields: According to Municipal Market Data, AAA yield curve data, 10-Year and 30-Year municipal yields increased 25 bps and 17 bps, respectively, to 2.82% and 3.68%.
- Municipal Credit Spreads: Credit spreads for high yield, BBB, and A rated bonds all compressed.
FUND PERFORMANCE (June 20, 2017 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (6/20/17) |
| First Trust California Municipal High Income ETF | 4.62% | 1.26% | 2.49% |
| Bloomberg 10 Year California Exempt Index | 1.92% | 0.95% | 1.81% |
| Bloomberg Municipal Bond Index | 3.74% | 1.18% | 2.01% |
Visit www.ftportfolios.com/etf/FCAL for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
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.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $253,518,578% |
| Total number of portfolio holdings | $306% |
| Total advisory fee paid | $1,252,427% |
| Portfolio turnover rate | $41% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Sector Allocation
| Insured | 17.4% |
| Special Assessment | 9.3% |
| Airport | 8.1% |
| Hospital | 7.5% |
| Water & Sewer | 7.5% |
| Government Obligation Bond - Unlimited Tax | 7.4% |
| Certificates of Participation | 7.0% |
| Industrial Development Bond | 6.2% |
| Education | 4.6% |
| All Other | 25.0% |
Credit Quality(1)
(1) 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.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/FCAL to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust New York Municipal
High Income ETF
High Income ETF
FMNY | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust New York Municipal High Income ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/FMNY. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the Period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust New York Municipal High Income ETF | $55 | 0.54% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 4.86% for the 12 months ended July 31, 2024. The Fund outperformed its benchmark, the Bloomberg Municipal New York 12-17 Year Index, which returned 4.34% for the same Period.
The following key Fund factors impacted Fund performance relative to its benchmark during the Period:
- Credit Rating: The Fund’s selection and allocation of AAA and non-rated bonds were the primary contributors to Fund outperformance relative to its benchmark. The Fund’s allocation to AA rated bonds and cash were the primary detractors to Fund performance relative to its benchmark.
- Yield Curve Positioning/Duration: Relative to its benchmark, the Fund’s allocation to bonds with a stated maturity of 18+ years and the selection of bonds 16-18 years were the primary factors contributing to Fund outperformance. Conversely, the Fund’s overweight of bonds in the 10-12 years and 4-6 years maturity range and cash were the primary detractors. Examining effective durations, the Fund’s selection of bonds with an effective duration of 7-10 years was the primary contributor to Fund outperformance while the Fund’s selection of bonds with an effective duration of 3-5 years was the primary detractor.
- Interest Rate Hedge: The use of Treasury futures to hedge interest rate risk was a modest positive contributor to Fund performance.
- Sector/Industry: The Fund’s selection and allocation of bonds in the utilities, special tax and industrial development sectors were the leading contributors to Fund outperformance. The Fund’s allocation and selection of local general obligation bonds were the primary detractors to Fund performance.
- U.S. Treasury Rate Trends: 10-Year and 30-Year U.S. Treasury yields increased by approximately 7 basis points ("bps") and 29 bps, respectively, to 4.02% and 4.30%.
- Industry Fund Flows: According to data collected by the Investment Company Institute, fund outflows totaled approximately $11.8 billion; however, for the seven-month period ended July 31, 2024, fund flows turned positive at $13.0 billion.
- New Issue Supply: Primary market supply increased 25.7% to $445.5 billion compared with $354.3 billion a year ago (SIFMA, Bloomberg, Barclays Research).
- Municipal Credit Yields: According to Municipal Market Data, AAA yield curve data, 10-Year and 30-Year municipal yields increased 25 bps and 17 bps, respectively, to 2.82% and 3.68%.
- Municipal Credit Spreads: Credit spreads for high yield, BBB, and A rated bonds all compressed.
FUND PERFORMANCE (May 12, 2021 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | Since Inception (5/12/21) |
| First Trust New York Municipal High Income ETF | 4.86% | -0.77% |
| Bloomberg Municipal New York 12-17 Years Index | 4.34% | -0.03% |
| Bloomberg Municipal Bond Index | 3.74% | -0.38% |
Visit www.ftportfolios.com/etf/FMNY for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
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.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $18,827,311% |
| Total number of portfolio holdings | $64% |
| Total advisory fee paid | $87,152% |
| Portfolio turnover rate | $36% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Sector Allocation
| Higher Education | 15.7% |
| Insured | 10.5% |
| Dedicated Tax | 9.7% |
| Government Obligation Bond - Unlimited Tax | 7.9% |
| Industrial Development Bond | 7.6% |
| Utility | 6.7% |
| Toll Road | 6.0% |
| Hospital | 5.0% |
| Water & Sewer | 4.7% |
| All Other | 26.2% |
Credit Quality(1)
(1) 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.
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/FMNY or upon request at 1-800-621-1675 or info@ftportfolios.com.
Effective May 12, 2024, a management fee waiver agreement terminated, which resulted in the Fund’s total annual operating expenses increasing from 0.50% to 0.54% of average daily net assets during the fiscal year ended July 31, 2024.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/FMNY to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Short Duration
Managed Municipal ETF
Managed Municipal ETF
FSMB | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Short Duration Managed Municipal ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/FSMB. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the reporting period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Short Duration Managed Municipal ETF | $56 | 0.55% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 3.46% for the 12 months ended July 31, 2024. The Fund outperformed its benchmark, the Bloomberg Municipal Short (1-5) Year Index, which returned 3.34% for the same Period.
The following key Fund factors impacted Fund performance relative to its benchmark during the Period:
- Yield Curve Positioning/Duration: In terms of bonds’ final maturity dates, the Fund’s under exposure to bonds in the 4-6 years maturity range was a positive contributor to the Fund’s performance relative to the benchmark. The Fund’s relative overweight exposure to bonds in the 6-8 years maturity range was a primary detractor to the Fund’s performance. As to duration, the Fund’s under exposure to bonds with effective durations of 1-3 years and 3-5 years was a primary contributor to the Fund’s outperformance relative to the benchmark. Conversely, the Fund’s over exposure to bonds with durations of 0-1 year was the primary detractor to performance as compared to its benchmark.
- Credit Rating: The Fund’s over exposure, relative to its benchmark, to BB-rated and non-rated bonds was the primary source of outperformance. The Fund’s overweight to A-rated bonds was the Fund’s primary source of underperformance as compared to its benchmark.
- Sector/Industry: In terms of sector exposure, key positive contributors were select special tax bonds and the Fund’s overweight allocations to industrial development and healthcare bonds. Sources of relative underperformance resulted from cash holdings and a slight overweight allocation to housing bonds.
- U.S. Treasury Rate Trends: During the Period, 10-Year and 30-Year U.S. Treasury yields increased by approximately 7 basis points (“bps”) and 29 bps, respectively, to 4.02% and 4.30%.
- Industry Fund Flows: For the Period, according to data collected by the Investment Company Institute, fund outflows totaled approximately $11.8 billion; however, for the seven month period ended July 31, 2024, fund flows turned positive at $13.0 billion.
- New Issue Supply: During the Period, primary market supply increased approximately 25.7% to $445.5 billion compared with $354.3 billion a year ago (SIFMA, Bloomberg, Barclays Research).
- Municipal Credit Yields: For the Period, according to Municipal Market Data, AAA yield curve data, 10-Year and 30-Year municipal yields increased 25 bps and 17 bps, respectively, to 2.82% and 3.68%.
- Municipal Credit Spreads: During the Period, credit spreads for high yield, BBB, and A rated bonds all compressed.
FUND PERFORMANCE (November 1, 2018 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (11/1/18) |
| First Trust Short Duration Managed Municipal ETF | 3.46% | 1.29% | 1.81% |
| Bloomberg Municipal Short (1-5) Year Index | 3.34% | 1.02% | 1.62% |
| Bloomberg Municipal Bond Index | 3.74% | 1.18% | 2.47% |
Visit www.ftportfolios.com/etf/FSMB for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
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.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $419,165,010% |
| Total number of portfolio holdings | $484% |
| Total advisory fee paid | $2,268,433% |
| Portfolio turnover rate | $51% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Sector Allocation
| Utility | 13.1% |
| Gas | 10.5% |
| Hospital | 10.3% |
| Airport | 7.5% |
| Government Obligation Bond - Unlimited Tax | 7.2% |
| Insured | 6.6% |
| Industrial Development Bond | 6.5% |
| Certificates of Participation | 5.5% |
| Local Housing | 5.1% |
| All Other | 27.7% |
Credit Quality(1)
(1) 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.
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/FSMB or upon request at 1-800-621-1675 or info@ftportfolios.com.
During the fiscal year ended July 31, 2024, the Fund’s total annual operating expenses increased from 0.49% to 0.55% of average daily net assets due to the termination of a management fee waiver agreement on November 30, 2022.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/FSMB to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
First Trust Ultra Short Duration
Municipal ETF
Municipal ETF
FUMB | NYSE ARCA, INC.
ANNUAL SHAREHOLDER REPORT | July 31, 2024
This annual shareholder report contains important information about the First Trust Ultra Short Duration Municipal ETF (the “Fund”) for the year of August 1, 2023 to July 31, 2024 (the “Period”). You can find additional information about the Fund at www.ftportfolios.com/fund-documents/etf/FUMB. You can also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
This report describes changes to the Fund that occurred during the reporting period.
WHAT WERE THE FUND COSTS FOR THE LAST YEAR?
(Based on a hypothetical $10,000 investment)
| Fund | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| First Trust Ultra Short Duration Municipal ETF | $46 | 0.45% |
HOW DID THE FUND PERFORM LAST YEAR? WHAT AFFECTED THE FUND’S PERFORMANCE?
The Fund returned 3.37% for the 12 months ended July 31, 2024. The Fund underperformed its benchmark, the Bloomberg Municipal Short-Term Index, which returned 3.61% for the same Period.
The following key Fund factors impacted the Fund’s performance relative to its benchmark during the Period:
- Credit Rating: The Fund’s selection and allocation of bonds in the A and BBB rated category were the primary negative contributors to performance versus the Fund’s benchmark during the Period.
- Years to Maturity: In terms of the Fund’s selection and allocation in years to a bond’s final maturity date, the Fund’s underweight allocation of bonds in the 0-2 years range was the primary detractor to the Fund’s performance relative to its benchmark during the Period.
- Effective Duration: Focusing on the Fund’s bonds’ effective duration, the Fund’s underweight allocation and selection of bonds with effective duration of 0-1 years were the primary detractors to the Fund’s performance relative to its benchmark during the Period.
- Sector/Industry: In terms of the Fund’s selection and allocation to municipal bond sectors, the Fund’s investment in the Industrial Development sector was the main detractor from the Fund’s performance relative to its benchmark during the Period.
- U.S. Treasury Rate Trends: During the Period, 10-Year and 30-Year U.S. Treasury yields increased by approximately 7 basis points (“bps”) and 29 bps, respectively, to 4.02% and 4.30%.
- Industry Fund Flows: For the Period, according to data collected by the Investment Company Institute, fund outflows totaled approximately $11.8 billion; however, for the seven-month period ended July 31, 2024, fund flows turned positive at $13.0 billion.
- New Issue Supply: During the Period, primary market supply increased 25.7% to $445.5 billion compared with $354.3 billion a year ago (SIFMA, Bloomberg, Barclays Research).
- Municipal Credit Yields: For the Period, according to Municipal Market Data, AAA yield curve data, 10-Year and 30-Year municipal yields increased 25 bps and 17 bps, respectively, to 2.82% and 3.68%.
- Municipal Credit Spreads: During the Period, credit spreads for high yield, BBB, and A rated bonds all compressed.
FUND PERFORMANCE (November 1, 2018 to July 31, 2024)
The performance line graph below shows the performance of a hypothetical $10,000 initial investment in the Fund over a ten-year period (or for the life of the Fund, if shorter). The subsequent account value as of the end of the Period is listed next to the name of the Fund or index, as applicable. The performance table below shows the average annual total returns of the Fund for the past one-, five-, and ten-year periods, as applicable (or for the life of the Fund, if shorter), as of the end of the Period. Both the line graph and performance table compare the Fund’s performance to an appropriate broad-based index and may compare to additional indices reflecting the market segment(s) in which the Fund invests over the same periods.
Investment Performance of $10,000
| Average Annual Total Returns (as of July 31, 2024) | 1 Year | 5 Year | Since Inception (11/1/18) |
| First Trust Ultra Short Duration Municipal ETF | 3.37% | 1.41% | 1.53% |
| Bloomberg Municipal Short-Term Index | 3.61% | 1.57% | 1.65% |
| Bloomberg Municipal Bond Index | 3.74% | 1.18% | 2.47% |
Visit www.ftportfolios.com/etf/FUMB for more recent performance information.
The Fund’s past performance is not a good predictor of the Fund’s future performance. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
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.
KEY FUND STATISTICS (As of July 31, 2024)
| Fund net assets | $199,215,632% |
| Total number of portfolio holdings | $183% |
| Total advisory fee paid | $1,023,599% |
| Portfolio turnover rate | $112% |
WHAT DID THE FUND INVEST IN? (As of July 31, 2024)
The tables below show the investment makeup of the Fund, representing the percentage of total investments of the Fund.
Sector Allocation
| Government Obligation Bond - Unlimited Tax | 14.3% |
| Water & Sewer | 11.4% |
| Insured | 11.1% |
| Pre-refunded/Escrowed-to-maturity | 10.1% |
| Dedicated Tax | 7.1% |
| Industrial Development Bond | 6.2% |
| Airport | 6.0% |
| Hospital | 5.8% |
| Certificates of Participation | 5.4% |
| All Other | 22.6% |
Credit Quality(1)
(1) 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.
HOW HAS THE FUND MATERIALLY CHANGED?
This is a summary of certain changes to the Fund since August 1, 2023. For more complete information, you may review the Fund’s current prospectus and any applicable supplements at www.ftportfolios.com/fund-documents/etf/FUMB or upon request at 1-800-621-1675 or info@ftportfolios.com.
During the fiscal year ended July 31, 2024, the Fund’s total annual operating expenses increased from 0.39% to 0.45% of average daily net assets due to the termination of a management fee waiver agreement on November 30, 2022.
WHERE CAN I FIND ADDITIONAL INFORMATION ABOUT THE FUND?
Visit www.ftportfolios.com/fund-documents/etf/FUMB to view additional information about the Fund such as the prospectus, financial information, Fund holdings and proxy voting information. You may also request this information by contacting us at 1-800-621-1675 or info@ftportfolios.com.
| (b) | Not applicable to the Registrant. |
Item 2. Code of Ethics.
| (a) | The First Trust Exchange-Traded Fund III (“Registrant”), as of the end of the period covered by this report, has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The Registrant, during the period covered by this report, has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
| (e) | Not applicable. |
| (f) | A copy of the code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the Registrant’s Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $296,000 for the fiscal year ended 2023 and $323,000 for the fiscal year ended 2024. |
| (b) | Audit-Related Fees (Registrant) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024. |
Audit-Related Fees (Investment Advisor) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
Audit-Related Fees (Distributor) -- The aggregate fees billed for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
| (c) | Tax Fees (Registrant) -- The aggregate fees billed for professional services rendered by the principal accountant for tax return review and debt instrument tax analysis and reporting were $92,114 for the fiscal year ended 2023 and $160,802 for the fiscal year ended 2024. These fees were for tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services. |
Tax Fees (Investment Advisor) -- The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the Registrant’s advisor and distributor $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
Tax Fees (Distributor) -- The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the Registrant’s distributor were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
| (d) | All Other Fees (Registrant) -- The aggregate fees billed for products and services provided by the principal accountant to the Registrant, other than the services reported in paragraphs (a) through (c) of this Item $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024. |
All Other Fees (Investment Advisor) -- The aggregate fees billed for products and services provided by the principal accountant to the Registrant’s investment advisor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
All Other Fees (Distributor) -- The aggregate fees billed for products and services provided by the principal accountant to the Registrant’s distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended 2023 and $0 for the fiscal year ended 2024.
(e)(1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the Registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the Registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the Registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) for the Registrant and the Registrant’s investment advisor and distributor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(C) or paragraph(C)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
| Registrant: | Advisor and Distributor: | |
| (b) 0% | (b) 0% | |
| (c) 0% | (c) 0% | |
| (d) 0% | (d) 0% |
| (f) | The percentage of hours expended on the principal accountant’s engagement to audit the Registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
| (g) | The aggregate non-audit fees billed by the Registrant’s accountant for services rendered to the Registrant, and rendered to the Registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the Registrant for the fiscal year ended 2023 were $92,114 for the Registrant, $31,000 for the Registrant’s investment advisor and $45,500 for the Registrant’s distributor; and for the fiscal year ended 2024 were $160,802 for the Registrant, $28,600 for the Registrant’s investment advisor and $33,000 for the Registrant’s distributor. |
| (h) | The Registrant’s audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the Registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
(i) Not applicable to the Registrant.
(j) Not applicable to the Registrant.
Item 5. Audit Committee of Listed Registrants.
| (a) | The Registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the Registrant. The audit committee of the Registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith, Niel B. Nielson and Bronwyn Wright. |
| (b) | Not applicable to the Registrant. |
Item 6. Investments.
| (a) | The Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included in the Financial Statements and Other Information filed under Item 7(a) of this Form N-CSR. |
| (b) | Not applicable to the Registrant. |
Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.
(a) Following is a copy of the annual financial statements required, and for the periods specified, by Regulation S-X.
Annual Financial Statements and Other Information |
For the Year Ended July 31, 2024 |
First Trust Exchange-Traded Fund III
First Trust Horizon Managed Volatility Domestic ETF (HUSV) |
First Trust Horizon Managed Volatility Developed International ETF (HDMV) |
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) |
Table of Contents
First Trust Exchange-Traded Fund III
Annual Financial Statements and Other Information
July 31, 2024
Annual Financial Statements and Other Information
July 31, 2024
1 | |
3 | |
7 | |
12 | |
13 | |
14 | |
16 | |
19 | |
27 | |
28 |
Performance and Risk Disclosure
There is no assurance that any 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”) 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.
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.
First Trust Advisors L.P., the Funds’ advisor, may also periodically provide additional information on Fund performance on each Fund’s webpage at www.ftportfolios.com.
How to Read This Report
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data that provides insight into each Fund’s performance and investment approach.
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 Horizon Managed Volatility Domestic ETF (HUSV)Portfolio of InvestmentsJuly 31, 2024
Shares | Description | Value | |||
COMMON STOCKS — 99.8% | |||||
Aerospace & Defense — 3.0% | |||||
2,974 | General Dynamics Corp. | $888,363 | |||
3,143 | Lockheed Martin Corp. | 1,703,255 | |||
2,591,618 | |||||
Beverages — 3.9% | |||||
33,211 | Coca-Cola (The) Co. | 2,216,502 | |||
7,084 | PepsiCo, Inc. | 1,223,194 | |||
3,439,696 | |||||
Biotechnology — 0.7% | |||||
560 | Regeneron Pharmaceuticals, Inc. (a) | 604,346 | |||
Capital Markets — 2.8% | |||||
2,010 | Ameriprise Financial, Inc. | 864,441 | |||
5,316 | Intercontinental Exchange, Inc. | 805,693 | |||
1,684 | S&P Global, Inc. | 816,285 | |||
2,486,419 | |||||
Chemicals — 2.2% | |||||
2,310 | Ecolab, Inc. | 532,894 | |||
1,814 | Linde PLC | 822,649 | |||
5,548 | LyondellBasell Industries N.V., Class A | 551,804 | |||
1,907,347 | |||||
Commercial Services & Supplies — 4.5% | |||||
11,089 | Republic Services, Inc. | 2,154,814 | |||
8,607 | Waste Management, Inc. | 1,744,295 | |||
3,899,109 | |||||
Communications Equipment — 4.7% | |||||
46,414 | Cisco Systems, Inc. | 2,248,758 | |||
4,676 | Motorola Solutions, Inc. | 1,865,350 | |||
4,114,108 | |||||
Consumer Staples Distribution & Retail — 2.1% | |||||
6,047 | Sysco Corp. | 463,502 | |||
20,179 | Walmart, Inc. | 1,385,087 | |||
1,848,589 | |||||
Containers & Packaging — 1.2% | |||||
5,000 | Avery Dennison Corp. | 1,084,150 | |||
Electric Utilities — 2.2% | |||||
10,904 | Duke Energy Corp. | 1,191,480 | |||
23,887 | PPL Corp. | 709,922 | |||
1,901,402 | |||||
Electrical Equipment — 1.1% | |||||
5,612 | AMETEK, Inc. | 973,570 | |||
Shares | Description | Value | |||
Electronic Equipment, Instruments & Components — 4.6% | |||||
29,578 | Amphenol Corp., Class A | $1,900,682 | |||
13,766 | TE Connectivity Ltd. | 2,124,507 | |||
4,025,189 | |||||
Entertainment — 1.0% | |||||
5,519 | Electronic Arts, Inc. | 833,038 | |||
Financial Services — 7.6% | |||||
5,217 | Berkshire Hathaway, Inc., Class B (a) | 2,287,655 | |||
6,002 | Fiserv, Inc. (a) | 981,747 | |||
3,465 | Mastercard, Inc., Class A | 1,606,755 | |||
6,585 | Visa, Inc., Class A | 1,749,437 | |||
6,625,594 | |||||
Food Products — 0.8% | |||||
10,837 | Mondelez International, Inc., Class A | 740,709 | |||
Gas Utilities — 1.2% | |||||
8,100 | Atmos Energy Corp. | 1,035,828 | |||
Ground Transportation — 1.2% | |||||
29,695 | CSX Corp. | 1,042,294 | |||
Health Care Equipment & Supplies — 3.1% | |||||
7,209 | Abbott Laboratories | 763,722 | |||
8,458 | Boston Scientific Corp. (a) | 624,877 | |||
9,077 | Hologic, Inc. (a) | 740,774 | |||
7,066 | Medtronic PLC | 567,541 | |||
2,696,914 | |||||
Health Care Providers & Services — 1.9% | |||||
4,188 | Cencora, Inc. | 996,241 | |||
1,087 | McKesson Corp. | 670,701 | |||
1,666,942 | |||||
Health Care REITs — 0.6% | |||||
4,904 | Welltower, Inc. | 545,570 | |||
Hotels, Restaurants & Leisure — 3.9% | |||||
5,181 | Darden Restaurants, Inc. | 757,929 | |||
2,451 | Hilton Worldwide Holdings, Inc. | 526,156 | |||
4,198 | McDonald’s Corp. | 1,114,149 | |||
7,960 | Yum! Brands, Inc. | 1,057,327 | |||
3,455,561 | |||||
Household Products — 6.8% | |||||
10,400 | Church & Dwight Co., Inc. | 1,019,304 | |||
22,058 | Colgate-Palmolive Co. | 2,187,933 | |||
8,490 | Kimberly-Clark Corp. | 1,146,574 | |||
10,018 | Procter & Gamble (The) Co. | 1,610,494 | |||
5,964,305 | |||||
See Notes to Financial Statements
Page 1
First Trust Horizon Managed Volatility Domestic ETF (HUSV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (Continued) | |||||
Industrial Conglomerates — 1.3% | |||||
5,553 | Honeywell International, Inc. | $1,136,977 | |||
Insurance — 5.9% | |||||
3,241 | Arthur J. Gallagher & Co. | 918,791 | |||
7,589 | Hartford Financial Services Group (The), Inc. | 841,772 | |||
20,670 | Loews Corp. | 1,652,567 | |||
8,088 | Marsh & McLennan Cos., Inc. | 1,800,146 | |||
5,213,276 | |||||
IT Services — 4.7% | |||||
31,255 | Cognizant Technology Solutions Corp., Class A | 2,365,378 | |||
9,470 | VeriSign, Inc. (a) | 1,770,985 | |||
4,136,363 | |||||
Machinery — 2.9% | |||||
6,297 | Illinois Tool Works, Inc. | 1,557,122 | |||
10,287 | Otis Worldwide Corp. | 972,122 | |||
2,529,244 | |||||
Multi-Utilities — 0.9% | |||||
8,330 | Consolidated Edison, Inc. | 812,342 | |||
Oil, Gas & Consumable Fuels — 2.8% | |||||
52,793 | Kinder Morgan, Inc. | 1,115,516 | |||
7,328 | ONEOK, Inc. | 610,642 | |||
16,522 | Williams (The) Cos., Inc. | 709,455 | |||
2,435,613 | |||||
Pharmaceuticals — 2.5% | |||||
8,295 | Johnson & Johnson | 1,309,366 | |||
7,550 | Merck & Co., Inc. | 854,131 | |||
2,163,497 | |||||
Professional Services — 2.1% | |||||
4,107 | Automatic Data Processing, Inc. | 1,078,580 | |||
5,058 | Leidos Holdings, Inc. | 730,375 | |||
1,808,955 | |||||
Residential REITs — 0.5% | |||||
13,468 | Invitation Homes, Inc. | 475,016 | |||
Retail REITs — 1.2% | |||||
10,222 | Realty Income Corp. | 587,050 | |||
7,289 | Regency Centers Corp. | 490,841 | |||
1,077,891 | |||||
Software — 6.8% | |||||
4,531 | Microsoft Corp. | 1,895,544 | |||
11,768 | PTC, Inc. (a) | 2,092,939 | |||
3,642 | Roper Technologies, Inc. | 1,983,979 | |||
5,972,462 | |||||
Specialty Retail — 2.5% | |||||
631 | O’Reilly Automotive, Inc. (a) | 710,721 | |||
Shares | Description | Value | |||
Specialty Retail (Continued) | |||||
4,102 | Ross Stores, Inc. | $587,529 | |||
8,088 | TJX (The) Cos., Inc. | 914,106 | |||
2,212,356 | |||||
Tobacco — 2.5% | |||||
20,034 | Altria Group, Inc. | 981,866 | |||
10,360 | Philip Morris International, Inc. | 1,193,058 | |||
2,174,924 | |||||
Wireless Telecommunication Services — 2.1% | |||||
10,102 | T-Mobile US, Inc. | 1,841,393 | |||
Total Common Stocks | 87,472,607 | ||||
(Cost $78,151,906) | |||||
MONEY MARKET FUNDS — 0.2% | |||||
160,936 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.21% (b) | 160,936 | |||
(Cost $160,936) | |||||
Total Investments — 100.0% | 87,633,543 | ||||
(Cost $78,312,842) | |||||
Net Other Assets and Liabilities — 0.0% | 10,092 | ||||
Net Assets — 100.0% | $87,643,635 | ||||
(a) | Non-income producing security. |
(b) | Rate shown reflects yield as of July 31, 2024. |
Abbreviations throughout the Portfolio of Investments: | |
REITs | – Real Estate Investment Trusts |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks* | $ 87,472,607 | $ 87,472,607 | $ — | $ — |
Money Market Funds | 160,936 | 160,936 | — | — |
Total Investments | $87,633,543 | $87,633,543 | $— | $— |
* | See Portfolio of Investments for industry breakout. |
See Notes to Financial Statements
Page 2
First Trust Horizon Managed Volatility Developed International ETF (HDMV)Portfolio of InvestmentsJuly 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (a) (b) — 99.6% | |||||
Australia — 9.6% | |||||
6,823 | ANZ Group Holdings Ltd. (AUD) (c) | $129,808 | |||
69,157 | Aurizon Holdings Ltd. (AUD) (c) | 168,623 | |||
3,850 | BHP Group Ltd. (AUD) (c) | 106,933 | |||
16,028 | Brambles Ltd. (AUD) (c) | 163,400 | |||
18,447 | Coles Group Ltd. (AUD) (c) | 218,628 | |||
2,598 | Commonwealth Bank of Australia (AUD) (c) | 234,106 | |||
8,454 | Computershare Ltd. (AUD) (c) | 152,476 | |||
897 | CSL Ltd. (AUD) (c) | 182,058 | |||
40,562 | Lottery (The) Corp., Ltd. (AUD) (c) | 132,174 | |||
8,312 | National Australia Bank Ltd. (AUD) (c) | 209,933 | |||
11,057 | Orica Ltd. (AUD) (c) | 130,106 | |||
22,768 | Origin Energy Ltd. (AUD) (c) | 156,222 | |||
1,318 | Rio Tinto Ltd. (AUD) (c) | 101,278 | |||
10,587 | Suncorp Group Ltd. (AUD) (c) | 123,181 | |||
158,322 | Telstra Group Ltd. (AUD) (c) | 409,146 | |||
6,892 | Washington H Soul Pattinson & Co., Ltd. (AUD) (c) | 160,414 | |||
4,773 | Wesfarmers Ltd. (AUD) (c) | 230,356 | |||
7,042 | Woolworths Group Ltd. (AUD) (c) | 158,890 | |||
3,167,732 | |||||
Belgium — 1.4% | |||||
2,667 | Ageas S.A./N.V. (EUR) (c) | 127,326 | |||
4,543 | Groupe Bruxelles Lambert N.V. (EUR) (c) | 339,041 | |||
466,367 | |||||
Denmark — 1.0% | |||||
949 | Carlsberg A/S, Class B (DKK) (c) | 114,598 | |||
10,276 | Tryg A/S (DKK) (c) | 224,984 | |||
339,582 | |||||
France — 8.9% | |||||
2,951 | Accor S.A. (EUR) (c) | 113,564 | |||
798 | Air Liquide S.A. (EUR) (c) | 145,602 | |||
3,367 | Bouygues S.A. (EUR) (c) | 116,249 | |||
4,519 | Bureau Veritas S.A. (EUR) (c) | 141,396 | |||
3,694 | Cie Generale des Etablissements Michelin S.C.A. (EUR) (c) | 146,242 | |||
8,600 | Credit Agricole S.A. (EUR) (c) | 130,509 | |||
9,183 | Danone S.A. (EUR) (c) | 596,575 | |||
12,411 | Engie S.A. (EUR) (c) | 195,103 | |||
695 | EssilorLuxottica S.A. (EUR) (c) | 159,044 | |||
6,258 | Klepierre S.A. (EUR) (c) | 179,196 | |||
1,377 | Legrand S.A. (EUR) (c) | 148,781 | |||
29,692 | Orange S.A. (EUR) (c) | 329,501 | |||
Shares | Description | Value | |||
France (Continued) | |||||
758 | Safran S.A. (EUR) (c) | $166,527 | |||
1,349 | Sodexo S.A. (EUR) (c) | 127,760 | |||
2,043 | Vinci S.A. (EUR) (c) | 233,143 | |||
2,929,192 | |||||
Germany — 8.7% | |||||
1,203 | Allianz SE (EUR) (c) | 338,844 | |||
2,020 | Beiersdorf AG (EUR) (c) | 293,197 | |||
1,940 | Brenntag SE (EUR) (c) | 138,005 | |||
1,212 | Deutsche Boerse AG (EUR) (c) | 248,180 | |||
2,985 | Deutsche Post AG (EUR) (c) | 133,148 | |||
19,095 | Deutsche Telekom AG (EUR) (c) | 499,478 | |||
13,909 | E.ON SE (EUR) (c) | 195,048 | |||
6,920 | Evonik Industries AG (EUR) (c) | 140,142 | |||
2,987 | GEA Group AG (EUR) (c) | 131,893 | |||
3,980 | Henkel AG & Co. KGaA (EUR) (c) | 308,382 | |||
1,524 | Mercedes-Benz Group AG (EUR) (c) | 100,743 | |||
231 | Muenchener Rueckversicherungs- Gesellschaft AG in Muenchen (EUR) (c) | 113,773 | |||
2,055 | Siemens Healthineers AG (EUR) (c) (d) (e) | 110,146 | |||
952 | Symrise AG (EUR) (c) | 119,982 | |||
2,870,961 | |||||
Ireland — 0.7% | |||||
2,260 | Kerry Group PLC, Class A (EUR) (c) | 211,301 | |||
Israel — 0.7% | |||||
1,309 | Check Point Software Technologies Ltd. (f) | 240,136 | |||
Italy — 3.1% | |||||
9,136 | Eni S.p.A. (EUR) (c) | 146,174 | |||
13,788 | Generali (EUR) (c) | 356,876 | |||
10,150 | Poste Italiane S.p.A. (EUR) (c) (d) (e) | 137,406 | |||
2,184 | Recordati Industria Chimica e Farmaceutica S.p.A. (EUR) (c) | 118,904 | |||
26,621 | Snam S.p.A. (EUR) (c) | 127,212 | |||
17,200 | Terna-Rete Elettrica Nazionale (EUR) (c) | 143,229 | |||
1,029,801 | |||||
Japan — 14.9% | |||||
9,300 | Aeon Co., Ltd. (JPY) (c) | 212,194 | |||
9,200 | ANA Holdings, Inc. (JPY) (c) | 175,975 | |||
20,600 | Asahi Kasei Corp. (JPY) (c) | 148,552 | |||
4,600 | Bridgestone Corp. (JPY) (c) | 187,559 | |||
3,100 | Canon, Inc. (JPY) (c) | 97,035 | |||
See Notes to Financial Statements
Page 3
First Trust Horizon Managed Volatility Developed International ETF (HDMV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (a) (b) (Continued) | |||||
Japan (Continued) | |||||
7,400 | Central Japan Railway Co. (JPY) (c) | $174,470 | |||
1,100 | Daito Trust Construction Co., Ltd. (JPY) (c) | 132,286 | |||
3,300 | Daiwa House Industry Co., Ltd. (JPY) (c) | 93,451 | |||
4,100 | FUJIFILM Holdings Corp. (JPY) (c) | 97,481 | |||
3,900 | Hankyu Hanshin Holdings, Inc. (JPY) (c) | 111,282 | |||
11,200 | Hulic Co., Ltd. (JPY) (c) | 109,324 | |||
8,800 | Japan Airlines Co., Ltd. (JPY) (c) | 142,585 | |||
12,700 | Japan Tobacco, Inc. (JPY) (c) | 373,700 | |||
6,500 | KDDI Corp. (JPY) (c) | 195,585 | |||
19,700 | Kirin Holdings Co., Ltd. (JPY) (c) | 278,510 | |||
10,500 | Kyocera Corp. (JPY) (c) | 132,247 | |||
6,300 | McDonald’s Holdings Co., Japan Ltd. (JPY) (c) | 261,004 | |||
2,800 | NIPPON EXPRESS HOLDINGS, Inc. (JPY) (c) | 138,547 | |||
215,900 | Nippon Telegraph & Telephone Corp. (JPY) (c) | 230,088 | |||
5,100 | Ono Pharmaceutical Co., Ltd. (JPY) (c) | 75,237 | |||
5,300 | SCSK Corp. (JPY) (c) | 104,346 | |||
2,500 | Secom Co., Ltd. (JPY) (c) | 159,632 | |||
16,200 | Sekisui Chemical Co., Ltd. (JPY) (c) | 244,426 | |||
7,900 | Sekisui House Ltd. (JPY) (c) | 197,945 | |||
4,100 | Shimadzu Corp. (JPY) (c) | 120,927 | |||
23,800 | SoftBank Corp. (JPY) (c) | 310,465 | |||
13,800 | Takeda Pharmaceutical Co., Ltd. (JPY) (c) | 387,425 | |||
4,892,278 | |||||
Netherlands — 7.5% | |||||
895 | Airbus SE (EUR) (c) | 135,438 | |||
1,848 | Akzo Nobel N.V. (EUR) (c) | 114,266 | |||
1,447 | EXOR N.V. (EUR) (c) | 148,336 | |||
3,766 | Ferrovial SE (EUR) (c) | 149,758 | |||
2,216 | Heineken Holding N.V. (EUR) (c) | 163,298 | |||
1,682 | Heineken N.V. (EUR) (c) | 149,262 | |||
12,390 | Koninklijke Ahold Delhaize N.V. (EUR) (c) | 399,147 | |||
163,975 | Koninklijke KPN N.V. (EUR) (c) | 646,092 | |||
4,223 | QIAGEN N.V. (EUR) (c) | 187,898 | |||
2,195 | Wolters Kluwer N.V. (EUR) (c) | 367,464 | |||
2,460,959 | |||||
Shares | Description | Value | |||
New Zealand — 0.8% | |||||
99,658 | Spark New Zealand Ltd. (NZD) (c) | $256,119 | |||
Norway — 1.0% | |||||
20,654 | Orkla ASA (NOK) (c) | 174,310 | |||
13,225 | Telenor ASA (NOK) | 157,576 | |||
331,886 | |||||
Singapore — 12.5% | |||||
91,400 | CapitaLand Ascendas REIT (SGD) (c) | 186,598 | |||
101,100 | CapitaLand Integrated Commercial Trust (SGD) (c) | 157,922 | |||
15,430 | DBS Group Holdings Ltd. (SGD) (c) | 422,835 | |||
39,900 | Keppel Ltd. (SGD) (c) | 198,577 | |||
59,700 | Oversea-Chinese Banking Corp., Ltd. (SGD) (c) | 664,500 | |||
32,800 | Singapore Airlines Ltd. (SGD) (c) | 171,410 | |||
89,200 | Singapore Exchange Ltd. (SGD) (c) | 657,663 | |||
133,600 | Singapore Technologies Engineering Ltd. (SGD) (c) | 442,320 | |||
155,400 | Singapore Telecommunications Ltd. (SGD) (c) | 358,845 | |||
27,700 | United Overseas Bank Ltd. (SGD) (c) | 671,689 | |||
73,200 | Wilmar International Ltd. (SGD) (c) | 174,548 | |||
4,106,907 | |||||
Spain — 2.3% | |||||
2,969 | ACS Actividades de Construccion y Servicios S.A. (EUR) (c) | 132,645 | |||
632 | Aena SME S.A. (EUR) (c) (d) (e) | 120,079 | |||
13,155 | Iberdrola S.A. (EUR) (c) | 173,754 | |||
10,316 | Redeia Corp. S.A. (EUR) (c) | 183,160 | |||
30,912 | Telefonica S.A. (EUR) (c) | 140,008 | |||
749,646 | |||||
Switzerland — 13.6% | |||||
2,254 | ABB Ltd. (CHF) (c) | 125,112 | |||
1,143 | Alcon, Inc. (CHF) (c) | 108,225 | |||
1,318 | Baloise Holding AG (CHF) (c) | 235,871 | |||
2,287 | Banque Cantonale Vaudoise (CHF) (c) | 242,759 | |||
5,075 | Coca-Cola HBC AG (GBP) (c) | 185,186 | |||
1,708 | Helvetia Holding AG (CHF) (c) | 254,798 | |||
1,762 | Holcim AG (CHF) (c) | 164,660 | |||
2,111 | Nestle S.A. (CHF) (c) | 213,829 | |||
2,644 | Novartis AG (CHF) (c) | 295,144 | |||
724 | Roche Holding AG (CHF) (c) | 234,402 | |||
See Notes to Financial Statements
Page 4
First Trust Horizon Managed Volatility Developed International ETF (HDMV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (a) (b) (Continued) | |||||
Switzerland (Continued) | |||||
371 | Roche Holding AG (CHF) (c) | $130,485 | |||
914 | Schindler Holding AG (CHF) (c) | 244,636 | |||
1,396 | SGS S.A. (CHF) (c) | 152,629 | |||
195 | Swiss Life Holding AG (CHF) (c) | 149,314 | |||
5,016 | Swiss Prime Site AG (CHF) (c) | 502,705 | |||
1,332 | Swiss Re AG (CHF) (c) | 164,214 | |||
924 | Swisscom AG (CHF) (c) | 565,527 | |||
926 | Zurich Insurance Group AG (CHF) (c) | 509,087 | |||
4,478,583 | |||||
United Kingdom — 12.9% | |||||
31,347 | Aviva PLC (GBP) (c) | 201,933 | |||
7,296 | Bunzl PLC (GBP) (c) | 305,697 | |||
3,328 | Coca-Cola Europacific Partners PLC | 245,506 | |||
13,786 | Compass Group PLC (GBP) (c) | 424,539 | |||
10,034 | GSK PLC (GBP) (c) | 194,847 | |||
47,647 | Haleon PLC (GBP) (c) | 213,715 | |||
18,865 | Informa PLC (GBP) (c) | 210,819 | |||
1,269 | InterContinental Hotels Group PLC (GBP) (c) | 127,846 | |||
2,314 | Intertek Group PLC (GBP) (c) | 150,266 | |||
3,993 | London Stock Exchange Group PLC (GBP) (c) | 486,049 | |||
1,101 | Next PLC (GBP) (c) | 128,684 | |||
6,876 | RELX PLC (GBP) (c) | 324,529 | |||
7,540 | Sage Group (The) PLC (GBP) (c) | 105,398 | |||
7,497 | Shell PLC (GBP) (c) | 273,369 | |||
10,282 | Smiths Group PLC (GBP) (c) | 236,168 | |||
8,145 | Unilever PLC (GBP) (c) | 500,547 | |||
2,822 | Whitbread PLC (GBP) (c) | 105,740 | |||
4,235,652 | |||||
Total Common Stocks | 32,767,102 | ||||
(Cost $30,450,009) | |||||
MONEY MARKET FUNDS — 0.1% | |||||
22,373 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.21% (g) | 22,373 | |||
(Cost $22,373) | |||||
Total Investments — 99.7% | 32,789,475 | ||||
(Cost $30,472,382) | |||||
Net Other Assets and Liabilities — 0.3% | 107,905 | ||||
Net Assets — 100.0% | $32,897,380 | ||||
(a) | Portfolio securities are categorized based upon their country of incorporation. |
(b) | Securities are issued in U.S. dollars unless otherwise indicated in the security description. |
(c) | 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 July 31, 2024, securities noted as such are valued at $32,123,884 or 97.6% 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. |
(d) | 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. |
(e) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
(f) | Non-income producing security. |
(g) | Rate shown reflects yield as of July 31, 2024. |
Abbreviations throughout the Portfolio of Investments: | |
AUD | – Australian Dollar |
CHF | – Swiss Franc |
DKK | – Danish Krone |
EUR | – Euro |
GBP | – British Pound Sterling |
JPY | – Japanese Yen |
NOK | – Norwegian Krone |
NZD | – New Zealand Dollar |
SGD | – Singapore Dollar |
USD | – United States Dollar |
Currency Exposure Diversification | % of Total Investments |
EUR | 32.7% |
JPY | 14.9 |
CHF | 13.1 |
GBP | 12.7 |
SGD | 12.5 |
AUD | 9.7 |
USD | 1.6 |
DKK | 1.0 |
NOK | 1.0 |
NZD | 0.8 |
Total | 100.0% |
See Notes to Financial Statements
Page 5
First Trust Horizon Managed Volatility Developed International ETF (HDMV)Portfolio of Investments (Continued)July 31, 2024
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks: | ||||
Israel | $ 240,136 | $ 240,136 | $ — | $ — |
Norway | 331,886 | 157,576 | 174,310 | — |
United Kingdom | 4,235,652 | 245,506 | 3,990,146 | — |
Other Country Categories* | 27,959,428 | — | 27,959,428 | — |
Money Market Funds | 22,373 | 22,373 | — | — |
Total Investments | $32,789,475 | $665,591 | $32,123,884 | $— |
* | See Portfolio of Investments for country breakout. |
See Notes to Financial Statements
Page 6
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)Portfolio of InvestmentsJuly 31, 2024
Shares | Description | Value | |||
COMMON STOCKS — 99.7% | |||||
Aerospace & Defense — 2.3% | |||||
994 | AAR Corp. (a) | $64,212 | |||
954 | BWX Technologies, Inc. | 94,914 | |||
360 | Curtiss-Wright Corp. | 106,092 | |||
1,352 | Hexcel Corp. | 89,516 | |||
513 | Moog, Inc., Class A | 100,599 | |||
455,333 | |||||
Automobile Components — 0.8% | |||||
762 | Autoliv, Inc. | 77,069 | |||
2,655 | Gentex Corp. | 82,464 | |||
159,533 | |||||
Banks — 1.7% | |||||
1,569 | Commerce Bancshares, Inc. | 101,530 | |||
6,387 | F.N.B. Corp. | 97,977 | |||
3,349 | Old National Bancorp | 67,047 | |||
1,097 | Prosperity Bancshares, Inc. | 79,554 | |||
346,108 | |||||
Biotechnology — 1.7% | |||||
4,161 | Exelixis, Inc. (a) | 97,576 | |||
820 | Neurocrine Biosciences, Inc. (a) | 116,087 | |||
386 | United Therapeutics Corp. (a) | 120,930 | |||
334,593 | |||||
Building Products — 1.1% | |||||
265 | Carlisle Cos., Inc. | 110,924 | |||
186 | Lennox International, Inc. | 108,531 | |||
219,455 | |||||
Capital Markets — 3.9% | |||||
583 | Affiliated Managers Group, Inc. | 108,216 | |||
557 | Evercore, Inc., Class A | 139,467 | |||
2,829 | Federated Hermes, Inc. | 97,120 | |||
2,920 | Janus Henderson Group PLC | 108,712 | |||
2,116 | Jefferies Financial Group, Inc. | 123,722 | |||
1,394 | SEI Investments Co. | 94,569 | |||
1,155 | Stifel Financial Corp. | 102,414 | |||
774,220 | |||||
Chemicals — 2.1% | |||||
975 | Ashland, Inc. | 94,234 | |||
666 | Balchem Corp. | 118,188 | |||
761 | Innospec, Inc. | 99,798 | |||
857 | RPM International, Inc. | 104,091 | |||
416,311 | |||||
Commercial Services & Supplies — 2.5% | |||||
1,266 | ABM Industries, Inc. | 70,339 | |||
475 | Clean Harbors, Inc. (a) | 113,397 | |||
491 | MSA Safety, Inc. | 92,627 | |||
Shares | Description | Value | |||
Commercial Services & Supplies (Continued) | |||||
481 | Tetra Tech, Inc. | $102,568 | |||
568 | UniFirst Corp. | 110,499 | |||
489,430 | |||||
Construction & Engineering — 1.5% | |||||
985 | AECOM | 89,251 | |||
289 | EMCOR Group, Inc. | 108,502 | |||
3,720 | MDU Resources Group, Inc. | 100,217 | |||
297,970 | |||||
Construction Materials — 0.6% | |||||
442 | Eagle Materials, Inc. | 120,357 | |||
Consumer Finance — 0.5% | |||||
802 | FirstCash Holdings, Inc. | 89,503 | |||
Consumer Staples Distribution & Retail — 3.0% | |||||
1,366 | BJ’s Wholesale Club Holdings, Inc. (a) | 120,153 | |||
287 | Casey’s General Stores, Inc. | 111,310 | |||
2,908 | Grocery Outlet Holding Corp. (a) | 56,881 | |||
1,343 | Performance Food Group Co. (a) | 92,667 | |||
1,214 | Sprouts Farmers Market, Inc. (a) | 121,267 | |||
1,793 | US Foods Holding Corp. (a) | 97,521 | |||
599,799 | |||||
Containers & Packaging — 1.9% | |||||
631 | AptarGroup, Inc. | 92,744 | |||
3,329 | Graphic Packaging Holding Co. | 100,203 | |||
1,948 | Silgan Holdings, Inc. | 100,186 | |||
1,612 | Sonoco Products Co. | 86,919 | |||
380,052 | |||||
Diversified Consumer Services — 1.6% | |||||
700 | Grand Canyon Education, Inc. (a) | 109,165 | |||
1,960 | H&R Block, Inc. | 113,563 | |||
1,275 | Service Corp. International | 101,885 | |||
324,613 | |||||
Diversified REITs — 1.0% | |||||
3,519 | Essential Properties Realty Trust, Inc. | 104,127 | |||
1,659 | WP Carey, Inc. | 95,907 | |||
200,034 | |||||
Diversified Telecommunication Services — 0.3% | |||||
849 | Cogent Communications Holdings, Inc. | 59,931 | |||
See Notes to Financial Statements
Page 7
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (Continued) | |||||
Electric Utilities — 2.6% | |||||
1,554 | ALLETE, Inc. | $100,233 | |||
976 | IDACORP, Inc. | 95,404 | |||
2,686 | OGE Energy Corp. | 104,136 | |||
2,516 | PNM Resources, Inc. | 104,615 | |||
2,134 | Portland General Electric Co. | 101,109 | |||
505,497 | |||||
Electrical Equipment — 0.5% | |||||
1,275 | nVent Electric PLC | 92,603 | |||
Electronic Equipment, Instruments & Components — 3.7% | |||||
718 | Arrow Electronics, Inc. (a) | 88,809 | |||
1,842 | Avnet, Inc. | 99,026 | |||
503 | Insight Enterprises, Inc. (a) | 112,924 | |||
441 | Littelfuse, Inc. | 117,796 | |||
1,013 | Plexus Corp. (a) | 129,836 | |||
779 | TD SYNNEX Corp. | 92,833 | |||
2,232 | Vontier Corp. | 87,561 | |||
728,785 | |||||
Entertainment — 0.5% | |||||
489 | Madison Square Garden Sports Corp. (a) | 98,000 | |||
Financial Services — 4.2% | |||||
1,717 | Essent Group Ltd. | 107,896 | |||
2,308 | EVERTEC, Inc. | 79,557 | |||
4,478 | MGIC Investment Corp. | 111,234 | |||
1,173 | Mr. Cooper Group, Inc. (a) | 105,429 | |||
2,964 | NMI Holdings, Inc. (a) | 116,633 | |||
3,037 | Radian Group, Inc. | 112,673 | |||
1,339 | Voya Financial, Inc. | 97,385 | |||
8,017 | Western Union (The) Co. | 95,322 | |||
826,129 | |||||
Food Products — 2.5% | |||||
3,726 | Flowers Foods, Inc. | 83,910 | |||
811 | Ingredion, Inc. | 100,864 | |||
673 | J & J Snack Foods Corp. | 113,535 | |||
554 | Lancaster Colony Corp. | 106,955 | |||
867 | Post Holdings, Inc. (a) | 94,815 | |||
500,079 | |||||
Gas Utilities — 3.2% | |||||
1,081 | Chesapeake Utilities Corp. | 127,590 | |||
1,727 | National Fuel Gas Co. | 101,185 | |||
2,133 | New Jersey Resources Corp. | 99,718 | |||
1,436 | ONE Gas, Inc. | 99,989 | |||
1,483 | Southwest Gas Holdings, Inc. | 109,979 | |||
1,503 | Spire, Inc. | 100,085 | |||
638,546 | |||||
Shares | Description | Value | |||
Ground Transportation — 2.0% | |||||
1,826 | Knight-Swift Transportation Holdings, Inc. | $99,389 | |||
521 | Landstar System, Inc. | 99,120 | |||
652 | Ryder System, Inc. | 91,384 | |||
2,666 | Werner Enterprises, Inc. | 104,481 | |||
394,374 | |||||
Health Care Equipment & Supplies — 1.0% | |||||
1,556 | Enovis Corp. (a) | 74,128 | |||
1,797 | Globus Medical, Inc., Class A (a) | 129,312 | |||
203,440 | |||||
Health Care Providers & Services — 2.3% | |||||
1,396 | Acadia Healthcare Co., Inc. (a) | 90,531 | |||
164 | Chemed Corp. | 93,506 | |||
1,105 | Encompass Health Corp. | 102,699 | |||
784 | Ensign Group (The), Inc. | 110,348 | |||
2,152 | Patterson Cos., Inc. | 54,338 | |||
451,422 | |||||
Health Care REITs — 2.0% | |||||
3,757 | CareTrust REIT, Inc. | 101,289 | |||
3,930 | Healthcare Realty Trust, Inc. | 69,522 | |||
3,003 | Omega Healthcare Investors, Inc. | 109,309 | |||
6,526 | Sabra Health Care REIT, Inc. | 105,917 | |||
386,037 | |||||
Hotels, Restaurants & Leisure — 3.6% | |||||
776 | Choice Hotels International, Inc. | 98,901 | |||
628 | Churchill Downs, Inc. | 90,156 | |||
1,342 | Monarch Casino & Resort, Inc. | 105,052 | |||
891 | Papa John’s International, Inc. | 39,409 | |||
579 | Texas Roadhouse, Inc. | 101,099 | |||
567 | Vail Resorts, Inc. | 103,200 | |||
4,620 | Wendy’s (The) Co. | 78,216 | |||
1,247 | Wyndham Hotels & Resorts, Inc. | 94,423 | |||
710,456 | |||||
Household Durables — 0.2% | |||||
3,072 | Leggett & Platt, Inc. | 40,458 | |||
Household Products — 0.4% | |||||
2,609 | Energizer Holdings, Inc. | 80,331 | |||
Independent Power and Renewable Electricity Producers — 0.3% | |||||
872 | Ormat Technologies, Inc. | 67,702 | |||
Industrial REITs — 2.9% | |||||
585 | EastGroup Properties, Inc. | 109,389 | |||
2,003 | First Industrial Realty Trust, Inc. | 109,604 | |||
13,904 | LXP Industrial Trust | 143,211 | |||
See Notes to Financial Statements
Page 8
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (Continued) | |||||
Industrial REITs (Continued) | |||||
2,027 | Rexford Industrial Realty, Inc. | $101,573 | |||
2,674 | STAG Industrial, Inc. | 109,126 | |||
572,903 | |||||
Insurance — 6.2% | |||||
723 | American Financial Group, Inc. | 94,684 | |||
1,178 | Assured Guaranty Ltd. | 97,032 | |||
3,431 | CNO Financial Group, Inc. | 119,605 | |||
1,824 | Fidelity National Financial, Inc. | 101,068 | |||
1,909 | First American Financial Corp. | 115,647 | |||
710 | Hanover Insurance Group (The), Inc. | 97,618 | |||
3,106 | Old Republic International Corp. | 107,530 | |||
427 | Primerica, Inc. | 107,506 | |||
488 | Reinsurance Group of America, Inc. | 110,010 | |||
384 | RenaissanceRe Holdings Ltd. | 89,053 | |||
650 | RLI Corp. | 97,883 | |||
914 | Selective Insurance Group, Inc. | 82,552 | |||
1,220,188 | |||||
Leisure Products — 0.5% | |||||
5,569 | Mattel, Inc. (a) | 107,426 | |||
Machinery — 6.3% | |||||
914 | AGCO Corp. | 86,300 | |||
1,152 | Albany International Corp., Class A | 107,804 | |||
1,268 | Donaldson Co., Inc. | 94,872 | |||
1,094 | Federal Signal Corp. | 109,367 | |||
1,966 | Flowserve Corp. | 99,381 | |||
897 | Franklin Electric Co., Inc. | 95,638 | |||
1,126 | Graco, Inc. | 95,766 | |||
699 | ITT, Inc. | 98,881 | |||
413 | Lincoln Electric Holdings, Inc. | 84,834 | |||
709 | Middleby (The) Corp. (a) | 96,126 | |||
793 | Oshkosh Corp. | 86,160 | |||
878 | Tennant Co. | 94,552 | |||
461 | Watts Water Technologies, Inc., Class A | 95,667 | |||
1,245,348 | |||||
Marine Transportation — 0.5% | |||||
842 | Kirby Corp. (a) | 103,465 | |||
Media — 0.6% | |||||
2,118 | New York Times (The) Co., Class A | 113,504 | |||
Metals & Mining — 0.9% | |||||
315 | Reliance, Inc. | 95,937 | |||
602 | Royal Gold, Inc. | 83,148 | |||
179,085 | |||||
Shares | Description | Value | |||
Mortgage REITs — 0.8% | |||||
3,008 | ARMOUR Residential REIT, Inc. | $60,762 | |||
8,005 | Ellington Financial, Inc. | 101,583 | |||
162,345 | |||||
Multi-Utilities — 1.5% | |||||
2,579 | Avista Corp. | 101,045 | |||
1,691 | Black Hills Corp. | 99,854 | |||
1,830 | Northwestern Energy Group, Inc. | 98,399 | |||
299,298 | |||||
Office REITs — 0.6% | |||||
3,887 | COPT Defense Properties | 112,606 | |||
Oil, Gas & Consumable Fuels — 1.0% | |||||
6,522 | Antero Midstream Corp. | 93,656 | |||
1,456 | DT Midstream, Inc. | 109,724 | |||
203,380 | |||||
Personal Care Products — 0.5% | |||||
2,470 | Edgewell Personal Care Co. | 96,700 | |||
Pharmaceuticals — 1.4% | |||||
6,000 | Innoviva, Inc. (a) | 113,040 | |||
711 | Jazz Pharmaceuticals PLC (a) | 78,388 | |||
1,299 | Prestige Consumer Healthcare, Inc. (a) | 91,982 | |||
283,410 | |||||
Professional Services — 4.7% | |||||
228 | CACI International, Inc., Class A (a) | 105,218 | |||
599 | Exponent, Inc. | 63,542 | |||
263 | FTI Consulting, Inc. (a) | 57,326 | |||
2,966 | Genpact Ltd. | 102,831 | |||
1,403 | KBR, Inc. | 93,426 | |||
1,503 | Korn Ferry | 110,801 | |||
1,212 | ManpowerGroup, Inc. | 92,815 | |||
1,145 | Maximus, Inc. | 106,359 | |||
707 | Science Applications International Corp. | 87,951 | |||
3,787 | Verra Mobility Corp. (a) | 114,102 | |||
934,371 | |||||
Residential REITs — 1.3% | |||||
2,557 | American Homes 4 Rent, Class A | 92,282 | |||
1,520 | Equity LifeStyle Properties, Inc. | 104,394 | |||
3,522 | Independence Realty Trust, Inc. | 65,685 | |||
262,361 | |||||
Retail REITs — 2.7% | |||||
1,600 | Agree Realty Corp. | 110,352 | |||
4,224 | Brixmor Property Group, Inc. | 107,585 | |||
2,279 | NNN REIT, Inc. | 102,305 | |||
See Notes to Financial Statements
Page 9
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS (Continued) | |||||
Retail REITs (Continued) | |||||
2,843 | Phillips Edison & Co., Inc. | $99,789 | |||
6,975 | Retail Opportunity Investments Corp. | 104,276 | |||
524,307 | |||||
Semiconductors & Semiconductor Equipment — 0.4% | |||||
618 | Cirrus Logic, Inc. (a) | 80,637 | |||
Software — 2.7% | |||||
714 | Blackbaud, Inc. (a) | 56,677 | |||
933 | CommVault Systems, Inc. (a) | 142,609 | |||
1,162 | Dolby Laboratories, Inc., Class A | 91,519 | |||
1,040 | InterDigital, Inc. | 127,671 | |||
1,836 | Progress Software Corp. | 107,222 | |||
525,698 | |||||
Specialized REITs — 4.1% | |||||
2,827 | CubeSmart | 134,508 | |||
2,248 | EPR Properties | 101,160 | |||
3,891 | Four Corners Property Trust, Inc. | 105,602 | |||
2,160 | Gaming and Leisure Properties, Inc. | 108,432 | |||
723 | Lamar Advertising Co., Class A | 86,659 | |||
1,716 | National Storage Affiliates Trust | 73,050 | |||
2,262 | PotlatchDeltic Corp. | 100,342 | |||
3,078 | Rayonier, Inc. | 93,356 | |||
803,109 | |||||
Specialty Retail — 1.1% | |||||
217 | Murphy USA, Inc. | 109,568 | |||
2,160 | Valvoline, Inc. (a) | 100,440 | |||
210,008 | |||||
Textiles, Apparel & Luxury Goods — 0.9% | |||||
1,321 | Carter’s, Inc. | 79,987 | |||
1,180 | Columbia Sportswear Co. | 96,406 | |||
176,393 | |||||
Trading Companies & Distributors — 1.0% | |||||
733 | GATX Corp. | 102,254 | |||
993 | MSC Industrial Direct Co., Inc., Class A | 88,327 | |||
190,581 | |||||
Water Utilities — 1.6% | |||||
1,316 | American States Water Co. | 108,609 | |||
1,923 | California Water Service Group | 102,804 | |||
2,540 | Essential Utilities, Inc. | 103,251 | |||
314,664 | |||||
Total Common Stocks | 19,712,888 | ||||
(Cost $16,547,854) | |||||
Shares | Description | Value | |||
MONEY MARKET FUNDS — 0.3% | |||||
58,618 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.21% (b) | $58,618 | |||
(Cost $58,618) | |||||
Total Investments — 100.0% | 19,771,506 | ||||
(Cost $16,606,472) | |||||
Net Other Assets and Liabilities — (0.0)% | (4,402 ) | ||||
Net Assets — 100.0% | $19,767,104 | ||||
(a) | Non-income producing security. |
(b) | Rate shown reflects yield as of July 31, 2024. |
Abbreviations throughout the Portfolio of Investments: | |
REITs | – Real Estate Investment Trusts |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks* | $ 19,712,888 | $ 19,712,888 | $ — | $ — |
Money Market Funds | 58,618 | 58,618 | — | — |
Total Investments | $19,771,506 | $19,771,506 | $— | $— |
* | See Portfolio of Investments for industry breakout. |
See Notes to Financial Statements
Page 10
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Page 11
First Trust Exchange-Traded Fund III
Statements of Assets and Liabilities
July 31, 2024First Trust Horizon Managed Volatility Domestic ETF (HUSV) | First Trust Horizon Managed Volatility Developed International ETF (HDMV) | First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | |
ASSETS: | |||
Investments, at value | $87,633,543 | $32,789,475 | $19,771,506 |
Foreign currency, at value | — | 419 | — |
Receivables: | |||
Dividends | 61,144 | 41,747 | 8,406 |
Capital shares sold | — | 770 | — |
Reclaims | — | 86,936 | — |
Total Assets | 87,694,687 | 32,919,347 | 19,779,912 |
LIABILITIES: | |||
Investment advisory fees payable | 51,052 | 21,967 | 12,808 |
Total Liabilities | 51,052 | 21,967 | 12,808 |
NET ASSETS | $87,643,635 | $32,897,380 | $19,767,104 |
NET ASSETS consist of: | |||
Paid-in capital | $121,312,274 | $62,679,126 | $19,373,786 |
Par value | 24,000 | 11,000 | 5,500 |
Accumulated distributable earnings (loss) | (33,692,639) | (29,792,746) | 387,818 |
NET ASSETS | $87,643,635 | $32,897,380 | $19,767,104 |
NET ASSET VALUE, per share | $36.52 | $29.91 | $35.94 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 2,400,002 | 1,100,002 | 550,002 |
Investments, at cost | $78,312,842 | $30,472,382 | $16,606,472 |
Foreign currency, at cost (proceeds) | $— | $431 | $— |
See Notes to Financial Statements
Page 12
First Trust Exchange-Traded Fund III
Statements of Operations
For the Year Ended July 31, 2024First Trust Horizon Managed Volatility Domestic ETF (HUSV) | First Trust Horizon Managed Volatility Developed International ETF (HDMV) | First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | |
INVESTMENT INCOME: | |||
Dividends | $1,799,589 | $1,398,763 | $388,255 |
Interest | 1,814 | 1,102 | — |
Foreign withholding tax | — | (64,672) | 85 |
Total investment income | 1,801,403 | 1,335,193 | 388,340 |
EXPENSES: | |||
Investment advisory fees | 602,266 | 284,244 | 144,853 |
Total expenses | 602,266 | 284,244 | 144,853 |
NET INVESTMENT INCOME (LOSS) | 1,199,137 | 1,050,949 | 243,487 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |||
Net realized gain (loss) on: | |||
Investments | 815,900 | (1,405,058) | (549,932) |
In-kind redemptions | 2,121,409 | 479,662 | 1,019,573 |
Foreign currency transactions | — | (12,551) | — |
Net realized gain (loss) | 2,937,309 | (937,947) | 469,641 |
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 6,000,129 | 1,729,609 | 1,799,653 |
Foreign currency translation | — | (3,045) | — |
Net change in unrealized appreciation (depreciation) | 6,000,129 | 1,726,564 | 1,799,653 |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 8,937,438 | 788,617 | 2,269,294 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $10,136,575 | $1,839,566 | $2,512,781 |
See Notes to Financial Statements
Page 13
First Trust Exchange-Traded Fund III
Statements of Changes in Net Assets
First Trust Horizon Managed Volatility Domestic ETF (HUSV) | First Trust Horizon Managed Volatility Developed International ETF (HDMV) | |||
Year Ended 7/31/2024 | Year Ended 7/31/2023 | Year Ended 7/31/2024 | Year Ended 7/31/2023 | |
OPERATIONS: | ||||
Net investment income (loss) | $1,199,137 | $1,732,570 | $1,050,949 | $1,259,414 |
Net realized gain (loss) | 2,937,309 | 518,203 | (937,947) | (2,345,242) |
Net change in unrealized appreciation (depreciation) | 6,000,129 | (811,009) | 1,726,564 | 3,026,749 |
Net increase (decrease) in net assets resulting from operations | 10,136,575 | 1,439,764 | 1,839,566 | 1,940,921 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||
Investment operations | (1,247,780) | (1,810,516) | (1,148,497) | (1,333,862) |
SHAREHOLDER TRANSACTIONS: | ||||
Proceeds from shares sold | 10,187,754 | 26,951,541 | — | — |
Cost of shares redeemed | (23,469,661) | (34,208,623) | (8,480,968) | (5,676,683) |
Net increase (decrease) in net assets resulting from shareholder transactions | (13,281,907) | (7,257,082) | (8,480,968) | (5,676,683) |
Total increase (decrease) in net assets | (4,393,112) | (7,627,834) | (7,789,899) | (5,069,624) |
NET ASSETS: | ||||
Beginning of period | 92,036,747 | 99,664,581 | 40,687,279 | 45,756,903 |
End of period | $87,643,635 | $92,036,747 | $32,897,380 | $40,687,279 |
CHANGES IN SHARES OUTSTANDING: | ||||
Shares outstanding, beginning of period | 2,800,002 | 3,000,002 | 1,400,002 | 1,600,002 |
Shares sold | 300,000 | 850,000 | — | — |
Shares redeemed | (700,000) | (1,050,000) | (300,000) | (200,000) |
Shares outstanding, end of period | 2,400,002 | 2,800,002 | 1,100,002 | 1,400,002 |
See Notes to Financial Statements
Page 14
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | |
Year Ended 7/31/2024 | Year Ended 7/31/2023 |
$243,487 | $245,842 |
469,641 | (1,432,164) |
1,799,653 | 1,284,546 |
2,512,781 | 98,224 |
(241,506) | (255,451) |
3,200,218 | 3,180,198 |
(4,795,606) | — |
(1,595,388) | 3,180,198 |
675,887 | 3,022,971 |
19,091,217 | 16,068,246 |
$19,767,104 | $19,091,217 |
600,002 | 500,002 |
100,000 | 100,000 |
(150,000) | — |
550,002 | 600,002 |
See Notes to Financial Statements
Page 15
First Trust Exchange-Traded Fund III
Financial Highlights
For a share outstanding throughout each periodFirst Trust Horizon Managed Volatility Domestic ETF (HUSV)
Year Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $32.87 | $33.22 | $33.08 | $27.19 | $26.71 |
Income from investment operations: | |||||
Net investment income (loss) | 0.47 (a) | 0.58 (a) | 0.51 | 0.46 | 0.37 |
Net realized and unrealized gain (loss) | 3.67 | (0.31 ) | 0.10 | 5.87 | 0.52 |
Total from investment operations | 4.14 | 0.27 | 0.61 | 6.33 | 0.89 |
Distributions paid to shareholders from: | |||||
Net investment income | (0.49 ) | (0.62 ) | (0.47 ) | (0.44 ) | (0.41 ) |
Net asset value, end of period | $36.52 | $32.87 | $33.22 | $33.08 | $27.19 |
Total return (b) | 12.74 % | 0.88 % | 1.82 % | 23.48 % | 3.41 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $87,644 | $92,037 | $99,665 | $120,758 | $214,822 |
Ratio of total expenses to average net assets | 0.70 % | 0.70 % | 0.70 % | 0.70 % | 0.70 % |
Ratio of net investment income (loss) to average net assets | 1.39 % | 1.79 % | 1.46 % | 1.42 % | 1.39 % |
Portfolio turnover rate (c) | 100 % | 122 % | 76 % | 152 % | 211 % |
(a) | Based on average shares outstanding. |
(b) | 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. |
(c) | 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
Page 16
First Trust Exchange-Traded Fund III
Financial Highlights (Continued)
For a share outstanding throughout each periodFirst Trust Horizon Managed Volatility Developed International ETF (HDMV)
Year Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $29.06 | $28.60 | $32.21 | $28.12 | $32.92 |
Income from investment operations: | |||||
Net investment income (loss) | 0.84 (a) | 0.88 (a) | 0.90 | 0.89 | 0.65 |
Net realized and unrealized gain (loss) | 0.93 | 0.52 | (3.62 ) | 4.13 | (4.61 ) |
Total from investment operations | 1.77 | 1.40 | (2.72 ) | 5.02 | (3.96 ) |
Distributions paid to shareholders from: | |||||
Net investment income | (0.92 ) | (0.94 ) | (0.89 ) | (0.93 ) | (0.84 ) |
Net asset value, end of period | $29.91 | $29.06 | $28.60 | $32.21 | $28.12 |
Total return (b) | 6.33 % | 5.22 % | (8.50 )% | 18.01 % (c) | (12.37 )% |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $32,897 | $40,687 | $45,757 | $86,962 | $123,714 |
Ratio of total expenses to average net assets | 0.80 % | 0.80 % | 0.80 % | 0.80 % | 0.80 % |
Ratio of net investment income (loss) to average net assets | 2.96 % | 3.19 % | 2.53 % | 2.68 % | 2.08 % |
Portfolio turnover rate (d) | 79 % | 80 % | 65 % | 127 % | 196 % |
(a) | Based on average shares outstanding. |
(b) | 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. |
(c) | The Fund received a reimbursement from the advisor in the amount of $6,254, which represents less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return. |
(d) | 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
Page 17
First Trust Exchange-Traded Fund III
Financial Highlights (Continued)
For a share outstanding throughout each periodFirst Trust Horizon Managed Volatility Small/Mid ETF (HSMV)
Year Ended July 31, | Period Ended 7/31/2020 (a) | ||||
2024 | 2023 | 2022 | 2021 | ||
Net asset value, beginning of period | $31.82 | $32.14 | $33.12 | $25.03 | $21.10 |
Income from investment operations: | |||||
Net investment income (loss) | 0.43 (b) | 0.44 (b) | 0.36 | 0.29 | 0.02 |
Net realized and unrealized gain (loss) | 4.12 | (0.29 ) | (1.05 ) | 8.09 | 3.92 |
Total from investment operations | 4.55 | 0.15 | (0.69 ) | 8.38 | 3.94 |
Distributions paid to shareholders from: | |||||
Net investment income | (0.43 ) | (0.47 ) | (0.29 ) | (0.29 ) | (0.01 ) |
Net realized gain | — | — | — | (0.00 ) (c) | — |
Total distributions | (0.43 ) | (0.47 ) | (0.29 ) | (0.29 ) | (0.01 ) |
Net asset value, end of period | $35.94 | $31.82 | $32.14 | $33.12 | $25.03 |
Total return (d) | 14.48 % | 0.57 % | (2.11 )% | 33.72 % | 18.67 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $19,767 | $19,091 | $16,068 | $14,906 | $20,023 |
Ratio of total expenses to average net assets | 0.80 % | 0.80 % | 0.80 % | 0.80 % | 0.80 % (e) |
Ratio of net investment income (loss) to average net assets | 1.34 % | 1.43 % | 1.09 % | 1.02 % | 0.60 % (e) |
Portfolio turnover rate (f) | 53 % | 70 % | 71 % | 118 % | 5 % |
(a) | Inception date is April 6, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
(b) | Based on average shares outstanding. |
(c) | Amount represents less than $0.01. |
(d) | 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. |
(e) | Annualized. |
(f) | 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
Page 18
Notes to Financial Statements
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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”).
This report covers the three funds (each a “Fund” and collectively, the “Funds”) listed below, each a diversified series of the Trust and listed and traded on the NYSE Arca, Inc.
First Trust Horizon Managed Volatility Domestic ETF – (ticker “HUSV”) |
First Trust Horizon Managed Volatility Developed International ETF – (ticker “HDMV”) |
First Trust Horizon Managed Volatility Small/Mid ETF – (ticker “HSMV”) |
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, HUSV seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in common stocks of domestic companies listed and traded on U.S. national securities exchanges that Horizon Investments, LLC (“Horizon” or the “Sub-Advisor”) believes exhibit low future expected volatility.
Under normal market conditions, HDMV seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in common stocks and depositary receipts of developed market companies listed and traded on non-U.S. exchanges that Horizon believes exhibit low future expected volatility.
Under normal market conditions, HSMV seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in small- and/or mid-capitalization common stocks listed and traded on U.S. national securities exchanges that Horizon believes exhibit low future expected volatility.
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.
A. Portfolio Valuation
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 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:
Page 19
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
Common stocks 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.
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.
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;
2)
the type of security;
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;
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.
Page 20
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 July 31, 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, if any, is recorded daily 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 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.
C. Foreign Currency
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in “Net change in unrealized appreciation (depreciation) on investments” on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are 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.
D. 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.
Page 21
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 July 31, 2024 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Return of Capital | |
First Trust Horizon Managed Volatility Domestic ETF | $1,247,780 | $— | $— |
First Trust Horizon Managed Volatility Developed International ETF | 1,148,497 | — | — |
First Trust Horizon Managed Volatility Small/Mid ETF | 241,506 | — | — |
The tax character of distributions paid by each Fund during the fiscal year ended July 31, 2023 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Return of Capital | |
First Trust Horizon Managed Volatility Domestic ETF | $1,810,516 | $— | $— |
First Trust Horizon Managed Volatility Developed International ETF | 1,333,862 | — | — |
First Trust Horizon Managed Volatility Small/Mid ETF | 255,451 | — | — |
As of July 31, 2024, 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 Horizon Managed Volatility Domestic ETF | $129,369 | $(43,100,565 ) | $9,278,557 |
First Trust Horizon Managed Volatility Developed International ETF | 225,121 | (32,257,003 ) | 2,239,136 |
First Trust Horizon Managed Volatility Small/Mid ETF | 30,591 | (2,586,938 ) | 2,944,165 |
E. Income Taxes
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable years ended 2021, 2022, 2023, and 2024 remain open to federal and state audit. As of July 31, 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 July 31, 2024, 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.
Page 22
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
Non-Expiring Capital Loss Carryforwards | |
First Trust Horizon Managed Volatility Domestic ETF | $43,100,565 |
First Trust Horizon Managed Volatility Developed International ETF | 32,257,003 |
First Trust Horizon Managed Volatility Small/Mid ETF | 2,586,938 |
During the taxable year ended July 31, 2024, the following Fund utilized capital loss carryforwards in the following amount:
Capital Loss Utilized | |
First Trust Horizon Managed Volatility Domestic ETF | $801,067 |
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 July 31, 2024, the Funds had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended July 31, 2024, the adjustments for each Fund were as follows:
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) on Investments | Paid-In Capital | |
First Trust Horizon Managed Volatility Domestic ETF | $— | $(2,118,552 ) | $2,118,552 |
First Trust Horizon Managed Volatility Developed International ETF | 36,362 | (464,547 ) | 428,185 |
First Trust Horizon Managed Volatility Small/Mid ETF | — | (996,676 ) | 996,676 |
As of July 31, 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:
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |
First Trust Horizon Managed Volatility Domestic ETF | $78,354,986 | $10,189,385 | $(910,828 ) | $9,278,557 |
First Trust Horizon Managed Volatility Developed International ETF | 30,550,683 | 3,093,330 | (854,538 ) | 2,238,792 |
First Trust Horizon Managed Volatility Small/Mid ETF | 16,827,341 | 3,547,848 | (603,683 ) | 2,944,165 |
F. Expenses
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.
Page 23
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
First Trust is paid an annual unitary management fee for each Fund. Pursuant to the Investment Management Agreement between First Trust and the Trust, First Trust manages 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 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, which are paid by each respective Fund. Prior to October 16, 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:
Breakpoints | HUSV | HSMV |
Fund net assets up to and including $2.5 billion | 0.7000 % | 0.80 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.6825 % | 0.78 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.6650 % | 0.76 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.6475 % | 0.74 % |
Fund net assets greater than $10 billion up to and including $15 billion | 0.6300 % | 0.72 % |
Fund net assets greater than $15 billion | 0.5950 % | 0.68 % |
Breakpoints | HDMV |
Fund net assets up to and including $2.5 billion | 0.80 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.78 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.76 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.74 % |
Fund net assets greater than $10 billion | 0.72 % |
Horizon serves as the Funds’ sub-advisor and manages each Fund’s portfolio subject to First Trust’s supervision. The Sub-Advisor receives a sub-advisory fee from First Trust equal to 50% of any remaining monthly unitary management fee paid to the Advisor after the average Fund’s expenses accrued during the most recent twelve months are subtracted from the unitary management fee for that month. During any period in which First Trust’s management fee is reduced in accordance with the breakpoints described above, the sub-advisory fee will be reduced to reflect the reduction in First Trust’s management fee.
Effective October 16, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNY”). Under the service agreements, BNY performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNY is responsible for custody of each Fund’s assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BNY is responsible for maintaining shareholder records for each Fund. BNY is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to October 16, 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.
Page 24
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
4. Purchases and Sales of Securities
For the fiscal year ended July 31, 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:
Purchases | Sales | |
First Trust Horizon Managed Volatility Domestic ETF | $86,632,866 | $86,601,000 |
First Trust Horizon Managed Volatility Developed International ETF | 28,012,210 | 28,031,494 |
First Trust Horizon Managed Volatility Small/Mid ETF | 9,777,994 | 9,704,603 |
For the fiscal year ended July 31, 2024, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases | Sales | |
First Trust Horizon Managed Volatility Domestic ETF | $10,162,644 | $23,380,374 |
First Trust Horizon Managed Volatility Developed International ETF | — | 8,375,500 |
First Trust Horizon Managed Volatility Small/Mid ETF | 3,182,643 | 4,763,135 |
5. 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 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.
6. Distribution Plan
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.
Page 25
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 November 30, 2025.
7. Indemnification
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust’s maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. Subsequent Events
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
Page 26
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of First Trust Horizon Managed Volatility Domestic ETF, First Trust Horizon Managed Volatility Developed International ETF, and First Trust Horizon Managed Volatility Small/Mid ETF (the “Funds”), each a series of the First Trust Exchange-Traded Fund III, including the portfolios of investments, as of July 31, 2024, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of July 31, 2024, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America.
Individual Funds Included in the Trust | Financial Highlights |
First Trust Horizon Managed Volatility Domestic ETF (HUSV) First Trust Horizon Managed Volatility Developed International ETF (HDMV) | For the years ended July 31, 2024, 2023, 2022, 2021, and 2020 |
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | For the years ended July 31, 2024, 2023, 2022, and 2021, and for the period from April 6, 2020 (commencement of investment operations) through July 31, 2020 |
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2024, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, LLP
Chicago, Illinois
September 23, 2024
September 23, 2024
We have served as the auditor of one or more First Trust investment companies since 2001.
Page 27
Other Information
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
Changes in and Disagreements with Accountants (Item 8 of Form N-CSR)
There were no changes in or disagreements with the Funds’ accountants during the fiscal year ended July 31, 2024.
Proxy Disclosures (Item 9 of Form N-CSR)
There were no matters submitted for vote by shareholders of any Fund during the fiscal year ended July 31, 2024.
Remuneration Paid to Directors, Officers, and Others (Item 10 of Form N-CSR)
Independent Trustees and any member of any advisory board of each Fund are compensated through the unitary management fee paid by each Fund to the advisor and not directly by each Fund. The investment advisory fee paid is included in the Statements of Operations.
Statement Regarding the Basis for the Board’s Approval of Investment Advisory Contract (Item 11 of Form N-CSR)
The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreements (as applicable to a specific Fund, the “Advisory Agreement” and collectively, the “Advisory Agreements”) with First Trust Advisors L.P. (the “Advisor”) and the Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement” and together with the Advisory Agreements, the “Agreements”) among the Trust, the Advisor and Horizon Investments, LLC (the “Sub-Advisor”) on behalf of the following series of the Trust (each a “Fund” and collectively, the “Funds”):
First Trust Horizon Managed Volatility Domestic ETF (HUSV)
First Trust Horizon Managed Volatility Developed International ETF (HDMV)
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)
First Trust Horizon Managed Volatility Developed International ETF (HDMV)
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)
The Board approved the continuation of the applicable Agreements for each Fund for a one-year period ending June 30, 2025 at a meeting held on June 2–3, 2024. The Board determined for each Fund that the continuation of the applicable Agreements is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 16, 2024, April 25, 2024 and June 2–3, 2024, the Board, including the Independent Trustees, reviewed materials provided by the Advisor and the Sub-Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor and the Sub-Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate schedule payable by each Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the sub-advisory fee as compared to fees charged to other clients of the Sub-Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor and the Sub-Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; financial data for the Sub-Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. (“FTP”), and the Sub-Advisor; and information on the Advisor’s and the Sub-Advisor’s compliance programs. The Board reviewed initial materials with the Advisor at the meeting held on April 25, 2024, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor and the Sub-Advisor. Following the April 25, 2024 meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 2–3, 2024 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor and among the Trust, the Advisor and the Sub-Advisor continue to be
Page 28
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
reasonable business arrangements from each Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor and the Sub-Advisor manage the Fund and knowing the Fund’s unitary fee.
In reviewing the applicable Agreements for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor under the applicable Agreements. With respect to the Advisory Agreements, the Board considered that the Advisor is responsible for the overall management and administration of the Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, including the oversight of the Sub-Advisor, as well as the background and experience of the persons responsible for such services. The Board noted that the Advisor oversees the Sub-Advisor’s day-to-day management of each Fund’s investments, including portfolio risk monitoring and performance review. The Board considered that the Sub-Advisor is responsible for the selection and ongoing monitoring of the securities in the Funds’ investment portfolios, but that the Advisor executes each Fund’s portfolio trades. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s, the Sub-Advisor’s and each Fund’s compliance with the 1940 Act, as well as each Fund’s compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 25, 2024 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. With respect to the Sub-Advisory Agreement, the Board noted that each Fund is an actively-managed ETF and the Sub-Advisor actively manages the Fund’s investments. The Board reviewed the materials provided by the Sub-Advisor and considered the services that the Sub-Advisor provides to each Fund, including the Sub-Advisor’s day-to-day management of the Funds’ investments. In considering the Sub-Advisor’s management of the Funds, the Board noted the background and experience of the Sub-Advisor’s portfolio management team, including the Board’s prior meetings with members of the portfolio management team. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor and the Sub-Advisor under the Agreements have been and are expected to remain satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has managed each Fund consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate schedule payable by each Fund under the applicable Advisory Agreement for the services provided. The Board noted that the sub-advisory fee for each Fund is paid by the Advisor from the Fund’s unitary fee. The Board considered that as part of the unitary fee the Advisor is responsible for each Fund’s expenses, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the applicable Advisory Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the total (net) expense ratio for HDMV was below the median total (net) expense ratio of the peer funds in its Expense Group and that the total (net) expense ratio for each of HUSV and HSMV was above the median total (net) expense ratio of the peer funds in its respective Expense Group. With respect to the Expense Groups, the Board discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that HDMV’s Expense Group did not include any other actively-managed ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board also noted that, for each Fund, not all peer funds employ an advisor/sub-advisor management structure. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Funds and other non-ETF clients that limited their comparability. In considering the unitary fee rate schedules overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to each Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor and the Sub-Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund’s performance. The Board received and reviewed information comparing each Fund’s performance for periods ended December 31, 2023 to the performance of the funds in its Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that HDMV underperformed its Performance Universe median and benchmark index for the one-, three- and five-year periods
Page 29
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
ended December 31, 2023; that HUSV underperformed its Performance Universe median and benchmark index for the one-, three- and five-year periods ended December 31, 2023; and that HSMV underperformed its Performance Universe median and benchmark index for the one- and three-year periods ended December 31, 2023. The Board noted the Advisor’s discussion of HDMV’s, HUSV’s and HSMV’s performance at the April 25, 2024 meeting.
On the basis of all the information provided on the unitary fee and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund (out of which the Sub-Advisor is compensated) continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds at current asset levels and whether the Funds may benefit from any economies of scale. The Board noted that the unitary fee rate schedule for each Fund includes breakpoints pursuant to which the unitary fee rate will be reduced as assets of the Fund meet certain thresholds. The Board considered the Advisor’s statement that it believes that its expenses relating to providing advisory services to the Funds will increase during the next twelve months as the Advisor continues to build infrastructure and add new staff. The Board also noted that under the unitary fee structure, any reduction in expenses associated with the management and operations of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for shareholders of the Funds. The Board concluded that the unitary fee rate schedule for each Fund reflects an appropriate level of sharing of any economies of scale that may be realized in the management of the Fund at current asset levels. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2023 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for each Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.
The Board considered the Sub-Advisor’s statements to the effect that it is difficult to know if or precisely when measurable economies of scale will be achieved for the Sub-Advisor and that the Sub-Advisor presumes expenses related to providing services will remain approximately the same over the next twelve months. The Board noted that the Advisor pays the Sub-Advisor for each Fund from the unitary fee, that the sub-advisory fee will be reduced consistent with the breakpoints in the unitary fee rate schedule and its understanding that each Fund’s sub-advisory fee was the product of an arm’s length negotiation. The Board did not review the profitability of the Sub-Advisor with respect to each Fund. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered the potential indirect benefits to the Sub-Advisor from being associated with the Advisor and the Funds. The Board noted that the Sub-Advisor is not responsible for coordinating execution of Fund trades and that the only known indirect benefit the Sub-Advisor receives from managing the Funds is publicity related to managing an ETF in a closely monitored sector of the ETF universe. The Board concluded that the character and amount of potential indirect benefits to the Sub-Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board’s analysis.
Federal Tax Information
For the taxable year ended July 31, 2024, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received Deduction | |
First Trust Horizon Managed Volatility Domestic ETF | 100.00 % |
First Trust Horizon Managed Volatility Developed International ETF | 0.00 % |
Page 30
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
Dividends Received Deduction | |
First Trust Horizon Managed Volatility Small/Mid ETF | 100.00 % |
For the taxable year ended July 31, 2024, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income | |
First Trust Horizon Managed Volatility Domestic ETF | 100.00 % |
First Trust Horizon Managed Volatility Developed International ETF | 84.58 % |
First Trust Horizon Managed Volatility Small/Mid ETF | 100.00 % |
A portion of each of the Funds’ 2024 ordinary dividends (including short-term capital gains) paid to its shareholders during the fiscal year ended July 31, 2024, may be eligible for the Qualified Business Income Deduction (QBI) under the Internal Revenue Code of 1986, as amended (the “Code”), Section 199A for the aggregate dividends each Fund received from the underlying Real Estate Investment Trusts (REITs) these Funds invest in.
The following Fund meets the requirements of Section 853 of the Code and elects to pass through to its shareholders credit for foreign taxes paid. For the taxable year ended July 31, 2024, the total amounts of income received by the Fund from sources within foreign countries and possessions of the United States and of taxes paid to such countries are as follows:
Gross Foreign Income | Foreign Taxes Paid | |||
Amount | Per Share | Amount | Per Share | |
First Trust Horizon Managed Volatility Developed International ETF | $1,398,763 | $1.27 | $38,609 | $0.04 |
Page 31
Annual Financial Statements and Other Information |
For the Year Ended July 31, 2024 |
First Trust Exchange-Traded Fund III
First Trust California Municipal High Income ETF (FCAL) |
First Trust New York Municipal High Income ETF (FMNY) |
Table of Contents
First Trust Exchange-Traded Fund III
Annual Financial Statements and Other Information
July 31, 2024
Annual Financial Statements and Other Information
July 31, 2024
1 | |
11 | |
14 | |
15 | |
16 | |
17 | |
19 | |
27 | |
28 |
Performance and Risk Disclosure
There is no assurance that any 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”) will achieve its investment objectives. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a 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.
First Trust Advisors L.P., the Funds’ advisor, may also periodically provide additional information on Fund performance on each Fund’s webpage at www.ftportfolios.com.
How to Read This Report
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data that provides insight into each Fund’s performance and investment approach.
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 California Municipal High Income ETF (FCAL)Portfolio of InvestmentsJuly 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS — 98.7% | |||||
California — 94.7% | |||||
$1,200,000 | Azusa CA Spl Tax Cmnty Facs Dist No 2005-1-Impt, AGM | 5.00% | 09/01/44 | $1,253,953 | |
1,000,000 | Bay Area CA Toll Auth Toll Bridge Rev Sustainable Bond, Ser F-2 | 5.00% | 04/01/42 | 1,118,350 | |
1,000,000 | Bay Area CA Toll Auth Toll Bridge Rev Sustainable Bond, Ser F-2 | 5.00% | 04/01/43 | 1,112,384 | |
1,765,000 | Bay Area CA Toll Auth Toll Bridge Rev Var Ref, Ser B (a) | 3.85% | 04/01/55 | 1,765,000 | |
2,000,000 | Bay Area CA Toll Auth Toll Bridge Rev Var, Ser H (a) | 3.90% | 04/01/59 | 2,000,000 | |
100,000 | Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area No 8F | 4.00% | 09/01/33 | 99,628 | |
620,000 | Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area No 8F | 4.00% | 09/01/40 | 589,413 | |
1,080,000 | Beverly Hills CA Pub Fing Auth Wtr Rev, Ser A | 4.00% | 06/01/40 | 1,121,786 | |
1,250,000 | Burbank CA Wtr & Pwr Elec Rev | 5.00% | 06/01/43 | 1,378,314 | |
1,000,000 | Burbank Glendale Pasadena CA Arpt Auth Arpt Rev Sr, Ser B, AMT | 5.00% | 07/01/38 | 1,101,202 | |
1,000,000 | Burbank Glendale Pasadena CA Arpt Auth Arpt Rev Sr, Ser B, AMT | 5.25% | 07/01/40 | 1,107,343 | |
750,000 | Burbank Glendale Pasadena CA Arpt Auth Arpt Rev Sr, Ser B, AMT | 5.25% | 07/01/44 | 820,532 | |
625,000 | Burbank Glendale Pasadena CA Arpt Auth Arpt Rev Sr, Ser B, AMT | 5.25% | 07/01/49 | 678,275 | |
325,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Clean Energy Proj Rev Bonds Sustainable Bond, Ser A-1 (Mandatory put 04/01/32) | 5.00% | 05/01/54 | 351,673 | |
2,220,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser B-1 (Mandatory put 08/01/31) | 4.00% | 02/01/52 | 2,243,526 | |
20,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond-Clean Energy Proj, Ser A (Mandatory put 12/01/27) | 4.00% | 10/01/52 | 20,207 | |
2,000,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bonds, Ser D (Mandatory put 11/01/28) | 5.50% | 05/01/54 | 2,146,383 | |
1,000,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bonds-Clean Energy Proj, Ser G-1 (Mandatory put 04/01/30) | 5.25% | 11/01/54 | 1,076,115 | |
925,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Var Sustainable Bonds Clean Energy Proj, Ser A-1 (Mandatory put 08/01/29) | 5.00% | 12/01/53 | 976,859 | |
1,000,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Var Sustainable Bonds Clean Energy Proj, Ser C (Mandatory put 10/01/31) | 5.25% | 01/01/54 | 1,072,364 | |
200,000 | CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref Sonoma Cnty Securitization Corp, Ser A | 4.00% | 06/01/35 | 205,468 | |
550,000 | CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A | 4.00% | 06/01/35 | 563,952 | |
200,000 | CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A | 4.00% | 06/01/39 | 201,756 | |
415,582 | CA Hsg Fin Agy Muni Ctfs, Ser A | 4.25% | 01/15/35 | 429,673 | |
290,000 | CA Pub Fin Auth Sr Living Rev ENSO Vlg Proj Sustainable Bond, Ser A (b) | 5.00% | 11/15/36 | 291,033 | |
250,000 | CA Pub Fin Auth Sr Living Rev ENSO Vlg Proj Sustainable Bond, Ser A (b) | 5.00% | 11/15/56 | 224,955 | |
605,000 | CA Sch Fin Auth Sch Fac Rev Alliance Clg Ready Pub Schs Proj, Ser C (b) | 4.50% | 07/01/26 | 608,269 | |
105,000 | CA Sch Fin Auth Sch Fac Rev Kipp SoCal Pub Schs, Ser A (b) | 5.00% | 07/01/27 | 108,437 | |
675,000 | CA Sch Fin Auth Sch Fac Rev Ref Granada Hills Chrt Oblig Grp, Ser A (b) | 4.00% | 07/01/48 | 599,349 | |
See Notes to Financial Statements
Page 1
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$200,000 | CA Sch Fin Auth Sch Fac Rev Ref Hth Learning Proj, Ser A (b) | 4.00% | 07/01/25 | $200,137 | |
200,000 | CA Sch Fin Auth Sch Fac Rev Ref Hth Learning Proj, Ser A (b) | 5.00% | 07/01/32 | 204,232 | |
545,000 | CA Sch Fin Auth Sch Fac Rev Ref Value Schs, Ser A (b) | 5.00% | 07/01/40 | 559,005 | |
450,000 | CA Sch Fin Auth Sch Fac Rev Ref Value Schs, Ser A (b) | 5.25% | 07/01/48 | 459,069 | |
650,000 | CA Sch Fin Auth Sch Fac Rev, Ser A (b) | 5.00% | 07/01/40 | 662,390 | |
1,000,000 | CA St | 5.25% | 10/01/45 | 1,139,270 | |
1,000,000 | CA St Dept of Wtr Res Cntrl Vly Proj Unrefunded Wtr Sys, Ser AS (Pre-refunded maturity (12/01/24) | 5.00% | 12/01/26 | 1,007,040 | |
450,000 | CA St Eductnl Facs Auth Rev Art Ctr Clg of Design, Ser A | 5.00% | 12/01/31 | 492,056 | |
500,000 | CA St Enterprise Dev Auth Lease Rev Riverside Cnty Mead Vly Wellness Vlg Proj, Ser A | 5.00% | 11/01/43 | 561,816 | |
2,500,000 | CA St Enterprise Dev Auth Lease Rev Riverside Cnty Mead Vly Wellness Vlg Proj, Ser A | 5.25% | 11/01/49 | 2,821,039 | |
650,000 | CA St Enterprise Dev Auth Stdt Hsg Rev Ref Pomona Properties LLC Proj, Ser A | 5.00% | 01/15/39 | 704,538 | |
785,000 | CA St Enterprise Dev Auth Stdt Hsg Rev Ref Pomona Properties LLC Proj, Ser A | 5.00% | 01/15/45 | 825,941 | |
500,000 | CA St Hlth Facs Fing Auth Rev Adventist Hlth Sys W, Ser A | 5.25% | 12/01/40 | 561,096 | |
500,000 | CA St Hlth Facs Fing Auth Rev Adventist Hlth Sys W, Ser A | 5.25% | 12/01/41 | 558,020 | |
500,000 | CA St Hlth Facs Fing Auth Rev Adventist Hlth Sys W, Ser A | 5.25% | 12/01/42 | 554,759 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Children’s Hosp of Orange County, Ser A | 5.00% | 11/01/49 | 1,102,938 | |
1,250,000 | CA St Hlth Facs Fing Auth Rev Commonspirit Hlth, Ser A | 5.00% | 12/01/45 | 1,370,388 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Commonspirit Hlth, Ser A | 5.25% | 12/01/49 | 1,108,828 | |
1,500,000 | CA St Hlth Facs Fing Auth Rev El Camino Hosp | 5.00% | 02/01/42 | 1,557,942 | |
520,000 | CA St Hlth Facs Fing Auth Rev Episcopal Cmntys & Svcs, Ser B | 5.00% | 11/15/33 | 576,593 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Episcopal Cmntys & Svcs, Ser B | 5.25% | 11/15/48 | 1,076,646 | |
1,250,000 | CA St Hlth Facs Fing Auth Rev Initial Entrance Fees, Ser A | 3.85% | 11/15/27 | 1,254,536 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Kaiser Permanente, Subser A-2 | 4.00% | 11/01/44 | 983,465 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Ref Commonspirit Hlth, Ser A | 4.00% | 04/01/37 | 1,008,071 | |
2,000,000 | CA St Hlth Facs Fing Auth Rev Ref Scripps Hlth, Ser A | 5.00% | 11/15/43 | 2,246,189 | |
220,000 | CA St Hlth Facs Fing Auth Rev Ref Sutter Hlth, Ser B | 5.00% | 11/15/33 | 227,896 | |
1,000,000 | CA St Hlth Facs Fing Auth Rev Var Ref Stanford Hlth Care, Ser A (Mandatory put 08/15/25) | 3.00% | 08/15/54 | 994,055 | |
1,000,000 | CA St Infra & Econ Dev Bank Natl Chrt Equitable Sch Revolving Fund Sustainable Bonds, Ser B | 5.00% | 11/01/38 | 1,099,858 | |
1,545,000 | CA St Infra & Econ Dev Bank Rev Adventist Hlth Energy Proj, Ser A | 5.00% | 07/01/41 | 1,664,539 | |
3,000,000 | CA St Infra & Econ Dev Bank Rev Var Brightline W Passenger Rail Proj Remk, Ser A, AMT (Mandatory put 01/30/25) (a) (b) | 3.95% | 01/01/50 | 3,000,094 | |
250,000 | CA St Muni Fin Auth Chrt Sch Lease Rev Sycamore Acdmy Proj (c) | 5.38% | 07/01/34 | 250,150 | |
250,000 | CA St Muni Fin Auth Chrt Sch Lease Rev Vista Chrt Middle Sch Proj (d) | 5.38% | 07/01/34 | 250,273 | |
900,000 | CA St Muni Fin Auth Chrt Sch Rev John Adams Acdmys Lincoln Proj, Ser A (b) | 5.00% | 10/01/39 | 906,220 | |
100,000 | CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj (b) | 4.00% | 07/01/26 | 99,815 | |
450,000 | CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj, Ser A (b) | 5.00% | 07/01/38 | 459,276 | |
See Notes to Financial Statements
Page 2
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$2,000,000 | CA St Muni Fin Auth Mf Hsg Rev Gibson Drive Apartments Proj, Ser A | 4.45% | 12/01/42 | $2,024,954 | |
785,000 | CA St Muni Fin Auth Mobile Home Park Rev Ref Sr Caritas Projs, Ser A | 5.00% | 08/15/27 | 818,476 | |
85,000 | CA St Muni Fin Auth Mobile Home Park Rev Ref Sr Caritas Projs, Ser A | 3.00% | 08/15/32 | 80,552 | |
400,000 | CA St Muni Fin Auth Mobile Home Park Rev Sr Caritas Affordable Hsg Inc Projs, Ser A | 5.25% | 08/15/39 | 400,279 | |
605,000 | CA St Muni Fin Auth Mobile Home Park Rev Sr Caritas Affordable Hsg Inc Projs, Ser A | 5.25% | 08/15/49 | 605,251 | |
220,000 | CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B | 3.00% | 08/15/31 | 208,993 | |
295,000 | CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B | 4.00% | 08/15/41 | 282,233 | |
435,000 | CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B | 4.00% | 08/15/51 | 385,263 | |
500,000 | CA St Muni Fin Auth Ref Palomar Hlth, Ser A, AGM, COPS | 5.25% | 11/01/34 | 563,730 | |
500,000 | CA St Muni Fin Auth Ref Palomar Hlth, Ser A, AGM, COPS | 5.25% | 11/01/36 | 560,484 | |
1,000,000 | CA St Muni Fin Auth Rev Aldersly Proj, Ser A | 5.00% | 05/15/43 | 1,080,693 | |
1,500,000 | CA St Muni Fin Auth Rev Bethany Home Proj | 5.00% | 11/15/42 | 1,643,662 | |
1,000,000 | CA St Muni Fin Auth Rev CA Baptist Univ, Ser A (b) | 5.00% | 11/01/36 | 1,018,017 | |
200,000 | CA St Muni Fin Auth Rev Ref Eisenhower Med Ctr, Ser A | 5.00% | 07/01/32 | 205,621 | |
250,000 | CA St Muni Fin Auth Rev Ref Emerson Clg, Ser B | 5.00% | 01/01/33 | 259,086 | |
1,080,000 | CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | 4.00% | 10/01/34 | 1,087,143 | |
500,000 | CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | 4.00% | 10/01/36 | 502,619 | |
110,000 | CA St Muni Fin Auth Rev Ref Retmnt Hsg Fdtn Oblig Grp, Ser A | 5.00% | 11/15/26 | 115,155 | |
435,000 | CA St Muni Fin Auth Rev Ref Retmnt Hsg Fdtn Oblig Grp, Ser A | 5.00% | 11/15/27 | 464,496 | |
600,000 | CA St Muni Fin Auth Rev Ref S Central Los Angeles Regl Ctr Proj | 5.00% | 12/01/40 | 671,586 | |
715,000 | CA St Muni Fin Auth Rev St Ignatius Clg Prep, Ser A | 5.00% | 09/01/41 | 806,575 | |
675,000 | CA St Muni Fin Auth Rev St Ignatius Clg Prep, Ser A | 5.00% | 09/01/44 | 749,677 | |
435,000 | CA St Muni Fin Auth Sch Fac Rev St Mary’s Sch Aliso Viejo, Ser A (b) | 5.75% | 05/01/54 | 452,448 | |
1,040,000 | CA St Muni Fin Auth Sch Fac Rev Temps St Mary’s Sch Aliso Viejo, Ser B | 4.65% | 05/01/30 | 1,060,430 | |
1,500,000 | CA St Muni Fin Auth Sol Wst Disp Rev Var Ref Rep Svcs Inc Proj Remk, Ser A, AMT (Mandatory put 10/01/24) (a) | 4.00% | 07/01/41 | 1,501,203 | |
1,550,000 | CA St Muni Fin Auth Spl Fac Rev United Airls Inc Proj, AMT | 4.00% | 07/15/29 | 1,550,666 | |
600,000 | CA St Muni Fin Auth Spl Tax Rev Bold Prog, Ser B | 5.50% | 09/01/43 | 644,312 | |
550,000 | CA St Muni Fin Auth Spl Tax Rev Bold Prog, Ser B | 5.75% | 09/01/53 | 595,225 | |
550,000 | CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I LLC W Vlg Stdt Hsg Proj | 5.00% | 05/15/27 | 573,060 | |
350,000 | CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I LLC W Vlg Stdt Hsg Proj | 5.00% | 05/15/40 | 364,742 | |
1,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Ref Wst Mgmt Inc, Ser A3, AMT | 4.30% | 07/01/40 | 1,000,324 | |
1,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Ref Wst Mgmt Inc, Ser B-1, AMT | 3.00% | 11/01/25 | 988,247 | |
1,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Var Ref Rep Svcs Remk, Ser B (Mandatory Put 05/01/24) (b) | 3.70% | 08/01/24 | 1,000,000 | |
2,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Var Wst Mgmt Proj Remk, Ser A, AMT (Mandatory put 07/02/29) | 4.25% | 07/01/31 | 2,005,666 | |
See Notes to Financial Statements
Page 3
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$1,500,000 | CA St Poll Control Fing Auth Wtr Furnishing Rev Plant Bonds, AMT (b) | 5.00% | 07/01/37 | $1,505,240 | |
1,500,000 | CA St Poll Control Fing Auth Wtr Furnishing Rev Poseidon Res LP Desalination Proj, AMT (b) | 5.00% | 07/01/36 | 1,666,165 | |
5,000 | CA St Prerefunded Various Purp (Pre-refunded maturity (04/01/26) | 5.00% | 10/01/35 | 5,178 | |
15,000 | CA St Pub Wks Brd Lease Rev Judicial Council CA, Ser B | 5.00% | 06/01/34 | 15,201 | |
310,000 | CA St Pub Wks Brd Lease Rev Various Corrnl Facs, Ser C | 5.00% | 11/01/26 | 324,911 | |
75,000 | CA St Ref | 4.00% | 08/01/34 | 75,627 | |
1,000,000 | CA St Ref | 5.00% | 11/01/39 | 1,068,535 | |
1,000,000 | CA St Ref | 4.00% | 09/01/43 | 1,033,800 | |
700,000 | CA St Sch Fin Auth Chrt Sch Rev Ref Classical Academies Oceanside Proj, Ser A (b) | 5.00% | 10/01/32 | 735,186 | |
600,000 | CA St Sch Fin Auth Chrt Sch Rev Sustainable Bonds Ref Camino Nuevo Chrt Acdmy, Ser A (b) | 5.00% | 06/01/43 | 605,145 | |
650,000 | CA St Sch Fin Auth Eductnl Facs Rev Ref New Designs Chrt Sch, Ser A (b) | 5.00% | 06/01/54 | 658,211 | |
1,000,000 | CA St Stwd Cmntys Dev Auth Rev Var Rady Childrens Hosp Remk, Ser B (a) | 3.82% | 08/15/47 | 1,000,000 | |
500,000 | CA St Stwd Cmntys Dev Auth Spl Tax Rev Impt Area No. 1 | 4.00% | 09/01/41 | 485,949 | |
1,000,000 | CA St Stwd Cmntys Dev Auth Spl Tax Rev Impt Area No. 2 | 5.00% | 09/01/44 | 1,039,592 | |
200,000 | CA St Stwd Cmntys Dev Auth Stdt Hsg Rev Ref Chf Irvine LLC | 5.00% | 05/15/30 | 205,019 | |
280,000 | CA St Stwd Cmntys Dev Auth Stdt Hsg Rev Ref Chf Irvine LLC | 5.00% | 05/15/35 | 285,876 | |
2,000,000 | CA St Stwd Cmntys Dev Auth Stdt Hsg Rev Ref Chf Irvine LLC Phase I Refunding & Phase IV, Ser B, BAM | 4.00% | 05/15/38 | 2,032,368 | |
500,000 | CA St Univ Rev, Ser A | 5.25% | 11/01/48 | 571,063 | |
95,000 | CA St Unrefunded Various Purp | 5.00% | 10/01/35 | 97,732 | |
705,000 | CA Stwd Cmntys Dev Auth Rev Kaiser Permanente Remk, Ser 2004-J (Mandatory put 11/01/29) | 5.00% | 04/01/36 | 772,920 | |
250,000 | CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr, Ser A (b) | 5.00% | 12/01/30 | 255,334 | |
300,000 | CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr, Ser A (b) | 5.00% | 12/01/33 | 313,150 | |
250,000 | CA Stwd Cmntys Dev Auth Rev Ref CA Baptist Univ, Ser A (b) | 5.00% | 11/01/32 | 257,606 | |
245,000 | CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | 5.00% | 04/01/27 | 253,283 | |
100,000 | CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | 5.00% | 04/01/30 | 103,484 | |
175,000 | CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | 5.00% | 04/01/31 | 181,060 | |
50,000 | CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A | 4.00% | 04/01/32 | 50,445 | |
50,000 | CA Stwd Cmntys Dev Auth Rev Ref Insd Enloe Med Ctr (Pre- refunded maturity 02/15/26) | 5.00% | 08/15/33 | 51,641 | |
385,000 | CA Stwd Cmntys Dev Auth Rev Var Adventist Hlth Sys W Remk, Ser 2007-A (Mandatory put 03/01/27) | 5.00% | 03/01/37 | 397,067 | |
450,000 | Chino CA Cmnty Facs Dist Spl Tax #2003-3 Impt Area #7 | 5.00% | 09/01/31 | 470,620 | |
1,500,000 | Chino Vly CA Unif Sch Dist Cibs Election of 2016, Ser D | 5.00% | 08/01/49 | 1,668,361 | |
815,000 | Clovis CA Unif Sch Dist, COPS | 5.00% | 06/01/41 | 923,550 | |
500,000 | Clovis CA Unif Sch Dist, COPS | 5.00% | 06/01/42 | 564,329 | |
500,000 | Clovis CA Unif Sch Dist, COPS | 5.00% | 06/01/43 | 561,799 | |
See Notes to Financial Statements
Page 4
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$250,000 | Compton CA Unif Sch Dist Los Angeles Co Schs Fing Prog, Ser A, BAM, COPS | 4.00% | 06/01/35 | $253,963 | |
210,000 | Cotati-Rohnert Park CA Unif Sch Dist 2016 Election, Ser C, AGM | 5.00% | 08/01/32 | 218,798 | |
2,000,000 | CSCDA Cmnty Impt Auth CA Essential Hsg Rev Union S Bay Sustainable Bonds, Ser A-2 (b) | 4.00% | 07/01/56 | 1,628,058 | |
150,000 | Dinuba CA Jt Unif Sch Dist, AGM, COPS | 4.00% | 02/01/35 | 152,000 | |
920,000 | E Bay CA Muni Util Dist Wtr Sys Rev Sustainable Bond, Ser A | 5.00% | 06/01/38 | 1,009,510 | |
795,000 | El Dorado CA Irr Dist Rev Ref, Ser C | 4.00% | 03/01/34 | 804,032 | |
1,450,000 | Elk Grove CA Fin Auth Spl Tax Rev Laguna Ridge CFD #2005-1 | 4.00% | 09/01/50 | 1,271,292 | |
1,455,000 | Elk Grove CA Fin Auth Spl Tax Rev Ref, BAM | 5.00% | 09/01/32 | 1,480,390 | |
1,000,000 | Elk Grove CA Unif Sch Dist Election of 2016 | 4.00% | 08/01/40 | 1,025,072 | |
3,075,000 | Estrn CA Muni Wtr Dist Wtr & Wstwtr Rev Var Ref, Ser A (a) | 3.80% | 07/01/46 | 3,075,000 | |
350,000 | Folsom Ranch CA Fing Auth Spl Tax Rev Cmnty Facs Dist No 19 Mangini | 5.00% | 09/01/32 | 363,644 | |
155,000 | Fontana CA Spl Tax Cmnty Facs Dist #80 Bella Strada | 5.00% | 09/01/29 | 161,596 | |
500,000 | Fontana CA Spl Tax Cmnty Facs Dist #80 Bella Strada | 5.00% | 09/01/46 | 509,245 | |
600,000 | Fontana CA Spl Tax Cmnty Facs Dt #111 | 5.00% | 09/01/39 | 644,787 | |
300,000 | Fontana CA Spl Tax Cmnty Facs Dt #111 | 5.00% | 09/01/48 | 312,481 | |
165,000 | Fontana CA Unif Sch Dist Unrefunded, AGM | (e) | 02/01/33 | 122,557 | |
140,000 | Fresno CA Jt Pwrs Fing Auth Lease Rev Ref Master Lease Proj, Ser A, AGM | 5.00% | 04/01/32 | 146,501 | |
1,000,000 | Garden Grove CA Pub Fing Auth Lease Rev, Ser A, BAM | 5.00% | 04/01/43 | 1,133,487 | |
1,000,000 | Garden Grove CA Pub Fing Auth Lease Rev, Ser A, BAM | 5.00% | 04/01/49 | 1,109,927 | |
1,000,000 | Golden St Tobacco Securitization Corp CA Tobacco Stlmt Ref Tobacco Stlmt Asset Backed Bonds, Ser A-1 | 5.00% | 06/01/51 | 1,040,762 | |
750,000 | Golden St Tobacco Securitization Corp CA Tobacco Stlmt Ref, Ser A-1 (Pre-refunded maturity (06/01/28) | 5.00% | 06/01/34 | 809,042 | |
500,000 | Huntington Beach CA Union High Sch Dist Ref, BAM, COPS | 4.00% | 09/01/24 | 500,438 | |
1,000,000 | Imperial CA Cmnty Clg Dist Election of 2022, Ser A, AGM | 5.25% | 08/01/53 | 1,119,675 | |
575,000 | Indio CA Elec Fing Auth Elec Rev | 5.25% | 01/01/41 | 653,089 | |
3,000,000 | Irvine CA Facs Fing Auth Lease Rev Gateway Preserve Land Acq Proj, Ser A | 5.25% | 05/01/48 | 3,070,058 | |
500,000 | Irvine CA Spl Tax Great Park Impt Area No 10, BAM | 5.00% | 09/01/43 | 559,568 | |
3,000,000 | Irvine CA Spl Tax Great Park Impt Area No 10, BAM | 5.25% | 09/01/53 | 3,339,673 | |
775,000 | Irvine CA Spl Tax Ref Cmnty Facs Dist #2013-3 Great Park Impt Area#1, BAM | 5.00% | 09/01/44 | 878,333 | |
1,350,000 | Irvine CA Spl Tax Ref Cmnty Facs Dist #2013-3 Great Park Impt Area#1, BAM | 5.00% | 09/01/48 | 1,510,757 | |
690,000 | Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist #09-1, Ser A | 5.00% | 09/01/42 | 709,245 | |
150,000 | Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist #09-1, Ser C | 5.00% | 09/01/31 | 156,752 | |
1,000,000 | Kern CA Cmnty Clg Dist, Ser D | 5.25% | 08/01/39 | 1,169,083 | |
485,000 | King City CA Union Sch Dist Cap Apprec Election 1998-C, Ser C, AMBAC | (e) | 08/01/29 | 408,968 | |
245,000 | Lake Elsinore CA Unif Sch Dist Cmnty Facs Dist Cmnty Facs Dt No 2017-2 | 5.00% | 09/01/39 | 261,789 | |
900,000 | Lake Elsinore CA Unif Sch Dist Cmnty Facs Dist Cmnty Facs Dt No 2017-2 | 5.00% | 09/01/44 | 940,276 | |
25,000 | Lammersville CA Jt Unif Sch Dist Spl Tax Cmnty Facs Dist #2014-1 Mountain House Sch Facs | 4.00% | 09/01/33 | 25,189 | |
25,000 | Lammersville CA Jt Unif Sch Dist Spl Tax Cmnty Facs Dist #2014-1 Mountain House Sch Facs | 4.00% | 09/01/34 | 25,180 | |
See Notes to Financial Statements
Page 5
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$200,000 | Lammersville CA Jt Unif Sch Dist Spl Tax Cmnty Facs Dist #2014-1 Mountain House Sch Facs | 4.00% | 09/01/40 | $194,850 | |
225,000 | Long Beach CA Arpt Rev Ref, Ser A, AGM | 5.00% | 06/01/30 | 252,911 | |
1,910,000 | Long Beach CA Arpt Rev, Ser C, AGM, AMT | 5.25% | 06/01/47 | 2,054,961 | |
1,000,000 | Long Beach CA Unif Sch Dist Ref | 4.00% | 08/01/31 | 1,017,030 | |
50,000 | Los Angeles CA Dept of Arpts Arpt Rev Prerefunded Subord Ref, Ser D, AMT (Pre-refunded maturity 11/15/31) | 5.00% | 05/15/33 | 55,465 | |
605,000 | Los Angeles CA Dept of Arpts Arpt Rev Ref Sub Priv Activity, Ser A, AMT | 5.00% | 05/15/35 | 653,866 | |
1,500,000 | Los Angeles CA Dept of Arpts Arpt Rev Sr, Ser C, AMT | 5.00% | 05/15/45 | 1,577,380 | |
875,000 | Los Angeles CA Dept of Arpts Arpt Rev Subord Los Angeles Intl Arpt, Ser F, AMT | 5.00% | 05/15/37 | 919,660 | |
500,000 | Los Angeles CA Dept of Arpts Arpt Rev Sustainable Bond Ref Subord Priv Activity, Ser A, AMT | 5.25% | 05/15/42 | 552,224 | |
1,100,000 | Los Angeles CA Dept of Arpts Arpt Rev Unrefunded Subord Ref, Ser D, AMT | 5.00% | 05/15/31 | 1,197,843 | |
690,000 | Los Angeles CA Dept of Arpts Arpt Rev Unrefunded Subord Ref, Ser D, AMT | 5.00% | 05/15/36 | 748,679 | |
10,000 | Los Angeles CA Dept of Arpts, Ser E | 5.00% | 05/15/28 | 10,157 | |
1,000,000 | Los Angeles CA Dept of Wtr & Pwr Wtrwks Rev, Ser A | 5.00% | 07/01/48 | 1,042,569 | |
1,500,000 | Los Angeles CA Trans | 5.00% | 06/26/25 | 1,528,251 | |
500,000 | Los Angeles CA Unif Sch Dist Ref, Ser A | 5.00% | 07/01/25 | 509,873 | |
650,000 | Los Angeles Cnty CA Dev Auth Mf Hsg Rev Var W LA VA Bldg 156 & 157 Apts, Ser C (Mandatory put 12/01/26) | 3.75% | 12/01/46 | 652,791 | |
410,000 | Los Osos CA Cmnty Svcs Wstwtr Assmnt Dist #1 Ref Reassmnt | 3.13% | 09/02/32 | 394,826 | |
1,000,000 | Madera CA Unif Sch Dist Ref 2018 Sch Fac Proj, AGM, COPS | 5.00% | 09/01/43 | 1,113,824 | |
450,000 | Mammoth Lakes CA, BAM, COPS | 5.00% | 06/01/41 | 508,427 | |
940,000 | Mammoth Lakes CA, BAM, COPS | 5.00% | 06/01/43 | 1,048,957 | |
500,000 | Mammoth Lakes CA, BAM, COPS | 5.00% | 06/01/44 | 555,911 | |
100,000 | Marina CA Redev Agy Successor Agy Tax Allocation Hsg, Ser B | 5.00% | 09/01/27 | 104,712 | |
250,000 | Marina CA Redev Agy Successor Agy Tax Allocation Hsg, Ser B | 5.00% | 09/01/33 | 260,596 | |
600,000 | Menifee CA Spl Tax, Ser A | 5.00% | 09/01/43 | 628,989 | |
700,000 | Menifee CA Spl Tax, Ser A | 5.00% | 09/01/48 | 726,778 | |
245,000 | Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1 | 5.00% | 09/01/34 | 257,596 | |
1,500,000 | Menifee CA Union Sch Dist, Ser C, AGM | 3.00% | 08/01/40 | 1,308,764 | |
1,500,000 | Met Wtr Dist of Sthrn CA Wtrwks Rev Unrefunded Var Authorization, Ser A (a) | 3.80% | 07/01/47 | 1,500,000 | |
1,000,000 | Met Wtr Dist of Sthrn CA Wtrwks Rev Var Subord, Ser B-2 (Mandatory put 07/01/29) | 5.00% | 07/01/37 | 1,080,126 | |
1,000,000 | Met Wtr Dist of Sthrn CA Wtrwks Rev, Ser A | 5.00% | 04/01/48 | 1,118,220 | |
530,000 | Modesto CA Elem Sch Dist Stanislaus Cnty Election of 2018 Measure D, Ser C | 5.00% | 08/01/41 | 595,547 | |
200,000 | Morongo Band of Mission Indians CA Rev Ref, Ser B (b) | 5.00% | 10/01/42 | 201,932 | |
1,115,000 | Natomas CA Unif Sch Dist, AGM | 3.00% | 08/01/36 | 1,012,050 | |
250,000 | Norco CA Spl Tax Ref Norco Ridge Ranch, BAM | 5.00% | 09/01/32 | 265,054 | |
1,000,000 | Oceanside CA Unif Sch Dist Unrefunded 2022 Cap Apprec, Ser A, AGC | (e) | 08/01/24 | 1,000,000 | |
100,000 | Ontario CA Cmnty Facs Dist #40 Spl Tax Emeral Park Fac | 4.00% | 09/01/34 | 99,380 | |
65,000 | Ontario CA Cmnty Facs Dist #40 Spl Tax Emeral Park Fac | 4.00% | 09/01/35 | 64,273 | |
275,000 | Ontario CA Cmnty Facs Dist #40 Spl Tax Emeral Park Fac | 4.00% | 09/01/39 | 261,245 | |
500,000 | Ontario CA Spl TX Countryside Phase 2 S Facs | 5.00% | 09/01/39 | 539,467 | |
See Notes to Financial Statements
Page 6
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$500,000 | Ontario CA Spl TX Countryside Phase 2 S Facs | 5.00% | 09/01/44 | $526,425 | |
1,150,000 | Ontario Pub Fing Auth Lease Rev Civic Ctr Impts, Ser A, AGM | 5.00% | 11/01/52 | 1,245,929 | |
805,000 | Orange Cnty CA Santn Dist Wstwtr Rev Ref, Ser A | 5.00% | 02/01/31 | 805,168 | |
610,000 | Orange Ctr CA Sch Dist Election of 2022, Ser A, AGM | 5.25% | 08/01/48 | 651,455 | |
1,000,000 | Oxnard CA Sch Dist Election of 2022, Ser A, BAM | 5.00% | 08/01/42 | 1,122,516 | |
650,000 | Palm Desert CA Spl Tax Ref Univ Park | 4.00% | 09/01/51 | 559,650 | |
925,000 | Pittsburg CA Unif Sch Dist Ref | 3.00% | 08/01/40 | 776,942 | |
210,000 | Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208 | 5.00% | 09/01/33 | 221,042 | |
220,000 | Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208 | 5.00% | 09/01/34 | 231,539 | |
1,500,000 | Rialto CA Pub Fing Auth Lease Rev Police Station Proj, Ser A | 5.25% | 06/01/53 | 1,628,516 | |
525,000 | Ripon CA Redev Agy Successor Agy Tax Allocation Ref, BAM | 4.00% | 11/01/31 | 546,293 | |
2,420,000 | River Islands CA Pub Fing Auth Spl Tax Auth Cmnty Facs Dist#2016-1 2023 Spl TX Bonds, AGM | 4.50% | 09/01/53 | 2,453,066 | |
500,000 | River Islands CA Pub Fing Auth Spl Tax Cmnty Facs Dist #2019-1 Phase 2 Pub Impts | 5.00% | 09/01/40 | 507,779 | |
1,000,000 | Riverside CA Elec Rev Ref, Ser A | 5.00% | 10/01/49 | 1,120,055 | |
575,000 | Riverside CA Unif Sch Dist Election of 2016, Ser B | 3.00% | 08/01/38 | 509,344 | |
185,000 | Riverside CA Unif Sch Dist Fing Auth Spl Tax Ref, BAM | 5.00% | 09/01/34 | 187,371 | |
375,000 | Riverside CA Unif Sch Dist Impt Area No 1 | 5.00% | 09/01/39 | 400,697 | |
690,000 | Riverside CA Unif Sch Dist Impt Area No 1 | 5.00% | 09/01/44 | 720,878 | |
1,050,000 | Riverside CA Unif Sch Dist Impt Area No 1 | 5.00% | 09/01/49 | 1,085,569 | |
750,000 | Riverside CA Wtr Rev, Ser A | 5.00% | 10/01/47 | 829,598 | |
685,000 | Riverside Cnty CA Pub Fing Auth Proj Area 1, Ser A, AGM | 5.00% | 10/01/24 | 687,111 | |
650,000 | Riverside Cnty CA Pub Fing Auth Ref Redev Proj Area #1 Desert Cmntys Redev Proj Area, Ser A, AGM (f) | 5.00% | 10/01/36 | 759,607 | |
650,000 | Riverside Cnty CA Pub Fing Auth Ref Redev Proj Area #1 Desert Cmntys Redev Proj Area, Ser A, AGM (f) | 5.00% | 10/01/37 | 756,488 | |
2,040,000 | Riverside Cnty CA Transprtn Commn Ref, Ser A | 3.00% | 06/01/25 | 2,034,532 | |
1,000,000 | Riverside Cnty CA Transprtn Commn Toll Rev Ref Sr Lien Rctc 91 Express Lanes, Ser B-1 | 4.00% | 06/01/38 | 1,014,870 | |
1,000,000 | Riverside Cnty CA Transprtn Commn Toll Rev Ref Sr Lien Rctc 91 Express Lanes, Ser B-1 | 4.00% | 06/01/41 | 1,001,588 | |
400,000 | Romoland CA Sch Dist Spl Tax Underwood Impt Area No. 2 Special Tax Bonds | 5.00% | 09/01/43 | 419,326 | |
185,000 | Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | 5.00% | 09/01/32 | 194,261 | |
160,000 | Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | 5.00% | 09/01/33 | 167,850 | |
170,000 | Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | 4.00% | 09/01/34 | 170,265 | |
150,000 | Roseville CA Spl Tax Fiddyment Ranch Cmnty Facs | 4.00% | 09/01/35 | 149,778 | |
750,000 | Sacramento CA Muni Util Dist Elec Rev Sustainable Bond, Ser M | 5.00% | 11/15/49 | 843,173 | |
200,000 | Sacramento CA Spl Tax Natomas Meadows Cmnty Facs Dist #2007-01 (b) | 5.00% | 09/01/32 | 206,190 | |
500,000 | Sacramento CA Transient Occupancy Tax Rev Sub Convention Ctr Complex, Ser C | 5.00% | 06/01/32 | 533,048 | |
1,000,000 | Sacramento Cnty CA Arpt Sys Rev Ref, Ser C, AMT | 5.00% | 07/01/37 | 1,040,158 | |
600,000 | San Diego CA Pub Facs Fing Auth Lease Rev Capital Impt Projs, Ser A | 5.00% | 10/15/40 | 685,291 | |
1,565,000 | San Diego CA Pub Facs Fing Auth Lease Rev Ref Capital Impt Projs, Ser A | 5.00% | 10/15/49 | 1,744,970 | |
1,000,000 | San Diego CA Pub Facs Fing Auth Swr Rev Subord, Ser A | 5.00% | 05/15/47 | 1,101,785 | |
See Notes to Financial Statements
Page 7
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$1,075,000 | San Diego CA Pub Facs Fing Auth Wtr Rev, Ser A | 5.00% | 08/01/41 | $1,108,341 | |
1,300,000 | San Diego CA Unif Sch Dist Ref, Ser R-2, CONV CABS | (e) | 07/01/41 | 1,289,548 | |
1,500,000 | San Diego CA Unif Sch Dist Sustainable Bond, Ser F2 | 5.00% | 07/01/42 | 1,683,880 | |
510,000 | San Diego Cnty CA Ltd Rev Obligs Ref Sanford Burnham Prebys Med Discovery Institute, Ser A | 5.00% | 11/01/28 | 524,102 | |
1,000,000 | San Diego Cnty CA Regl Arpt Auth Arpt Rev Sr Priv Activity, Ser B, AMT | 5.25% | 07/01/35 | 1,119,289 | |
130,000 | San Diego Cnty CA Regl Arpt Auth Arpt Rev Subord Ref, Ser A | 5.00% | 07/01/39 | 141,250 | |
1,550,000 | San Diego Cnty CA Regl Arpt Auth Arpt Rev Subord Rev, Ser B, AMT | 5.00% | 07/01/42 | 1,582,891 | |
1,000,000 | San Diego Cnty CA Regl Arpt Auth Arpt Rev Subord, Ser B, AMT | 5.00% | 07/01/34 | 1,082,311 | |
85,000 | San Diego Cnty CA Spl Tax Harmony Grove Vlg Impt Area No 2, Ser A | 4.00% | 09/01/33 | 84,748 | |
900,000 | San Diego Cnty CA Wtr Auth Ref Sustainable Bond, Ser A | 5.00% | 05/01/25 | 915,162 | |
140,000 | San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev Ref Second Ser, Ser 2020A, AMT | 5.00% | 05/01/37 | 149,030 | |
2,570,000 | San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev Ref, Ser A, AMT | 5.00% | 05/01/34 | 2,777,086 | |
3,040,000 | San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev, Ser E, AMT | 5.00% | 05/01/50 | 3,112,454 | |
500,000 | San Francisco CA City & Cnty Dev Spl Tax Dist No 2020-1 Mission Rock Facs & Svcs, Ser A (b) | 4.00% | 09/01/46 | 437,753 | |
1,000,000 | San Francisco CA City & Cnty Pub Utils Commn Wtr Rev Reg & Loc Wtr Subord, Ser A | 5.25% | 11/01/48 | 1,136,184 | |
1,250,000 | San Francisco City & Cnty CA Redev Agy Successor Agy Cmnty Ref Cmnty Facs Dt#6 Mission Bay S Pub Impts, AGM | 5.25% | 08/01/40 | 1,436,095 | |
100,000 | San Francisco City & Cnty CA Redev Agy Successor Agy Tax Ref Mission Bay N Redev Proj, Ser A | 5.00% | 08/01/35 | 103,591 | |
1,350,000 | San Francisco City & Cnty CA Redev Agy Successor Agy Tax Transbay Infra Projs Third Lien, Ser B, AGM | 5.00% | 08/01/48 | 1,481,956 | |
935,000 | San Francisco City & Cnty CA, Ser B | 2.00% | 06/15/29 | 854,765 | |
175,000 | San Joaquin Hills CA Transprtn Corridor Agy Toll Road Rev Cap Apprec Ref, Ser A, NATL-RE | (e) | 01/15/29 | 150,075 | |
120,000 | San Joaquin Hills CA Transprtn Corridor Agy Toll Road Rev Ref Sr Lien Toll Road, Ser A | 4.00% | 01/15/37 | 124,722 | |
1,145,000 | San Jose CA Arpt Rev Ref, Ser A, AMT, BAM | 4.00% | 03/01/34 | 1,160,126 | |
1,000,000 | San Luis Coastal CA Unif Sch Dist Election of 2022, Ser A | 5.00% | 08/01/41 | 1,133,469 | |
1,000,000 | San Luis Obispo Cnty CA Fing Auth Lease Rev Multiple Capital Projs Ref, Ser A | 5.25% | 11/15/40 | 1,152,640 | |
1,000,000 | San Luis Obispo Pub Fing Auth Lease Rev Ref Cultural Arts Dist Parking Proj | 5.00% | 12/01/48 | 1,114,114 | |
2,000,000 | San Mateo Cnty CA Transprtn Auth Sales Tax Rev Var Subord, Ser B (a) | 3.80% | 06/01/49 | 2,000,000 | |
500,000 | Santa Ana CA Pub Fing Auth Wtr Rev Ref | 5.00% | 09/01/41 | 578,781 | |
1,000,000 | Santa Ana CA Pub Fing Auth Wtr Rev Ref | 5.00% | 09/01/42 | 1,152,399 | |
1,590,000 | Santa Clara CA Wstwtr Rev Sustainable Bonds, COPS | 4.25% | 02/01/41 | 1,681,472 | |
500,000 | Santa Clara Vly CA Wtr Dist Safe Clean Wtr Rev Sustainable Bond, Ser A | 5.00% | 08/01/40 | 568,273 | |
500,000 | Santa Clara Vly CA Wtr Dist Safe Clean Wtr Rev Sustainable Bond, Ser A | 5.00% | 08/01/41 | 564,468 | |
800,000 | Santa Clarita CA Cmnty Facs Dist Vista Canyon #2016-1 (b) | 4.00% | 09/01/35 | 775,122 | |
1,100,000 | Santa Margarita CA Wtr Dist Spl Tax Ref, Ser A, BAM | 5.00% | 09/01/43 | 1,190,901 | |
See Notes to Financial Statements
Page 8
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$335,000 | Sch Proj for Util Rate Reduction CA Natural Gas Purchase Prog, RANS | 5.00% | 08/01/24 | $335,000 | |
150,000 | Temecula Vly CA Unif Sch Dist Cmnty Facs Dist #2014-1 | 5.00% | 09/01/32 | 156,109 | |
400,000 | Temecula Vly Unif Sch Dist Fing Auth CA Spl Tax Rev, BAM | 5.00% | 09/01/34 | 403,549 | |
500,000 | Temescal Vly CA Wtr Dist Spl Tax Terramor Cmnty Facs Dist #4 Impt Area #1 | 5.00% | 09/01/31 | 521,144 | |
1,000,000 | Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev Ref San Diego Co Asset Securitization Corp, Class 1, Ser A | 5.00% | 06/01/48 | 1,029,615 | |
250,000 | Tracy CA Cmnty Facs Dist | 5.00% | 09/01/33 | 260,050 | |
850,000 | Tustin CA Cmnty Fac Dist Spl Tax Ref #06-1 Legacy Columbus Vlgs, Ser A | 5.00% | 09/01/35 | 863,900 | |
2,000,000 | Univ of CA CA Revs Ref, Ser BN | 5.00% | 05/15/42 | 2,267,612 | |
500,000 | Univ of CA CA Revs Ref, Ser BS | 5.00% | 05/15/43 | 570,590 | |
1,950,000 | Univ of CA CA Rgts Med Ctr Pooled Rev Ref, Ser 0-1 (a) | 3.85% | 05/15/45 | 1,950,000 | |
1,000,000 | Univ of CA CA Rgts Med Ctr Pooled Rev Var Remk, Ser K (a) | 3.85% | 05/15/47 | 1,000,000 | |
330,000 | Val Verde CA Unif Sch Dist Spl Tax Cmty Facs Dist No 2018-2 (Stratford Ranch) | 5.00% | 09/01/38 | 350,736 | |
500,000 | Val Verde CA Unif Sch Dist Spl Tax Cmty Facs Dist No 2018-2 (Stratford Ranch) | 5.00% | 09/01/43 | 521,935 | |
1,295,000 | Western Placer Wst Mgmt Auth CA Solid Wst Rev Landfill Impt Proj, Ser B | 5.00% | 06/01/42 | 1,352,686 | |
240,126,142 | |||||
Florida — 0.1% | |||||
245,000 | Rhodine Road N CDD FL Spl Assmnt 2019 Assmnt Area | 4.00% | 05/01/30 | 246,963 | |
Guam — 0.3% | |||||
100,000 | Guam Govt Busn Privilege Tax Rev Ref, Ser D | 5.00% | 11/15/32 | 101,311 | |
210,000 | Guam Pwr Auth Rev Ref, Ser A | 5.00% | 10/01/41 | 229,178 | |
325,000 | Guam Pwr Auth Rev Ref, Ser A | 5.00% | 10/01/42 | 353,107 | |
683,596 | |||||
Louisiana — 0.3% | |||||
750,000 | Saint James Parish LA Rev Var Nustar Logistics LP Proj Remk, Ser 2008 (Mandatory put 06/01/30) (b) | 6.10% | 06/01/38 | 833,234 | |
Puerto Rico — 2.6% | |||||
1,100,000 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/33 | 1,105,715 | |
1,960,000 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/41 | 1,844,744 | |
1,000,000 | Puerto Rico Indl Tourist Eductnl Med & Envrnmntl Control Fac San Juan Cruise Terminal Proj, Ser 2023-A-2-P3, AMT | 6.75% | 01/01/45 | 1,185,395 | |
1,541,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured Converted, Ser A-2 | 4.33% | 07/01/40 | 1,532,709 | |
839,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-2 | 4.33% | 07/01/40 | 834,486 | |
6,503,049 | |||||
Texas — 0.1% | |||||
370,000 | Houston TX Arpt Sys Rev Ref United Airls Inc Terminal Impt Proj, Ser B-2, AMT | 5.00% | 07/15/27 | 377,471 | |
See Notes to Financial Statements
Page 9
First Trust California Municipal High Income ETF (FCAL)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Utah — 0.6% | |||||
$1,000,000 | Black Desert Pub Infra Dist UT Spl Assmnt Black Desert Assmnt Area #1 (b) | 5.63% | 12/01/53 | $1,033,930 | |
500,000 | Military Installation Dev Auth UT Tax Allocation Rev, Ser A-2 | 4.00% | 06/01/52 | 419,798 | |
1,453,728 | |||||
Total Investments — 98.7% | 250,224,183 | ||||
(Cost $248,061,319) | |||||
Net Other Assets and Liabilities — 1.3% | 3,294,395 | ||||
Net Assets — 100.0% | $253,518,578 | ||||
(a) | Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
(b) | 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 July 31, 2024, securities noted as such amounted to $21,965,002 or 8.7% of net assets. |
(c) | 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). |
(d) | Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
(e) | Zero coupon security. |
(f) | When-issued security. The interest rate shown reflects the rate in effect at July 31, 2024. Interest will begin accruing on the security’s first settlement date. |
Abbreviations throughout the Portfolio of Investments: | |
AGC | – Assured Guaranty Corp. |
AGM | – Assured Guaranty Municipal Corp. |
AMBAC | – American Municipal Bond Assurance Corp. |
AMT | – Alternative Minimum Tax |
BAM | – Build America Mutual |
CONV CABS | – Convertible Capital Appreciation Bonds |
COPS | – Certificates of Participation |
NATL-RE | – National Public Finance Guarantee Corp. |
RANS | – Revenue Anticipation Notes |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Municipal Bonds* | $250,224,183 | $— | $250,224,183 | $— |
* | See Portfolio of Investments for state and territory breakout. |
See Notes to Financial Statements
Page 10
First Trust New York Municipal High Income ETF (FMNY)Portfolio of InvestmentsJuly 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS — 97.5% | |||||
Florida — 1.4% | |||||
$250,000 | Ridge at Apopka CDD FL Spl Assmnt, Ser 22 | 5.38% | 05/01/42 | $256,265 | |
Guam — 1.8% | |||||
330,000 | Guam Govt Wtrwks Auth Wtr & Wstwtr Sys Rev, Ser A | 5.00% | 01/01/50 | 340,787 | |
New York — 88.5% | |||||
100,000 | Build NYC Res Corp NY Rev Sustainable Bond E Harlem Scholars Acdmy Chrt Sch Proj (a) | 5.75% | 06/01/42 | 106,714 | |
300,000 | Build NYC Res Corp NY Rev Sustainable Bond Kipp NYC Pub Sch Facs Canal W Proj | 5.00% | 07/01/42 | 313,589 | |
300,000 | Chautauqua Cnty NY Capital Res Corp Exempt Facs Rev Var Ref NRG Energy Proj Remk (Mandatory put 04/03/28) | 4.25% | 04/01/42 | 303,957 | |
250,000 | Dutchess Cnty NY Loc Dev Corp Mf Mtebs Sustainable Bonds Tomopkins Terrace Hsg LP Proj | 5.00% | 10/01/40 | 264,851 | |
250,000 | Dutchess Cnty NY Loc Dev Corp Rev Marist Clg Proj | 5.00% | 07/01/52 | 259,149 | |
335,000 | Hempstead Town NY Loc Dev Corp Rev Ref Hofstra Univ Proj, Ser A | 4.00% | 07/01/36 | 341,094 | |
250,000 | Hudson Yards Infra Corp NY 2nd Indenture Rev Ref, Ser A | 5.00% | 02/15/37 | 260,210 | |
285,000 | Kings Park NY Centrl Sch Dist, Ser B | 3.00% | 07/15/31 | 271,303 | |
295,000 | Livingston Cnty NY Ref | 4.00% | 05/01/33 | 315,677 | |
300,000 | Long Beach NY, Ser B, BAM | 5.25% | 07/15/32 | 336,397 | |
350,000 | Long Island NY Pwr Auth Elec Sys Rev Ref, Ser A | 5.00% | 09/01/35 | 389,549 | |
255,000 | Met Transprtn Auth NY Dedicated Tax Fund Sustainable Bond, Subser B-1 | 5.00% | 11/15/36 | 263,732 | |
300,000 | Met Transprtn Auth NY Rev Sustainable Bond Ref, Ser A | 5.50% | 11/15/47 | 338,006 | |
300,000 | Monroe Cnty NY Indl Dev Agy Mf Hsg Rev Var Andrews Terrace Cmnty Partners LP Proj B-1 (Mandatory put 07/01/27) | 5.00% | 07/01/28 | 313,021 | |
250,000 | Monroe Cnty NY Indl Dev Corp Rev Ref St John Fisher Univ Proj | 5.00% | 06/01/44 | 268,688 | |
250,000 | Monroe Cnty NY Indl Dev Corp Rev Univ of Rochester Proj, Ser A | 5.00% | 07/01/53 | 272,184 | |
300,000 | N Babylon NY Union Free Sch Dist | 3.00% | 07/01/35 | 276,292 | |
300,000 | Nassau Cnty NY Indl Dev Agy Var Ref & Impt Cold Spring Rmkt (b) | 4.05% | 01/01/34 | 300,000 | |
250,000 | Nassau Cnty NY Loc Econ Asst Corp Edl Rev Roosevelt Children Acdmy Chrt Sch Proj, Ser A | 5.00% | 07/01/43 | 259,648 | |
305,000 | Nassau Cnty NY, Ser A, AGM | 5.00% | 04/01/29 | 335,204 | |
250,000 | New York City NY Hsg Dev Corp Mf Hsg Rev Sustainable Bond, Ser A-1 | 3.95% | 05/01/35 | 251,421 | |
300,000 | New York City NY Hsg Dev Corp Mf Hsg Rev Sustainable Dev Bonds, Ser F-2A (Mandatory put 12/22/26) | 3.40% | 11/01/62 | 298,889 | |
250,000 | New York City NY Indl Dev Agy Rev Ref Queens Baseball Stadium Proj, Ser A, AGM | 3.00% | 01/01/37 | 226,838 | |
250,000 | New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Adj 2nd Gen Resolution, Ser BB-1B (b) | 4.05% | 06/15/49 | 250,000 | |
265,000 | New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Ref 2nd General Resolution, Ser AA | 4.00% | 06/15/40 | 265,262 | |
250,000 | New York City NY Transitional Fin Auth Rev Subord, Ser B-1 | 4.00% | 08/01/39 | 253,208 | |
250,000 | New York NY Adjustable Fiscal 2015, Subser F-6 (b) | 4.05% | 06/01/44 | 250,000 | |
250,000 | New York NY Fiscal 2021, Ser C | 4.00% | 08/01/41 | 250,231 | |
250,000 | NY St Dorm Auth Revs Non St Supported Debt Memorial Sloan Kettering Cancer Ctr, Ser 1 | 5.00% | 07/01/39 | 269,226 | |
300,000 | NY St Dorm Auth Revs Non St Supported Debt New York Institute of Technology | 5.00% | 07/01/44 | 321,390 | |
250,000 | NY St Dorm Auth Revs Non St Supported Debt Pace Univ, Ser A | 5.25% | 05/01/43 | 272,901 | |
See Notes to Financial Statements
Page 11
First Trust New York Municipal High Income ETF (FMNY)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
New York (Continued) | |||||
$250,000 | NY St Dorm Auth Revs Non St Supported Debt Pratt Institute Ref | 5.00% | 07/01/39 | $254,453 | |
280,000 | NY St Dorm Auth Revs Non St Supported Debt Ref New Sch, Ser A | 5.00% | 07/01/31 | 307,835 | |
355,000 | NY St Dorm Auth Revs Non St Supported Debt Ref Northwell Hlth Oblig Grp, Ser A | 5.00% | 05/01/38 | 391,054 | |
250,000 | NY St Dorm Auth Revs Non St Supported Debt Sch Dists Rev Bond Financing Prog, Ser A, BAM | 5.00% | 10/01/29 | 275,125 | |
285,000 | NY St Dorm Auth Revs Non St Supported Debt, Ser A | 5.00% | 07/01/40 | 302,712 | |
275,000 | NY St Dorm Auth St Personal Income Tax Rev Ref, Ser A-Grp 3 | 3.00% | 03/15/38 | 249,122 | |
250,000 | NY St Energy Rsrch & Dev Auth Poll Cntrl Rev Ref NY Elec & Gas Remk, Ser C | 4.00% | 04/01/34 | 251,647 | |
250,000 | NY St Envrnmntl Facs Corp Sol Wst Disp Rev Var Draw Down Casella Wst Sys Inc Proj, Ser R-2, AMT (Mandatory put 09/03/30) (a) | 5.13% | 09/01/50 | 259,620 | |
255,000 | NY St Hsg Fin Agy Affordable Hsg, Ser B | 3.20% | 11/01/36 | 228,088 | |
250,000 | NY St Thruway Auth Gen Rev Jr Indebtedness Obl Subord, Ser B | 4.00% | 01/01/45 | 244,945 | |
250,000 | NY St Thruway Auth Ref, Ser P | 5.00% | 01/01/49 | 273,469 | |
360,000 | NY St Transprtn Dev Corp Spl Fac Rev Delta Airls Inc LaGuardia Arpt Terminals C&D Redev, AMT | 4.00% | 10/01/30 | 358,040 | |
250,000 | NY St Transprtn Dev Corp Spl Fac Rev Ref American Airls Inc John F Kennedy Intl Arpt Proj, AMT | 5.00% | 08/01/31 | 250,055 | |
435,000 | NY St Transprtn Dev Corp Spl Fac Rev Terminal 4 JFK Intl Arpt Proj, AMT | 5.00% | 12/01/30 | 465,594 | |
315,000 | NY St Urban Dev Corp Rev Personal Income Tax, Ser A | 5.00% | 03/15/35 | 349,417 | |
75,000 | Onondaga Cnty NY | 3.00% | 04/15/36 | 67,633 | |
250,000 | Onondaga NY Civic Dev Corp Ref Crouse Hlth Hosp Inc Proj, Ser A | 5.13% | 08/01/44 | 254,077 | |
250,000 | Oyster Bay NY, Ser A, AGM | 2.00% | 03/01/35 | 194,842 | |
250,000 | Port Auth of NY & NJ NY Ref Two Hundred, Ninth Ser | 5.00% | 07/15/32 | 268,138 | |
290,000 | Southampton Vlg NY Ambulance Bldg | 2.13% | 03/01/29 | 263,595 | |
500,000 | Suffolk Regl Off Track Betting Corp NY Rev | 6.00% | 12/01/53 | 525,216 | |
250,000 | Syracuse Regl Arpt Auth NY Sr Arpt Rev Ref, AMT | 4.00% | 07/01/36 | 245,642 | |
250,000 | Triborough NY Bridge & Tunnel Auth Revs, Ser A | 5.00% | 11/15/42 | 276,428 | |
285,000 | Triborough NY Bridge & Tunnel Auth Revs, Ser A | 5.00% | 11/15/47 | 308,764 | |
250,000 | Util Debt Securitization Auth NY Ref TE, Ser 1 | 5.00% | 12/15/41 | 288,226 | |
250,000 | Westchester Cnty NY Loc Dev Corp Rev Westchester Med Ctr Oblig Grp Proj, AGM | 5.75% | 11/01/49 | 279,630 | |
250,000 | Westchester NY Tobacco Asset Securitization Ref Sr, Ser B | 5.00% | 06/01/41 | 255,122 | |
250,000 | Yonkers NY, Ser F, BAM | 5.00% | 11/15/41 | 277,098 | |
16,664,218 | |||||
Puerto Rico — 5.8% | |||||
400,000 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/33 | 402,078 | |
See Notes to Financial Statements
Page 12
First Trust New York Municipal High Income ETF (FMNY)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Puerto Rico (Continued) | |||||
$250,000 | Puerto Rico Indl Tourist Eductnl Med & Envrnmntl Control Fac San Juan Cruise Terminal Proj, Ser 2023-A-2-P3, AMT | 6.50% | 01/01/42 | $294,456 | |
400,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-2 | 4.33% | 07/01/40 | 397,848 | |
1,094,382 | |||||
Total Investments — 97.5% | 18,355,652 | ||||
(Cost $17,996,158) | |||||
Net Other Assets and Liabilities — 2.5% | 471,659 | ||||
Net Assets — 100.0% | $18,827,311 | ||||
(a) | 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, 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 July 31, 2024, securities noted as such amounted to $366,334 or 1.9% of net assets. |
(b) | Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
Abbreviations throughout the Portfolio of Investments: | |
AGM | – Assured Guaranty Municipal Corp. |
AMT | – Alternative Minimum Tax |
BAM | – Build America Mutual |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Municipal Bonds* | $18,355,652 | $— | $18,355,652 | $— |
* | See Portfolio of Investments for state and territory breakout. |
See Notes to Financial Statements
Page 13
First Trust Exchange-Traded Fund III
Statements of Assets and Liabilities
July 31, 2024First Trust California Municipal High Income ETF (FCAL) | First Trust New York Municipal High Income ETF (FMNY) | |
ASSETS: | ||
Investments, at value | $250,224,183 | $18,355,652 |
Cash | — | 329,035 |
Due from broker | 2,072 | — |
Receivables: | ||
Capital shares sold | 7,452,493 | — |
Interest | 2,652,106 | 152,975 |
Total Assets | 260,330,854 | 18,837,662 |
LIABILITIES: | ||
Due to custodian | 2,793,176 | — |
Payables: | ||
Investment securities purchased | 3,884,134 | — |
Investment advisory fees | 134,966 | 10,351 |
Total Liabilities | 6,812,276 | 10,351 |
NET ASSETS | $253,518,578 | $18,827,311 |
NET ASSETS consist of: | ||
Paid-in capital | $261,595,894 | $20,010,664 |
Par value | 51,000 | 7,000 |
Accumulated distributable earnings (loss) | (8,128,316) | (1,190,353) |
NET ASSETS | $253,518,578 | $18,827,311 |
NET ASSET VALUE, per share | $49.71 | $26.90 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 5,100,002 | 700,002 |
Investments, at cost | $248,061,319 | $17,996,158 |
See Notes to Financial Statements
Page 14
First Trust Exchange-Traded Fund III
Statements of Operations
For the Year Ended July 31, 2024First Trust California Municipal High Income ETF (FCAL) | First Trust New York Municipal High Income ETF (FMNY) | |
INVESTMENT INCOME: | ||
Interest | $7,092,421 | $662,505 |
Total investment income | 7,092,421 | 662,505 |
EXPENSES: | ||
Investment advisory fees | 1,252,427 | 105,205 |
Total expenses | 1,252,427 | 105,205 |
Less fees waived by the investment advisor | — | (18,053) |
Net expenses | 1,252,427 | 87,152 |
NET INVESTMENT INCOME (LOSS) | 5,839,994 | 575,353 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments | (1,068,275) | (81,986) |
Futures contracts | 22,005 | 7,441 |
Net realized gain (loss) | (1,046,270) | (74,545) |
Net change in unrealized appreciation (depreciation) on: | ||
Investments | 3,504,189 | 288,400 |
Futures contracts | (39,993) | 812 |
Net change in unrealized appreciation (depreciation) | 3,464,196 | 289,212 |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 2,417,926 | 214,667 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $8,257,920 | $790,020 |
See Notes to Financial Statements
Page 15
First Trust Exchange-Traded Fund III
Statements of Changes in Net Assets
First Trust California Municipal High Income ETF (FCAL) | First Trust New York Municipal High Income ETF (FMNY) | |||
Year Ended 7/31/2024 | Year Ended 7/31/2023 | Year Ended 7/31/2024 | Year Ended 7/31/2023 | |
OPERATIONS: | ||||
Net investment income (loss) | $5,839,994 | $3,225,087 | $575,353 | $401,597 |
Net realized gain (loss) | (1,046,270) | (5,582,737) | (74,545) | (272,871) |
Net change in unrealized appreciation (depreciation) | 3,464,196 | 2,604,413 | 289,212 | 83,519 |
Net increase (decrease) in net assets resulting from operations | 8,257,920 | 246,763 | 790,020 | 212,245 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||
Investment operations | (5,695,478) | (3,179,922) | (576,001) | (388,501) |
Return of capital | — | (39,081) | — | — |
Total distributions to shareholders | (5,695,478) | (3,219,003) | (576,001) | (388,501) |
SHAREHOLDER TRANSACTIONS: | ||||
Proceeds from shares sold | 109,180,702 | 53,936,928 | 5,330,174 | 5,282,016 |
Cost of shares redeemed | (7,442,694) | (23,524,755) | — | (2,670,964) |
Net increase (decrease) in net assets resulting from shareholder transactions | 101,738,008 | 30,412,173 | 5,330,174 | 2,611,052 |
Total increase (decrease) in net assets | 104,300,450 | 27,439,933 | 5,544,193 | 2,434,796 |
NET ASSETS: | ||||
Beginning of period | 149,218,128 | 121,778,195 | 13,283,118 | 10,848,322 |
End of period | $253,518,578 | $149,218,128 | $18,827,311 | $13,283,118 |
CHANGES IN SHARES OUTSTANDING: | ||||
Shares outstanding, beginning of period | 3,050,002 | 2,450,002 | 500,002 | 400,002 |
Shares sold | 2,200,000 | 1,100,000 | 200,000 | 200,000 |
Shares redeemed | (150,000) | (500,000) | — | (100,000) |
Shares outstanding, end of period | 5,100,002 | 3,050,002 | 700,002 | 500,002 |
See Notes to Financial Statements
Page 16
First Trust Exchange-Traded Fund III
Financial Highlights
For a share outstanding throughout each periodFirst Trust California Municipal High Income ETF (FCAL)
Year Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $48.92 | $49.71 | $55.37 | $53.16 | $52.70 |
Income from investment operations: | |||||
Net investment income (loss) | 1.48 (a) | 1.32 (a) | 1.08 | 1.16 | 1.17 |
Net realized and unrealized gain (loss) | 0.74 | (0.81 ) | (5.65 ) | 2.19 (b) | 0.51 |
Total from investment operations | 2.22 | 0.51 | (4.57 ) | 3.35 | 1.68 |
Distributions paid to shareholders from: | |||||
Net investment income | (1.43 ) | (1.29 ) | (1.08 ) | (1.14 ) | (1.17 ) |
Return of capital | — | (0.01 ) | (0.01 ) | — | (0.05 ) |
Total distributions | (1.43 ) | (1.30 ) | (1.09 ) | (1.14 ) | (1.22 ) |
Net asset value, end of period | $49.71 | $48.92 | $49.71 | $55.37 | $53.16 |
Total return (c) | 4.62 % | 1.08 % | (8.33 )% | 6.37 % (b) | 3.23 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $253,519 | $149,218 | $121,778 | $105,199 | $87,706 |
Ratio of total expenses to average net assets | 0.65 % | 0.65 % | 0.65 % | 0.65 % | 0.65 % |
Ratio of net expenses to average net assets | 0.65 % | 0.60 % | 0.50 % | 0.50 % | 0.50 % |
Ratio of net investment income (loss) to average net assets | 3.03 % | 2.71 % | 2.09 % | 2.16 % | 2.28 % |
Portfolio turnover rate (d) | 41 % | 54 % | 30 % | 25 % | 81 % |
(a) | Based on average shares outstanding. |
(b) | The Fund received a reimbursement from the advisor in the amount of $219, which represents less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return. |
(c) | 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. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. |
(d) | 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
Page 17
First Trust Exchange-Traded Fund III
Financial Highlights (Continued)
For a share outstanding throughout each periodFirst Trust New York Municipal High Income ETF (FMNY)
Year Ended July 31, | Period Ended 7/31/2021 (a) | |||
2024 | 2023 | 2022 | ||
Net asset value, beginning of period | $26.57 | $27.12 | $30.51 | $30.00 |
Income from investment operations: | ||||
Net investment income (loss) | 0.94 (b) | 0.86 (b) | 0.68 | 0.09 |
Net realized and unrealized gain (loss) | 0.32 | (0.59 ) | (3.61 ) | 0.48 |
Total from investment operations | 1.26 | 0.27 | (2.93 ) | 0.57 |
Distributions paid to shareholders from: | ||||
Net investment income | (0.93 ) | (0.82 ) | (0.46 ) | (0.04 ) |
Net realized gain | — | — | — | (0.02 ) |
Total distributions | (0.93 ) | (0.82 ) | (0.46 ) | (0.06 ) |
Net asset value, end of period | $26.90 | $26.57 | $27.12 | $30.51 |
Total return (c) | 4.86 % | 1.06 % | (9.66 )% | 1.90 % |
Ratios to average net assets/supplemental data: | ||||
Net assets, end of period (in 000’s) | $18,827 | $13,283 | $10,848 | $15,256 |
Ratio of total expenses to average net assets | 0.65 % | 0.65 % | 0.65 % | 0.65 % (d) |
Ratio of net expenses to average net assets | 0.54 % | 0.50 % | 0.50 % | 0.50 % (d) |
Ratio of net investment income (loss) to average net assets | 3.55 % | 3.24 % | 2.18 % | 1.41 % (d) |
Portfolio turnover rate (e) | 36 % | 41 % | 154 % | 16 % |
(a) | Inception date is May 12, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
(b) | Based on average shares outstanding. |
(c) | 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. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. |
(d) | Annualized. |
(e) | 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
Page 18
Notes to Financial Statements
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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”).
This report covers the two funds (each a “Fund” and collectively, the “Funds”) listed below:
First Trust California Municipal High Income ETF – (Nasdaq, Inc. ticker “FCAL”) |
First Trust New York Municipal High Income ETF – (NYSE Arca, Inc. ticker “FMNY”) |
FCAL is a diversified series of the Trust. FMNY is a non-diversified series of the Trust.
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 primary investment objective of each Fund is to seek to provide current income that is exempt from regular federal income taxes and, for FCAL, California income taxes and, for FMNY, New York income taxes. The secondary investment objective of each Fund is long-term capital appreciation. Under normal market conditions, each 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 and, for FCAL, California income taxes and, for FMNY, New York State and New York City income taxes. There can be no assurance that a Fund will achieve its investment objectives. 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.
A. Portfolio Valuation
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 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:
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:
1)
benchmark yields;
2)
reported trades;
3)
broker/dealer quotes;
4)
issuer spreads;
Page 19
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
5)
benchmark securities;
6)
bids and offers; and
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.
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 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 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;
10)
the coupon payments;
11)
the quality, value and salability of collateral, if any, securing the security; and
12)
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:
Page 20
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
• 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 July 31, 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. 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 or delayed-delivery securities basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. Each Fund maintains liquid assets with a current value at least equal to the amount of its when-issued or delayed-delivery securities. At July 31, 2024, FCAL held $1,516,095 of when-issued or delayed-delivery securities.
C. Futures Contracts
The Funds may purchase or sell (i.e., are long or short) exchange-listed futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Funds 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 Funds are not able to enter into an offsetting transaction, the Funds will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Funds record 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 Statements of Operations.
Upon entering into a futures contract, a 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 Statements 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 Statements of Assets and Liabilities.
If market conditions change unexpectedly, the Funds 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. The Funds did not hold any futures contracts at July 31, 2024.
D. Restricted Securities
FCAL 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 July 31, 2024, FCAL 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
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Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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. FCAL 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. There are no unrestricted securities with the same maturity dates and yields for these issuers.
Security | Acquisition Date | Principal Value | Current Price | Carrying Cost | Value | % of Net Assets |
FCAL | ||||||
CA St Muni Fin Auth Chrt Sch Lease Rev Sycamore Acdmy Proj, 5.38%, 07/01/34 | 06/14/18 | $250,000 | $100.06 | $250,000 | $250,150 | 0.10 % |
E. 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 July 31, 2024 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Tax-Exempt Income | Distributions paid from Return of Capital | |
First Trust California Municipal High Income ETF | $10,657 | $— | $5,684,821 | $— |
First Trust New York Municipal High Income ETF | 177 | — | 575,824 | — |
The tax character of distributions paid by each Fund during the fiscal year ended July 31, 2023 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Tax-Exempt Income | Distributions paid from Return of Capital | |
First Trust California Municipal High Income ETF | $36,889 | $— | $3,143,033 | $39,081 |
First Trust New York Municipal High Income ETF | — | — | 388,501 | — |
As of July 31, 2024, 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 California Municipal High Income ETF | $191,729 | $(10,586,008 ) | $2,265,963 |
First Trust New York Municipal High Income ETF | 86,696 | (1,658,578 ) | 381,529 |
F. Income Taxes
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (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,
Page 22
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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.
In addition, each Fund intends to invest in municipal securities to allow it to pay shareholders “exempt dividends” as defined in the Code.
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. For FCAL, taxable years ended 2021, 2022, 2023, and 2024 remain open to federal and state audit. For FMNY, the taxable period ended 2021 and the taxable years ended 2022, 2023, and 2024 remain open to federal and state audit. As of July 31, 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 July 31, 2024, 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 California Municipal High Income ETF | $10,586,008 |
First Trust New York Municipal High Income ETF | 1,658,578 |
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 July 31, 2024, the Funds had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended July 31, 2024, the adjustments for each Fund were as follows:
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) on Investments | Paid-In Capital | |
First Trust California Municipal High Income ETF | $(4,684 ) | $4,684 | $— |
First Trust New York Municipal High Income ETF | (219 ) | 219 | — |
As of July 31, 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:
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |
First Trust California Municipal High Income ETF | $247,958,220 | $3,908,780 | $(1,642,817 ) | $2,265,963 |
First Trust New York Municipal High Income ETF | 17,974,123 | 449,685 | (68,156 ) | 381,529 |
G. Expenses
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
Page 23
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 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 Agreements between the Trust and the Advisor, First Trust manages the investment of each Fund’s assets and is responsible for the expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, and other services, but excluding fee payments under the Investment Management Agreements, 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 October 16, 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 schedule, provided that FMNY was not eligible for any breakpoints until the termination of the Fee Waiver Agreement described below:
Breakpoints | |
Fund net assets up to and including $2.5 billion | 0.65000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.63375 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.61750 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.60125 % |
Fund net assets greater than $10 billion | 0.58500 % |
The Trust’s Board of Trustees and the Advisor entered into a Fee Waiver Agreement for FMNY pursuant to which the Advisor contractually agreed to waive management fees of 0.15% of average daily net assets until May 11, 2024. The Fee Waiver Agreement for FMNY expired on May 12, 2024. First Trust does not have the right to recover the fees waived under the Fee Waiver Agreement. During the fiscal year ended July 31, 2024, the Advisor waived fees of $18,053 for FMNY.
Effective October 16, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNY”). Under the service agreements, BNY performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNY is responsible for custody of each Fund’s assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BNY is responsible for maintaining shareholder records for each Fund. BNY is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to October 16, 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.
Page 24
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
4. Purchases and Sales of Securities
For the fiscal year ended July 31, 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:
Purchases | Sales | |
First Trust California Municipal High Income ETF | $176,379,321 | $75,791,811 |
First Trust New York Municipal High Income ETF | 11,113,728 | 5,605,894 |
For the fiscal year ended July 31, 2024, the Funds had no in-kind transactions.
5. Borrowings
Effective February 28, 2024, the Trust, on behalf of FCAL, 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 BNY 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. BNY 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 FCAL, 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 FCAL accesses the credit line, there would also be an interest fee charged. FCAL did not have any borrowings outstanding during the fiscal year ended July 31, 2024.
6. Derivative Transactions
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended July 31, 2024, on each Fund’s derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
Statements of Operations Location | FCAL | FMNY |
Interest Rate Risk Exposure | ||
Net realized gain (loss) on futures contracts | $22,005 | $7,441 |
Net change in unrealized appreciation (depreciation) on futures contracts | (39,993 ) | 812 |
For FCAL, the average notional value of futures contracts outstanding during the fiscal year ended July 31, 2024, which is indicative of the volume of this derivative type, was $4,521,938.
For FMNY, the average notional value of futures contracts outstanding during the fiscal year ended July 31, 2024. which is indicative of the volume of this derivative type, was $266,069.
The Funds do not have the right to offset financial assets and financial liabilities related to futures contracts on the Statements of Assets and Liabilities.
7. 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
Page 25
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 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.
8. Distribution Plan
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 November 30, 2025.
9. Indemnification
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust’s maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
10. Subsequent Events
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
Page 26
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of First Trust California Municipal High Income ETF and First Trust New York Municipal High Income ETF (the “Funds”), each a series of the First Trust Exchange-Traded Fund III, including the portfolios of investments, as of July 31, 2024, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of July 31, 2024, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods listed in the table below in conformity with accounting principles generally accepted in the United States of America.
Individual Funds Included in the Trust | Financial Highlights |
First Trust California Municipal High Income ETF (FCAL) | For the years ended July 31, 2024, 2023, 2022, 2021, and 2020 |
First Trust New York Municipal High Income ETF (FMNY) | For the years ended July 31, 2024, 2023 and 2022, and for the period from May 12, 2021 (commencement of investment operations) through July 31, 2021 |
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2024, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, LLP
Chicago, Illinois
September 23, 2024
September 23, 2024
We have served as the auditor of one or more First Trust investment companies since 2001.
Page 27
Other Information
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
Changes in and Disagreements with Accountants (Item 8 of Form N-CSR)
There were no changes in or disagreements with the Funds’ accountants during the fiscal year ended July 31, 2024.
Proxy Disclosures (Item 9 of Form N-CSR)
There were no matters submitted for vote by shareholders of any Fund during the fiscal year ended July 31, 2024.
Remuneration Paid to Directors, Officers, and Others (Item 10 of Form N-CSR)
Independent Trustees and any member of any advisory board of each Fund are compensated through the unitary management fee paid by each Fund to the advisor and not directly by each Fund. The investment advisory fee paid is included in the Statements of Operations.
Statement Regarding the Basis for the Board’s Approval of Investment Advisory Contract (Item 11 of Form N-CSR)
The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreements (as applicable to a specific Fund, the “Agreement” and collectively, the “Agreements”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the following series of the Trust (each a “Fund” and collectively, the “Funds”):
First Trust California Municipal High Income ETF (FCAL)
First Trust New York Municipal High Income ETF (FMNY)
First Trust New York Municipal High Income ETF (FMNY)
The Board approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2025 at a meeting held on June 2–3, 2024. The Board determined for each Fund that the continuation of the applicable Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 16, 2024, April 25, 2024 and June 2–3, 2024, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate schedule payable by each Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. (“FTP”); and information on the Advisor’s compliance program. The Board reviewed initial materials with the Advisor at the meeting held on April 25, 2024, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the April 25, 2024 meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 2–3, 2024 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from each Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor manages the Fund and knowing the Fund’s unitary fee.
Page 28
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
In reviewing the Agreement for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. The Board noted that each Fund is an actively-managed ETF and noted that the Advisor’s Municipal Securities Team is responsible for the day-to-day management of the Funds’ investments. The Board considered the background and experience of the members of the Municipal Securities Team and noted the Board’s prior meetings with members of the Team. The Board considered the Advisor’s statement that it applies the same oversight model internally with its Municipal Securities Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s and each Fund’s compliance with the 1940 Act, as well as each Fund’s compliance with its investment objectives, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 25, 2024 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor under the Agreements have been and are expected to remain satisfactory and that the Advisor has managed each Fund consistent with its investment objectives, policies and restrictions.
The Board considered the unitary fee rate schedule payable by each Fund under the applicable Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for each Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the applicable Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the total (net) expense ratio for each Fund was above the median total (net) expense ratio of the peer funds in its respective Expense Group. With respect to the Expense Groups, the Board discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Funds and other non-ETF clients that limited their comparability. In considering the unitary fee rate schedules overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to each Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund’s performance. The Board received and reviewed information comparing each Fund’s performance for one or more periods ended December 31, 2023 to the performance of the funds in its Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that FCAL outperformed its Performance Universe median and benchmark index for the one- and five-year periods ended December 31, 2023 and outperformed its Performance Universe median and underperformed its benchmark index for the three-year period ended December 31, 2023. The Board noted that FMNY outperformed its Performance Universe median and underperformed its benchmark index for the one-year period ended December 31, 2023.
On the basis of all the information provided on the unitary fee and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds at current asset levels and whether the Funds may benefit from any economies of scale. The Board noted that the unitary fee rate schedule for each Fund includes breakpoints pursuant to which the unitary fee rate will be reduced as assets of the Fund meet certain thresholds. The Board considered the Advisor’s statement that it believes that its expenses
Page 29
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
relating to providing advisory services to the Funds will increase during the next twelve months as the Advisor continues to build infrastructure and add new staff. The Board also noted that under the unitary fee structure, any reduction in expenses associated with the management and operations of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for shareholders of the Funds. The Board concluded that the unitary fee rate schedule for each Fund reflects an appropriate level of sharing of any economies of scale that may be realized in the management of the Fund at current asset levels. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2023 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for each Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board’s analysis.
Federal Tax Information
For the taxable year ended July 31, 2024, the following distribution information is being provided as required by the Internal Revenue Code of 1986, as amended, or to meet a specific state’s requirement. The Funds designate the following percentages or, if subsequently determined to be different, the maximum amount allowable for their fiscal year ended July 31, 2024:
Tax Exempt Interest Dividends | Alternative Minimum Tax (AMT) | |
First Trust California Municipal High Income ETF | 99.81 % | 16.33 % |
First Trust New York Municipal High Income ETF | 99.97 % | 13.14 % |
Page 30
Annual Financial Statements and Other Information |
For the Year Ended July 31, 2024 |
First Trust Exchange-Traded Fund III
First Trust Municipal High Income ETF (FMHI) |
Table of Contents
First Trust Municipal High Income ETF (FMHI)
Annual Financial Statements and Other Information
July 31, 2024
Annual Financial Statements and Other Information
July 31, 2024
1 | |
20 | |
21 | |
22 | |
23 | |
24 | |
32 | |
33 |
Performance and Risk Disclosure
There is no assurance that First Trust Municipal High Income ETF (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.
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.
First Trust Advisors L.P., the Fund’s advisor, may also periodically provide additional information on Fund performance on the Fund’s webpage at www.ftportfolios.com.
How to Read This Report
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data that provides insight into the Fund’s performance and investment approach.
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 Municipal High Income ETF (FMHI)Portfolio of InvestmentsJuly 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS — 98.8% | |||||
Alabama — 2.0% | |||||
$2,000,000 | Black Belt Energy Gas Dist AL Gas Proj Rev Proj No 6, Ser B (Mandatory put 12/01/26) | 4.00% | 10/01/52 | $2,009,834 | |
530,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C-1 (Mandatory put 06/01/29) | 5.25% | 02/01/53 | 563,238 | |
1,340,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser F (Mandatory put 12/01/28) | 5.50% | 11/01/53 | 1,425,547 | |
1,000,000 | Energy SE AL A Cooperative Dist Energy Sply Rev, Ser A-1 (Mandatory put 01/01/31) | 5.50% | 11/01/53 | 1,088,362 | |
1,500,000 | Homewood AL Eductnl Bldg Auth Rev Stdt Hsg & Parking Proj, Ser C | 5.50% | 10/01/49 | 1,597,037 | |
1,500,000 | Jefferson Cnty AL Swr Rev Warrants Ref Warrants | 5.25% | 10/01/49 | 1,621,067 | |
1,000,000 | Mobile Cnty AL Indl Dev Auth Sol Wst Disp Rev AM/NS Calvert LLC Proj, Ser A, AMT | 5.00% | 06/01/54 | 1,024,767 | |
2,425,000 | SE Energy Auth AL Cmdy Sply Rev Proj #1, Ser A (Mandatory put 10/01/28) | 4.00% | 11/01/51 | 2,444,754 | |
1,650,000 | Univ of AL at Birmingham Gen Rev Brd of Trustees, Ser B | 3.00% | 10/01/41 | 1,406,442 | |
13,181,048 | |||||
Arizona — 4.2% | |||||
1,790,000 | AZ St Indl Dev Auth Edu Rev Acads of Math & Science Proj (a) | 5.00% | 07/01/39 | 1,814,828 | |
610,000 | AZ St Indl Dev Auth Edu Rev Acads of Math & Science Proj (a) | 5.00% | 07/01/49 | 605,677 | |
500,000 | AZ St Indl Dev Auth Edu Rev Acads of Math & Science Proj, Ser B (a) | 5.00% | 07/01/29 | 509,890 | |
750,000 | AZ St Indl Dev Auth Edu Rev Doral Acdmy NV Fire Mesa & Red Rock Cmps Proj, Ser A | 5.00% | 07/15/39 | 760,486 | |
400,000 | AZ St Indl Dev Auth Edu Rev Lone Mountain Cmps Proj, Ser A (a) | 5.00% | 12/15/39 | 403,556 | |
1,000,000 | AZ St Indl Dev Auth Edu Rev Pinecrest Acdmy Horizon Inspirada & St Rose Cmps, Ser A (a) | 5.75% | 07/15/38 | 1,024,631 | |
300,000 | AZ St Indl Dev Auth Edu Rev Ref Basis Sch Projs, Ser D (a) | 5.00% | 07/01/37 | 304,210 | |
1,670,000 | AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser A (a) | 5.13% | 07/01/37 | 1,689,509 | |
2,240,000 | AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser A (a) | 5.25% | 07/01/47 | 2,249,609 | |
795,000 | AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser D (a) | 4.00% | 07/01/27 | 792,381 | |
365,000 | AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (a) | 4.00% | 07/15/33 | 359,860 | |
385,000 | AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (a) | 4.00% | 07/15/34 | 377,246 | |
950,000 | AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (a) | 4.00% | 07/15/41 | 852,280 | |
1,500,000 | AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (a) | 4.00% | 07/15/51 | 1,244,361 | |
1,740,000 | AZ St Indl Dev Auth Edu Rev Somerset Acdmy of LV Aliante & Skye Canyon Cmps Proj, Ser A (a) | 4.00% | 12/15/41 | 1,567,613 | |
1,000,000 | AZ St Indl Dev Auth Edu Rev Somerset Acdmy of LV Aliante & Skye Canyon Cmps Proj, Ser A (a) | 4.00% | 12/15/51 | 823,266 | |
500,000 | Glendale AZ Indl Dev Auth Sr Living Facs Rev Royal Oaks Inspirata Pointe Proj, Ser A | 5.00% | 05/15/41 | 494,923 | |
1,000,000 | Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Legacy Trad Schs Proj Auth, Ser B (a) | 5.00% | 07/01/39 | 1,034,326 | |
2,035,000 | Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Legacy Trad Schs Proj Auth, Ser B (a) | 5.00% | 07/01/49 | 2,072,150 | |
515,000 | Maricopa Cnty AZ Indl Dev Auth Edu Rev Ref Paradise Schs Projs Paragon Mgmt Inc (a) | 4.00% | 07/01/26 | 509,748 | |
See Notes to Financial Statements
Page 1
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Arizona (Continued) | |||||
$3,000,000 | Maricopa Cnty Indl Dev Auth Exempt Facs Rev Comml Metals Company Proj, AMT (a) | 4.00% | 10/15/47 | $2,772,968 | |
2,000,000 | Phoenix AZ Indl Dev Auth Edu Rev Ref Fac Legacy Trad Schs Projs (a) | 5.00% | 07/01/45 | 2,010,021 | |
2,000,000 | Phoenix AZ Indl Dev Auth Hotel Rev Sr Falcon Properties LLC Proj, Ser A (a) | 4.00% | 12/01/51 | 1,510,200 | |
100,000 | Phoenix AZ Indl Dev Auth Stdt Hsg Rev Ref Downtown Phoenix Stdt Hsg LLC AZ St Univ Proj, Ser A | 5.00% | 07/01/27 | 103,162 | |
1,000,000 | Pima Cnty AZ Indl Dev Auth Sr Living Rev La Posada at Pusch Ridge Proj, Ser A (a) | 6.75% | 11/15/42 | 1,092,171 | |
26,979,072 | |||||
Arkansas — 1.0% | |||||
3,000,000 | AR Dev Fin Auth Envrnmntl Rev Sustainable Bond United States Steel Corp Proj, AMT | 5.45% | 09/01/52 | 3,103,275 | |
1,000,000 | AR Dev Fin Auth Envrnmntl Rev Sustainable Bond US Steel Corp Proj, AMT | 5.70% | 05/01/53 | 1,051,875 | |
2,000,000 | AR St Dev Fin Auth Indl Dev Rev Sustainable Bonds Hybar Steel Proj, Ser A, AMT (a) | 6.88% | 07/01/48 | 2,199,760 | |
6,354,910 | |||||
California — 4.1% | |||||
250,000 | CA Pub Fin Auth Sr Living Rev Enso Vlg Proj Sustainable Bond, Ser A (a) | 5.00% | 11/15/51 | 228,476 | |
250,000 | CA Sch Fin Auth Sch Fac Rev Ref Value Schs, Ser A (a) | 5.25% | 07/01/48 | 255,038 | |
2,500,000 | CA St Hlth Facs Fing Auth Rev El Camino Hosp | 5.00% | 02/01/42 | 2,596,570 | |
1,050,000 | CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj, Ser A (a) | 5.00% | 07/01/38 | 1,071,644 | |
2,000,000 | CA St Muni Fin Auth Rev CA Baptist Univ, Ser A (a) | 5.00% | 11/01/46 | 2,002,373 | |
205,000 | CA St Muni Fin Auth Rev Ref Eisenhower Med Ctr, Ser A | 5.00% | 07/01/32 | 210,762 | |
1,250,000 | CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A | 5.00% | 10/01/44 | 1,272,077 | |
2,280,000 | CA St Muni Fin Auth Spl Fac Rev United Airls Inc Proj, AMT | 4.00% | 07/15/29 | 2,280,980 | |
1,300,000 | CA St Muni Fin Auth Spl Tax Rev Bold Prog, Ser B | 5.75% | 09/01/53 | 1,406,896 | |
1,250,000 | CA St Poll Control Fing Auth Wtr Furnishing Rev Plant Bonds, AMT (a) | 5.00% | 07/01/37 | 1,254,367 | |
2,480,000 | CA St Poll Control Fing Auth Wtr Furnishing Rev Plant Bonds, AMT (a) | 5.00% | 11/21/45 | 2,485,698 | |
550,000 | CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr, Ser A (a) | 5.00% | 12/01/33 | 574,108 | |
1,500,000 | CSCDA Cmnty Impt Auth CA Essential Hsg Rev The Link Glendale Sustainable Bonds, Ser A-2 (a) | 4.00% | 07/01/56 | 1,163,254 | |
500,000 | CSCDA Cmnty Impt Auth CA Essential Hsg Rev Union S Bay Sustainable Bonds, Ser A-2 (a) | 4.00% | 07/01/56 | 407,014 | |
1,000,000 | Golden St Tobacco Securitization Corp CA Tobacco Stlmt Ref Tobacco Stlmt Asset Backed Bonds, Ser A-1 | 5.00% | 06/01/51 | 1,040,762 | |
300,000 | Morongo Band of Mission Indians CA Rev Ref, Ser B (a) | 5.00% | 10/01/42 | 302,898 | |
450,000 | Palm Desert CA Spl Tax Ref Univ Park | 4.00% | 09/01/41 | 416,142 | |
850,000 | Roseville CA Spl Tax The Ranch at Sierra Vista Cmnty Facs Dt No. 1 | 5.00% | 09/01/48 | 882,517 | |
1,100,000 | Roseville CA Spl Tax The Ranch at Sierra Vista Cmnty Facs Dt No. 1 | 5.00% | 09/01/53 | 1,130,999 | |
See Notes to Financial Statements
Page 2
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$3,735,000 | San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev, Ser A, AMT | 5.00% | 05/01/44 | $3,854,655 | |
1,615,000 | San Luis Obispo Cnty CA Fing Auth Lease Rev Multiple Capital Projs Ref, Ser A | 5.25% | 11/15/42 | 1,836,722 | |
26,673,952 | |||||
Colorado — 5.2% | |||||
1,125,000 | Allison Vly Met Dist #2 CO Ref | 4.70% | 12/01/47 | 970,514 | |
525,000 | Brighton Crossing Met Dist #6 CO, Ser A | 5.00% | 12/01/35 | 514,383 | |
1,000,000 | Cascade Ridge Met Dist CO | 5.00% | 12/01/51 | 890,956 | |
750,000 | CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Skyview Acdmy Proj (a) | 5.50% | 07/01/49 | 750,272 | |
1,000,000 | CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Univ Lab Bldg Corp (a) | 5.00% | 12/15/45 | 1,002,149 | |
500,000 | CO St Hlth Facs Auth Rev Ref Christian Living Neighborhoods Proj | 5.00% | 01/01/31 | 503,375 | |
1,400,000 | CO St Hlth Facs Auth Rev Ref Christian Living Neighborhoods Proj | 5.00% | 01/01/37 | 1,407,350 | |
950,000 | CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser A-1 | 4.00% | 08/01/39 | 935,303 | |
1,275,000 | CO St Hlth Facs Auth Rev Ref Frasier Meadows Retmnt Cmnty Proj, Ser A | 5.25% | 05/15/30 | 1,310,480 | |
670,000 | CO St Hlth Facs Auth Rev Ref Frasier Proj, Ser 2023A | 4.00% | 05/15/35 | 654,456 | |
1,125,000 | CO St Hlth Facs Auth Rev Ref Frasier Proj, Ser 2023A | 4.00% | 05/15/41 | 1,037,891 | |
625,000 | CO St Hlth Facs Auth Rev Sr Living Ralston Creek Arvada Proj, Ser A (b) (c) | 5.25% | 11/01/32 | 375,000 | |
1,120,000 | Denver City & Cnty CO Arpt Rev Ref, Ser D, AMT | 5.75% | 11/15/40 | 1,284,962 | |
1,100,000 | Denver City & Cnty CO Arpt Rev Ref, Ser D, AMT | 5.75% | 11/15/45 | 1,239,397 | |
1,220,000 | Denver City & Cnty CO Arpt Rev, Ser A, AMT | 5.00% | 11/15/41 | 1,307,724 | |
500,000 | Denver CO Intl Busn Ctr CO Met Dist #1 Subord, Ser B | 6.00% | 12/01/48 | 514,105 | |
1,700,000 | Elbert & Hwy 86 CO Comml Spl Rev & Tax Supported Ref Sr Bonds, Ser A (a) | 5.00% | 12/01/41 | 1,657,271 | |
1,510,000 | Elbert & Hwy 86 CO Comml Spl Rev & Tax Supported Ref Sr Bonds, Ser A (a) | 5.00% | 12/01/51 | 1,383,318 | |
1,500,000 | Four Corners Busn Impt Dist CO Ltd Tax Supported | 6.00% | 12/01/52 | 1,538,022 | |
1,000,000 | Grandview Reserve Met Dist #3 CO Sr Bonds, Ser A | 6.25% | 12/01/52 | 990,335 | |
575,000 | Jefferson Ctr CO Met Dist #1 Spl Rev, Ser A-2 | 4.13% | 12/01/40 | 533,460 | |
1,000,000 | Lanterns Met Dist #3, Ser A-1 | 7.25% | 12/01/53 | 1,063,239 | |
1,000,000 | Meridian Ranch Met Dist 2018 Subdistrict CO | 6.75% | 12/01/52 | 1,019,283 | |
2,000,000 | Mirabelle Met Dist #2 CO Sr, Ser A | 5.00% | 12/01/49 | 2,006,036 | |
905,000 | Mountain Brook Met Dist CO | 4.50% | 12/01/41 | 762,344 | |
500,000 | Peak Met Dist #1 CO, Ser A (a) | 4.00% | 12/01/35 | 442,845 | |
1,000,000 | Peak Met Dist #1 CO, Ser A (a) | 5.00% | 12/01/41 | 926,431 | |
1,200,000 | Pinon Pines Met Dist #2 CO MDD | 5.00% | 12/01/50 | 1,124,390 | |
1,500,000 | Prairie Ctr CO Met Dist #3 Ltd Property Tax Supported Pri Ref, Ser A (a) | 5.00% | 12/15/41 | 1,510,117 | |
315,000 | Prairie Ctr Met Dist #7 CO | 4.13% | 12/15/36 | 288,588 | |
550,000 | Sterling Ranch Cmnty Auth Brd CO Supported Rev Ref Sr, Ser A | 6.13% | 12/01/39 | 572,989 | |
900,000 | Thompson Crossing Met Dist #4 CO Ref | 5.00% | 12/01/39 | 900,201 | |
1,520,000 | Trails at Crowfoot Met Dist #3 CO Sr Ser, Ser A (Pre-refunded maturity 09/01/24) | 5.00% | 12/01/39 | 1,565,384 | |
700,000 | W Meadow Met Dist CO Ref Sr Bonds, Ser A (a) | 6.00% | 12/01/38 | 730,721 | |
33,713,291 | |||||
See Notes to Financial Statements
Page 3
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Connecticut — 1.7% | |||||
$250,000 | Bridgeport CT, Ser A, BAM | 5.00% | 02/01/31 | $269,904 | |
2,000,000 | CT St Hlth & Eductnl Facs Auth Rev Covenant Home Inc, Ser B | 5.00% | 12/01/40 | 2,025,344 | |
800,000 | CT St Hlth & Eductnl Facs Auth Rev Hartford Hlthcare, Ser A | 4.00% | 07/01/37 | 810,425 | |
2,500,000 | CT St Hlth & Eductnl Facs Auth Rev Sustainable Bonds Goodwin Univ Obligated Grp, Ser A1 | 5.00% | 07/01/44 | 2,539,653 | |
2,725,000 | CT St Hlth & Eductnl Facs Auth Rev Trinity Hlth Corp | 5.00% | 12/01/45 | 2,753,548 | |
2,500,000 | Harbor Point CT Infra Impt Dist Spl Oblig Rev Ref Harbor Point Proj Ltd (a) | 5.00% | 04/01/39 | 2,517,536 | |
10,916,410 | |||||
Delaware — 0.2% | |||||
875,000 | Bridgeville DE Spl Oblig Heritage Shores Spl Dev Dist (a) | 5.25% | 07/01/44 | 918,364 | |
314,000 | Millsboro DE Spl Oblig Ref Plantation Lakes Spl Dev Dist (a) | 5.00% | 07/01/28 | 316,060 | |
1,234,424 | |||||
Florida — 16.3% | |||||
705,000 | Alachua Cnty FL Hlth Facs Auth CCRC Ref Oak Hammock at the Univ of FL Inc Proj | 4.00% | 10/01/40 | 645,015 | |
100,000 | Ave Maria FL Stewardship Cmnty Dist Capital Impt Rev Maple Ridge Phase 4 Proj (a) | 4.30% | 05/01/42 | 93,724 | |
1,655,000 | Ave Maria FL Stewardship Cmnty Dist Capital Impt Rev Maple Ridge Phase 4 Proj (a) | 4.45% | 05/01/52 | 1,500,630 | |
2,380,000 | Ave Maria FL Stewardship Cmnty Dist Capital Impt Rev Phase 4 Master Impt Proj (a) | 5.25% | 05/01/43 | 2,431,715 | |
2,000,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Assmt Area 3A (a) | 5.13% | 11/01/49 | 2,013,519 | |
485,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Proj, Ser 2021 | 4.00% | 05/01/52 | 405,777 | |
1,000,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Proj, Ser 2022 | 5.00% | 05/01/53 | 1,001,833 | |
1,000,000 | Berry Bay CDD FL Spl Assmnt Rev Assmnt Area One | 3.63% | 05/01/41 | 856,425 | |
2,000,000 | Bexley CDD FL Spl Assmnt Rev | 4.88% | 05/01/47 | 1,945,812 | |
1,600,000 | Bridgewater N Cmnty Dev Dist FL Capital Impt Rev | 4.00% | 05/01/42 | 1,427,763 | |
895,000 | Capital Trust Agy FL Eductnl Facs Rev Academir Chrt Schs Inc Proj, Ser A (a) | 4.00% | 07/01/41 | 793,599 | |
525,000 | Capital Trust Agy FL Eductnl Facs Rev Academir Chrt Schs Inc Proj, Ser A (a) | 4.00% | 07/01/51 | 428,357 | |
180,000 | Capital Trust Agy FL Eductnl Facs Rev Liza Jackson Preparatory Sch Inc Proj, Ser A | 4.00% | 08/01/30 | 178,117 | |
1,070,000 | Capital Trust Agy FL Eductnl Facs Rev Liza Jackson Preparatory Sch Inc Proj, Ser A | 5.00% | 08/01/40 | 1,091,550 | |
1,000,000 | Celebration Pointe Cmnty Dev Dist No 1 FL Spl Assmnt Rev | 4.00% | 05/01/53 | 831,010 | |
1,000,000 | Charlotte Cnty FL Indl Dev Auth Util Sys Rev Town & Country Utils Proj (a) | 5.00% | 10/01/34 | 1,019,342 | |
595,000 | Charlotte Cnty FL Indl Dev Auth Util Sys Rev Town & Country Utils Proj, Ser A, AMT (a) | 4.00% | 10/01/41 | 546,105 | |
4,000,000 | Charlotte Cnty FL Indl Dev Auth Util Sys Rev Town & Country Utils Proj, Ser A, AMT (a) | 4.00% | 10/01/51 | 3,364,053 | |
540,000 | Coco Palms FL CDD Spl Assmnt | 4.50% | 05/01/32 | 544,770 | |
1,000,000 | Coco Palms FL CDD Spl Assmnt | 5.00% | 05/01/46 | 1,002,718 | |
1,500,000 | Connerton E CDD FL Spl Assmnt Area One | 5.25% | 06/15/43 | 1,555,899 | |
1,000,000 | Crosswinds E CDD FL Spl Assmnt Area One Proj | 5.50% | 05/01/44 | 1,021,942 | |
1,500,000 | Crosswinds E CDD FL Spl Assmnt Area One Proj | 5.75% | 05/01/54 | 1,526,728 | |
See Notes to Financial Statements
Page 4
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Florida (Continued) | |||||
$600,000 | Cypress Bluff CDD FL Spl Assmnt Del Web Proj, Ser A (a) | 3.63% | 05/01/40 | $568,480 | |
1,000,000 | Edgewater E CDD FL Spl Assmnt Rev Assmnt Area One | 4.00% | 05/01/51 | 847,042 | |
2,635,000 | Edgewater E CDD FL Spl Assmnt Rev Assmnt Area Two | 4.00% | 05/01/42 | 2,370,781 | |
3,050,000 | Epperson N CDD FL Capital Impt Rev Assmnt Area #2 | 4.00% | 05/01/51 | 2,544,405 | |
845,000 | Epperson N CDD FL Capital Impt Rev Assmnt Area 1, Ser A-1 (a) | 5.00% | 11/01/29 | 862,672 | |
1,000,000 | Epperson N CDD FL Capital Impt Rev Assmnt Area 1, Ser A-1 (a) | 5.50% | 11/01/39 | 1,034,285 | |
1,250,000 | Fallschase Cmnty Dev Dist FL Spl Assmnt | 3.38% | 05/01/41 | 1,038,872 | |
1,385,000 | FL St Dev Fin Corp Eductnl Facs Rev Ref Global Outreach Chrt Acdmy Proj, Ser A (a) | 4.00% | 06/30/56 | 990,214 | |
250,000 | FL St Dev Fin Corp Ref Brightline FL Passenger Rail Proj, AGM, AMT | 5.25% | 07/01/53 | 261,242 | |
2,000,000 | FL St Dev Fin Corp Sol Wst Disp Rev Var Waste Pro USA Inc Proj, AMT (Mandatory put 07/01/26) (a) | 6.13% | 07/01/32 | 2,053,179 | |
1,005,000 | FL St Dev Fin Corp Sr Living Rev Ref Mayflower Retmnt Cmnty Proj, Ser A (a) | 4.00% | 06/01/41 | 859,619 | |
750,000 | FL St Dev Fin Corp Sr SFP Tampa I The Henry Proj, Ser A1 (a) | 5.00% | 06/01/44 | 766,913 | |
1,000,000 | FL St Dev Fin Corp Sr SFP Tampa I The Henry Proj, Ser A1 (a) | 5.25% | 06/01/54 | 1,023,064 | |
500,000 | Forest Lake Cmnty Dev Dist FL Spl Assmnt Area 1 Proj (a) | 4.00% | 05/01/40 | 491,934 | |
1,750,000 | Fort Lauderdale FL Wtr & Swr Rev Enabling Wks Proj, Ser A | 5.50% | 09/01/53 | 1,977,221 | |
190,000 | Gardens at Hammock Beach CDD FL Spl Assmnt Area One, Ser 1 | 4.80% | 05/01/31 | 190,231 | |
305,000 | Gardens at Hammock Beach CDD FL Spl Assmnt Area One, Ser 1 | 5.38% | 05/01/44 | 305,691 | |
2,000,000 | Gtr Orlando FL Aviation Auth Arpt Facs Rev, Ser A, AMT | 4.00% | 10/01/35 | 2,014,649 | |
1,560,000 | Gulfstream Polo Cmnty Dev Dist FL Spl Assmnt Phase 2 Proj | 4.38% | 11/01/49 | 1,427,203 | |
2,000,000 | Halifax FL Hosp Med Ctr Ref | 5.00% | 06/01/36 | 2,024,149 | |
500,000 | Hamilton Bluff Cmnty Dev Dist FL Spl Assmnt Area One Proj | 4.70% | 05/01/31 | 503,408 | |
500,000 | Hamilton Bluff Cmnty Dev Dist FL Spl Assmnt Area One Proj | 5.50% | 05/01/44 | 506,732 | |
1,000,000 | Hamilton Bluff Cmnty Dev Dist FL Spl Assmnt Area One Proj | 5.80% | 05/01/54 | 1,011,775 | |
750,000 | Lakewood Ranch FL Stewardship Dist Spl Assmnt Rev N E Sector Proj Phase 1A | 5.00% | 05/01/38 | 763,567 | |
1,325,000 | Lakewood Ranch FL Stewardship Dist Spl Assmnt Rev Stewardship Dist Azario Proj | 4.00% | 05/01/50 | 1,137,973 | |
1,000,000 | Lee Cnty FL Indl Dev Auth Hlthcare Facs Rev Shell Point (Temps- 65), Ser 2024 B-2 | 4.38% | 11/15/29 | 1,002,859 | |
1,050,000 | Lee Cnty FL Indl Dev Auth Hlthcare Facs Rev Shell Point Waterside Hlth Proj | 5.00% | 11/15/49 | 1,070,435 | |
1,790,000 | LTC Ranch W Rsdl Cmnty Dev Dist Spl Assmnt Rev Assmnt Area One Proj, Ser A | 4.00% | 05/01/52 | 1,478,483 | |
300,000 | LTC Ranch W Rsdl Cmnty Dev Dist Spl Assmnt Rev Assmnt Area Two Proj Pod 5, Ser AA2 | 5.70% | 05/01/44 | 304,926 | |
2,570,000 | Miami-Dade Cnty FL Aviation Rev Ref, Ser A, AMT | 5.00% | 10/01/38 | 2,587,645 | |
1,240,000 | Mirada II Cmnty Dev Dist FL Cap Impt Rev | 4.00% | 05/01/51 | 1,033,941 | |
1,880,000 | N Park Isle Cmnty Dev Dist FL Spl Assmnt Rev Assmnt Area One | 4.50% | 05/01/40 | 1,841,188 | |
1,500,000 | N Park Isle Cmnty Dev Dist FL Spl Assmnt Rev Assmnt Area Two | 3.38% | 11/01/41 | 1,255,059 | |
1,000,000 | N Springs FL Impt Dist Parkland Bay Assmt Area (a) | 4.88% | 05/01/38 | 1,008,961 | |
1,300,000 | Old Hickory CDD FL Spl Assmnt Spl Asmt | 4.00% | 06/15/40 | 1,198,947 | |
465,000 | Parkland Preserve CDD FL Spl Assmnt Rev 2019A Spl Assmnts, Ser A | 5.25% | 05/01/39 | 477,728 | |
1,000,000 | Parrish Lakes CDD Capital Impt Rev Assmnt Area Three | 5.50% | 05/01/44 | 1,003,975 | |
1,000,000 | Polk Cnty FL Indl Dev Auth Mineral Dev LLC Secondary Phosphate Tailings Recovery Proj (d) | 5.88% | 01/01/33 | 942,164 | |
610,000 | Pompano Beach FL Rev John Knox Vlg Proj, Ser A | 4.00% | 09/01/41 | 569,057 | |
See Notes to Financial Statements
Page 5
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Florida (Continued) | |||||
$690,000 | Prosperity Lakes Cmnty Dev Dist FL Spl Assmnt Area One | 5.88% | 12/15/43 | $728,874 | |
1,000,000 | Prosperity Lakes Cmnty Dev Dist FL Spl Assmnt Area One | 6.13% | 12/15/53 | 1,055,706 | |
3,700,000 | Putnam Cnty FL Dev Auth Adj Ref FL Pwr & Lt Co Proj (e) | 4.25% | 09/01/24 | 3,700,000 | |
1,710,000 | Reunion E FL CDD Spl Assmnt, Ser 2021 | 4.00% | 05/01/51 | 1,443,567 | |
760,000 | Rivington CDD FL Spl Assmnt Rev Assmnt Area | 3.38% | 05/01/31 | 715,313 | |
500,000 | Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | 4.00% | 12/15/36 | 458,595 | |
750,000 | Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | 4.00% | 12/15/41 | 647,059 | |
2,765,000 | Saltleaf CDD FL Capital Impt Rev | 6.00% | 05/01/56 | 2,815,959 | |
3,055,000 | Sawyers Landing CDD FL Spl Assmnt Rev | 4.13% | 05/01/41 | 2,656,429 | |
2,000,000 | Sawyers Landing CDD FL Spl Assmnt Rev | 4.25% | 05/01/53 | 1,681,345 | |
1,705,000 | Scenic Terrace S CDD FL Spl Assmnt Proj, Ser 2022 | 4.50% | 05/01/42 | 1,618,288 | |
250,000 | SE Overtown Park W Cmnty Redev Agy FL Tax, Ser A-1 (a) | 5.00% | 03/01/30 | 250,185 | |
490,000 | Shell Point Cmnty Dev Dist FL Spl Assmnt (a) | 5.25% | 11/01/39 | 502,131 | |
1,000,000 | Shingle Creek At Bronson CDD FL Spl Assmnt | 3.50% | 06/15/41 | 902,387 | |
1,950,000 | Six Mile Creek FL CDD Capital Impt Rev Assmnt Area 3 Phase 1 | 4.00% | 05/01/51 | 1,655,796 | |
2,580,000 | Stillwater CDD FL Sp Assmnt Spl Assmt 2021 Proj (a) | 3.50% | 06/15/41 | 2,170,536 | |
2,000,000 | The Heights CDD FL Spl Assmnt Rev CDD | 5.00% | 01/01/50 | 1,979,581 | |
835,000 | Triple Creek FL CDD Spl Assmnt Vlgs Q&R Proj (a) | 4.00% | 11/01/51 | 695,992 | |
1,050,000 | Trout Creek CDD FL Capital Impt Rev | 4.00% | 05/01/51 | 869,923 | |
230,000 | Villamar CDD FL Spl Assmnt | 4.00% | 05/01/29 | 229,791 | |
2,400,000 | Volusia Cnty FL Eductnl Fac Auth Stetson Univ Inc Proj | 5.25% | 06/01/49 | 2,545,487 | |
1,370,000 | W Vlgs FL Impt Dist Ref Spl Assmt Unit Dev #1 | 4.63% | 05/01/38 | 1,340,578 | |
1,000,000 | W Vlgs FL Impt Dist Unit Dev #10 Assmnt Area One | 5.38% | 05/01/44 | 1,010,879 | |
900,000 | Westside FL CDD Spl Assmnt Rev Ref (a) | 4.13% | 05/01/38 | 849,016 | |
1,810,000 | Westview S CDD FL Spl Assmnt Area One 2023 Proj Area | 5.38% | 05/01/43 | 1,851,084 | |
1,190,000 | Wildblue CDD FL Spl Assmnt (a) | 4.25% | 06/15/39 | 1,116,111 | |
105,067,684 | |||||
Georgia — 4.9% | |||||
1,000,000 | Atlanta GA Arpt Passenger Fac Charge Rev Arpt Rev Subord, Ser D, AMT | 4.00% | 07/01/37 | 1,005,570 | |
2,800,000 | Bartow Cnty GA Dev Auth Solid Waste Disp Fac Rev Var GA Pwr Co Plt Bowen Proj, AMT (e) | 4.30% | 11/01/62 | 2,800,000 | |
4,400,000 | Burke Cnty GA Dev Auth Poll Control Rev Adjustable GA Pwr Co Plant Vogtle Proj Remk (e) | 4.30% | 11/01/52 | 4,400,000 | |
3,300,000 | Burke Cnty GA Dev Auth Poll Control Rev GA Pwr Co Plant Vogtle Proj Remk, 1st Ser (e) | 4.30% | 11/01/48 | 3,300,000 | |
500,000 | Cobb Cnty GA Dev Auth Chartersch Rev NW Classical Acdmy Proj, Ser A (a) | 6.00% | 06/15/43 | 513,828 | |
1,750,000 | Cobb Cnty GA Dev Auth Chartersch Rev NW Classical Acdmy Proj, Ser A (a) | 6.40% | 06/15/53 | 1,797,732 | |
1,125,000 | Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser A | 5.75% | 04/01/53 | 1,268,838 | |
2,000,000 | Floyd Cnty GA Dev Auth Adj GA Pwr Co Plt Hammond Proj (e) | 4.30% | 09/01/26 | 2,000,000 | |
1,335,000 | Fulton Cnty GA Rsdl Care Facs Elderly Auth Retmnt Fac Rev Ref Lenbrook Sq Fdtn Inc | 5.00% | 07/01/31 | 1,356,392 | |
1,515,000 | Fulton Cnty GA Rsdl Care Facs Elderly Auth Retmnt Fac Rev Ref Lenbrook Sq Fdtn Inc | 5.00% | 07/01/42 | 1,520,699 | |
500,000 | Geo L Smith II GA Congress Ctr Auth Convention Ctr Hotel Second Tier, Ser B (a) | 5.00% | 01/01/36 | 503,070 | |
See Notes to Financial Statements
Page 6
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Georgia (Continued) | |||||
$1,750,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 12/01/29) | 4.00% | 09/01/52 | $1,765,333 | |
1,285,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser C (Mandatory put 09/01/26) | 4.00% | 03/01/50 | 1,289,904 | |
1,000,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser C (Mandatory put 12/01/28) | 4.00% | 05/01/52 | 1,006,846 | |
3,435,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser C (Mandatory put 09/01/30) | 5.00% | 09/01/53 | 3,674,054 | |
2,000,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser D (Mandatory put 12/01/30) | 5.00% | 05/01/54 | 2,122,821 | |
1,000,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser E-1 (Mandatory put 06/01/31) | 5.00% | 12/01/53 | 1,071,360 | |
350,000 | Muni Elec Auth of GA Plant Vogtle Units 3&4 Proj J, Ser A, AGM | 5.00% | 07/01/30 | 381,768 | |
31,778,215 | |||||
Guam — 0.1% | |||||
250,000 | Guam Govt Busn Privilege Tax Rev Ref, Ser D | 5.00% | 11/15/35 | 252,659 | |
155,000 | Guam Govt Wtrwks Auth Wtr & Wstwtr Sys Rev, Ser A | 5.00% | 01/01/50 | 160,067 | |
412,726 | |||||
Hawaii — 0.4% | |||||
1,500,000 | HI St Dept of Budget & Fin Spl Purp Rev Ref HI Pacific Univ Proj (a) | 5.00% | 07/01/39 | 1,511,608 | |
1,000,000 | HI St Dept of Budget & Fin Spl Purp Rev Ref HI Pacific Univ Proj (a) | 5.13% | 07/01/43 | 989,806 | |
2,501,414 | |||||
Idaho — 1.4% | |||||
1,500,000 | Avimor Cmnty Infra Dist #1 ID Spl Assmnt Area Five (a) | 5.88% | 09/01/53 | 1,563,559 | |
985,000 | ID St Hlth Facs Auth Rev Ref Madison Memorial Hosp | 5.00% | 09/01/25 | 988,924 | |
1,265,000 | ID St Hlth Facs Auth Rev Ref Madison Memorial Hosp | 5.00% | 09/01/30 | 1,277,154 | |
1,000,000 | Idaho Falls ID Auditorium Dist Annual Approp Ctfs, COPS (a) | 5.25% | 05/15/51 | 1,004,345 | |
4,000,000 | Spring Vly Cmnty Infra Dist #1 Spl Assmnt Area Two (a) | 6.25% | 09/01/53 | 4,212,103 | |
9,046,085 | |||||
Illinois — 3.3% | |||||
2,615,000 | Chicago IL Brd of Edu Proj, Ser C | 5.25% | 12/01/35 | 2,621,277 | |
300,000 | Chicago IL Brd of Edu Ref Dedicated, Ser C | 5.00% | 12/01/30 | 307,657 | |
3,500,000 | Chicago IL Brd of Edu Ref, Ser B | 5.00% | 12/01/30 | 3,700,623 | |
1,000,000 | Chicago IL Brd of Edu Sustainable Bond, Ser E | 5.13% | 12/01/32 | 1,002,191 | |
1,000,000 | Chicago IL Brd of Edu, Ser A | 5.00% | 12/01/35 | 1,047,156 | |
2,130,000 | Chicago IL Brd of Edu, Ser D | 5.00% | 12/01/46 | 2,137,233 | |
750,000 | Chicago IL Chicago Wks, Ser A | 5.50% | 01/01/40 | 818,591 | |
400,000 | Chicago IL O’Hare Intl Arpt Rev Ref Sr Lien, Ser A, AMT | 5.00% | 01/01/37 | 418,055 | |
1,300,000 | Chicago IL Park Dist Ref, Ser A, BAM | 4.00% | 01/01/32 | 1,328,430 | |
400,000 | Chicago IL Ref 2003B Remk | 5.25% | 01/01/29 | 401,683 | |
625,000 | Chicago IL, Ser A | 5.50% | 01/01/39 | 626,567 | |
250,000 | IL St | 5.50% | 05/01/26 | 259,681 | |
200,000 | IL St | 5.00% | 06/01/27 | 205,489 | |
250,000 | IL St Fin Auth Chrt Sch Rev Ref & Impt Chicago Intl Chrt Sch Proj | 5.00% | 12/01/30 | 257,468 | |
250,000 | IL St Fin Auth Chrt Sch Rev Ref & Impt Chicago Intl Chrt Sch Proj | 5.00% | 12/01/31 | 257,158 | |
100,000 | IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | 5.00% | 02/15/26 | 100,763 | |
See Notes to Financial Statements
Page 7
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Illinois (Continued) | |||||
$300,000 | IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | 5.00% | 02/15/27 | $304,634 | |
145,000 | IL St Fin Auth Stdt Hsg & Acad Fac Rev Chf Chicago LLC Univ IL Chicago Proj, Ser A | 5.00% | 02/15/28 | 147,695 | |
2,000,000 | IL St, Ser C | 5.00% | 11/01/29 | 2,101,019 | |
545,000 | IL St, Ser D | 5.00% | 11/01/24 | 547,324 | |
1,660,000 | Lincolnwood IL Tax Incr Allocation Rev Nts Dist 1860 Dev Proj, Ser A, COPS (a) | 4.82% | 01/01/41 | 1,601,152 | |
1,000,000 | S Wstrn IL Dev Auth Envrnmntl Impt Rev US Steel Corp Proj | 5.75% | 08/01/42 | 1,000,498 | |
21,192,344 | |||||
Indiana — 1.1% | |||||
1,410,000 | Carmel IN Redev Auth | 3.00% | 07/15/40 | 1,216,375 | |
250,000 | Fort Wayne IN Mf Hsg Rev Silver Birch at Cook Road (a) | 5.30% | 01/01/32 | 228,286 | |
1,410,000 | IN St Fin Auth Envrnmntl Rev Ref Var Duke Energy IN Inc Proj Remk, Ser A-1, AMT (Mandatory put 06/01/32) | 4.50% | 05/01/35 | 1,417,076 | |
535,000 | IN St Fin Auth Hlth Fac Rev Margaret Mary Hlth Proj, Ser A | 5.50% | 03/01/44 | 576,402 | |
750,000 | IN St Fin Auth Hosp Rev Reid Hlth, AGM | 5.00% | 01/01/41 | 802,069 | |
1,700,000 | Indianapolis IN Loc Pub Impt Bond Bank Sr Convention Ctr Hotel, Ser E | 6.00% | 03/01/53 | 1,877,775 | |
500,000 | Terre Haute IN Mf Hsg Rev Silver Birch of Terre Haute Proj | 5.10% | 01/01/32 | 449,476 | |
500,000 | Valparaiso IN Exempt Facs Rev Ref Pratt Paper IN LLC Proj, AMT (a) | 4.88% | 01/01/44 | 516,962 | |
7,084,421 | |||||
Iowa — 1.4% | |||||
1,600,000 | Dallas Ctr IA Grimes Cmnty Sch Dist | 3.00% | 05/01/39 | 1,393,833 | |
3,000,000 | IA St Fin Auth Midwstrn Disaster Area Rev Alcoa Inc Proj | 4.75% | 08/01/42 | 2,999,893 | |
1,300,000 | IA St Fin Auth Midwstrn Disaster Area Rev Ref IA Fertilizer Company Proj (Mandatory put 12/01/42) | 5.00% | 12/01/50 | 1,376,138 | |
3,000,000 | IA St Fin Auth Midwstrn Disaster Area Rev Ref IA Fertilizer Company Proj | 5.00% | 12/01/50 | 3,186,625 | |
8,956,489 | |||||
Kansas — 0.5% | |||||
150,000 | Goddard KS Sales Tax Spl Oblg Rev Ref Olympic Park Star Bond Proj | 3.60% | 06/01/30 | 146,378 | |
1,850,000 | Lenexa KS Hlth Care Fac Rev Ref Lakeview Vlg Inc, Ser A | 5.00% | 05/15/43 | 1,847,625 | |
175,000 | Shawnee Cnty KS Pub Bldg Commn Rev Corrections and Parks & Rec Projs | 5.50% | 09/01/34 | 205,020 | |
1,250,000 | Wyandotte Cnty KS Kansas City Unif Govt Spl Oblg Rev Ref Vlg E Proj Areas 2B 3 5 (a) | 5.75% | 09/01/39 | 1,288,046 | |
3,487,069 | |||||
Kentucky — 2.9% | |||||
2,000,000 | Boyle Cnty KY Eductnl Facs Rev Ref Ctr Clg, Ser A | 5.25% | 06/01/43 | 2,162,380 | |
875,000 | Henderson KY Exempt Facs Rev Pratt Paper LLC Proj, Ser A, AMT (a) | 4.45% | 01/01/42 | 876,066 | |
1,650,000 | Jefferson Cnty KY Sch Dist Fin Corp Sch Bldg Rev, Ser B | 3.00% | 12/01/38 | 1,468,797 | |
1,000,000 | KY St Econ Dev Fin Auth Ref Owensboro Hlth, Ser A | 5.00% | 06/01/41 | 1,014,895 | |
1,500,000 | KY St Pub Energy Auth Gas Sply Rev Ref, Ser A-1 (Mandatory put 02/01/32) | 5.25% | 04/01/54 | 1,634,052 | |
2,525,000 | KY St Pub Energy Auth Gas Sply Rev Var, Ser C (Mandatory put 02/01/28) | 4.00% | 02/01/50 | 2,539,234 | |
See Notes to Financial Statements
Page 8
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Kentucky (Continued) | |||||
$230,000 | KY St Univ KY St Univ Proj, BAM, COPS | 4.00% | 11/01/41 | $231,545 | |
1,000,000 | Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Norton Hlthcare Inc, Ser A | 4.00% | 10/01/39 | 976,406 | |
7,600,000 | Meade Cnty KY Indl Bldg Rev Var Nucor Steel Brandenburg Proj Sustainable Bond, Ser B-1 (e) | 4.80% | 08/01/61 | 7,600,000 | |
18,503,375 | |||||
Louisiana — 0.9% | |||||
1,500,000 | LA St Loc Govt Envrnmntl Facs & Cmnty Dev Auth Rev Ref Westlake Chemical Corp Proj Remk | 3.50% | 11/01/32 | 1,454,862 | |
200,000 | Monroe LA Wtr Rev, BAM | 5.00% | 11/01/32 | 214,891 | |
1,000,000 | Saint James Parish LA Rev NuStar Logistics LP Proj Remk, Ser 2010 (a) | 6.35% | 07/01/40 | 1,104,702 | |
1,000,000 | Saint James Parish LA Rev NuStar Logistics LP Proj Remk, Ser 2010A (a) | 6.35% | 10/01/40 | 1,104,702 | |
1,600,000 | Saint James Parish LA Rev Var NuStar Logistics LP Proj Remk, Ser 2010B (Mandatory put 06/01/30) (a) | 6.10% | 12/01/40 | 1,781,971 | |
5,661,128 | |||||
Maine — 0.5% | |||||
3,000,000 | ME St Fin Auth Sol Wst Disp Rev Casella Waste Sys Proj, AMT (Mandatory put 08/01/25) (a) | 5.13% | 08/01/35 | 3,017,553 | |
Maryland — 0.6% | |||||
1,020,000 | Baltimore MD Spl Oblig Ref E Baltimore Rsrch Park Proj, Ser A | 5.00% | 09/01/38 | 1,027,761 | |
175,000 | Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (a) | 2.95% | 06/01/27 | 167,811 | |
185,000 | Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (a) | 3.05% | 06/01/28 | 174,471 | |
200,000 | Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (a) | 3.15% | 06/01/29 | 186,513 | |
190,000 | Baltimore MD Spl Oblig Ref Sr Lien Harbor Point Proj, Ser A (a) | 3.20% | 06/01/30 | 175,319 | |
900,000 | Frederick Cnty MD Tax Incr & Spl Tax Ref Jefferson Technology Park Proj, Ser B (a) | 4.63% | 07/01/43 | 884,339 | |
1,000,000 | MD St Econ Dev Corp Stdt Hsg Rev Morgan St Univ Proj, Ser A | 5.38% | 07/01/38 | 1,096,951 | |
3,713,165 | |||||
Massachusetts — 0.5% | |||||
500,000 | MA St Dev Fin Agy Rev Linden Ponds Inc Fac (a) | 5.00% | 11/15/28 | 522,706 | |
500,000 | MA St Dev Fin Agy Rev Ref Boston Med Ctr Sustainable Bonds, Ser G | 5.25% | 07/01/48 | 540,541 | |
1,020,000 | MA St Dev Fin Agy Rev Ref Salem Cmnty Corp | 5.13% | 01/01/40 | 1,006,613 | |
1,000,000 | MA St Dev Fin Agy Rev UMass Dartmouth Stdt Hsg Proj | 5.00% | 10/01/48 | 1,005,531 | |
3,075,391 | |||||
Michigan — 1.4% | |||||
300,000 | Detroit MI Downtown Dev Auth Tax Incr Rev Ref Catalyst Dev Proj, Ser A, AGM (Pre-refunded maturity 09/25/24) | 5.00% | 07/01/31 | 300,814 | |
1,100,000 | Detroit MI Sustainable Bonds, Ser A | 5.00% | 04/01/46 | 1,145,361 | |
2,000,000 | Detroit MI Sustainable Bonds, Ser A | 5.00% | 04/01/50 | 2,067,821 | |
1,000,000 | Great Lakes MI Wtr Auth Wtr Sply Sys Rev Sr Lien Bonds, Ser B | 5.25% | 07/01/48 | 1,117,869 | |
2,000,000 | MI St Fin Auth Rev Henry Ford Hlth Sys, Ser A | 5.00% | 11/15/48 | 2,081,225 | |
2,230,000 | MI St Strategic Fund Ltd Oblg Rev Var Sustainable Bond Recycled Brd Machine Proj, AMT (Mandatory put 10/01/26) | 4.00% | 10/01/61 | 2,238,177 | |
8,951,267 | |||||
Minnesota — 0.4% | |||||
150,000 | Minneapolis MN Stdt Hsg Rev Riverton Cmnty Hsg Proj (a) | 3.80% | 08/01/27 | 147,744 | |
See Notes to Financial Statements
Page 9
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Minnesota (Continued) | |||||
$1,200,000 | Saint Paul MN Hsg & Redev Auth Chrt Sch Lease Rev Ref Hgr Ground Acdmy Proj | 4.25% | 12/01/32 | $1,228,818 | |
105,000 | Saint Paul MN Hsg & Redev Auth Chrt Sch Lease Rev Ref, Ser A | 5.00% | 12/01/30 | 105,201 | |
850,000 | Woodbury MN Chrt Sch Lease Rev Woodbury Leadership Proj, Ser A | 4.00% | 07/01/41 | 714,886 | |
660,000 | Woodbury MN Chrt Sch Lease Rev Woodbury Leadership Proj, Ser A | 4.00% | 07/01/51 | 502,780 | |
2,699,429 | |||||
Mississippi — 1.0% | |||||
6,600,000 | MS St Busn Fin Corp Sol Wst Disp Rev Adj MS Pwr Co Proj Remk, AMT (e) | 4.80% | 07/01/25 | 6,600,000 | |
Missouri — 1.4% | |||||
500,000 | Lees Summit MO Indl Dev Auth Sr Living Facs Rev John Knox Vlg, Ser A | 5.00% | 08/15/51 | 446,343 | |
1,000,000 | Lees Summit MO Indl Dev Auth Sr Living Facs Rev Ref John Knox Vlg, Ser A | 5.00% | 08/15/39 | 1,054,897 | |
550,000 | MO St Hlth & Eductnl Facs Auth Lutheran Sr Svc Projs Svcs Projs, Ser A, Ser ASR | 5.00% | 02/01/29 | 572,159 | |
1,000,000 | MO St Hlth & Eductnl Facs Auth Lutheran Sr Svc Projs Svcs Projs, Ser A, Ser ASR | 5.00% | 02/01/42 | 1,023,174 | |
550,000 | MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | 4.00% | 02/01/32 | 561,806 | |
10,000 | MO St Hlth & Eductnl Facs Auth Med Rsrch Lutheran Svcs, Ser A | 5.00% | 02/01/29 | 10,200 | |
2,000,000 | MO St Hlth & Eductnl Facs Auth Ref Lutheran Sr Svcs Projs, Ser A | 5.25% | 02/01/48 | 2,113,338 | |
1,145,000 | MO St Hlth & Eductnl Facs Auth Ref Lutheran Sr Svcs Projs, Ser B | 5.00% | 02/01/46 | 1,151,566 | |
250,000 | Saint Charles Cnty MO Pub Wtr Sply Dist #2 Pub Wtr Sply Dist No. 2, COPS | 4.00% | 12/01/44 | 245,362 | |
2,000,000 | Taney Cnty MO Indl Dev Auth Sales Tax Rev Big Cedar Infra Proj (a) | 6.00% | 10/01/49 | 2,013,802 | |
9,192,647 | |||||
Nevada — 0.6% | |||||
775,000 | Henderson NV Loc Impt Dists Rainbow Canyon Phase II Roject | 5.00% | 03/01/38 | 789,736 | |
1,000,000 | Henderson NV Loc Impt Dists Rainbow Canyon Phase II Roject | 5.25% | 03/01/48 | 1,002,176 | |
445,000 | Las Vegas NV Spl Assmnt Dist #817 Spl Impt Dt# 817 Summerlin Vlg 29 | 5.75% | 06/01/43 | 466,616 | |
500,000 | Las Vegas NV Spl Assmnt Dist #817 Spl Impt Dt# 817 Summerlin Vlg 29 | 6.00% | 06/01/48 | 525,237 | |
190,000 | N Las Vegas NV Loc Impt Vly Vista Spl Impt Dist #64 | 4.00% | 06/01/29 | 187,417 | |
700,000 | NV Dept of Busn & Ind NV Doral Acdmy, Ser A | 5.00% | 07/15/37 | 704,235 | |
3,675,417 | |||||
New Hampshire — 0.3% | |||||
2,000,000 | Natl Fin Auth NH Rev Ref Sustainable Bond, Ser B, AMT (Mandatory put 07/02/40) (a) | 3.75% | 07/01/45 | 1,692,416 | |
New Jersey — 0.4% | |||||
950,000 | NJ St Econ Dev Auth Spl Fac Rev Continental Airls Inc Proj Remk, Ser B, AMT | 5.63% | 11/15/30 | 958,033 | |
100,000 | NJ St Econ Dev Auth Spl Fac Rev Ref Port Newark Container Terminal LLC Proj, AMT | 5.00% | 10/01/25 | 101,055 | |
190,000 | NJ St Hgr Edu Asst Auth Stdt Loan Rev, Ser 1A, AMT | 4.00% | 12/01/30 | 189,642 | |
See Notes to Financial Statements
Page 10
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
New Jersey (Continued) | |||||
$560,000 | NJ St Transprtn Trust Fund Auth Fun Auth Transprtn Prog Bonds, Ser CC | 5.25% | 06/15/41 | $627,739 | |
500,000 | NJ St Transprtn Trust Fund Auth Ref Transprtn Sys, Ser A | 5.00% | 12/15/30 | 537,118 | |
2,413,587 | |||||
New Mexico — 0.4% | |||||
1,000,000 | NM St Hosp Equipment Loan Council Hosp Rev Ref Var Presbyterian Hlthcare Remk, Ser B (e) | 4.05% | 08/01/34 | 1,000,000 | |
534,000 | Winrock Town Ctr NM Tax Incr Dev Dist #1 Ref Sr Lien (a) | 3.75% | 05/01/28 | 525,664 | |
500,000 | Winrock Town Ctr NM Tax Incr Dev Dist #1 Ref Sr Lien (a) | 4.00% | 05/01/33 | 483,072 | |
500,000 | Winrock Town Ctr NM Tax Incr Dev Dist #1 Ref Sr Lien (a) | 4.25% | 05/01/40 | 472,497 | |
2,481,233 | |||||
New York — 4.5% | |||||
1,000,000 | Build NYC Res Corp NY Rev Sustainable Bond Kipp NYC Pub Sch Facs Canal W Proj | 5.25% | 07/01/52 | 1,041,605 | |
450,000 | Dutchess Cnty NY Loc Dev Corp Mf Mtebs Sustainable Bonds Tomopkins Terrace Hsg LP Proj | 5.00% | 10/01/40 | 476,732 | |
950,000 | Nassau Cnty NY Loc Econ Asst Corp Edl Rev Roosevelt Children Acdmy Chrt Sch Proj, Ser A | 5.00% | 07/01/43 | 986,664 | |
595,000 | New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Ref 2nd Gen Resolution Fiscal 2018 Block 4, Ser AA | 5.00% | 06/15/38 | 619,926 | |
2,625,000 | New York City NY Transitional Fin Auth Rev Future Tax Secured Subord Bonds, Ser C-1 | 4.00% | 02/01/42 | 2,621,460 | |
2,000,000 | NY NY, Ser B, Subser B-1 | 5.25% | 10/01/41 | 2,259,916 | |
300,000 | NY St Dorm Auth Revs Non St Supported Debt New York Institute of Technology | 5.00% | 07/01/44 | 321,390 | |
1,925,000 | NY St Dorm Auth St Personal Income Tax Rev Ref, Ser A | 3.00% | 03/15/42 | 1,644,198 | |
500,000 | NY St Transprtn Dev Corp Exempt Fac Rev NY St Thruway Srvc Areas Proj, AMT | 4.00% | 10/31/46 | 442,425 | |
1,250,000 | NY St Transprtn Dev Corp Spl Fac Rev Delta Airls Inc LaGuardia Arpt Terminals C&D Redev, AMT | 5.00% | 10/01/40 | 1,301,406 | |
2,000,000 | NY St Transprtn Dev Corp Spl Fac Rev Delta Airls Inc LaGuardia Arpt Terminals C&D Redev, AMT | 4.38% | 10/01/45 | 1,930,547 | |
1,000,000 | NY St Transprtn Dev Corp Spl Fac Rev Ref American Airls Inc John F Kennedy Intl Arpt Proj, AMT | 5.00% | 08/01/31 | 1,000,222 | |
3,695,000 | NY St Transprtn Dev Corp Spl Fac Rev Ref John F. Kennedy Intl Arpt Proj, AMT | 5.25% | 08/01/31 | 3,920,968 | |
1,000,000 | NY St Transprtn Dev Corp Spl Fac Rev Sustainable Bond JFK Intl Arpt Terminal One Prj, AMT | 6.00% | 06/30/54 | 1,089,085 | |
500,000 | Onondaga NY Civic Dev Corp Ref Crouse Hlth Hosp Inc Proj, Ser A | 5.13% | 08/01/44 | 508,154 | |
1,000,000 | Onondaga NY Civic Dev Corp Ref Crouse Hlth Hosp Inc Proj, Ser A | 5.38% | 08/01/54 | 1,026,357 | |
500,000 | Oyster Bay NY, Ser A, AGM | 2.00% | 03/01/35 | 389,684 | |
2,000,000 | Suffolk Regl Off Track Betting Corp NY Rev | 5.75% | 12/01/44 | 2,092,650 | |
2,000,000 | Suffolk Regl Off Track Betting Corp NY Rev | 6.00% | 12/01/53 | 2,100,864 | |
2,810,000 | Tsasc Inc NY Tsasc Inc Rev Ref Turbo Sub, Ser B | 5.00% | 06/01/48 | 2,498,194 | |
100,000 | Westchester Cnty NY Loc Dev Corp Rev Ref Miriam Osborn Memorial Home Assn Proj | 5.00% | 07/01/34 | 103,910 | |
460,000 | Westchester NY Tobacco Asset Securitization Ref Sr, Ser B | 5.00% | 06/01/41 | 469,424 | |
28,845,781 | |||||
See Notes to Financial Statements
Page 11
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
North Carolina — 2.2% | |||||
$3,300,000 | NC St Med Care Commn Hlth Care Facs Rev Lutheran Svcs For the Aging Ref, Ser A | 4.00% | 03/01/41 | $3,014,502 | |
500,000 | NC St Med Care Commn Hlth Care Facs Rev Ref Pennybyrn at Maryfield | 5.00% | 10/01/30 | 500,259 | |
1,500,000 | NC St Med Care Commn Retmnt Facs Rev Carolina Meadows | 5.25% | 12/01/49 | 1,607,438 | |
1,940,000 | NC St Med Care Commn Retmnt Facs Rev Pennybyrn at Maryfield Proj, Ser A | 5.00% | 10/01/45 | 1,871,120 | |
2,850,000 | NC St Med Care Commn Retmnt Facs Rev Ref Southminster Inc | 5.00% | 10/01/37 | 2,876,587 | |
1,545,000 | NC St Med Care Commn Retmnt Facs Rev The Forest at Duke Proj | 4.00% | 09/01/46 | 1,330,494 | |
750,000 | NC St Med Care Commn Retmnt Facs Rev The United Methodist Retmnt Homes Proj, Ser A | 5.00% | 10/01/49 | 777,826 | |
2,050,000 | NC St Med Care Commn Retmnt Facs Rev The United Methodist Retmnt Homes Proj, Ser A | 5.13% | 10/01/54 | 2,127,619 | |
14,105,845 | |||||
North Dakota — 0.1% | |||||
520,000 | Horace ND Ref | 3.00% | 05/01/36 | 428,502 | |
Ohio — 3.3% | |||||
6,250,000 | Buckeye OH Tobacco Stlmt Fing Auth Ref Sr, Class 2, Ser B-2 | 5.00% | 06/01/55 | 5,796,628 | |
900,000 | Cleveland Cuyahoga Cnty OH Port Auth Tax Incr Fing Rev Ref Sr Flats E Bank Proj, Ser A (a) | 4.00% | 12/01/55 | 757,449 | |
2,245,000 | Franklin Cnty OH Rev Trinity Hlth Credit Grp OH, Ser A | 5.00% | 12/01/47 | 2,293,988 | |
500,000 | Hamilton Cnty OH Hlth Care Rev Life Enriching Cmntys Proj, Ser A | 5.25% | 01/01/38 | 523,516 | |
500,000 | Hamilton Cnty OH Hlth Care Rev Life Enriching Cmntys Proj, Ser A | 5.50% | 01/01/43 | 523,979 | |
2,000,000 | Hamilton Cnty OH Hosp Facs Rev Var Ref Trihealth Inc Obligated Grp Proj Remk, Ser B (e) | 4.05% | 08/15/51 | 2,000,000 | |
3,000,000 | OH St Air Quality Dev Auth Exempt Facs Rev AMG Vanadium Proj, AMT (a) | 5.00% | 07/01/49 | 2,836,550 | |
2,410,000 | OH St Air Quality Dev Auth Var Ref Duke Energy Corp Proj, Ser A, AMT (Mandatory put 06/01/27) | 4.25% | 11/01/39 | 2,430,571 | |
1,000,000 | OH St Hgr Eductnl Fac Commn Ref Rev Judson Oblig Grp 2020 Proj, Ser A | 5.00% | 12/01/45 | 979,374 | |
2,535,000 | OH St Hosp Rev Ref Var Univ Hosps Hlth Sys Inc, Ser C (e) | 3.85% | 01/15/51 | 2,535,000 | |
490,000 | Port of Gtr Cincinnati Dev Auth OH Rev (a) | 3.75% | 12/01/31 | 465,766 | |
21,142,821 | |||||
Oklahoma — 0.6% | |||||
2,500,000 | OK St Dev Fin Auth Sr OK Proton Ctr, Ser A1 (a) | 7.25% | 09/01/51 | 2,539,760 | |
1,165,000 | Tulsa Cnty OK Indl Auth Sr Living Cmnty Rev Ref Montereau Inc Proj | 5.25% | 11/15/37 | 1,185,295 | |
3,725,055 | |||||
Oregon — 1.1% | |||||
750,000 | Astoria OR Hosp Facs Auth Columbia Memorial Hosp Proj | 5.25% | 08/01/49 | 801,456 | |
290,000 | Clackamas Cnty OR Hosp Fac Auth Rev Mary’s Woods at Marylhurst Inc Proj, Ser A | 5.00% | 05/15/26 | 290,864 | |
1,150,000 | Clackamas Cnty OR Hosp Fac Auth Rev Ref Rose Villa Proj, Ser A | 5.13% | 11/15/40 | 1,151,459 | |
2,250,000 | Clackamas Cnty OR Hosp Fac Auth Rev Ref Rose Villa Proj, Ser A | 5.38% | 11/15/55 | 2,191,647 | |
575,000 | Clackamas Cnty OR Hosp Fac Auth Rev Ref Sr Living Willamette View Proj, Ser A | 5.00% | 11/15/37 | 578,767 | |
500,000 | Salem OR Hosp Fac Auth Rev Capital Manor Proj | 5.00% | 05/15/38 | 505,634 | |
See Notes to Financial Statements
Page 12
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Oregon (Continued) | |||||
$750,000 | Salem OR Hosp Fac Auth Rev Capital Manor Proj | 5.00% | 05/15/43 | $751,225 | |
750,000 | Union Cnty OR Hosp Fac Auth Grande Ronde Hosp | 5.00% | 07/01/42 | 757,399 | |
7,028,451 | |||||
Pennsylvania — 2.1% | |||||
300,000 | Allegheny Cnty PA Hosp Dev Auth Ref Allegheny Hlth Network Obligted Grp Issue, Ser A | 5.00% | 04/01/32 | 313,781 | |
1,855,000 | Allegheny Cnty PA Hosp Dev Auth Ref Allegheny Hlth Network Obligted Grp Issue, Ser A | 5.00% | 04/01/47 | 1,894,612 | |
500,000 | Allegheny Cnty PA Indl Dev Auth Envrnmtl Impt Rev Ref United States Steel Corp Proj | 4.88% | 11/01/24 | 501,085 | |
100,000 | Chester Cnty PA Indl Dev Auth Renaissance Acdmy Chrt Sch | 5.00% | 10/01/34 | 100,039 | |
1,110,000 | Lancaster Cnty PA Hosp Auth Hlthcare Facs Rev Moravian Manors Inc Proj, Ser A | 5.00% | 06/15/38 | 1,098,992 | |
250,000 | Latrobe PA Indl Dev Auth Univ Rev Ref Seton Hill Univ | 4.00% | 03/01/38 | 229,943 | |
1,200,000 | Latrobe PA Indl Dev Auth Univ Rev Ref Seton Hill Univ | 4.00% | 03/01/46 | 1,014,288 | |
1,655,000 | Montgomery Cnty PA Indl Dev Auth Exempt Facs Rev Var Constellation Energy Genration LLC Proj Ref, Ser C, AMT (Mandatory put 04/03/28) | 4.45% | 10/01/34 | 1,694,323 | |
1,780,000 | PA St Econ Dev Fing Auth Exempt Facs Rev Var Ref Energy Sply LLC Proj Remk, Ser C (Mandatory put 06/01/27) | 5.25% | 12/01/37 | 1,809,355 | |
1,000,000 | PA St Econ Dev Fing Auth Rev Ref Presbyterian Sr Living Prj, Ser B-2 | 5.25% | 07/01/46 | 1,061,759 | |
1,250,000 | PA St Econ Dev Fing Auth T/E Priv Activity Rev The Penndot Major Bridges Package One Proj P3 Proj, AMT | 5.25% | 06/30/35 | 1,363,502 | |
10,000 | PA St Turnpike Commn Turnpike Rev Ref Sub, Ser B | 5.00% | 06/01/39 | 10,179 | |
1,000,000 | Philadelphia PA Arpt Rev Ref Priv Activity, AGM | 4.00% | 07/01/38 | 993,941 | |
850,000 | Philadelphia PA Auth for Indl Dev Chrt Sch Rev Philadelphia E&T Chrt High Sch, Ser A | 4.00% | 06/01/56 | 694,337 | |
215,000 | Philadelphia PA Auth for Indl Dev Revs Kipp Philadelphia Chrt Sch Proj, Ser A | 5.00% | 04/01/36 | 216,248 | |
495,000 | W Cornwall Twp PA Muni Auth Ref Lebanon Vly Brethren Home Proj, Ser A | 4.00% | 11/15/41 | 460,939 | |
13,457,323 | |||||
Puerto Rico — 3.0% | |||||
2,900,000 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/33 | 2,915,068 | |
3,002,265 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/35 | 2,957,784 | |
3,358,267 | Puerto Rico Cmwlth Restructured, Ser A1 | 4.00% | 07/01/41 | 3,160,787 | |
250,000 | Puerto Rico Indl Tourist Eductnl Med & Envrnmntl Control Fac San Juan Cruise Terminal Proj, Ser 2023-A-2-P3, AMT | 6.50% | 01/01/42 | 294,456 | |
2,866,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured Converted, Ser A-2 | 4.33% | 07/01/40 | 2,850,580 | |
1,559,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1 | 4.50% | 07/01/34 | 1,561,583 | |
1,170,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1 | 4.55% | 07/01/40 | 1,171,622 | |
4,500,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-2 | 4.33% | 07/01/40 | 4,475,788 | |
19,387,668 | |||||
Rhode Island — 0.4% | |||||
2,500,000 | Tobacco Stlmt Fing Corp RI Ref, Ser A | 5.00% | 06/01/40 | 2,514,147 | |
See Notes to Financial Statements
Page 13
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
South Carolina — 1.0% | |||||
$380,000 | Berkeley Cnty SC Assmnt Rev Nexton Impt Dist | 4.00% | 11/01/30 | $368,029 | |
230,000 | Lancaster Cnty SC Assmnt Rev Ref Walnut Creek Impt Dist, Ser A-1 | 5.00% | 12/01/31 | 230,074 | |
2,000,000 | Lexington Cnty SC Hlth Svcs Dist Lexington Med Ctr | 5.00% | 11/01/41 | 2,023,501 | |
275,000 | SC St Jobs Econ Dev Auth Econ Dev Rev Ref The Woodlands at Furman | 4.00% | 11/15/32 | 266,670 | |
1,045,000 | SC St Jobs Econ Dev Auth Econ Dev Rev Ref The Woodlands at Furman | 5.25% | 11/15/47 | 1,049,921 | |
1,450,000 | SC St Jobs Econ Dev Auth Econ Dev Rev Woodlands at Furman Proj, Ser A | 5.00% | 11/15/42 | 1,457,660 | |
1,250,000 | SC St Pub Svc Auth Rev Ref Santee Cooper, Ser B | 5.00% | 12/01/43 | 1,360,418 | |
6,756,273 | |||||
Tennessee — 0.5% | |||||
2,500,000 | TN St Energy Acq Corp Gas Rev (Mandatory put 11/01/25) | 4.00% | 11/01/49 | 2,505,014 | |
800,000 | TN St Energy Acq Corp Gas Rev Var Ref Gas Proj, Ser A-1 (Mandatory put 05/01/28) | 5.00% | 05/01/53 | 833,379 | |
3,338,393 | |||||
Texas — 7.7% | |||||
1,160,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Ref Legacy Trad Schs TX Proj, Ser A | 4.00% | 02/15/31 | 1,076,947 | |
1,000,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Ref Legacy Trad Schs TX Proj, Ser A | 4.13% | 02/15/41 | 810,474 | |
2,000,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Var Basis TX Chrt Schs Inc (Mandatory put 06/15/26) (a) | 4.50% | 06/15/56 | 2,000,328 | |
1,000,000 | Aubrey TX Spl Assmnt Ref Jackson Ridge Pub Impt Dt Phase #1 & #2 Assmnts, BAM | 5.00% | 09/01/45 | 1,081,788 | |
2,000,000 | Austin TX Arpt Sys Rev, Ser B, AMT | 5.00% | 11/15/46 | 2,022,192 | |
1,410,000 | Cool Wtr Muni Util Dist TX, Ser A, BAM | 5.00% | 08/15/45 | 1,448,353 | |
1,556,000 | Crandall TX Spl Assmnt Rev Cartwright Ranch Pub Impt Dt Impt Area #1 Proj (a) | 4.25% | 09/15/41 | 1,434,526 | |
1,445,000 | Fate TX Spl Assmnt Rev Monterra Pub Impt Dt Impt Area #1 Proj (a) | 4.00% | 08/15/51 | 1,202,650 | |
1,000,000 | Fate TX Spl Assmnt Rev Monterra Pub Impt Dt Impt Area #2 Proj (a) | 5.38% | 08/15/44 | 1,001,981 | |
1,577,000 | Ferris TX Spl Assmnt Rev Woodstone Pub Impt Dist No 2 Impt Area 1 Proj (a) | 4.00% | 09/01/51 | 1,294,196 | |
400,000 | Galveston TX Wharves & Terminal Rev Wharves & Terminal First Lien, AMT | 5.25% | 08/01/37 | 433,177 | |
250,000 | Galveston TX Wharves & Terminal Rev Wharves & Terminal First Lien, AMT | 5.25% | 08/01/38 | 270,764 | |
500,000 | Harris Cnty TX Cultural Edu Facs Fin Corp Rev Memorial Hermann Hlth Sys | 5.00% | 07/01/45 | 507,464 | |
500,000 | Harris Cnty TX Indl Dev Corp Var Ref Energy Transfer Proj (Mandatory put 06/01/33) | 4.05% | 11/01/50 | 509,202 | |
1,025,000 | Haslet TX Spl Assmnt Rev Haslet Pub Impt Dist #5 Impt Area #1 (a) | 4.13% | 09/01/39 | 949,506 | |
2,500,000 | Houston TX Arpt Sys Rev Ref Subord Lien, Ser A, AMT, AGM | 5.25% | 07/01/48 | 2,683,434 | |
1,000,000 | Houston TX Arpt Sys Rev Ref United Airls Inc Arpt Impt Proj, Ser C, AMT | 5.00% | 07/15/27 | 1,020,191 | |
1,250,000 | Houston TX Arpt Sys Rev Ref United Airls Inc Terminal E Proj, Ser A, AMT | 5.00% | 07/01/27 | 1,274,829 | |
See Notes to Financial Statements
Page 14
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Texas (Continued) | |||||
$1,460,000 | Houston TX Arpt Sys Rev United Airls Inc Terminal E Proj, Ser A, AMT | 4.00% | 07/01/41 | $1,407,021 | |
1,065,000 | Houston TX Arpt Sys Rev United Airls Inc Terminal Impt Proj, Ser B-1, AMT | 4.00% | 07/15/41 | 1,026,307 | |
450,000 | Justin TX Spl Assmnt Rev Timberbrook Pub Imp Dt #1 Imp Area #2 Proj (a) | 3.38% | 09/01/41 | 378,248 | |
690,000 | Kyle TX Spl Assmnt Rev 6 Creeks Pub Impt Dist Area #4 (a) | 4.50% | 09/01/33 | 693,362 | |
250,000 | Kyle TX Spl Assmnt Rev 6 Creeks Pub Impt Dist Impt Area #1 (a) | 4.13% | 09/01/29 | 247,708 | |
500,000 | Kyle TX Spl Assmnt Rev 6 Creeks Pub Impt Dist Impt Area #1 (a) | 4.63% | 09/01/39 | 496,106 | |
155,000 | La Vernia TX Hgr Edu Fin Corp Edu Rev Meridian World Sch (a) | 4.35% | 08/15/25 | 155,797 | |
1,000,000 | Liberty Hill TX Spl Assmnt Rev Butler Farms Pub Imp Dt Areas #1 and 2 Proj (a) | 3.38% | 09/01/42 | 811,797 | |
1,350,000 | Liberty Hill TX Spl Assmnt Rev Butler Farms Pub Imp Dt Areas #1 and 2 Proj (a) | 4.00% | 09/01/52 | 1,109,018 | |
1,410,000 | Matagorda Cnty TX Nav Dist #1 Ref AEP Tex Centrl Company Proj Remk, Ser B-2 | 4.00% | 06/01/30 | 1,410,270 | |
500,000 | Matagorda Cnty TX Nav Dist #1 Ref AEP Tex PJ Rmkt, Ser A, AMBAC | 4.40% | 05/01/30 | 514,645 | |
2,750,000 | N Parkway Muni Mgmt Dist #1 TX Spl Assmnt Rev Major Impts Proj (a) | 5.00% | 09/15/51 | 2,714,257 | |
1,235,000 | New Hope Cultural Edu Facs Fin Corp TX Retmnt Fac Rev Ref Longhorn Vlg Proj | 5.00% | 01/01/31 | 1,241,082 | |
1,580,000 | New Hope Cultural Edu Facs Fin Corp TX Retmnt Fac Rev Ref Longhorn Vlg Proj | 5.00% | 01/01/32 | 1,584,207 | |
300,000 | New Hope Cultural Edu Facs Fin Corp TX Retmnt Fac Rev Ref Longhorn Vlg Proj | 5.00% | 01/01/37 | 300,663 | |
600,000 | Newark Hgr Edu Fin Corp TX Edu Rev Hughen Ctr Inc Proj, Ser A | 5.00% | 08/15/42 | 657,695 | |
500,000 | Port Beaumont TX Nav Dist Dock & Wharf Fac Rev Jefferson Gulf Coast Energy Proj, Ser A, AMT (a) | 5.00% | 01/01/39 | 504,466 | |
1,500,000 | Port Beaumont TX Nav Dist Dock & Wharf Fac Rev Jefferson Gulf Coast Energy Proj, Ser A, AMT (a) | 5.13% | 01/01/44 | 1,510,519 | |
2,200,000 | Princeton TX Spl Assmnt Rev Whitewing Trails Pub Impr Dist #2 Phase 2 Proj Rev (a) | 5.13% | 09/01/43 | 2,204,760 | |
1,550,000 | Princeton TX Spl Assmnt Rev Winchester Pub Impr Dist #2 Proj (a) | 5.13% | 09/01/42 | 1,546,565 | |
223,000 | Rowlett TX Spl Assmnt Rev Trails at Cottonwood Creek Pub Imp Dist Major Imp Area Proj (a) | 3.75% | 09/15/31 | 208,246 | |
500,000 | Rowlett TX Spl Assmnt Rev Trails at Cottonwood Creek Pub Imp Dist Major Imp Area Proj (a) | 4.13% | 09/15/41 | 444,219 | |
765,000 | Rowlett TX Spl Assmnt Rev Trails at Cottonwood Creek Pub Imp Dist Major Imp Area Proj (a) | 4.25% | 09/15/51 | 640,588 | |
1,000,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Cook Childrens Med Ctr | 5.00% | 12/01/44 | 1,000,433 | |
3,500,000 | TX St Muni Gas Acq & Sply Corp IV, Ser B (Mandatory put 01/01/34) | 5.50% | 01/01/54 | 3,930,485 | |
1,750,000 | TX St Priv Activity Bond Surface Transprtn Corp Rev Ref Sr Lien Bond Surface Transprtn Corp, AMT | 5.50% | 06/30/42 | 1,885,710 | |
250,000 | TX St Transprtn Commn Central TX Turnpike Sys Rev Ref, Ser B | 5.00% | 08/15/37 | 251,153 | |
49,897,329 | |||||
Utah — 3.6% | |||||
1,500,000 | Black Desert Pub Infra Dist Sr Bonds, Ser A (a) | 4.00% | 03/01/51 | 1,269,369 | |
See Notes to Financial Statements
Page 15
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Utah (Continued) | |||||
$4,000,000 | Black Desert Pub Infra Dist UT Spl Assmnt Black Desert Assmnt Area #1 (a) | 5.63% | 12/01/53 | $4,135,723 | |
500,000 | Downtown E Streetcar Swr Pub Infra Dist Sr Lien, Ser A (a) | 5.75% | 03/01/42 | 499,900 | |
1,000,000 | Firefly Pub Infra Dist #1 UT, Ser A-1 (a) | 6.63% | 03/01/54 | 1,034,278 | |
2,000,000 | Jordanelle Ridge Pub Infra Dist #2 UT, Ser A (a) | 7.75% | 03/01/54 | 2,034,185 | |
1,000,000 | Mida Golf & Equestrian Ctr Pub Infra Dist UT Ltd (a) | 4.25% | 06/01/41 | 844,183 | |
3,000,000 | Mida Golf & Equestrian Ctr Pub Infra Dist UT Ltd (a) | 4.63% | 06/01/57 | 2,394,266 | |
3,000,000 | Military Installation Dev Auth UT Tax Allocation Rev, Ser A-2 | 4.00% | 06/01/52 | 2,518,787 | |
1,485,000 | Olympia Pub Infra Dist #1 UT, Ser A-1 (a) | 6.38% | 03/01/55 | 1,521,726 | |
500,000 | Red Bridge Pub Infra Dist #1 UT Sr Infra Dist, Ser 1-A (a) | 4.13% | 02/01/41 | 393,419 | |
1,500,000 | Red Bridge Pub Infra Dist #1 UT Sr Infra Dist, Ser 1-A (a) | 4.38% | 02/01/51 | 1,109,256 | |
475,000 | UT St Chrt Sch Fin Auth Chrt Sch Rev Mountain W Montessori Acdmy Proj, Ser A (a) | 5.00% | 06/15/39 | 461,862 | |
1,705,000 | UT St Chrt Sch Fin Auth Chrt Sch Rev Ref Ronald Wilson Reagan Acdmy Proj, Ser A (a) | 5.00% | 02/15/46 | 1,650,351 | |
675,000 | UT St Chrt Sch Fin Auth Chrt Sch Rev Wallace Stegner Acdmy Proj, Ser A (a) | 5.00% | 06/15/39 | 670,086 | |
1,605,000 | UT St Chrt Sch Fin Auth Chrt Sch Rev Wallace Stegner Acdmy, Ser A (a) | 5.63% | 06/15/42 | 1,641,473 | |
1,300,000 | Wood Ranch Pub Infra Dist UT Spl Assmnt Wood Ranch Assmnt Area No. 1 (a) | 5.63% | 12/01/53 | 1,336,620 | |
23,515,484 | |||||
Vermont — 0.0% | |||||
260,000 | VT St Econ Dev Auth Mtge Rev Ref Wake Robin Corp Proj, Ser A | 4.00% | 05/01/37 | 249,920 | |
Virginia — 1.7% | |||||
2,500,000 | Botetourt Cnty VA Rsdl Care Fac Rev Ref Glebe Inc, Ser A | 6.00% | 07/01/44 | 2,501,071 | |
1,060,000 | Henrico Cnty VA Econ Dev Auth Rsdl Care Fac Rev Ref Lifespire of VA, Ser C | 5.00% | 12/01/37 | 1,083,744 | |
600,000 | Henrico Cnty VA Econ Dev Auth Rsdl Care Fac Rev Ref Lifespire of VA, Ser C | 5.00% | 12/01/47 | 604,168 | |
2,000,000 | VA Small Busn Fing Auth Priv Activity Rev Sr Transform 66 P3 Proj, AMT | 5.00% | 12/31/49 | 2,029,674 | |
1,000,000 | VA St Small Bus Fing Auth Rev Ref Sr Lien 95 Express Lanes LLC Proj, AMT | 5.00% | 01/01/38 | 1,057,816 | |
750,000 | VA St Small Busn Fing Auth Rsdl Fac Care Rev Ref Lifespire of VA | 4.00% | 12/01/31 | 746,667 | |
1,000,000 | Virginia Beach VA Dev Auth Rsdl Care Fac Rev Ref Westminster Canterbury on Chesapeake Bay | 5.00% | 09/01/29 | 1,029,697 | |
2,000,000 | Virginia Beach VA Dev Auth Rsdl Care Fac Rev Westminster Canterbury on Chesapeake Bay, Ser A | 7.00% | 09/01/53 | 2,301,069 | |
11,353,906 | |||||
Washington — 1.5% | |||||
1,000,000 | Port of Seattle WA Rev Ref Intermediate Lien Priv Activity, Ser C, AMT | 5.00% | 08/01/39 | 1,076,364 | |
2,000,000 | Port of Seattle WA Rev Ref Intermediate Lien Priv Activity, Ser C, AMT | 5.00% | 08/01/46 | 2,103,374 | |
1,950,000 | Skagit Cnty WA Pub Hosp Dist #1 | 5.50% | 12/01/54 | 2,086,979 | |
875,000 | WA St Hgr Edu Facs Auth Seattle Univ Proj Rev | 4.00% | 05/01/45 | 822,963 | |
1,500,000 | WA St Hsg Fin Commn Nonprofit Hsg Rev Ref Emerald Heights Proj, Ser A | 5.00% | 07/01/43 | 1,576,965 | |
See Notes to Financial Statements
Page 16
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Washington (Continued) | |||||
$500,000 | WA St Hsg Fin Commn Nonprofit Rev Radford Court & Nordheim Court Portfolio | 5.50% | 07/01/49 | $541,365 | |
710,000 | WA St Hsg Fin Commn Nonprofit Rev Spokane Int Acad Proj, Ser A (a) | 5.00% | 07/01/50 | 696,818 | |
952,695 | WA St Hsg Fin Commn Sustainable Ctf, Ser A-1 | 3.50% | 12/20/35 | 885,009 | |
9,789,837 | |||||
West Virginia — 0.9% | |||||
695,000 | Monongalia Cnty WV Commn TX Incr Rev Ref Dev Dist #4 Univ Twn Centre, Ser A (a) | 5.00% | 06/01/33 | 727,683 | |
500,000 | Monongalia Cnty WV Commn TX Incr Rev Ref Dev Dist #4 Univ Twn Centre, Ser A (a) | 5.75% | 06/01/43 | 538,305 | |
2,000,000 | S Charleston WV Spl Dist Excise Tax Ref S Charleston Park Place Proj, Ser A (d) | 4.50% | 06/01/50 | 1,594,267 | |
1,000,000 | WV St Econ Dev Auth Sol Wst Disp Facs Var Arch Res Proj, AMT (Mandatory put 07/01/25) | 4.13% | 07/01/45 | 999,392 | |
1,000,000 | WV St Econ Dev Auth Sol Wst Disp Facs Var Sr Arch Res Proj, AMT (Mandatory put 07/01/25) | 5.00% | 07/01/45 | 1,003,246 | |
1,050,000 | WV St Hosp Fin Auth Vandalia Hlth Grp, Ser B, AGM | 5.50% | 09/01/48 | 1,163,687 | |
6,026,580 | |||||
Wisconsin — 5.5% | |||||
925,000 | Pub Fin Auth WI Chrt Sch Rev American Preparatory Acdmy Las Vegas 2 Proj, Ser A (a) | 5.00% | 07/15/39 | 934,841 | |
1,600,000 | Pub Fin Auth WI Chrt Sch Rev American Preparatory Acdmy Las Vegas 2 Proj, Ser A (a) | 5.00% | 07/15/54 | 1,565,908 | |
795,000 | Pub Fin Auth WI Chrt Sch Rev Eno River Acdmy Proj, Ser A (a) | 4.00% | 06/15/30 | 785,955 | |
810,000 | Pub Fin Auth WI Chrt Sch Rev Eno River Acdmy Proj, Ser A (a) | 5.00% | 06/15/40 | 818,159 | |
685,000 | Pub Fin Auth WI Chrt Sch Rev Eno River Acdmy Proj, Ser A (a) | 5.00% | 06/15/54 | 669,375 | |
400,000 | Pub Fin Auth WI Chrt Sch Rev Founders of Acdmy Las Vegas Proj, Ser A (a) | 4.00% | 07/01/30 | 384,072 | |
300,000 | Pub Fin Auth WI Chrt Sch Rev Founders of Acdmy Las Vegas Proj, Ser A (a) | 6.38% | 07/01/43 | 314,214 | |
1,300,000 | Pub Fin Auth WI Chrt Sch Rev Founders of Acdmy Las Vegas Proj, Ser A (a) | 5.00% | 07/01/55 | 1,152,936 | |
550,000 | Pub Fin Auth WI Chrt Sch Rev Founders of Acdmy Las Vegas Proj, Ser A (a) | 6.75% | 07/01/58 | 578,749 | |
330,000 | Pub Fin Auth WI Chrt Sch Rev Ltd American Prep Acdmy Las Vegas Proj, Ser A (a) | 4.20% | 07/15/27 | 330,122 | |
375,000 | Pub Fin Auth WI Chrt Sch Rev Ltd American Prep Acdmy Las Vegas Proj, Ser A (a) | 5.13% | 07/15/37 | 381,826 | |
1,000,000 | Pub Fin Auth WI Chrt Sch Rev Ref N E Carolina Preparatory Sch, Ser A | 5.25% | 06/15/54 | 1,020,199 | |
1,000,000 | Pub Fin Auth WI Edu Rev Coral Acdmy Science Las Vegas, Ser A | 5.00% | 07/01/43 | 1,008,802 | |
1,500,000 | Pub Fin Auth WI Edu Rev Coral Acdmy Science Las Vegas, Ser A | 5.00% | 07/01/45 | 1,506,315 | |
500,000 | Pub Fin Auth WI Edu Rev Ref Mountain Island Chrt Sch Ltd | 5.00% | 07/01/37 | 500,197 | |
200,000 | Pub Fin Auth WI Edu Rev Ref Mountain Island Chrt Sch Ltd | 5.00% | 07/01/52 | 199,216 | |
1,140,000 | Pub Fin Auth WI Edu Rev Triad Eductnl Svcs Inc | 5.00% | 06/15/42 | 1,167,546 | |
1,175,000 | Pub Fin Auth WI Edu Rev Triad Eductnl Svcs Inc, Ser A | 4.00% | 06/15/41 | 1,065,497 | |
160,000 | Pub Fin Auth WI Eductnl Rev Piedmont Cmnty Chrt Sch | 5.00% | 06/15/27 | 163,792 | |
1,500,000 | Pub Fin Auth WI Hosp Rev Ref Carson Vly Med Ctr, Ser A (a) | 4.00% | 12/01/41 | 1,372,621 | |
1,000,000 | Pub Fin Auth WI Hotel Rev Sr Lien Grand Hyatt San Antonio Hotel Acq Proj, Ser A | 5.00% | 02/01/42 | 1,042,660 | |
See Notes to Financial Statements
Page 17
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Wisconsin (Continued) | |||||
$1,335,000 | Pub Fin Auth WI Retmnt Cmntys Rev Acts Retmnt Life Cmntys Inc Oblig Grp, Ser A | 5.00% | 11/15/41 | $1,389,664 | |
1,750,000 | Pub Fin Auth WI Retmnt Cmntys Rev Ref Evergreens Retmnt Cmnty, Ser A | 5.00% | 11/15/49 | 1,782,412 | |
685,000 | Pub Fin Auth WI Retmnt Fac Rev Ref United Methodist Retmnt Homes, Ser A | 4.00% | 10/01/46 | 632,708 | |
65,000 | Pub Fin Auth WI Retmnt Fac Rev Southminster (a) | 5.00% | 10/01/43 | 65,117 | |
510,000 | Pub Fin Auth WI Retmnt Fac Rev Southminster (a) | 5.00% | 10/01/48 | 498,767 | |
2,000,000 | Pub Fin Auth WI Rev Sr Proton Intl AR LLC, Ser A (d) | 6.85% | 01/01/51 | 1,505,273 | |
3,000,000 | Pub Fin Auth WI Spl Rev Astro TX Land Projs (a) | 5.50% | 12/15/28 | 3,012,159 | |
1,215,000 | Pub Fin Auth WI Sr Living Rev Ref Mary’s Woods at Marylhurst Proj, Ser A (a) | 5.00% | 05/15/31 | 1,231,310 | |
1,275,000 | Pub Fin Auth WI Sr Living Rev Ref Mary’s Woods at Marylhurst Proj, Ser A (a) | 5.00% | 05/15/32 | 1,291,782 | |
1,225,000 | Pub Fin Auth WI Sr Living Rev Ref Mary’s Woods at Marylhurst Proj, Ser A (a) | 5.25% | 05/15/47 | 1,216,849 | |
1,900,000 | Pub Fin Auth WI Stdt Hsg Rev NC A&T Real Estate Fdtn LLC Proj, Ser B | 5.00% | 06/01/44 | 1,927,829 | |
3,110,000 | Pub Fin Auth WI Tax Incr Rev Miami Worldcenter Proj, Ser A (a) | 5.00% | 06/01/41 | 3,155,358 | |
1,000,000 | WI St Hlth & Eductnl Facs Auth Rev Bellin Memorial Hosp Inc, Ser A | 5.50% | 12/01/52 | 1,094,751 | |
35,766,981 | |||||
Total Investments — 98.8% | 637,586,458 | ||||
(Cost $624,831,002) | |||||
Net Other Assets and Liabilities — 1.2% | 7,622,909 | ||||
Net Assets — 100.0% | $645,209,367 | ||||
(a) | 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 July 31, 2024, securities noted as such amounted to $179,084,387 or 27.8% of net assets. |
(b) | Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
(c) | This issuer is in default and interest is not being accrued by the Fund. |
(d) | 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). |
(e) | Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
Abbreviations throughout the Portfolio of Investments: | |
AGM | – Assured Guaranty Municipal Corp. |
AMBAC | – American Municipal Bond Assurance Corp. |
AMT | – Alternative Minimum Tax |
BAM | – Build America Mutual |
COPS | – Certificates of Participation |
See Notes to Financial Statements
Page 18
First Trust Municipal High Income ETF (FMHI)Portfolio of Investments (Continued)July 31, 2024
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Municipal Bonds* | $637,586,458 | $— | $637,586,458 | $— |
* | See Portfolio of Investments for state and territory breakout. |
See Notes to Financial Statements
Page 19
First Trust Municipal High Income ETF (FMHI)
Statement of Assets and Liabilities
July 31, 2024ASSETS: | |
Investments, at value | $637,586,458 |
Cash | 847,396 |
Receivables: | |
Interest | 6,761,329 |
Investment securities sold | 485,672 |
Total Assets | 645,680,855 |
LIABILITIES: | |
Payables: | |
Investment advisory fees | 379,309 |
Investment securities purchased | 92,179 |
Total Liabilities | 471,488 |
NET ASSETS | $645,209,367 |
NET ASSETS consist of: | |
Paid-in capital | $669,085,999 |
Par value | 132,500 |
Accumulated distributable earnings (loss) | (24,009,132) |
NET ASSETS | $645,209,367 |
NET ASSET VALUE, per share | $48.70 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 13,250,002 |
Investments, at cost | $624,831,002 |
See Notes to Financial Statements
Page 20
First Trust Municipal High Income ETF (FMHI)
Statement of Operations
For the Year Ended July 31, 2024INVESTMENT INCOME: | |
Interest | $25,532,513 |
Total investment income | 25,532,513 |
EXPENSES: | |
Investment advisory fees | 3,715,659 |
Total expenses | 3,715,659 |
NET INVESTMENT INCOME (LOSS) | 21,816,854 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
Investments | (3,276,362) |
Futures contracts | 206,036 |
Net realized gain (loss) | (3,070,326) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | 26,166,910 |
Futures contracts | (130,582) |
Net change in unrealized appreciation (depreciation) | 26,036,328 |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 22,966,002 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $44,782,856 |
See Notes to Financial Statements
Page 21
First Trust Municipal High Income ETF (FMHI)
Statements of Changes in Net Assets
Year Ended 7/31/2024 | Year Ended 7/31/2023 | |
OPERATIONS: | ||
Net investment income (loss) | $21,816,854 | $12,857,943 |
Net realized gain (loss) | (3,070,326) | (14,661,583) |
Net change in unrealized appreciation (depreciation) | 26,036,328 | 469,999 |
Net increase (decrease) in net assets resulting from operations | 44,782,856 | (1,333,641) |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||
Investment operations | (21,326,758) | (12,644,552) |
Return of capital | (270,420) | (178,777) |
Total distributions to shareholders | (21,597,178) | (12,823,329) |
SHAREHOLDER TRANSACTIONS: | ||
Proceeds from shares sold | 238,266,691 | 198,607,434 |
Cost of shares redeemed | (25,570,566) | (114,077,874) |
Net increase (decrease) in net assets resulting from shareholder transactions | 212,696,125 | 84,529,560 |
Total increase (decrease) in net assets | 235,881,803 | 70,372,590 |
NET ASSETS: | ||
Beginning of period | 409,327,564 | 338,954,974 |
End of period | $645,209,367 | $409,327,564 |
CHANGES IN SHARES OUTSTANDING: | ||
Shares outstanding, beginning of period | 8,700,002 | 6,900,002 |
Shares sold | 5,100,000 | 4,250,000 |
Shares redeemed | (550,000) | (2,450,000) |
Shares outstanding, end of period | 13,250,002 | 8,700,002 |
See Notes to Financial Statements
Page 22
First Trust Municipal High Income ETF (FMHI)
Financial Highlights
For a share outstanding throughout each periodYear Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $47.05 | $49.12 | $56.69 | $51.93 | $52.48 |
Income from investment operations: | |||||
Net investment income (loss) | 1.94 (a) | 1.82 (a) | 1.50 | 1.59 | 1.64 |
Net realized and unrealized gain (loss) | 1.62 | (2.08 ) | (7.50 ) | 4.83 (b) | (0.48 ) |
Total from investment operations | 3.56 | (0.26 ) | (6.00 ) | 6.42 | 1.16 |
Distributions paid to shareholders from: | |||||
Net investment income | (1.89 ) | (1.78 ) | (1.49 ) | (1.59 ) | (1.62 ) |
Return of capital | (0.02 ) | (0.03 ) | (0.08 ) | (0.07 ) | (0.09 ) |
Total distributions | (1.91 ) | (1.81 ) | (1.57 ) | (1.66 ) | (1.71 ) |
Net asset value, end of period | $48.70 | $47.05 | $49.12 | $56.69 | $51.93 |
Total return (c) | 7.77 % | (0.44 )% | (10.74 )% | 12.57 % (b) | 2.25 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $645,209 | $409,328 | $338,955 | $283,461 | $111,650 |
Ratio of total expenses to average net assets | 0.70 % | 0.70 % | 0.70 % | 0.70 % | 0.70 % |
Ratio of net expenses to average net assets | 0.70 % | 0.65 % | 0.55 % | 0.55 % | 0.55 % |
Ratio of net investment income (loss) to average net assets | 4.11 % | 3.88 % | 2.87 % | 3.00 % | 3.22 % |
Portfolio turnover rate (d) | 22 % | 69 % | 79 % | 19 % | 89 % |
(a) | Based on average shares outstanding. |
(b) | The Fund received a reimbursement from the advisor in the amount of $469 in connection with a trade error, which represents less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return. |
(c) | 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. The total returns would have been lower if certain fees had not been waived by the investment advisor. |
(d) | 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
Page 23
Notes to Financial Statements
First Trust Municipal High Income ETF (FMHI)July 31, 2024
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”).
This report covers the First Trust Municipal High Income ETF (the “Fund”), a diversified series of the Trust, which trades under the ticker “FMHI” 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 provide federally tax-exempt income, 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.
A. Portfolio Valuation
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:
1)
benchmark yields;
2)
reported trades;
3)
broker/dealer quotes;
4)
issuer spreads;
5)
benchmark securities;
6)
bids and offers; and
7)
reference data including market research publications.
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.
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
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;
10)
the coupon payments;
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).
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
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 July 31, 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. 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 July 31, 2024, the Fund had no when-issued, delayed-delivery or forward purchase commitments.
C. Futures Contracts
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. The Fund did not hold any futures contracts at July 31, 2024.
D. Restricted Securities
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 July 31, 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.
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
Security | Acquisition Date | Principal Value | Current Price | Carrying Cost | Value | % of Net Assets |
Polk Cnty FL Indl Dev Auth Mineral Dev LLC Secondary Phosphate Tailings Recovery Proj, 5.88%, 01/01/33 | 10/23/20 | $1,000,000 | $94.22 | $1,000,000 | $942,164 | 0.15 % |
Pub Fin Auth WI Rev Sr Proton Intl AR LLC, Ser A, 6.85%, 01/01/51 | 12/17/21 | 2,000,000 | 75.26 | 1,964,047 | 1,505,273 | 0.23 |
S Charleston WV Spl Dist Excise Tax Ref S Charleston Park Place Proj, Ser A, 4.50%, 06/01/50 | 01/14/22 | 2,000,000 | 79.71 | 2,005,667 | 1,594,267 | 0.25 |
$4,969,714 | $4,041,704 | 0.63 % |
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 years ended July 31, 2024 and 2023 was as follows:
Distributions paid from: | 2024 | 2023 |
Ordinary income | $24,847 | $122,735 |
Capital gains | — | — |
Tax-exempt income | 21,301,911 | 12,521,817 |
Return of capital | 270,420 | 178,777 |
As of July 31, 2024, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income | $— |
Accumulated capital and other gain (loss) | (36,821,174 ) |
Net unrealized appreciation (depreciation) | 12,812,042 |
F. Income Taxes
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 2021, 2022, 2023, and 2024 remain open to federal and state audit. As of July 31, 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
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
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 July 31, 2024, for federal income tax purposes, the Fund had $36,821,174 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 July 31, 2024, the Fund had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended July 31, 2024, the adjustments for the Fund were as follows:
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) on Investments | Paid-In Capital |
$(12,149 ) | $12,149 | $— |
As of July 31, 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:
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) |
$624,774,416 | $23,526,574 | $(10,714,532 ) | $12,812,042 |
G. Expenses
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 October 16, 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:
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
Breakpoints | |
Fund net assets up to and including $2.5 billion | 0.7000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.6825 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.6650 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.6475 % |
Fund net assets greater than $10 billion | 0.6300 % |
Effective October 16, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNY”). Under the service agreements, BNY performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNY is responsible for custody of the Fund’s assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BNY is responsible for maintaining shareholder records for the Fund. BNY is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to October 16, 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.
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 fiscal year ended July 31, 2024, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $326,140,825 and $114,021,917, respectively.
For the fiscal year ended July 31, 2024, the Fund had no in-kind transactions.
5. Borrowings
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 BNY 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. BNY 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 fiscal year ended July 31, 2024.
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
6. Derivative Transactions
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the fiscal year ended July 31, 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 | $206,036 |
Net change in unrealized appreciation (depreciation) on futures contracts | (130,582 ) |
The average notional value of futures contracts outstanding during the fiscal year ended July 31, 2024, which is indicative of the volume of this derivative type, was $15,317,456.
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.
8. Distribution Plan
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
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Notes to Financial Statements (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024
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 November 30, 2025.
9. Indemnification
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.
10. Subsequent Events
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.
Page 31
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of First Trust Municipal High Income ETF (the “Fund”), one of the funds constituting the First Trust Exchange-Traded Fund III, as of July 31, 2024, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of July 31, 2024, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2024, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, LLP
Chicago, Illinois
September 24, 2024
September 24, 2024
We have served as the auditor of one or more First Trust investment companies since 2001.
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Other Information
First Trust Municipal High Income ETF (FMHI)July 31, 2024 (Unaudited)
Changes in and Disagreements with Accountants (Item 8 of Form N-CSR)
There were no changes in or disagreements with the Fund’s accountants during the fiscal year ended July 31, 2024.
Proxy Disclosures (Item 9 of Form N-CSR)
There were no matters submitted for vote by shareholders of the Fund during the fiscal year ended July 31, 2024.
Remuneration Paid to Directors, Officers, and Others (Item 10 of Form N-CSR)
Independent Trustees and any member of any advisory board of the Fund are compensated through the unitary management fee paid by the Fund to the advisor and not directly by the Fund. The investment advisory fee paid is included in the Statement of Operations.
Statement Regarding the Basis for the Board’s Approval of Investment Advisory Contract (Item 11 of Form N-CSR)
The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the “Agreement”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the First Trust Municipal High Income ETF (the “Fund”). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2025 at a meeting held on June 2–3, 2024. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.
To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 16, 2024, April 25, 2024 and June 2–3, 2024, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate schedule payable by the Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. (“FTP”); and information on the Advisor’s compliance program. The Board reviewed initial materials with the Advisor at the meeting held on April 25, 2024, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the April 25, 2024 meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 2–3, 2024 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund’s unitary fee.
In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor’s Municipal Securities Team is responsible for the day-to-day management of the Fund’s investments. The Board considered the background and experience of the members of the Municipal Securities Team and noted the Board’s prior meetings with members of the Team. The Board considered the Advisor’s statement that it applies the same oversight model internally with its Municipal Securities Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services
Page 33
Other Information (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024 (Unaudited)
provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s and the Fund’s compliance with the 1940 Act, as well as the Fund’s compliance with its investment objectives, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 25, 2024 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objectives, policies and restrictions.
The Board considered the unitary fee rate schedule payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the total (net) expense ratio for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate schedule overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund’s performance. The Board received and reviewed information comparing the Fund’s performance for periods ended December 31, 2023 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median for the one-, three- and five-year periods ended December 31, 2023, outperformed the benchmark index for the one- and five-year periods ended December 31, 2023 and underperformed the benchmark index for the three-year period ended December 31, 2023.
On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund at current asset levels and whether the Fund may benefit from any economies of scale. The Board noted that the unitary fee rate schedule for the Fund includes breakpoints pursuant to which the unitary fee rate will be reduced as assets of the Fund meet certain thresholds. The Board considered the Advisor’s statement that it believes that its expenses relating to providing advisory services to the Fund will increase during the next twelve months as the Advisor continues to build infrastructure and add new staff. The Board also noted that under the unitary fee structure, any reduction in expenses associated with the management and operations of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for shareholders of the Fund. The Board concluded that the unitary fee rate schedule for the Fund reflects an appropriate level of sharing of any economies of scale that may be realized in the management of the Fund at current asset levels. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2023 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for the Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their
Page 34
Other Information (Continued)
First Trust Municipal High Income ETF (FMHI)July 31, 2024 (Unaudited)
exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board’s analysis.
Federal Tax Information
For the taxable year ended July 31, 2024, the following distribution information is being provided as required by the Internal Revenue Code of 1986, as amended, or to meet a specific state’s requirement. The Fund designates the following percentages or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended July 31, 2024:
Federal and State Income Tax | Percentages |
Tax-Exempt Interest Dividends | 99.88 % |
Alternative Minimum Tax (AMT) | 18.57 % |
Page 35
Annual Financial Statements and Other Information |
For the Year Ended July 31, 2024 |
First Trust Exchange-Traded Fund III
First Trust Short Duration Managed Municipal ETF (FSMB) |
First Trust Ultra Short Duration Municipal ETF (FUMB) |
Table of Contents
First Trust Exchange-Traded Fund III
Annual Financial Statements and Other Information
July 31, 2024
Annual Financial Statements and Other Information
July 31, 2024
1 | |
18 | |
26 | |
27 | |
28 | |
29 | |
31 | |
38 | |
39 |
Performance and Risk Disclosure
There is no assurance that any 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”) 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.
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.
First Trust Advisors L.P., the Funds’ advisor, may also periodically provide additional information on Fund performance on each Fund’s webpage at www.ftportfolios.com.
How to Read This Report
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data that provides insight into each Fund’s performance and investment approach.
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 Short Duration Managed Municipal ETF (FSMB)Portfolio of InvestmentsJuly 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS — 100.0% | |||||
Alabama — 4.6% | |||||
$130,000 | Black Belt Energy Gas Dist AL Gas Prepay Rev Proj No. 4, Ser A-1 (Mandatory put 12/01/25) | 4.00% | 12/01/49 | $130,481 | |
1,035,000 | Black Belt Energy Gas Dist AL Gas Proj Rev Bonds Proj No 7, Ser C-1 (Mandatory put 12/01/26) | 4.00% | 10/01/52 | 1,040,089 | |
490,000 | Black Belt Energy Gas Dist AL Gas Proj Rev Proj No 6, Ser B (Mandatory put 12/01/26) | 4.00% | 10/01/52 | 492,409 | |
1,000,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C (Mandatory put 07/01/31) (a) | 5.00% | 05/01/55 | 1,067,322 | |
1,165,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C-1 | 5.25% | 12/01/27 | 1,220,180 | |
1,000,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C-1 (Mandatory put 06/01/29) | 5.25% | 02/01/53 | 1,062,713 | |
1,500,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser E | 5.00% | 06/01/26 | 1,531,264 | |
100,000 | Greenville AL Pub Impt Cooperative Pub Impt Rev Greenville Funding, BAM | 5.00% | 03/01/25 | 101,039 | |
1,000,000 | Hlth Care Auth for Baptist Hlth AL Ref Affiliate of UAB Hlth Sys, Ser A | 5.00% | 11/15/29 | 1,067,207 | |
2,000,000 | Jefferson Cnty AL Swr Rev Warrants Ref Warrants | 5.00% | 10/01/30 | 2,177,707 | |
2,470,000 | Lower AL Gas Dist Gas Proj Rev Bonds Proj 2 (Mandatory put 12/01/25) | 4.00% | 12/01/50 | 2,477,014 | |
300,000 | Midcity Impt Dist AL Spl Assmnt Rev | 3.88% | 11/01/27 | 284,952 | |
2,000,000 | SE Energy Auth AL Cmdy Sply Rev Proj #1, Ser A (Mandatory put 10/01/28) | 4.00% | 11/01/51 | 2,016,292 | |
2,095,000 | SE Energy Auth AL Cmdy Sply Rev Proj #2, Ser B | 4.00% | 06/01/30 | 2,083,333 | |
500,000 | SE Energy Auth AL Cmdy Sply Rev Proj No. 3, Ser A-1 | 5.00% | 12/01/26 | 509,069 | |
2,000,000 | Selma AL Indl Dev Brd Rev Var Ref Intl Paper Company Proj, Ser A (Mandatory put 10/01/24) | 2.00% | 11/01/33 | 1,990,668 | |
19,251,739 | |||||
Arizona — 1.5% | |||||
1,340,000 | AZ Indl Dev Auth Hosp Rev Phoenix Children’s Hosp, Ser A | 5.00% | 02/01/35 | 1,459,437 | |
500,000 | AZ St Indl Dev Auth Edu Rev Acads of Math & Science Proj, Ser B (b) | 5.00% | 07/01/29 | 509,890 | |
155,000 | AZ St Indl Dev Auth Edu Rev Jerome Fac Proj Sustainable Bonds, Ser B | 5.00% | 07/01/29 | 159,122 | |
965,000 | AZ St Indl Dev Auth Edu Rev Pinecrest Acdmy Horizon Inspirada & St Rose Cmps, Ser A (b) | 5.00% | 07/15/28 | 982,233 | |
100,000 | AZ St Indl Dev Auth Edu Rev Ref Basis Schs Projs, Ser A (b) | 5.00% | 07/01/26 | 101,110 | |
230,000 | AZ St Indl Dev Auth Edu Rev Ref Doral Acdmy of Northern NV Proj, Ser A (b) | 4.00% | 07/15/26 | 229,141 | |
500,000 | AZ St Indl Dev Auth Natl Chrt Sch Revolving Loan Fd Equitable Sch Revolving Fund Sustainable Bonds, Ser A | 4.00% | 11/01/27 | 502,918 | |
1,250,000 | Chandler AZ Indl Dev Auth Indl Dev Rev Var Intel Corp Proj, Ser 2022-2, AMT (Mandatory put 09/01/27) | 5.00% | 09/01/52 | 1,289,445 | |
1,000,000 | Coconino Cnty AZ Poll Controlcorp Var Ref NV Pwr Co Proj Remk, Ser B (Mandatory put 03/31/26) | 3.75% | 03/01/39 | 996,490 | |
95,000 | Glendale AZ Indl Dev Auth Sr Living Facs Rev Ref Royal Oaks Life Care Cmnty | 4.00% | 05/15/29 | 92,411 | |
6,322,197 | |||||
California — 4.4% | |||||
910,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Clean Energy Proj Rev Bonds Sustainable Bond, Ser A-1 (Mandatory put 04/01/32) | 5.00% | 05/01/54 | 984,685 | |
See Notes to Financial Statements
Page 1
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$250,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser A-1 | 4.00% | 08/01/24 | $250,000 | |
350,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser A-1 (Mandatory put 08/01/28) | 4.00% | 05/01/53 | 353,163 | |
1,000,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser B-1 (Mandatory put 08/01/29) | 5.00% | 07/01/53 | 1,061,609 | |
4,500,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Sustainable Bond, Ser B-1 (Mandatory put 08/01/31) | 4.00% | 02/01/52 | 4,547,687 | |
50,000 | CA St Enterprise Dev Auth Stdt Hsg Rev M@College Proj, Ser A | 5.00% | 08/01/24 | 50,000 | |
385,000 | CA St Hlth Facs Fing Auth Rev El Camino Hosp | 5.00% | 02/01/33 | 404,655 | |
1,250,000 | CA St Hlth Facs Fing Auth Rev Initial Entrance Fees, Ser A | 3.85% | 11/15/27 | 1,254,536 | |
1,160,000 | CA St Hlth Facs Fing Auth Rev Var Ref Stanford Hlth Care, Ser A (Mandatory put 08/15/25) | 3.00% | 08/15/54 | 1,153,104 | |
1,350,000 | CA St Infra & Econ Dev Bank Rev Var Brightline W Passenger Rail Proj Remk, Ser A, AMT (Mandatory put 01/30/25) (b) (c) | 3.95% | 01/01/50 | 1,350,042 | |
525,000 | CA St Muni Fin Auth Mobile Home Park Rev Ref Sr Caritas Projs, Ser A | 5.00% | 08/15/25 | 530,777 | |
100,000 | CA St Muni Fin Auth Ref Palomar Hlth, Ser A, AGM, COPS | 5.00% | 11/01/27 | 105,588 | |
1,000,000 | CA St Muni Fin Auth Spl Fac Rev United Airls Inc Proj, AMT | 4.00% | 07/15/29 | 1,000,430 | |
1,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Ref Wst Mgmt Inc, Ser B-1, AMT | 3.00% | 11/01/25 | 988,247 | |
1,000,000 | CA St Poll Control Fin Auth Sol Wst Disp Rev Var Wst Mgmt Proj Remk, Ser A, AMT (Mandatory put 07/02/29) | 4.25% | 07/01/31 | 1,002,833 | |
455,000 | CA St Sch Fin Auth Chrt Sch Rev Ref Classical Academies Oceanside Proj, Ser A (b) | 4.00% | 10/01/27 | 454,227 | |
50,000 | CA St Stwd Cmntys Dev Auth Spl Tax Rev Impt Area No. 1 | 4.00% | 09/01/24 | 50,001 | |
80,000 | CA St Stwd Cmntys Dev Auth Spl Tax Rev Impt Area No. 1 | 4.00% | 09/01/25 | 80,086 | |
355,000 | CA St Stwd Cmntys Dev Auth Stwd Rev Dev Auth, Ser 2021A | 4.00% | 09/02/25 | 354,673 | |
100,000 | Folsom Ranch CA Fing Auth Spl Tax Rev White Rock Springs Ranch | 4.00% | 09/01/26 | 100,401 | |
200,000 | Long Beach CA Arpt Rev Ref, Ser A, AGM | 5.00% | 06/01/26 | 207,914 | |
730,000 | Los Angeles CA Dept of Arpts Arpt Rev Subord Ref, Ser A, AMT | 5.00% | 05/15/29 | 777,762 | |
95,000 | March Jt Pwrs Redev Agy Successor Agy CA Tax Allocation Ref March Air Force Base Redev Proj, Ser A, BAM | 4.00% | 08/01/27 | 96,667 | |
90,000 | Rancho Cordova CA Cmnty Facs Dist Spl Tax Rev Grantline 208 Cmnty Fac Dt #2018-1 | 3.00% | 09/01/24 | 89,912 | |
150,000 | River Islands CA Pub Fing Auth Spl Tax Ref Cmnty Facs Dt #2003-1, Ser A-1, AGM | 5.00% | 09/01/26 | 155,836 | |
60,000 | Roseville CA Spl Tax Svsp Westpark Federico Cmnty Facs Dt No. 1 | 3.00% | 09/01/24 | 59,905 | |
70,000 | Roseville CA Spl Tax Svsp Westpark Federico Cmnty Facs Dt No. 1 | 3.00% | 09/01/25 | 68,768 | |
85,000 | Roseville CA Spl Tax Svsp Westpark Federico Cmnty Facs Dt No. 1 | 4.00% | 09/01/26 | 84,818 | |
65,000 | San Diego CA Unif Sch Dist Ref Election 1998, Ser C-2, AGM | 5.50% | 07/01/25 | 66,665 | |
140,000 | San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev Ref, 2nd Ser, Ser A | 4.00% | 05/01/26 | 142,861 | |
200,000 | San Francisco CA City & Cnty Dev Spl Tax Dist No Mission Rock Fac and Svcs, Ser A (b) | 4.00% | 09/01/26 | 199,849 | |
175,000 | San Luis Obispo CA Cmnty Facs Dist #2019-1 Spl Tax | 4.00% | 09/01/25 | 175,115 | |
See Notes to Financial Statements
Page 2
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
California (Continued) | |||||
$100,000 | San Luis Obispo CA Cmnty Facs Dist #2019-1 Spl Tax | 4.00% | 09/01/26 | $100,182 | |
225,000 | Western Placer Wst Mgmt Auth CA Solid Wst Rev Landfill Impt Proj, Ser B | 5.00% | 06/01/34 | 237,863 | |
18,540,861 | |||||
Colorado — 2.7% | |||||
500,000 | CO St Eductnl & Cultural Facs Auth Rev Ref & Impt Chrt Sch Univ Lab Bldg Corp (b) | 5.00% | 12/15/28 | 505,257 | |
400,000 | CO St Hlth Facs Auth Rev Commonspirit Hlth Oblig Grp, Ser A | 5.00% | 11/01/26 | 415,863 | |
1,000,000 | CO St Hlth Facs Auth Rev Ref Frasier Meadows Retmnt Cmnty Proj, Ser A | 5.25% | 05/15/30 | 1,027,827 | |
125,000 | CO St Hlth Facs Auth Rev Var Ref Intermountain Hlthcare, Ser B (Mandatory put 08/17/26) | 5.00% | 05/15/62 | 129,150 | |
2,000,000 | CO St Hlth Facs Auth Rev Var Ref Intermountain Hlthcare, Ser C (Mandatory put 08/15/28) | 5.00% | 05/15/62 | 2,132,604 | |
1,290,000 | Denver City & Cnty CO Arpt Rev Ref Sub Sys, Ser A, AMT | 5.00% | 12/01/31 | 1,352,771 | |
1,000,000 | Denver City & Cnty CO Arpt Rev Ref Sub Sys, Ser A, AMT | 5.00% | 12/01/34 | 1,043,319 | |
1,000,000 | Denver City & Cnty CO Arpt Rev Var Ref, Ser B2, AMT (Mandatory put 11/15/25) | 5.00% | 11/15/31 | 1,016,602 | |
770,000 | Denver City & Cnty CO Arpt Rev, Ser A, AMT | 5.00% | 11/15/25 | 786,690 | |
1,000,000 | Denver City & Cnty CO Arpt Rev, Ser A, AMT | 5.00% | 11/15/26 | 1,037,229 | |
270,000 | Gold Hill Mesa Met Dist #2 CO Ltd Tax & Spl Rev Ref, Ser A, BAM | 5.00% | 12/01/25 | 274,819 | |
500,000 | Sand Creek CO Met Dist Ref Ltd Tax, Ser A | 4.00% | 12/01/31 | 496,182 | |
1,055,000 | Traditions CO Met Dist #2 Ref, BAM | 5.00% | 12/01/32 | 1,094,745 | |
11,313,058 | |||||
Connecticut — 2.0% | |||||
215,000 | CT St Hlth & Eductnl Facs Auth Rev Hartford Hlthcare, Ser A | 5.00% | 07/01/30 | 229,972 | |
50,000 | CT St Hlth & Eductnl Facs Auth Rev Hartford Hlthcare, Ser E | 5.00% | 07/01/25 | 50,063 | |
135,000 | CT St Hlth & Eductnl Facs Auth Rev Ref Yale Univ, Ser A-2 (Mandatory put 07/01/26) | 2.00% | 07/01/42 | 130,843 | |
1,700,000 | CT St Hlth & Eductnl Facs Auth Rev Var Remk, Ser A (Mandatory put 02/10/26) | 2.80% | 07/01/48 | 1,688,106 | |
1,365,000 | CT St Hsg Fin Auth Ref St Supported Spl Oblig, Ser 21, AMT | 4.00% | 06/15/30 | 1,360,294 | |
2,000,000 | CT St Spl Tax Oblig Rev Transprtn Infra, Ser A | 5.00% | 09/01/30 | 2,067,462 | |
140,000 | CT St Spl Tax Oblig Rev, Ser B | 5.00% | 10/01/27 | 149,064 | |
235,000 | CT St Sustainable Bond, Ser F | 5.00% | 10/15/30 | 243,366 | |
1,000,000 | CT St, Ser B | 5.00% | 06/15/25 | 1,017,864 | |
1,500,000 | E Hartford CT Hsg Auth Multifamily Hsg Rev Var Summerfield Townhouses Proj, Ser A (Mandatory put 02/01/25) | 4.25% | 02/01/27 | 1,500,553 | |
25,000 | Univ of CT CT, Ser A | 5.00% | 11/01/35 | 26,751 | |
8,464,338 | |||||
District of Columbia — 0.5% | |||||
1,000,000 | Met Washington DC Arpts Auth Arpt Sys Rev Ref, Ser A, AMT | 5.00% | 10/01/28 | 1,057,914 | |
1,060,000 | Met Washington DC Arpts Auth Arpt Sys Rev Ref, Ser A, AMT | 5.00% | 10/01/30 | 1,114,366 | |
2,172,280 | |||||
Florida — 8.3% | |||||
110,000 | Alachua Cnty FL Hlth Facs Auth CCRC Ref Oak Hammock at the Univ of FL Inc Proj | 4.00% | 10/01/24 | 109,889 | |
200,000 | Alachua Cnty FL Hlth Facs Auth CCRC Ref Oak Hammock at the Univ of FL Inc Proj | 4.00% | 10/01/25 | 199,068 | |
See Notes to Financial Statements
Page 3
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Florida (Continued) | |||||
$135,000 | Alachua Cnty FL Hlth Facs Auth CCRC Ref Oak Hammock at the Univ of FL Inc Proj | 4.00% | 10/01/26 | $134,219 | |
1,165,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Assmt Area 3A (b) | 4.50% | 11/01/29 | 1,184,692 | |
260,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Proj, Ser 2021 | 2.38% | 05/01/26 | 252,071 | |
165,000 | Babcock Ranch Cmnty Indep Spl Dist FL Spl Assmnt Rev Proj, Ser 2022 | 4.13% | 05/01/27 | 164,791 | |
105,000 | Berry Bay CDD FL Spl Assmnt Rev Assmnt Area One | 2.63% | 05/01/26 | 102,303 | |
645,000 | Berry Bay CDD FL Spl Assmnt Rev Assmnt Area One | 3.13% | 05/01/31 | 599,542 | |
155,000 | Black Creek FL CDD Spl Assmnt Expansion Area Proj | 4.80% | 06/15/27 | 157,024 | |
1,125,000 | Broward Cnty FL Arpt Sys Rev, Ser A, AMT | 5.25% | 10/01/24 | 1,126,698 | |
400,000 | Broward Cnty FL Port Facs Rev, AMT | 5.00% | 09/01/24 | 400,468 | |
1,285,000 | Broward Cnty FL Port Facs Rev Sr Bond, Ser B, AMT | 5.00% | 09/01/28 | 1,353,484 | |
350,000 | Cross Creek N CDD FL Spl Assmnt, Ser 2022 | 3.40% | 05/01/27 | 346,717 | |
610,000 | Edgewater E CDD FL Spl Assmnt Rev Assmnt Area Two | 3.00% | 05/01/27 | 589,614 | |
155,000 | Epperson N CDD FL Capital Impt Rev Assmnt Area Three, Ser A | 2.45% | 11/01/26 | 149,409 | |
400,000 | Escambia Cnty FL Envrnmntl Impt Rev Var Ref Intl Paper Company Proj, Ser B (Mandatory put 10/01/24) | 2.00% | 11/01/33 | 398,134 | |
500,000 | FL St Dept Gen Svcs Div Facs Mgmt Rev Ref FL Facs Pool, Ser A | 4.00% | 09/01/30 | 514,736 | |
330,000 | FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | 4.00% | 07/01/25 | 328,494 | |
155,000 | FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | 4.00% | 07/01/26 | 155,492 | |
150,000 | FL St Dev Fin Corp Eductnl Facs Rev River City Science Acdmy Projs, Ser A | 4.00% | 07/01/28 | 151,041 | |
100,000 | FL St Dev Fin Corp Sr Living Rev Ref Glenridge on Palmer Ranch Proj (b) | 4.00% | 06/01/25 | 99,220 | |
1,750,000 | FL St Hsg Fin Corp Var The Sailx On Vine, Ser E (Mandatory put 06/01/27) | 3.80% | 06/01/42 | 1,760,841 | |
220,000 | FL St Muni Pwr Agy Ref, Ser A | 5.00% | 10/01/30 | 227,286 | |
1,000,000 | Gainesville FL Utilities Sys Rev Var Ref Remk, Ser B (c) | 4.05% | 10/01/42 | 1,000,000 | |
65,000 | Gulfstream Polo Cmnty Dev Dist FL Spl Assmnt Phase 2 Proj | 3.00% | 11/01/24 | 64,832 | |
380,000 | Harmony FL CDD Capital Impt Rev Ref | 5.00% | 05/01/25 | 380,121 | |
845,000 | Hidden Creek N Cmnty Dev Dist FL Spl Assmnt, Ser A1 | 4.00% | 11/01/30 | 844,953 | |
105,000 | Hills Minneola Cmnty Dev Dist FL Spl Assmnt Rev S Parcel Assmnt Area (b) | 3.00% | 05/01/25 | 104,097 | |
1,100,000 | Hills Minneola Cmnty Dev Dist FL Spl Assmnt Rev S Parcel Assmnt Area (b) | 3.50% | 05/01/31 | 1,050,967 | |
750,000 | Lakes By The Bay S FL CDD Assmnt Ref | 5.00% | 05/01/27 | 768,833 | |
1,000,000 | Lee Cnty FL Indl Dev Auth Hlthcare Facs Rev Shell Point, Ser 2024B-3 (Temps-50) | 4.13% | 11/15/29 | 1,002,876 | |
350,000 | Liberty Cove CDD FL Spl Assmnt Rev Assmnt Area One Proj (a) | 4.80% | 05/01/31 | 350,184 | |
375,000 | LTC Ranch W Rsdl Cmnty Dev Dist Spl Assmnt Rev Assmnt Area One Proj, Ser A | 2.50% | 05/01/26 | 364,201 | |
145,000 | LTC Ranch W Rsdl Cmnty Dev Dist Spl Assmnt Rev Assmnt Area Two Proj Pod 5, Ser AA2 | 4.85% | 05/01/31 | 146,106 | |
500,000 | Martin Cnty FL Hlth Facs Auth Martin Mem Med Ctr (Pre- refunded maturity 11/15/24) | 5.00% | 11/15/45 | 502,365 | |
2,035,000 | Miami-Dade Cnty FL Sch Brd Ref, Ser C, COPS | 5.00% | 02/01/32 | 2,081,464 | |
4,000,000 | Miami-Dade Cnty FL Seaport Rev Ref Sr Bonds, Ser A, AMT | 5.00% | 10/01/30 | 4,279,557 | |
See Notes to Financial Statements
Page 4
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Florida (Continued) | |||||
$205,000 | Mirada II Cmnty Dev Dist FL Cap Impt Rev | 2.50% | 05/01/26 | $198,761 | |
1,770,000 | Palm Beach Cnty FL Hlth Facs Auth Ref Acts Retmnt Life Cmntys Inc Oblig Grp | 5.00% | 11/15/32 | 1,811,747 | |
500,000 | Parrish Lakes CDD Capital Impt Rev Assmnt Area Three | 5.00% | 05/01/31 | 500,987 | |
125,000 | Pine Isle Cmnty Dev Dist FL Spl Assmnt 2021 Proj (b) | 2.38% | 12/15/26 | 121,118 | |
415,000 | Rhodine Road N CDD FL Spl Assmnt 2019 Assmnt Area | 4.00% | 05/01/30 | 418,325 | |
145,000 | Saint Johns Cnty FL Indl Dev Auth Sr Living Rev Ref Vicar’s Landing Proj, Ser A | 4.00% | 12/15/24 | 144,494 | |
450,000 | Saltleaf CDD FL Capital Impt Rev | 4.75% | 05/01/31 | 451,649 | |
960,000 | San Simeon Cmnty Dev Dist FL Spl Assmnt (b) | 3.75% | 06/15/31 | 925,510 | |
240,000 | Sarasota Natl FL CDD Spl Assmnt Ref | 3.00% | 05/01/25 | 238,390 | |
740,000 | Shell Point Cmnty Dev Dist FL Spl Assmnt (b) | 4.50% | 11/01/29 | 748,668 | |
105,000 | Shingle Creek at Bronson CDD FL Spl Assmnt | 2.50% | 06/15/26 | 102,252 | |
235,000 | Silver Palms W CDD FL Spl Assmnt 2022 Proj | 2.60% | 06/15/27 | 224,919 | |
145,000 | Six Mile Creek FL CDD Capital Impt Rev Assmnt Area 3 Phase 1 | 2.50% | 05/01/26 | 141,338 | |
465,000 | Summer Woods CDD FL Spl Assmnt Area Two 2020 Proj | 3.30% | 05/01/31 | 435,384 | |
870,000 | The Heights CDD FL Spl Assmnt Rev CDD | 4.00% | 01/01/28 | 869,145 | |
325,000 | Timber Creek SW CDD FL Spl Assmnt Area Two Proj | 2.35% | 12/15/26 | 312,325 | |
780,000 | Tolomato FL CDD Ref 2022A Assmnt Area, Ser A, AGM | 3.00% | 05/01/26 | 774,793 | |
825,000 | Tolomato FL CDD Ref 2022A Assmnt Area, Ser A, AGM | 3.00% | 05/01/28 | 813,699 | |
250,000 | Two Rivers W CDD FL Spl Assmnt Proj, Ser 2024 (b) | 4.80% | 05/01/31 | 251,201 | |
190,000 | V-Dana CDD FL Spl Assmnt CDD Assmnt Area One 2021 Proj | 2.60% | 05/01/26 | 185,072 | |
660,000 | Veranda CDD II FL Spl Assmnt Rev Ref Assmt Area 3 Preserve E Proj | 4.25% | 05/01/31 | 665,682 | |
225,000 | Villamar CDD FL Spl Assmnt | 4.00% | 05/01/29 | 224,796 | |
425,000 | Volusia Cnty FL Eductnl Fac Auth Stetson Univ Inc Proj | 5.00% | 06/01/30 | 455,631 | |
130,000 | Westside Haines City CDD Spl Assmnt Area One Proj | 2.50% | 05/01/26 | 126,313 | |
34,587,988 | |||||
Georgia — 6.2% | |||||
2,000,000 | Atlanta GA Arpt Rev Ref, Ser B, AMT | 5.00% | 07/01/26 | 2,065,030 | |
1,660,000 | Bartow Cnty GA Dev Auth Var GA Pwr Comp Plant Bowen Proj Remk (Mandatory put 08/19/25) | 2.88% | 08/01/43 | 1,641,187 | |
250,000 | Bartow Cnty GA Dev Auth Var Ref GA Pwr Co Plt Bowen Proj Remk, First Ser (Mandatory put 03/08/28) | 3.95% | 12/01/32 | 256,063 | |
1,000,000 | Burke Cnty GA Dev Auth Poll Control Rev GA Pwr Co Plant Vogtle Proj Remk, 1st Ser (c) | 4.30% | 11/01/48 | 1,000,000 | |
875,000 | Burke Cnty GA Dev Auth Poll Control Rev Var GA Pwr Co Plant Vogtle Proj Remk, 5th Ser (Mandatory put 06/13/28) | 3.70% | 10/01/32 | 889,572 | |
1,000,000 | Burke Cnty GA Dev Auth Poll Control Rev Var GA Pwr Co Vogtle, 1st Ser (c) | 4.25% | 07/01/49 | 1,000,000 | |
1,100,000 | Burke Cnty GA Dev Auth Poll Control Rev Var Ref GA Pwr Co Plant Vogtle Proj (c) | 4.25% | 11/01/52 | 1,100,000 | |
1,500,000 | Burke Cnty GA Dev Auth Poll Control Rev Var Ref GA Pwr Co Plant Vogtle Proj Remk, 1st Ser (Mandatory put 03/12/27) | 3.38% | 11/01/53 | 1,501,693 | |
250,000 | Columbia Cnty GA Hosp Auth Rev Anticipation Ctfs Wellstar Hlth Sys Inc Proj, Ser B | 5.00% | 04/01/27 | 262,477 | |
735,000 | GA St Ref Bid Grp 3, Ser C | 4.00% | 07/01/25 | 742,245 | |
240,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A | 5.00% | 05/15/25 | 241,874 | |
2,000,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A | 5.00% | 06/01/29 | 2,099,359 | |
4,265,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 09/01/27) | 4.00% | 07/01/52 | 4,298,634 | |
See Notes to Financial Statements
Page 5
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Georgia (Continued) | |||||
$510,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 12/01/29) | 4.00% | 09/01/52 | $514,468 | |
2,180,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A (Mandatory put 09/01/31) | 5.00% | 05/01/54 | 2,341,684 | |
800,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser B | 5.00% | 06/01/26 | 818,385 | |
1,290,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser C (Mandatory put 09/01/26) | 4.00% | 03/01/50 | 1,294,924 | |
100,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser D (Mandatory put 12/01/30) | 5.00% | 05/01/54 | 106,141 | |
1,000,000 | Monroe Cnty GA Dev Auth Poll Control Rev GA Pwr Co Plant Scherer Proj Remk, 1st Ser | 2.25% | 07/01/25 | 981,746 | |
1,700,000 | Monroe Cnty GA Dev Auth Poll Control Rev Var GA Pwr Co Plt Scherer Proj Remk, 2nd Ser (Mandatory put 03/06/26) | 3.88% | 10/01/48 | 1,716,356 | |
200,000 | Muni Elec Auth of GA Plant Vogtle Units 3&4 Proj J Bonds, Ser A, AGM | 5.00% | 07/01/30 | 218,153 | |
200,000 | Muni Elec Auth of GA Plant Vogtle Units 3&4 Proj J, Ser A, AGM | 5.00% | 07/01/26 | 206,541 | |
405,000 | Muni Elec Auth of GA Plant Vogtle Units 3&4 Proj M, Ser A, AGM | 5.00% | 07/01/28 | 431,826 | |
150,000 | Muni Elec Auth of GA Ref Subord General Resolution Projs, Ser A | 4.00% | 01/01/25 | 150,458 | |
25,878,816 | |||||
Guam — 0.1% | |||||
250,000 | Guam Govt Busn Privilege Tax Rev Ref, Ser F | 5.00% | 01/01/28 | 261,371 | |
Idaho — 0.3% | |||||
1,250,000 | ID St Hlth Facs Auth Hosp Rev Var Che Trinity Hlth Credit Grp Remk, Ser ID (Mandatory put 11/01/24) (c) | 3.70% | 12/01/48 | 1,250,000 | |
Illinois — 7.3% | |||||
590,000 | Bolingbrook IL Ref, Ser A, AGM | 5.00% | 01/01/32 | 616,512 | |
115,000 | Chicago IL Brd of Edu Chicago Sch Reform Brd, Ser A, NATL-RE | 5.50% | 12/01/26 | 117,708 | |
110,000 | Chicago IL Brd of Edu Ref, Ser A | 5.00% | 12/01/26 | 112,457 | |
625,000 | Chicago IL Brd of Edu Sustainable Bond, Ser E | 5.13% | 12/01/32 | 626,370 | |
500,000 | Chicago IL Mf Hsg Rev Var Covent Apartments Proj (Mandatory put 09/01/24) | 4.00% | 09/01/25 | 500,193 | |
500,000 | Chicago IL Midway Arpt Rev Ref Sr Lien, Ser A, AMT, BAM | 5.00% | 01/01/27 | 516,527 | |
2,000,000 | Chicago IL Midway Arpt Rev Ref Sr, Ser C, AMT | 5.00% | 01/01/33 | 2,167,915 | |
520,000 | Chicago IL O’Hare Intl Arpt Rev Gen Sr Lien, Ser D, AMT | 5.00% | 01/01/29 | 534,759 | |
500,000 | Chicago IL O’Hare Intl Arpt Rev Ref Sr Lien O’Hare Intl Arpt, Ser C, AMT | 5.00% | 01/01/26 | 510,200 | |
100,000 | Chicago IL Ref 2003B Remk (Pre-refunded maturity 01/01/25) | 5.13% | 01/01/27 | 100,725 | |
65,000 | Chicago IL Ref, Ser C, CABS | (d) | 01/01/25 | 63,975 | |
70,000 | Chicago IL Unrefunded, Ser A | 5.00% | 01/01/26 | 70,287 | |
2,230,000 | Chicago IL Wtrwks Rev Ref 2nd Lien, AGM | 5.25% | 11/01/34 | 2,352,195 | |
80,000 | Chicago IL, Ser A (Pre-refunded maturity 01/01/25) | 5.00% | 01/01/26 | 80,506 | |
675,000 | Cook Cnty IL Sales Tax Rev Ref, Ser A | 5.00% | 11/15/29 | 737,698 | |
205,000 | Glencoe IL, Ser A | 3.00% | 12/15/28 | 203,618 | |
345,000 | IL St Fin Auth Hlth Svcs Facs Lease Rev Univ of IL Hlth Svcs Fac Proj | 5.00% | 10/01/24 | 345,667 | |
1,265,000 | IL St Fin Auth Rev Centegra Hlth Sys, Ser A (Pre-refunded maturity 09/01/24) | 5.00% | 09/01/39 | 1,266,792 | |
225,000 | IL St Fin Auth Rev Ref Ascension Hlth Credit Grp, Ser C | 5.00% | 02/15/27 | 234,952 | |
2,000,000 | IL St Fin Auth Rev Ref Ascension Hlth Credit Grp, Ser C | 5.00% | 02/15/30 | 2,086,736 | |
See Notes to Financial Statements
Page 6
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Illinois (Continued) | |||||
$1,000,000 | IL St Fin Auth Rev Ref Rush Univ Med Ctr, Ser A | 5.00% | 11/15/24 | $1,004,306 | |
2,000,000 | IL St Hsg Dev Auth Mf Hsg Rev Var 6900 Crandon (Mandatory put 02/01/26) | 5.00% | 02/01/27 | 2,046,851 | |
1,000,000 | IL St Hsg Dev Auth Mf Hsg Rev Var Berry Manor (Mandatory put 09/01/24) | 4.00% | 09/01/25 | 1,000,597 | |
625,000 | IL St Hsg Dev Auth Mf Hsg Rev Var S Shore (Mandatory put 06/01/25) | 4.00% | 06/01/26 | 627,451 | |
2,000,000 | IL St Muni Elec Agy Pwr Sply Ref, Ser A | 5.00% | 02/01/26 | 2,034,064 | |
550,000 | IL St Ref, Ser B | 5.00% | 03/01/25 | 555,613 | |
500,000 | IL St Sales Tax Rev Ref, Subser C, BAM | 4.00% | 06/15/27 | 504,811 | |
180,000 | IL St Toll Hwy Auth Sr, Ser B | 5.00% | 01/01/33 | 185,140 | |
250,000 | IL St, Ser B | 5.00% | 05/01/28 | 265,498 | |
2,445,000 | IL St, Ser C | 5.00% | 11/01/29 | 2,568,496 | |
710,000 | Railsplitter IL Tobacco Stlmt Auth (Pre-refunded maturity 06/01/26) | 5.00% | 06/01/27 | 733,971 | |
1,055,000 | Rock Island Cnty IL Sch Dist #41 Rock Island, BAM | 5.00% | 12/01/29 | 1,121,667 | |
585,000 | Sales Tax Securitization Corp IL Ref Sales Tax Securitiztn, Ser A | 5.00% | 01/01/29 | 616,694 | |
2,750,000 | Schaumburg IL Ref | 4.00% | 12/01/24 | 2,756,566 | |
355,000 | Springfield IL Elec Rev Ref Sr Lien | 5.00% | 03/01/26 | 357,814 | |
1,000,000 | Wauconda IL Spl Svc Area #1 Spl Tax Ref, BAM | 5.00% | 03/01/33 | 1,006,370 | |
30,631,701 | |||||
Indiana — 3.9% | |||||
125,000 | IN Bond Bank Rev Hamilton Co Projs, CABS | (d) | 01/15/26 | 118,289 | |
1,000,000 | IN St Fin Auth Econ Dev Rev Var Ref Rep Svcs Inc Proj Remk, Ser B (Mandatory put 09/03/24) (c) | 3.90% | 05/01/28 | 1,000,656 | |
2,000,000 | IN St Fin Auth Envrnmntl Facs Rev Var Ref IN Pwr & Light Co Proj, Ser A | 1.40% | 08/01/29 | 1,728,267 | |
520,000 | IN St Fin Auth Envrnmntl Rev Ref Var Duke Energy IN Inc Proj Remk, Ser A-1, AMT (Mandatory put 06/01/32) | 4.50% | 05/01/35 | 522,610 | |
1,480,000 | IN St Fin Auth Hlth Fac Rev Margaret Mary Hlth Proj, Ser A | 5.00% | 03/01/30 | 1,556,751 | |
1,985,000 | IN St Fin Auth Hlth Sys Rev IN Univ Hlth Oblig Grp, Ser B (Mandatory put 07/01/25) | 2.25% | 12/01/58 | 1,955,576 | |
80,000 | IN St Fin Auth Rev BHI Sr Living, Ser A | 4.00% | 11/15/26 | 80,169 | |
315,000 | IN St Fin Auth Rev Cmnty Fdtn of NW IN Ref | 5.00% | 03/01/31 | 318,142 | |
2,000,000 | IN St Hsg & Cmnty Dev Auth Sf Mtge Rev Var Remk, Ser C-3 (c) | 4.05% | 07/01/47 | 2,000,000 | |
1,000,000 | Rockport IN Poll Control Rev Ref AEP Generating Company Proj Remk, Ser A | 3.13% | 07/01/25 | 989,699 | |
1,000,000 | Rockport IN Poll Control Rev Ref AEP Generating Company Proj Remk, Ser B | 3.13% | 07/01/25 | 989,699 | |
3,610,000 | Rockport IN Poll Control Rev Ref IN MI Pwr Co Proj Remk, Ser A | 3.05% | 06/01/25 | 3,587,483 | |
1,525,000 | Whiting IN Envrnmntl Facs Rev Ref BP Products N America Inc Proj, Ser A, AMT (Mandatory put 06/05/26) | 5.00% | 12/01/44 | 1,557,225 | |
16,404,566 | |||||
Kansas — 1.6% | |||||
1,000,000 | Dodge City KS Temp Nts, Ser 2023-1 | 4.13% | 09/01/25 | 1,000,654 | |
2,660,000 | Johnson Cnty KS Unif Sch Dist #512 Shawnee Mission Ref, Ser A | 3.25% | 10/01/28 | 2,660,823 | |
1,650,000 | Olathe KS Temp Nts, Ser A | 5.00% | 08/01/24 | 1,650,000 | |
1,370,000 | Wyandotte Cnty KS Kansas City Unif Govt Spl Oblg Rev Ref Sales Tax KS Intl Speedway Corp Proj | 5.00% | 12/01/25 | 1,376,259 | |
6,687,736 | |||||
See Notes to Financial Statements
Page 7
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Kentucky — 2.0% | |||||
$240,000 | KY St Econ Dev Fin Auth Hlth Sys Rev Norton Hlthcare Inc, Ser B, CABS, NATL-RE | (d) | 10/01/25 | $228,506 | |
20,000 | KY St Econ Dev Fin Auth Ref Owensboro Hlth, Ser A | 5.00% | 06/01/25 | 20,064 | |
1,070,000 | KY St Interlocal Sch Transprtn Assn Equipment Lease Re, COPS | 4.00% | 03/01/29 | 1,099,470 | |
300,000 | KY St Muni Pwr Agy Pwr Sys Rev Ref, Ser A, NATL-RE | 5.00% | 09/01/25 | 304,750 | |
175,000 | KY St Muni Pwr Agy Pwr Sys Rev Ref, Ser A, NATL-RE | 5.00% | 09/01/30 | 177,129 | |
1,060,000 | KY St Pub Energy Auth Gas Sply Rev Ref, Ser B | 5.00% | 08/01/28 | 1,101,372 | |
325,000 | KY St Pub Energy Auth Gas Sply Rev Var, Ser C (Mandatory put 02/01/28) | 4.00% | 02/01/50 | 326,832 | |
190,000 | Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Ref Norton Hlthcare Inc, Ser A | 5.00% | 10/01/30 | 194,542 | |
100,000 | Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Ref Norton Hlthcare Inc, Ser A | 5.00% | 10/01/24 | 100,261 | |
330,000 | Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Ref Norton Hlthcare Inc, Ser A | 5.00% | 10/01/25 | 336,426 | |
200,000 | Louisville & Jefferson Cnty KY Met Govt Hlth Sys Rev Var Norton Hlthcare Inc, Ser C (Mandatory put 10/01/26) | 5.00% | 10/01/47 | 205,430 | |
2,100,000 | Meade Cnty KY Indl Bldg Rev Var Nucor Steel Brandenburg Proj Sustainable Bond, Ser B-1 (c) | 4.80% | 08/01/61 | 2,100,000 | |
1,195,000 | Paducah KY Elec Plant Brd Rev Ref, Ser A, AGM | 5.00% | 10/01/30 | 1,236,605 | |
1,000,000 | Trimble Cnty KY Envrnmntl Facs Rev Var Louisville Gas & Elec Co Proj, Ser A, AMT (Mandatory put 06/01/27) | 4.70% | 06/01/54 | 1,007,805 | |
8,439,192 | |||||
Louisiana — 1.1% | |||||
1,200,000 | LA St Loc Govt Envrnmntl Facs & Cmnty Dev Auth Rev Ref Hosp Womans Fdtn Proj, Ser A | 5.00% | 10/01/33 | 1,239,607 | |
1,150,000 | LA St Pub Facs Auth Sol Wst Disp Fac Rev Var Elementus Minerals LLC Proj (Mandatory put 11/01/25) (b) | 5.00% | 10/01/43 | 1,162,190 | |
455,000 | New Orleans LA Aviation Brd, Ser B, AMT | 5.00% | 01/01/31 | 456,623 | |
1,000,000 | Saint James Parish LA Rev Var Nustar Logistics LP Proj Remk, Ser 2011 (Mandatory put 06/01/25) (b) | 5.85% | 08/01/41 | 1,015,198 | |
640,000 | Saint John the Baptist Parish LA Rev Var Ref Marathon Oil Corp Proj Remk, Subser 2017B-2 (Mandatory put 07/01/26) | 2.38% | 06/01/37 | 621,787 | |
4,495,405 | |||||
Maine — 0.2% | |||||
1,000,000 | ME St Fin Auth Sol Wst Disp Rev Casella Waste Sys Proj, AMT (Mandatory put 08/01/25) (b) | 5.13% | 08/01/35 | 1,005,851 | |
Maryland — 1.1% | |||||
1,550,000 | MD St Econ Dev Corp Var Ref Constellation Energy Grp Proj Remk, Ser B (Mandatory put 04/03/28) | 4.10% | 10/01/36 | 1,587,100 | |
1,000,000 | MD St First Ser | 4.00% | 06/01/29 | 1,000,078 | |
100,000 | MD St Hlth & Hgr Eductnl Facs Auth Rev Ref Stevenson Univ Proj, Ser A | 5.00% | 06/01/28 | 103,812 | |
925,000 | MD St Stadium Auth Rev Football Stadium Issue, Ser A | 5.00% | 03/01/25 | 935,739 | |
1,000,000 | MD St Transprtn Auth Passenger Fac Charge Baltimore Washington Intl Thurgood Marshall Arpt, AMT | 5.00% | 06/01/25 | 1,013,703 | |
4,640,432 | |||||
Massachusetts — 0.0% | |||||
150,000 | MA St Bay Transprtn Auth Sales Tax Rev Unrefunded Subord Sustainable Bonds, BANS | 4.00% | 05/01/25 | 151,299 | |
See Notes to Financial Statements
Page 8
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Michigan — 1.6% | |||||
$220,000 | Detroit MI | 5.00% | 04/01/26 | $226,270 | |
435,000 | Great Lakes MI Wtr Auth Sewage Disposal Sys Rev Ref 2nd Lien, Ser C | 5.00% | 07/01/36 | 445,108 | |
500,000 | Great Lakes MI Wtr Auth Sewage Disposal Sys Rev Ref Sr Lien, Ser B | 5.00% | 07/01/31 | 516,486 | |
140,000 | Great Lakes MI Wtr Auth Wtr Sply Sys Rev Ref Second Lien, Ser D | 5.00% | 07/01/36 | 143,253 | |
400,000 | Great Lakes MI Wtr Auth Wtr Sply Sys Rev Sr Lien Bonds, Ser B | 5.00% | 07/01/29 | 438,785 | |
1,155,000 | MI St Fin Auth Rev Multi Modal McLaren Hlth Care, Ser A | 5.00% | 02/15/29 | 1,239,799 | |
85,000 | MI St Fin Auth Rev Ref Henry Ford Hlth Sys | 4.00% | 11/15/36 | 84,513 | |
155,000 | MI St Fin Auth Rev Ref Hosp McLaren Hlth Care, Ser A | 5.00% | 05/15/27 | 156,630 | |
1,790,000 | MI St Fin Auth Rev Var Trinity Hlth Credit Grp, Ser B (Mandatory put 12/01/28) | 5.00% | 12/01/43 | 1,903,432 | |
500,000 | MI St Fin Auth Rev, Ser A-1 (a) | 5.00% | 07/21/25 | 507,846 | |
1,000,000 | MI St Strategic Fund Ltd Oblg Rev Var DTE Electric Company Exempt Fac Proj, Ser 2023DT, AMT (Mandatory put 06/03/30) | 3.88% | 06/01/53 | 1,007,498 | |
6,669,620 | |||||
Minnesota — 2.2% | |||||
2,250,000 | Buffalo MN Indep Sch Dist #877 | 3.00% | 02/01/29 | 2,195,753 | |
3,510,000 | Hennepin Cnty MN Sales Tax Rev Ref 1st Lien Ballpark Proj, Ser A | 5.00% | 12/15/30 | 3,657,673 | |
1,000,000 | Minneapolis MN Mf Rev Var Greenway Apartments Proj (Mandatory put 08/01/24) | 2.70% | 08/01/25 | 1,000,000 | |
2,500,000 | MN Muni Gas Agy Cmdy Sply Rev, Ser A | 4.00% | 12/01/25 | 2,520,825 | |
9,374,251 | |||||
Missouri — 1.8% | |||||
1,000,000 | Kansas City MO Indl Dev Auth Arpt Spl Oblig Kansas City Intl Arpt, Ser A, AMT | 5.00% | 03/01/30 | 1,068,904 | |
1,230,000 | MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Ref Saint Lukes Hlth Sys Inc | 4.00% | 11/15/33 | 1,233,709 | |
1,000,000 | MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Ref, Ser C (Mandatory put 05/01/28) | 5.00% | 05/01/52 | 1,063,484 | |
400,000 | MO St Hlth & Eductnl Facs Auth Hlth Facs Rev Var SSM Hlth, Ser F (c) | 3.95% | 06/01/36 | 400,000 | |
760,000 | MO St Hlth & Eductnl Facs Auth Lutheran Sr Svcs Projs | 4.00% | 02/01/28 | 768,417 | |
500,000 | MO St Hlth & Eductnl Facs Auth Ref Lutheran Sr Svcs Projs, Ser A | 5.00% | 02/01/29 | 528,411 | |
485,000 | MO St Hlth & Eductnl Facs Auth Ref Lutheran Sr Svcs Projs, Ser A | 5.00% | 02/01/30 | 517,604 | |
1,485,000 | Pettis Cnty MO Sch Dist Sedalia Lease Cops Sedalia Sch Dist No.200 of Pettis Cnty, MO Proj | 5.00% | 04/15/29 | 1,581,176 | |
575,000 | Saint Louis Cnty MO Pattonville Sch Dist #R-3 | 4.00% | 03/01/25 | 578,511 | |
7,740,216 | |||||
Montana — 0.5% | |||||
2,000,000 | Forsyth Mt Poll Control Rev Ref Northwestern Corp Colstrip Proj | 3.88% | 07/01/28 | 2,021,913 | |
Nebraska — 0.7% | |||||
1,000,000 | Centrl Plains Energy Proj NE Gas Proj Rev Var Ref Proj #4, Ser A (Mandatory put 11/01/29) | 5.00% | 05/01/54 | 1,056,804 | |
400,000 | Muni Energy Agy of NE Ref | 5.00% | 04/01/28 | 416,480 | |
250,000 | Omaha NE Pub Dist Elec Rev Ref Sys, Ser A | 5.00% | 02/01/28 | 256,946 | |
1,235,000 | Omaha NE Pub Facs Corp Lease Rev, Ser A | 4.00% | 04/15/25 | 1,241,760 | |
2,971,990 | |||||
See Notes to Financial Statements
Page 9
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Nevada — 0.5% | |||||
$120,000 | Clark Cnty NV Sch Dist Bldg Cr, Ser B, AGM | 5.00% | 06/15/31 | $128,753 | |
260,000 | Las Vegas NV Spl Impt Dist #808 & #810 Ref | 5.00% | 06/01/28 | 260,114 | |
980,000 | Las Vegas NV Spl Impt Dist #812 Loc Impt Summerlin Vlg 24 | 5.00% | 12/01/31 | 984,489 | |
225,000 | Las Vegas NV Spl Impt Dist #816 Summerlin Vlg 22 | 2.00% | 06/01/26 | 214,703 | |
470,000 | NV Dept of Busn & Industry NV Doral Acdmy, Ser A | 5.00% | 07/15/27 | 473,694 | |
2,061,753 | |||||
New Hampshire — 0.5% | |||||
1,000,000 | Natl Fin Auth NH Hlthcare Facs Rev Var Novant Hlth Oblig Grp, Ser B (c) | 4.10% | 11/01/64 | 1,000,000 | |
1,175,000 | Natl Fin Auth NH Pollution Control Rev Ref NY St Elec & Gas Corp Proj, Ser A, AMT | 4.00% | 12/01/28 | 1,174,930 | |
2,174,930 | |||||
New Jersey — 2.1% | |||||
1,000,000 | Casino Reinvestment Dev Auth NJ Luxury Tax Rev Ref, AGM | 5.00% | 11/01/29 | 1,004,708 | |
2,000,000 | NJ St | 2.00% | 06/01/29 | 1,806,030 | |
250,000 | NJ St Covid-19 Go Emergency Bonds, Ser A | 4.00% | 06/01/30 | 264,138 | |
580,000 | NJ St Econ Dev Auth Rev Portal N Bridge Proj NJ Transit Transprtn Proj Bonds, Ser A | 5.00% | 11/01/26 | 604,812 | |
2,000,000 | NJ St Hlth Care Facs Fing Auth Rev Ref Rwj Barnabas Hlth Oblig Grp Issue, Ser B-2 (Mandatory put 07/01/25) | 5.00% | 07/01/42 | 2,029,665 | |
965,000 | NJ St Hlth Care Facs Fing Auth Rev Ref Rwj Barnabas Hlth Oblig Grp Issue, Ser B-3 (Mandatory put 07/01/26) | 5.00% | 07/01/45 | 993,837 | |
2,275,000 | NJ St Transprtn Trust Fund Auth Cap Apprec Transprtn Sys, Ser C, AMBAC | (d) | 12/15/25 | 2,172,407 | |
8,875,597 | |||||
New Mexico — 0.5% | |||||
2,000,000 | Farmington NM Poll Control Rev Var Ref Pub Svc Co NM San Juan Proj Remk, Ser D (Mandatory put 06/01/28) | 3.90% | 06/01/40 | 2,028,538 | |
New York — 2.9% | |||||
305,000 | Batavia Town NY, BANS | 4.00% | 03/05/25 | 306,378 | |
2,000,000 | Chautauqua Cnty NY Capital Res Corp Exempt Facs Rev Var Ref NRG Energy Proj Remk (Mandatory put 04/03/28) | 4.25% | 04/01/42 | 2,026,383 | |
1,500,000 | Elmira City NY Sch Dist, BANS | 4.50% | 06/13/25 | 1,516,167 | |
285,000 | Kings Park NY Centrl Sch Dist, Ser B | 3.00% | 07/15/31 | 271,303 | |
125,000 | Long Beach NY, Ser B | 5.50% | 07/15/25 | 127,008 | |
1,000,000 | Met Transprtn Auth NY Rev Var Ref Remk, Ser D, 2002D-2A-1 (c) | 4.10% | 11/01/32 | 1,000,000 | |
2,000,000 | New York City NY Hsg Dev Corp Mf Hsg Rev Sustainable Dev Bonds, Ser F-2A (Mandatory put 12/22/26) | 3.40% | 11/01/62 | 1,992,594 | |
340,000 | New York City NY Transitional Fin Auth Bldg Aid Rev Ref Fiscal 2018, Ser S-1 | 5.00% | 07/15/35 | 354,779 | |
2,000,000 | NY St Transprtn Dev Corp Spl Fac Rev Delta Air Lines Inc Laguardia Arpt Terminals C&D Redev, AMT | 5.00% | 01/01/25 | 2,007,977 | |
305,000 | NY St Transprtn Dev Corp Spl Fac Rev Ref American Airls Inc John F Kennedy Intl Arpt Proj, AMT | 2.25% | 08/01/26 | 295,566 | |
1,180,000 | Port Auth of NY & NJ NY Ref, 194th Ser | 5.00% | 10/15/34 | 1,205,435 | |
1,100,000 | Tioga NY Centrl Sch Dist, BANS | 4.50% | 06/27/25 | 1,111,753 | |
12,215,343 | |||||
North Carolina — 3.2% | |||||
400,000 | Charlotte Mecklenburg NC Hosp Auth Hlth Care Sys Rev Var Atrium Hlth Remk, Ser D (Mandatory put 06/15/27) | 3.63% | 01/15/48 | 398,694 | |
See Notes to Financial Statements
Page 10
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
North Carolina (Continued) | |||||
$250,000 | Charlotte NC Arpt Rev, Ser A | 5.00% | 07/01/30 | $263,155 | |
1,000,000 | Columbus Cnty NC Indl Facs & Poll Control Fing Auth Rev Var Ref Intl Paper Co Proj, Ser A (Mandatory put 06/16/25) | 1.38% | 05/01/34 | 978,472 | |
400,000 | NC St Capital Facs Fin Agy Eductnl Facs Rev Ref High Point Univ | 5.00% | 05/01/28 | 420,908 | |
1,000,000 | NC St Grant Anticipation Rev Vehcl, GARVEE | 5.00% | 03/01/26 | 1,010,577 | |
2,800,000 | NC St Hsg Fin Agy Mf Hsg Rev Var Fitch Irick Portfolio (Mandatory put 04/01/28) | 5.00% | 04/01/29 | 2,950,123 | |
3,435,000 | NC St Med Care Commn Hosp Rev Caromont Hlth, Ser B (Mandatory put 02/01/26) | 5.00% | 02/01/51 | 3,516,479 | |
525,000 | NC St Med Care Commn Retmnt Facs Rev United Methodist Retmnt Homes, Ser 2024B-2 | 3.75% | 10/01/28 | 524,779 | |
170,000 | Raleigh Durham NC Arpt Auth Arpt Rev Ref, Ser A, AMT | 5.00% | 05/01/29 | 180,652 | |
1,500,000 | Raleigh Durham NC Arpt Auth Arpt Rev Ref, Ser A, AMT | 5.00% | 05/01/34 | 1,542,867 | |
1,580,000 | Raleigh Durham NC Arpt Auth Arpt Rev Ref, Ser A, AMT | 5.00% | 05/01/35 | 1,622,149 | |
13,408,855 | |||||
North Dakota — 0.8% | |||||
2,000,000 | Cass Cnty ND Jt Wtr Res Dist Ref and Impt, Ser A | 3.45% | 04/01/27 | 2,012,554 | |
1,400,000 | ND St Hsg Fin Agy Sustainable Bonds, Ser C | 3.45% | 01/01/26 | 1,402,680 | |
3,415,234 | |||||
Ohio — 4.2% | |||||
2,760,000 | Franklin Cnty OH Hosp Facs Rev Var Ref Nationwide Children’s Hosp, Ser B (c) | 4.05% | 11/01/42 | 2,760,000 | |
75,000 | NE OH Med Univ Gen Recpts Ref, Ser A | 5.00% | 12/01/24 | 75,272 | |
1,000,000 | OH St Air Quality Dev Auth American Elec Pwr Co Proj Remk, Ser A (Mandatory put 10/01/29) | 2.40% | 12/01/38 | 907,090 | |
1,000,000 | OH St Air Quality Dev Auth OH Vly Elec Corp Proj Remk, Ser C (Mandatory put 11/04/25) | 1.50% | 02/01/26 | 955,390 | |
900,000 | OH St Air Quality Dev Auth Ref American Elec Pwr Company Proj Remk, Ser B, AMT (Mandatory put 10/01/24) | 2.10% | 07/01/28 | 895,783 | |
2,700,000 | OH St Air Quality Dev Auth Var OH Vly Elec Corp Proj Remk, Ser B (Mandatory put 11/01/24) | 1.38% | 02/01/26 | 2,674,380 | |
3,115,000 | OH St Air Quality Dev Auth Var Ref Duke Energy Corp Proj, Ser A, AMT (Mandatory put 06/01/27) | 4.25% | 11/01/39 | 3,141,589 | |
200,000 | OH St Hosp Fac Rev Ref Cleveland Clinic Hlth Sys, Ser A | 5.00% | 01/01/25 | 201,622 | |
235,000 | OH St Hosp Fac Rev Ref Cleveland Clinic Hlth Sys, Ser A | 5.00% | 01/01/33 | 248,755 | |
1,750,000 | OH St Hosp Rev Var Cleveland Clinic Hlth Sys Remk, Ser C (Mandatory put 05/01/28) | 2.75% | 01/01/52 | 1,703,656 | |
1,000,000 | OH St Hosp Rev Var Ref Univ Hosps Hlth Sys Inc, Ser A (c) | 3.90% | 01/15/45 | 1,000,000 | |
1,000,000 | OH St Sol Wst Rev Ref Rep Svcs Inc Pj Remk (Mandatory put 09/03/24) (c) | 3.90% | 11/01/35 | 1,000,656 | |
1,990,000 | OH St, Ser A | 5.00% | 02/01/31 | 2,047,945 | |
17,612,138 | |||||
Oklahoma — 0.7% | |||||
1,500,000 | Canadian Cnty OK Eductnl Facs Auth Educ Facs Lease Rev Yukon Pub Sch Proj | 5.00% | 09/01/27 | 1,574,709 | |
1,000,000 | McClain Cnty OK Indep Sch Dist #1 New Castle Comb Purp | 5.00% | 07/01/26 | 1,032,515 | |
300,000 | Oklahoma Cnty OK Fin Auth Eductnl Facs Lease Rev Midwest City De City Pub Schs Proj | 5.00% | 10/01/26 | 310,870 | |
2,918,094 | |||||
See Notes to Financial Statements
Page 11
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Oregon — 1.1% | |||||
$660,000 | Astoria OR Hosp Facs Auth Columbia Memorial Hosp Proj | 5.00% | 08/01/31 | $720,714 | |
1,070,000 | OR St Article XI-P Schs Dist Capital Projs, Ser G | 5.00% | 12/01/30 | 1,118,895 | |
260,000 | Port of Portland OR Arpt Rev Portland Intl Arpt, Ser 25B, AMT | 5.00% | 07/01/27 | 270,992 | |
1,170,000 | Port of Portland OR Arpt Rev Ref Portland Intl Arpt, Ser 23 | 5.00% | 07/01/34 | 1,184,578 | |
130,000 | Port of Portland OR Arpt Rev, Ser 24B, AMT | 5.00% | 07/01/33 | 133,451 | |
260,000 | Salem OR Hosp Fac Auth Rev Ref Capital Manor Proj | 5.00% | 05/15/25 | 260,779 | |
265,000 | Salem OR Hosp Fac Auth Rev Ref Capital Manor Proj | 5.00% | 05/15/26 | 266,918 | |
260,000 | Salem OR Hosp Fac Auth Rev Ref Capital Manor Proj | 4.00% | 05/15/29 | 254,441 | |
100,000 | Union Cnty OR Hosp Fac Auth Grande Ronde Hosp | 5.00% | 07/01/25 | 100,915 | |
100,000 | Union Cnty OR Hosp Fac Auth Grande Ronde Hosp | 5.00% | 07/01/26 | 101,814 | |
4,413,497 | |||||
Pennsylvania — 4.6% | |||||
1,500,000 | Allegheny Cnty PA Indl Dev Auth Envrnmtl Impt Rev Ref United States Steel Corp Proj | 4.88% | 11/01/24 | 1,503,256 | |
2,000,000 | Chester Cnty PA Indl Dev Auth Nts Avon Grove Chrt Sch | 5.00% | 03/01/27 | 2,029,523 | |
1,000,000 | Cmwlth Fing Auth PA Tobacco Master Stlmt Payment Rev Bonds | 5.00% | 06/01/30 | 1,068,975 | |
395,000 | Cumberland Cnty PA Muni Auth Prerefunded Ref Diakon Lutheran Ministries Proj (Pre-refunded maturity 01/01/25) | 5.00% | 01/01/38 | 397,990 | |
90,000 | E Hempfield Twp PA Indl Dev Auth Ref Willow Vly Cmntys Proj | 5.00% | 12/01/24 | 90,393 | |
170,000 | E Hempfield Twp PA Indl Dev Auth Ref Willow Vly Cmntys Proj | 5.00% | 12/01/30 | 172,971 | |
150,000 | Latrobe PA Indl Dev Auth Univ Rev Ref Seton Hill Univ | 5.00% | 03/01/25 | 150,479 | |
255,000 | Lehigh Cnty PA Gen Purp Auth Revs Ref Lehigh Carbon Cmnty Clg, Ser 2016, BAM | 5.00% | 11/01/26 | 263,149 | |
1,000,000 | Lehigh Cnty PA Indl Dev Auth Ref Ppl Elec Util Corp Proj 2016 Remk, Ser B | 2.63% | 02/15/27 | 976,224 | |
2,450,000 | Lehigh Cnty PA Indl Dev Auth Ref Ppl Elec Util Corp Proj Remk, Ser A | 3.00% | 09/01/29 | 2,377,684 | |
1,000,000 | Montgomery Cnty PA Indl Dev Auth Exempt Facs Rev Var Constellation Energy Generation LLC Proj Ref, Ser A (Mandatory put 04/03/28) | 4.10% | 04/01/53 | 1,022,200 | |
175,000 | Montgomery Cnty PA Indl Dev Auth Ref Waverly Heights Ltd Proj | 4.00% | 12/01/26 | 174,786 | |
210,000 | Northampton Cnty PA Gen Purp Auth Clg Rev Ref Moravian Clg | 5.00% | 10/01/27 | 216,480 | |
150,000 | Northampton Cnty PA Gen Purp Auth Clg Rev Ref Moravian Clg | 5.00% | 10/01/30 | 154,711 | |
2,100,000 | PA St Econ Dev Fing Auth T/E Priv Activity Rev The Penndot Major Bridges Package One Proj P3 Proj, AMT | 5.00% | 12/31/29 | 2,195,811 | |
465,000 | PA St Hsg Fin Agy Sf Mtge Rev Non Ace, Ser 123B | 3.45% | 10/01/32 | 447,797 | |
405,000 | PA St Ref, 1st Ser | 5.00% | 09/15/27 | 421,523 | |
1,380,000 | PA St Turnpike Commn Turnpike Rev Ref Mtr License Fund Enh Trn Pke Subord | 5.00% | 12/01/30 | 1,433,257 | |
1,000,000 | PA St Turnpike Commn Turnpike Rev Ref Sub | 5.00% | 06/01/29 | 1,021,513 | |
375,000 | PA St Turnpike Commn Turnpike Rev Ref Sub, Ser A | 5.00% | 12/01/36 | 385,504 | |
1,735,000 | PA St Turnpike Commn Turnpike Rev, Ser A-1 | 5.00% | 12/01/36 | 1,776,409 | |
185,000 | PA St, 1st Ser 2020 | 5.00% | 05/01/29 | 202,257 | |
300,000 | Philadelphia PA Auth for Indl Dev Chrt Sch Rev Ref String Theory Chrt Sch Proj (b) | 5.00% | 06/15/25 | 302,199 | |
330,000 | Philadelphia PA Auth for Indl Dev Temple Univ Rev Ref, 1st Ser 2015 | 5.00% | 04/01/27 | 333,591 | |
35,000 | Philadelphia PA Ref, Ser A | 5.00% | 08/01/27 | 36,944 | |
19,155,626 | |||||
See Notes to Financial Statements
Page 12
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Puerto Rico — 0.1% | |||||
$328,000 | Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1, CABS | (d) | 07/01/27 | $293,978 | |
Rhode Island — 0.4% | |||||
1,670,000 | Providence RI Pub Bldgs Auth Rev, Ser A, AGM | 5.00% | 09/15/30 | 1,790,442 | |
South Carolina — 0.8% | |||||
355,000 | Berkeley Cnty SC Assmnt Rev Nexton Impt Dist | 4.00% | 11/01/30 | 343,816 | |
2,000,000 | Greenville Cnty SC Sch Dist Installment Pur Rev Ref SC Proj | 5.00% | 12/01/25 | 2,054,382 | |
700,000 | SC St Jobs Econ Dev Auth Econ Dev Rev Ref The Woodlands at Furman | 4.00% | 11/15/27 | 691,687 | |
60,000 | SC St Pub Svc Auth Rev Unrefunded Ref, Ser A | 5.00% | 12/01/24 | 60,292 | |
3,150,177 | |||||
South Dakota — 0.4% | |||||
355,000 | SD St Hlth & Eductnl Facs Auth Ref Sanford Oblig Grp | 5.00% | 11/01/27 | 363,034 | |
150,000 | SD St Hlth & Eductnl Facs Auth Ref Westhills Vlg Retmnt Cmnty Issue | 3.00% | 09/01/26 | 147,418 | |
990,000 | SD St Hsg Dev Auth Ref Homeownership Mtge, Ser E, AMT | 2.80% | 11/01/25 | 975,773 | |
1,486,225 | |||||
Tennessee — 1.3% | |||||
350,000 | Met Govt Nashville & Davidson Cnty TN Hlth & Eductnl Fac Brd Belmont Univ | 5.00% | 05/01/28 | 370,948 | |
450,000 | Met Nashville TN Arpt Auth Arpt Rev, Ser B, AMT | 5.00% | 07/01/27 | 467,882 | |
1,595,000 | TN St Energy Acq Corp Gas Rev (Mandatory put 11/01/25) | 4.00% | 11/01/49 | 1,598,200 | |
2,500,000 | TN St Energy Acq Corp Gas Rev Var Ref Gas Proj, Ser A-1 (Mandatory put 05/01/28) | 5.00% | 05/01/53 | 2,604,308 | |
250,000 | TN St Energy Acq Corp Gas Rev, Ser A | 5.25% | 09/01/26 | 255,692 | |
5,297,030 | |||||
Texas — 11.5% | |||||
250,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Ref Uplift Edu, Ser A | 4.00% | 12/01/30 | 252,840 | |
150,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Trinity Basin Preparatory Inc | 5.00% | 08/15/27 | 158,973 | |
150,000 | Arlington TX Hgr Edu Fin Corp Edu Rev Trinity Basin Preparatory Inc | 5.00% | 08/15/28 | 161,891 | |
500,000 | Arlington TX Hsg Fin Corp Mf Hsg Rev Var 6900 Matlok Road (Mandatory put 04/01/27) | 4.50% | 04/01/41 | 507,956 | |
500,000 | Austin TX Arpt Sys Rev, AMT | 5.00% | 11/15/25 | 509,567 | |
250,000 | Austin TX Arpt Sys Rev, AMT | 5.00% | 11/15/28 | 250,531 | |
2,000,000 | Austin TX Ref | 3.15% | 09/01/28 | 1,959,467 | |
950,000 | Centrl TX Regl Mobility Auth Rev, Ser C, BANS | 5.00% | 01/01/27 | 973,752 | |
35,000 | Clifton TX Hgr Edu Fin Corp Edu Rev Idea Pub Schs, Ser B | 5.00% | 08/15/24 | 35,016 | |
100,000 | Club Muni Mgmt Dist #1 TX Spl Assmnt Rev Impt Area #2 Proj (b) | 2.50% | 09/01/26 | 95,104 | |
207,000 | Crandall TX Spl Assmnt Rev Cartwright Ranch Pub Impt Dt Impt Area #1 Proj (b) | 3.38% | 09/15/26 | 201,735 | |
500,000 | Dallas Fort Worth TX Intl Arpt Rev Ref, Ser B | 5.00% | 11/01/27 | 531,120 | |
1,000,000 | Denton Cnty TX Hsg Fin Corp Var Pathway on Woodrow Apts (Mandatory put 02/01/25) | 5.00% | 02/01/26 | 1,006,086 | |
280,000 | Fort Bend Cnty TX Muni Util Dist #184, BAM | 6.00% | 04/01/27 | 296,297 | |
295,000 | Fort Bend Cnty TX Muni Util Dist #184, BAM | 6.00% | 04/01/28 | 311,984 | |
840,000 | Fort Bend TX Indep Sch Dist Ref | 5.00% | 08/15/26 | 874,684 | |
See Notes to Financial Statements
Page 13
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Texas (Continued) | |||||
$1,225,000 | Fort Bend TX Indep Sch Dist Var Remk, Ser A (Mandatory put 08/01/24) | 2.38% | 08/01/49 | $1,225,000 | |
672,000 | Fort Worth TX Spl Assmnt Rev Walsh Ranch Quail Valley Impt Area #1-3 Proj, BAM | 5.00% | 09/01/29 | 718,316 | |
465,000 | Galveston Cnty TX Muni Util Dist #54 Ref | 2.00% | 12/01/25 | 444,062 | |
560,000 | Galveston Cnty TX Muni Util Dist #54 Ref | 2.00% | 12/01/27 | 504,751 | |
610,000 | Galveston TX Wharves & Terminal Rev Wharves & Terminal First Lien, AMT | 5.25% | 08/01/28 | 641,938 | |
1,500,000 | Grayson Cnty TX Ref | 3.00% | 01/01/26 | 1,481,224 | |
710,000 | Harris Cnty TX Cultural Edu Facs Fin Corp Ref Rev Memorial Herman Hlth Sys, Ser A | 5.00% | 07/01/29 | 771,036 | |
400,000 | Harris Cnty TX Cultural Edu Facs Fin Corp Rev Ref Memorial Hermann Hlth Sys, Ser B | 5.00% | 07/01/31 | 446,557 | |
1,340,000 | Harris Cnty TX Cultural Edu Facs Fin Corp Rev Var Memorial Hermann Hlth System, Ser B-2 (Mandatory put 12/01/24) | 5.00% | 07/01/49 | 1,350,911 | |
230,000 | Harris Cnty TX Muni Util Dist #536, BAM | 5.50% | 09/01/26 | 240,304 | |
240,000 | Harris Cnty TX Muni Util Dist #536, BAM | 5.50% | 09/01/27 | 255,662 | |
2,000,000 | Hays Cnty TX Ref | 3.38% | 02/15/29 | 1,979,756 | |
660,000 | Houston TX Arpt Sys Rev Ref Sub, Ser C, AMT | 5.00% | 07/01/27 | 686,227 | |
1,835,000 | Houston TX Arpt Sys Rev Ref Subord Lien, Ser A, AGM, AMT | 5.00% | 07/01/27 | 1,909,987 | |
900,000 | Houston TX Arpt Sys Rev Ref United Airls Inc Terminal Impt Proj, Ser B-2, AMT | 5.00% | 07/15/27 | 918,172 | |
200,000 | Houston TX Arpt Sys Rev Sub, Ser A, AMT | 5.00% | 07/01/28 | 210,609 | |
300,000 | Houston TX Arpt Sys Rev Sub, Ser A, AMT | 5.00% | 07/01/29 | 318,891 | |
1,500,000 | Houston TX Cmnty Clg Ref, Ser A | 5.00% | 02/15/25 | 1,516,411 | |
925,000 | Kyle TX Spl Assmnt Rev 6 Creeks Pub Impt Dist Impt Area #1 (b) | 4.13% | 09/01/29 | 916,518 | |
700,000 | Love Field TX Arpt Modernization Corp Gen Arpt Rev, AMT | 5.00% | 11/01/33 | 715,791 | |
310,000 | Lower CO River TX Auth Trans Contract Rev Ref LCRA Trans Svcs Corp Proj | 5.00% | 05/15/33 | 317,871 | |
2,250,000 | Mesquite TX Hsg Fin Corp Var Palladium Carver Living (Mandatory put 08/01/27) (a) | 3.35% | 08/01/29 | 2,249,467 | |
300,000 | N Parkway Muni Mgmt Dist #1 TX Contract Rev Legacy Hills Pub Impt Dt Phase #1A-1B Impts (b) | 3.00% | 09/15/26 | 290,780 | |
1,000,000 | N TX Tollway Auth Rev Ref 2nd Tier, Ser A | 5.00% | 01/01/35 | 1,004,755 | |
150,000 | N TX Tollway Auth Rev Ref Second Tier Bonds, Ser C | 5.00% | 01/01/27 | 156,337 | |
105,000 | N TX Tollway Auth Rev Ref Sys 1st Tier, Ser A | 5.00% | 01/01/25 | 105,386 | |
300,000 | N TX Tollway Auth Rev Second Tier, Ser B | 5.00% | 01/01/27 | 312,674 | |
310,000 | Rockwall Cnty TX Muni Util Dist #8, AGM | 6.75% | 10/01/35 | 354,051 | |
2,075,000 | San Antonio TX Hsg Trust Pub Fac Corp Mf Hsg Rev Var Palladium San Antonio (Mandatory put 07/01/27) | 3.45% | 07/01/29 | 2,077,097 | |
1,340,000 | Southmost TX Regl Wtr Auth Wtr Sply Contract Rev Ref Desalination Plant Proj, BAM | 4.00% | 09/01/28 | 1,362,745 | |
1,000,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Ref Baylor Scott & White Hlth Proj, Ser A | 5.00% | 11/15/28 | 1,028,355 | |
680,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Hosp Rev Var Baylor Scott & White Hlth Proj, Ser E (Mandatory put 05/15/26) | 5.00% | 11/15/52 | 698,584 | |
300,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Rev Ref Christus Hlth, Ser B | 5.00% | 07/01/30 | 327,399 | |
950,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Rev Ref Trinity Terrace Proj (a) | 5.00% | 10/01/30 | 1,035,828 | |
See Notes to Financial Statements
Page 14
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Texas (Continued) | |||||
$995,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Rev Ref Trinity Terrace Proj (a) | 5.00% | 10/01/31 | $1,096,520 | |
875,000 | Travis Cnty TX Hsg Fin Corp Mf Hsg Rev Var Kensington Apts (Mandatory put 08/01/25) | 3.75% | 08/01/26 | 877,311 | |
2,000,000 | TX St Muni Gas Acq & Sply Corp IV, Ser A (Mandatory put 01/01/30) | 5.50% | 01/01/54 | 2,157,964 | |
480,000 | TX St Wtr Dev Brd St Wtr Implementation Fund, Ser A | 5.00% | 04/15/25 | 487,024 | |
340,000 | Univ of Houston TX Univ Revs Ref Consol, Ser C | 5.00% | 02/15/30 | 349,061 | |
2,000,000 | Univ of TX TX Univ Revs Ref, Ser B (Pre-refunded maturity 08/15/24) | 5.00% | 08/15/28 | 2,001,358 | |
1,650,000 | Univ of TX TX Univ Revs Ref, Ser H | 5.00% | 08/15/25 | 1,685,579 | |
1,580,000 | Univ of TX TX Univ Revs, Ser D | 5.00% | 08/15/26 | 1,644,602 | |
630,000 | Viridian TX Muni Mgmt Dist Unlimited Tax Road Impt Bonds, BAM | 4.00% | 12/01/29 | 636,753 | |
760,000 | Williamson Cnty TX Muni Util Dist #10 Ref, BAM | 3.00% | 08/01/26 | 748,027 | |
48,384,654 | |||||
Utah — 2.3% | |||||
2,000,000 | Davis Cnty UT Sch Dist UT Sch Bond Guaranty Ref, Ser B | 4.00% | 06/01/25 | 2,005,046 | |
650,000 | Salt Lake City UT Arpt Rev, Ser A, AMT | 5.00% | 07/01/26 | 669,302 | |
1,300,000 | Salt Lake City UT Arpt Rev, Ser A, AMT | 5.00% | 07/01/28 | 1,348,943 | |
700,000 | Salt Lake City UT Arpt Rev, Ser A, AMT | 5.00% | 07/01/28 | 737,656 | |
1,000,000 | Salt Lake City UT Arpt Rev, Ser A, AMT | 5.00% | 07/01/29 | 1,052,527 | |
1,000,000 | UT St Associated Muni Pwr Sys Rev Ref Horse Butte Wind, Ser A | 5.00% | 09/01/30 | 1,050,052 | |
625,000 | UT St Associated Muni Pwr Sys Rev Ref Horse Butte Wind, Ser A | 5.00% | 09/01/31 | 655,913 | |
2,000,000 | UT St Hsg Corp Mf Rev Var Silos On 500 (Mandatory put 08/01/27) | 3.70% | 08/01/43 | 2,011,595 | |
9,531,034 | |||||
Vermont — 0.0% | |||||
100,000 | VT St Econ Dev Auth Solid Wst Disp Rev Var Casella Wst Sys Inc Remk, AMT (Mandatory put 04/03/28) (b) | 4.63% | 04/01/36 | 100,851 | |
Virginia — 3.3% | |||||
2,000,000 | Arlington Cnty VA Indl Dev Auth Mf Rev Park Shirlington Apartments, Ser A | 5.00% | 01/01/26 | 2,043,583 | |
2,500,000 | Fairfax Cnty VA Redev & Hsg Auth Mf Hsg Rev Var Dominion Square N Proj (Mandatory put 01/01/28) | 5.00% | 01/01/45 | 2,588,081 | |
600,000 | Henrico Cnty VA Econ Dev Auth Rsdl Care Fac Rev Ref Westminster Canterbury Proj | 5.00% | 10/01/30 | 619,183 | |
1,490,000 | Loudoun Cnty VA, Ser B | 4.00% | 12/01/28 | 1,493,648 | |
1,000,000 | Louisa VA Indl Dev Auth Poll Control Rev Var VA Elec & Pwr Co Proj Remk, Ser A (Mandatory put 10/01/27) | 3.65% | 11/01/35 | 1,009,923 | |
1,525,000 | Norfolk VA Wtr Rev Ref | 5.00% | 11/01/31 | 1,624,367 | |
845,000 | Richmond VA Redev & Hsg Auth Mf Rev Var Townes at River South (Mandatory put 03/01/25) | 4.25% | 03/01/26 | 848,445 | |
1,585,000 | VA St Pub Bldg Auth Pub Facs Rev, Ser C, AMT | 5.00% | 08/01/29 | 1,630,769 | |
1,000,000 | VA St Small Busn Fing Auth Rev Ref Sr Lien 95 Express Lanes LLC Proj, AMT | 5.00% | 01/01/37 | 1,060,479 | |
1,000,000 | Virginia Beach VA Dev Auth Rsdl Care Fac Rev Temps 50Sm Westminster Canterbury on Chesapeake Bay, Ser B-3 | 5.38% | 09/01/29 | 1,039,573 | |
13,958,051 | |||||
See Notes to Financial Statements
Page 15
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Washington — 1.0% | |||||
$1,000,000 | Port of Seattle WA Rev Intermediate Lien, Ser D, AMT | 5.00% | 05/01/27 | $1,039,177 | |
500,000 | Port of Seattle WA Rev Ref 1st Lien, Ser B, AMT | 5.00% | 10/01/28 | 512,011 | |
100,000 | WA St Hlth Care Facs Auth Ref Seattle Cancer Care Alliance | 5.00% | 09/01/27 | 104,413 | |
2,120,000 | WA St Hsg Fin Commn Nonprofit Hsg Rev Heron’s Key, Ser A (Pre-refunded maturity 07/01/25) (b) | 7.00% | 07/01/45 | 2,182,194 | |
350,000 | WA St Hsg Fin Commn Nonprofit Hsg Rev Ref Emerald Heights Proj, Ser A | 5.00% | 07/01/27 | 361,970 | |
4,199,765 | |||||
West Virginia — 0.8% | |||||
1,000,000 | WV St Econ Dev Auth Sol Wst Disp Facs Var Arch Res Proj, AMT (Mandatory put 07/01/25) | 4.13% | 07/01/45 | 999,392 | |
1,000,000 | WV St Econ Dev Auth Sol Wst Disp Facs Var Ref Appalachian Pwr Co Remk, Ser 2015A (Mandatory put 06/15/28) | 3.38% | 03/01/40 | 991,998 | |
1,500,000 | WV St Econ Dev Auth Sol Wst Disp Facs Var Sr Arch Res Proj, AMT (Mandatory put 07/01/25) | 5.00% | 07/01/45 | 1,504,868 | |
3,496,258 | |||||
Wisconsin — 2.1% | |||||
2,000,000 | Oak Creek WI, Ser B, NANS | 4.00% | 04/01/26 | 2,002,039 | |
100,000 | Pub Fin Auth WI Edu Rev Coral Acdmy of Science Las Vegas, Ser A | 4.00% | 07/01/26 | 99,751 | |
185,000 | Pub Fin Auth WI Eductnl Rev Piedmont Cmnty Chrt Sch | 5.00% | 06/15/25 | 185,904 | |
250,000 | Pub Fin Auth WI Hosp Rev Ref Carson Vly Med Ctr, Ser A (b) | 3.00% | 12/01/26 | 235,156 | |
4,000,000 | Pub Fin Auth WI Poll Control Rev Var Ref Duke Energy Progress Proj, Ser A-1 (Mandatory put 10/01/26) | 3.30% | 10/01/46 | 3,969,114 | |
325,000 | Pub Fin Auth WI Retmnt Fac Rev Ref United Methodist Retmnt Homes, Ser A | 4.00% | 10/01/29 | 328,618 | |
115,000 | Pub Fin Auth WI Rev Unrefunded Roseman Univ Hlth Sciences Proj (b) | 3.00% | 04/01/25 | 114,016 | |
1,000,000 | Pub Fin Auth WI Sol Wst Disp Rev Ref Wst Mgmt Inc Proj, Ser A-1, AMT | 2.63% | 11/01/25 | 981,694 | |
800,000 | Pub Fin Auth WI Sr Living Rev Rose Villa Proj, Ser A (Pre- refunded maturity 11/15/24) (b) | 5.75% | 11/15/44 | 804,906 | |
8,721,198 | |||||
Wyoming — 0.3% | |||||
250,000 | Consol Muni Elec Pwr Sys WY Jt Pwrs Brd Sys Jt Pwrs Brd Ref Electrical Sys Proj | 5.00% | 06/01/26 | 258,215 | |
755,000 | Consol Muni Elec Pwr Sys WY Jt Pwrs Brd Sys Jt Pwrs Brd Ref Electrical Sys Proj | 5.25% | 06/01/37 | 857,403 | |
1,115,618 | |||||
Total Investments — 100.0% | 419,081,706 | ||||
(Cost $418,719,982) | |||||
Net Other Assets and Liabilities — 0.0% | 83,304 | ||||
Net Assets — 100.0% | $419,165,010 | ||||
See Notes to Financial Statements
Page 16
First Trust Short Duration Managed Municipal ETF (FSMB)Portfolio of Investments (Continued)July 31, 2024
(a) | When-issued security. The interest rate shown reflects the rate in effect at July 31, 2024. Interest will begin accruing on the security’s first settlement date. |
(b) | 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, 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 July 31, 2024, securities noted as such amounted to $17,243,920 or 4.1% of net assets. |
(c) | Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
(d) | Zero coupon security. |
Abbreviations throughout the Portfolio of Investments: | |
AGM | – Assured Guaranty Municipal Corp. |
AMBAC | – American Municipal Bond Assurance Corp. |
AMT | – Alternative Minimum Tax |
BAM | – Build America Mutual |
BANS | – Bond Anticipation Notes |
CABS | – Capital Appreciation Bonds |
COPS | – Certificates of Participation |
GARVEE | – Grant Anticipation Revenue Vehicle |
NANS | – Note Anticipation Notes |
NATL-RE | – National Public Finance Guarantee Corp. |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Municipal Bonds* | $419,081,706 | $— | $419,081,706 | $— |
* | See Portfolio of Investments for state and territory breakout. |
See Notes to Financial Statements
Page 17
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of InvestmentsJuly 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS — 100.5% | |||||
Alabama — 2.0% | |||||
$200,000 | Black Belt Energy Gas Dist AL Gas Prepay Rev Proj #5, Ser A-1 | 4.00% | 10/01/24 | $199,996 | |
625,000 | Black Belt Energy Gas Dist AL Gas Proj Rev, Ser C-1 | 5.25% | 12/01/24 | 627,843 | |
1,595,000 | Lower AL Gas Dist Gas Proj Rev Bonds Proj 2 (Mandatory put 12/01/25) | 4.00% | 12/01/50 | 1,599,529 | |
1,500,000 | Tender Option Bond Trust Receipts / Ctfs Various States JPM Putters Xm1090, Ser 2022 (a) (b) | 4.20% | 02/01/46 | 1,500,000 | |
3,927,368 | |||||
Arizona — 1.8% | |||||
1,615,000 | AZ St Transprtn Brd Excise Tax Rev Ref | 5.00% | 07/01/25 | 1,645,122 | |
500,000 | Phoenix AZ Civic Impt Corp Arpt Rev Ref Sr Lien, AMT | 5.00% | 07/01/25 | 507,552 | |
1,410,000 | Phoenix AZ Civic Impt Corp Arpt Rev Sr Lien, AMT | 5.00% | 07/01/25 | 1,431,298 | |
3,583,972 | |||||
California — 0.9% | |||||
200,000 | CA Cmnty Choice Fing Auth Clean Energy Proj Rev Var Sustainable Bonds Clean Energy Proj, Ser C | 5.00% | 10/01/24 | 200,228 | |
1,625,000 | CA St Infra & Econ Dev Bank Rev Var Brightline W Passenger Rail Proj Remk, Ser A, AMT (Mandatory put 01/30/25) (a) (b) | 3.95% | 01/01/50 | 1,625,051 | |
1,825,279 | |||||
Colorado — 1.5% | |||||
265,000 | CO Springs CO Sch Dist #11, BAM, COPS | 5.00% | 12/15/25 | 271,808 | |
280,000 | CO St Hlth Facs Auth Rev Ref Commonspirit Hlth, Ser B-1 (Mandatory put 08/01/25) | 5.00% | 08/01/49 | 282,258 | |
1,125,000 | CO St Hlth Facs Auth Rev Ref Sanford Hlth, Ser A | 5.00% | 11/01/24 | 1,129,593 | |
1,230,000 | CO St Ref Projs, Ser A, COPS | 5.00% | 09/01/24 | 1,232,014 | |
2,915,673 | |||||
Connecticut — 1.8% | |||||
1,500,000 | Bridgeport CT Unrefunded 2021 Ref, Ser B, AGM | 5.00% | 08/15/25 | 1,530,023 | |
2,000,000 | CT St, Ser A | 5.00% | 01/15/25 | 2,018,431 | |
3,548,454 | |||||
District of Columbia — 0.6% | |||||
1,255,000 | DC Rev Federal Hwy Grant Anticipation Rev Bonds, GARVEE | 5.00% | 12/01/24 | 1,262,952 | |
Florida — 8.1% | |||||
2,000,000 | FL St Brd of Edu Pub Edu Ref Capital Outlay, Ser A | 5.00% | 06/01/25 | 2,002,994 | |
1,250,000 | Gtr Orlando FL Aviation Auth Arpt Facs Rev Unrefunded, Ser A, AMT | 5.00% | 10/01/25 | 1,273,622 | |
380,000 | Harmony FL CDD Capital Impt Rev Ref | 5.00% | 05/01/25 | 380,121 | |
1,150,000 | JEA FL Wtr & Swr Rev Ref, Ser A | 5.00% | 10/01/24 | 1,153,719 | |
1,250,000 | Lakeland FL Energy Sys Rev Ref | 5.00% | 10/01/25 | 1,277,518 | |
685,000 | Lakes By The Bay S FL CDD Assmnt Ref | 5.00% | 05/01/25 | 690,608 | |
175,000 | Lakewood Ranch FL Stewardship Dist Spl Assmnt Rev Ref Country Club E Proj, AGM | 5.00% | 05/01/25 | 177,086 | |
750,000 | Miami-Dade Cnty FL Hsg Fin Auth Mf Hsg Rev Var Cutler Vista (Mandatory put 09/01/25) | 5.00% | 03/01/27 | 762,836 | |
750,000 | Miami-Dade Cnty FL Hsg Fin Auth Mf Hsg Rev Var Emerald Dunes, Ser B (Mandatory put 09/01/25) | 4.05% | 09/01/26 | 754,528 | |
1,000,000 | Miami-Dade Cnty FL Hsg Fin Auth Mf Hsg Rev Var Running Brook Apartments (Mandatory put 01/01/26) | 3.55% | 01/01/27 | 1,000,539 | |
3,000,000 | Miami-Dade Cnty FL Indl Dev Auth Sol Wst Disp Rev Var Ref Wst Mgmt Inc Proj Remk, Ser A, AMT (Mandatory put 07/01/25) | 4.50% | 11/01/33 | 2,999,984 | |
See Notes to Financial Statements
Page 18
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Florida (Continued) | |||||
$1,000,000 | Miami-Dade Cnty FL Seaport Rev Ref Sr Bonds, Ser A, AMT | 5.00% | 10/01/25 | $1,016,597 | |
1,620,000 | N Sumter Cnty FL Util Dependent Dist Util Rev Ref | 5.00% | 10/01/25 | 1,654,726 | |
600,000 | Santa Rosa Cnty Sch Brd, Ser A, AGM, COPS | 5.00% | 02/01/25 | 605,792 | |
455,000 | Tampa FL Capital Impt Cigarette Tax Allocation H Lee Moffitt Cancer Ctr Proj, Ser A | 5.00% | 09/01/24 | 455,548 | |
16,206,218 | |||||
Georgia — 3.8% | |||||
750,000 | Appling Cnty GA Dev Auth Var GA Pwr Co Plt Hatch Proj (b) | 4.30% | 09/01/41 | 750,000 | |
860,000 | Atlanta GA Arpt Rev, Ser B, AMT | 5.00% | 07/01/25 | 873,068 | |
1,000,000 | Atlanta GA Wtr & Wstwtr Rev Ref, Ser C | 5.00% | 11/01/24 | 1,004,385 | |
1,000,000 | Burke Cnty GA Dev Auth Poll Control Rev Var GA Pwr Co Vogtle, 1st Ser (b) | 4.25% | 07/01/49 | 1,000,000 | |
1,000,000 | Burke Cnty GA Dev Auth Poll Control Rev Var Ref GA Pwr Co Plant Vogtle Proj (b) | 4.25% | 11/01/52 | 1,000,000 | |
250,000 | Main Street Nat Gas Inc GA Gas Sply Rev Var, Ser B (Mandatory put 12/02/24) | 4.00% | 08/01/49 | 250,160 | |
540,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A | 5.00% | 03/01/25 | 543,241 | |
550,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser A | 5.00% | 06/01/25 | 555,635 | |
250,000 | Main Street Nat Gas Inc GA Gas Sply Rev, Ser B | 5.00% | 09/01/24 | 250,193 | |
1,370,000 | Monroe Cnty GA Dev Auth Poll Control Rev GA Pwr Co Plant Scherer Proj Remk, 1st Ser | 2.25% | 07/01/25 | 1,344,992 | |
7,571,674 | |||||
Idaho — 1.3% | |||||
1,315,000 | Cassia Oneida & Twin Falls Cntys ID Jt Sch Dist #151 Ref | 5.00% | 09/15/25 | 1,344,601 | |
1,250,000 | ID St Hlth Facs Auth Hosp Rev Var Che Trinity Hlth Credit Grp Remk, Ser ID (Mandatory put 11/01/24) (b) | 3.70% | 12/01/48 | 1,250,000 | |
2,594,601 | |||||
Illinois — 5.3% | |||||
500,000 | Chicago IL Midway Arpt Rev Ref Sr Lien, Ser A, AMT | 5.00% | 01/01/26 | 510,061 | |
1,250,000 | IL St Fin Auth Centegra Hlth Sys, Ser A (Pre-refunded maturity 09/01/24) | 5.00% | 09/01/28 | 1,251,771 | |
250,000 | IL St Fin Auth Hlth Svcs Facs Lease Rev Univ of IL Hlth Svcs Fac Proj | 5.00% | 10/01/24 | 250,483 | |
1,185,000 | IL St Fin Auth Rev Ref Ann & Robert H Lurie Childrens Hosp | 5.00% | 08/15/25 | 1,206,888 | |
1,020,000 | IL St Fin Auth Rev Ref Rush Univ Med Ctr, Ser A | 5.00% | 11/15/25 | 1,032,824 | |
625,000 | IL St Hsg Dev Auth Mf Hsg Rev Var S Shore (Mandatory put 06/01/25) | 4.00% | 06/01/26 | 627,451 | |
2,090,000 | IL St, Ser D | 5.00% | 11/01/24 | 2,098,912 | |
600,000 | Kane Cook & DuPage Cntys IL Sch Dist #46 Elgin | 5.00% | 01/01/25 | 604,142 | |
1,000,000 | Sales Tax Securitization Corp IL Sr, Ser D | 5.00% | 01/01/25 | 1,007,361 | |
840,000 | Schaumburg IL Ref | 4.00% | 12/01/24 | 841,196 | |
1,035,000 | Winnebago Cnty IL Ref | 5.00% | 12/30/25 | 1,062,851 | |
10,493,940 | |||||
Indiana — 1.3% | |||||
2,500,000 | IN St Fin Auth Econ Dev Rev Rep Svcs Inc Proj Remk, AMT (Mandatory put 09/03/24) (b) | 4.20% | 12/01/37 | 2,501,631 | |
Iowa — 0.8% | |||||
1,500,000 | IA St Fin Auth Sol Wst Facs Rev Var Sustainable Gevo NW Rng LLC Renewable Natrl Gas Proj, AMT (Mandatory put 04/01/26) | 3.88% | 01/01/42 | 1,503,251 | |
See Notes to Financial Statements
Page 19
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Kansas — 1.0% | |||||
$1,000,000 | Dodge City KS Temp Nts, Ser 2023-1 | 4.13% | 09/01/25 | $1,000,654 | |
1,000,000 | Johnson Cnty KS Pub Bldg Commn Lease Pur Rev Courthouse & Med Examiners Fac Proj, Ser A | 5.00% | 09/01/25 | 1,021,405 | |
2,022,059 | |||||
Kentucky — 3.6% | |||||
930,000 | KY Bond Dev Corp Indl Bldg Rev KY Communications Network Auth Proj, BAM | 5.00% | 09/01/24 | 931,341 | |
200,000 | KY St Property & Bldgs Commn Rev Ref Proj #128, Ser A | 5.00% | 11/01/24 | 200,948 | |
505,000 | KY St Property & Bldgs Commn Rev Ref Proj #128, Ser A | 5.00% | 11/01/25 | 517,546 | |
165,000 | KY St Pub Energy Auth Gas Sply Rev Gas Sply, Ser C-1 (Mandatory put 06/01/25) | 4.00% | 12/01/49 | 165,396 | |
500,000 | KY St Pub Energy Auth Gas Sply Rev Ref, Ser B | 5.00% | 08/01/25 | 505,397 | |
615,000 | KY St Pub Energy Auth Gas Sply Rev Ref, Ser B | 5.00% | 08/01/26 | 628,237 | |
2,665,000 | Nthrn KY Wtr Dist Rev Ref, Ser B | 4.00% | 02/01/25 | 2,676,678 | |
1,525,000 | Paducah Elec Plant Brd Ref Rev, Ser A, AGM | 5.00% | 10/01/24 | 1,528,849 | |
7,154,392 | |||||
Louisiana — 2.7% | |||||
1,170,000 | E Baton Rouge Parish LA Swr Commn Rev Ref, Ser B (Pre- refunded maturity 02/01/25) | 5.00% | 02/01/30 | 1,182,168 | |
1,000,000 | LA St, GARVEE | 5.00% | 09/01/24 | 1,001,544 | |
1,925,000 | LA St Pub Facs Auth Sol Wst Disp Fac Rev Var Elementus Minerals LLC Proj (Mandatory put 11/01/25) (a) | 5.00% | 10/01/43 | 1,945,404 | |
15,000 | New Orleans LA Wtr Rev Ref (Pre-refunded maturity 12/01/24) | 5.00% | 12/01/29 | 15,093 | |
35,000 | New Orleans LA Wtr Rev Ref (Pre-refunded maturity 12/01/24) | 5.00% | 12/01/34 | 35,216 | |
280,000 | New Orleans LA Wtr Rev Ref (Pre-refunded maturity 12/01/24) | 5.00% | 12/01/44 | 281,727 | |
1,000,000 | Saint James Parish LA Rev Var Nustar Logistics LP Proj Remk, Ser 2011 (Mandatory put 06/01/25) (a) | 5.85% | 08/01/41 | 1,015,198 | |
5,476,350 | |||||
Maine — 0.9% | |||||
800,000 | ME St Fin Auth Sol Wst Disp Rev Casella Waste Sys Proj, AMT (Mandatory put 08/01/25) (a) | 5.13% | 08/01/35 | 804,681 | |
1,000,000 | ME St Govtl Facs Auth, Ser B | 5.00% | 10/01/24 | 1,003,031 | |
1,807,712 | |||||
Maryland — 2.0% | |||||
925,000 | MD St Stadium Auth Rev Football Stadium Issue, Ser A | 5.00% | 03/01/25 | 935,739 | |
1,000,000 | MD St Transprtn Auth Passenger Fac Charge Baltimore Washington Intl Thurgood Marshall Arpt, AMT | 5.00% | 06/01/25 | 1,013,703 | |
2,000,000 | Montgomery Cnty MD, Ser A | 5.00% | 12/01/25 | 2,011,610 | |
3,961,052 | |||||
Massachusetts — 2.4% | |||||
2,000,000 | MA St Clg Bldg Auth Ref, Ser D (Pre-refunded maturity 05/01/25) | 5.00% | 05/01/41 | 2,030,998 | |
1,500,000 | Millbury MA, BANS | 5.00% | 08/30/24 | 1,502,273 | |
1,260,000 | Newton MA, BANS | 5.00% | 03/28/25 | 1,275,708 | |
4,808,979 | |||||
Michigan — 2.2% | |||||
1,000,000 | Great Lakes MI Wtr Auth Wtr Sply Sys Rev Ref Sr Lien, Ser C | 5.00% | 07/01/25 | 1,018,196 | |
1,430,000 | MI St Fin Auth Rev Ref Clean Wtr Revolving Fund, Ser B | 5.00% | 10/01/25 | 1,462,970 | |
See Notes to Financial Statements
Page 20
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Michigan (Continued) | |||||
$790,000 | New Haven MI Cmnty Schs Ref | 3.00% | 05/01/25 | $788,026 | |
1,000,000 | Wayne Cnty MI Arpt Auth Rev Ref Junior Lien, Ser B, AMT | 5.00% | 12/01/25 | 1,020,467 | |
4,289,659 | |||||
Minnesota — 1.2% | |||||
725,000 | Chaska MN Econ Dev Auth Lease Rev, Ser A | 5.00% | 02/01/26 | 746,273 | |
1,000,000 | MN St Hsg Fin Agy Calvary Ctr Apartments, Ser D | 3.65% | 02/01/25 | 999,782 | |
700,000 | MN St Hsg Fin Agy Phalen Vlg, Ser E | 3.88% | 08/01/25 | 700,914 | |
2,446,969 | |||||
Missouri — 1.5% | |||||
480,000 | MO St Hlth & Eductnl Facs Auth Ref Lutheran Sr Svcs Projs, Ser A | 5.00% | 02/01/26 | 488,881 | |
1,500,000 | MO St Pub Util Commn Rev Nts | 4.00% | 12/01/24 | 1,500,250 | |
1,000,000 | N Kansas City MO Sch Dist #74 Ref | 5.00% | 03/01/26 | 1,031,599 | |
3,020,730 | |||||
Nebraska — 0.3% | |||||
500,000 | Centrl Plains Energy Proj NE Gas Sply Rev Ref (Mandatory put 08/01/25) | 4.00% | 12/01/49 | 500,971 | |
Nevada — 0.6% | |||||
1,205,000 | Clark Cnty NV Transprtn Impt, Ser B | 5.00% | 12/01/25 | 1,237,606 | |
New Hampshire — 0.5% | |||||
1,000,000 | Natl Fin Auth NH Hlthcare Facs Rev Var Novant Hlth Oblig Grp, Ser B (b) | 4.10% | 11/01/64 | 1,000,000 | |
New Jersey — 4.6% | |||||
1,000,000 | Evesham Twp NJ, Ser A, BANS | 5.00% | 09/18/24 | 1,002,142 | |
2,335,000 | Jersey City NJ, Ser C, BANS | 5.00% | 10/24/24 | 2,342,494 | |
1,170,000 | Newark NJ Ref, Ser A, AGM | 5.00% | 10/01/24 | 1,172,716 | |
1,000,000 | NJ St Econ Dev Auth Rev Ref, Ser B | 5.00% | 11/01/24 | 1,004,457 | |
100,000 | NJ St Hgr Edu Asst Auth Stdt Loan Rev Sr, Ser 2015-1A, AMT | 5.00% | 12/01/24 | 100,557 | |
1,935,000 | NJ St Hlth Care Facs Fing Auth Rev RWJ Barnabas Hlth Obligated Grp Issue, Ser A | 5.00% | 07/01/25 | 1,970,561 | |
1,500,000 | Woodbridge Twp NJ, BANS | 4.00% | 03/14/25 | 1,507,074 | |
9,100,001 | |||||
New Mexico — 0.7% | |||||
1,455,000 | NM St Hosp Equipment Loan Council Hosp Rev Presbyterian Hlthcare Svcs Obligated Grp Ref Ser (Pre-refunded maturity 08/01/25) | 5.00% | 08/01/31 | 1,482,318 | |
New York — 8.6% | |||||
1,000,000 | Homer NY Centrl Sch Dist, BANS | 4.50% | 06/27/25 | 1,011,448 | |
1,300,000 | Hoosick Falls NY Centrl Sch Dist, BANS (c) | 4.50% | 06/20/25 | 1,313,787 | |
1,965,000 | New York City NY Hsg Dev Corp Mf Hsg Rev Sustainable Dev Bonds Var, Ser F-2 (Mandatory put 07/01/25) | 0.60% | 05/01/61 | 1,907,146 | |
2,000,000 | New York City NY Transitional Fin Auth Rev Ref Sub Multi- Modal, Ser B-1 | 5.00% | 11/01/24 | 2,009,982 | |
1,500,000 | NY NY Ref Remk, Ser J Subser J11 | 5.00% | 08/01/25 | 1,529,800 | |
1,295,000 | NY St Transprtn Dev Corp Spl Fac Rev Ref Terminal 4 JFK Intl Arpt Proj, Ser A, AMT | 5.00% | 12/01/24 | 1,299,876 | |
1,200,000 | Port Auth of NY & NJ NY Ref, Ser 226, AMT | 5.00% | 10/15/25 | 1,225,587 | |
1,000,000 | Rochester NY, Ser III, BANS | 5.00% | 07/31/25 | 1,018,088 | |
1,595,000 | Suffolk Cnty NY, Ser A, BAM | 5.00% | 06/15/25 | 1,623,493 | |
1,500,000 | Tioga NY Centrl Sch Dist, BANS | 4.50% | 06/27/25 | 1,516,026 | |
See Notes to Financial Statements
Page 21
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
New York (Continued) | |||||
$830,000 | Triborough NY Bridge & Tunnel Auth Payroll Mobility Tax Prerefunded, Ser A, BANS | 5.00% | 08/15/24 | $830,583 | |
670,000 | Triborough NY Bridge & Tunnel Auth Payroll Mobility Tax Prerefunded, Ser A, BANS | 5.00% | 08/15/24 | 670,484 | |
1,200,000 | Triborough NY Bridge & Tunnel Auth Payroll Mobility Tax, Ser B, BANS | 5.00% | 12/16/24 | 1,208,139 | |
17,164,439 | |||||
North Carolina — 3.1% | |||||
1,000,000 | NC St Capital Facs Fin Agy Rev Ref Duke Univ, Ser B (Pre- refunded maturity 10/01/25) | 5.00% | 10/01/55 | 1,023,636 | |
1,630,000 | NC St Dept Grant Anticipation Rev | 5.00% | 03/01/25 | 1,649,588 | |
1,350,000 | NC St Turnpike Auth Ref Sr Lien, AGM | 5.00% | 01/01/26 | 1,384,698 | |
1,080,000 | NC St Univ at Raleigh Ref Gen | 5.00% | 10/01/25 | 1,105,276 | |
1,000,000 | Raleigh Durham NC Arpt Auth Arpt Rev Ref, Ser A, AMT | 5.00% | 05/01/26 | 1,028,400 | |
6,191,598 | |||||
Ohio — 2.7% | |||||
2,000,000 | Hamilton OH, BANS | 4.50% | 12/19/24 | 2,006,859 | |
500,000 | OH St Air Quality Dev Auth Ref American Elec Pwr Company Proj Remk, Ser B, AMT (Mandatory put 10/01/24) | 2.10% | 07/01/28 | 497,657 | |
1,500,000 | OH St Air Quality Dev Auth Ref American Elec Pwr Company Proj Remk, Ser C, AMT (Mandatory put 10/01/24) | 2.10% | 04/01/28 | 1,492,972 | |
1,400,000 | OH St Hosp Fac Rev Ref Cleveland Clinic Hlth Sys, Ser A | 5.00% | 01/01/25 | 1,411,354 | |
5,408,842 | |||||
Oregon — 3.3% | |||||
1,500,000 | OR St Article XI-Q State Projs, Ser J | 5.00% | 11/01/24 | 1,507,562 | |
1,790,000 | OR St Dept of Transprtn Hwy User Tax Rev Ref Sr Lien, Ser A | 5.00% | 11/15/24 | 1,800,101 | |
685,000 | OR St Ref, Ser I | 5.00% | 08/01/25 | 699,221 | |
2,500,000 | Portland OR Wtr Sys Rev Ref Second Lien, Ser B | 5.00% | 05/01/25 | 2,538,561 | |
6,545,445 | |||||
Pennsylvania — 4.4% | |||||
1,530,000 | PA Ref, 1st Ser, AGM | 5.00% | 09/15/25 | 1,567,174 | |
2,580,000 | PA St Turnpike Commn Turnpike Rev, Ser A (Forward refunding maturity 12/01/24) | 5.00% | 12/01/38 | 2,593,257 | |
1,250,000 | Philadelphia PA Arpt Rev Ref, Ser B, AMT | 5.00% | 07/01/25 | 1,267,861 | |
300,000 | Riverside PA Sch Dist Ref, BAM | 4.00% | 10/15/24 | 300,457 | |
275,000 | Riverside PA Sch Dist Ref, BAM | 4.00% | 10/15/25 | 277,834 | |
785,000 | Scranton PA Sch Dist Ref | 5.00% | 12/01/24 | 789,029 | |
2,000,000 | Tender Option Bond Trust Receipts / Ctfs Various States JPM Putters Xm1120, AGM (a) (b) | 4.22% | 10/01/26 | 2,000,000 | |
8,795,612 | |||||
South Carolina — 0.7% | |||||
550,000 | Greenville Cnty SC Sch Dist Installment Pur Rev Ref SC Proj | 5.00% | 12/01/24 | 553,301 | |
740,000 | Greenville Cnty SC Sch Dist Installment Pur Rev Ref SC Proj | 5.00% | 12/01/25 | 760,121 | |
1,313,422 | |||||
Tennessee — 3.4% | |||||
2,000,000 | Knoxville TN Wstwtr Sys Rev, Ser A | 4.00% | 04/01/25 | 2,013,339 | |
1,500,000 | Shelby Cnty TN Hlth Eductnl & Hsg Facs Brd Rev Var Methodist Le Bonheur Hlthcare Remk, Ser B, AGM (b) | 4.05% | 06/01/42 | 1,500,000 | |
1,300,000 | Tennergy Corp TN Gas Rev, Ser A (Mandatory put 10/01/24) | 5.00% | 02/01/50 | 1,303,940 | |
See Notes to Financial Statements
Page 22
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Tennessee (Continued) | |||||
$910,000 | TN St Energy Acq Corp Gas Rev, Ser A | 5.25% | 09/01/24 | $911,189 | |
1,000,000 | TN St, Ser A (Pre-refunded maturity 09/01/24) | 5.00% | 09/01/33 | 1,001,655 | |
6,730,123 | |||||
Texas — 17.3% | |||||
1,650,000 | Austin TX Wtr & Wstwtr Sys Rev Ref | 5.00% | 11/15/25 | 1,693,136 | |
1,000,000 | Austin TX Wtr & Wstwtr Sys Rev Ref | 5.00% | 11/15/25 | 1,026,143 | |
1,250,000 | Boerne TX Indep Sch Dist | 5.00% | 02/01/25 | 1,262,564 | |
1,000,000 | Centrl TX Regl Mobility Auth Rev Ref | 5.00% | 01/01/25 | 1,006,986 | |
650,000 | Cypress Fairbanks TX Indep Sch Dist Ref, Ser A | 5.00% | 02/15/25 | 657,146 | |
1,000,000 | Cypress Fairbanks TX Indep Sch Dist, Ser A | 5.00% | 02/15/26 | 1,032,242 | |
560,000 | Dallas Fort Worth TX Intl Arpt Rev Ref, Ser B | 5.00% | 11/01/24 | 562,625 | |
500,000 | Dallas Fort Worth TX Intl Arpt Rev Ref, Ser B | 5.00% | 11/01/25 | 512,484 | |
1,625,000 | Dallas TX Area Rapid Transit Sales Tax Rev Ref Sr Lien | 5.00% | 12/01/25 | 1,669,401 | |
1,900,000 | Duncanville TX Indep Sch Dist Sch Bldg (Pre-refunded maturity 02/15/25) | 5.00% | 02/15/36 | 1,918,203 | |
1,295,000 | Fort Bend TX Indep Sch Dist Var Remk, Ser A (Mandatory put 08/01/24) | 2.38% | 08/01/49 | 1,295,000 | |
1,665,000 | Fort Worth TX Wtr & Swr Rev Impt Ref, Ser A | 5.00% | 02/15/25 | 1,682,769 | |
250,000 | Galveston TX Wharves & Terminal Rev First Lien, AMT | 5.25% | 08/01/25 | 252,963 | |
1,105,000 | Georgetown TX Indep Sch Dist | 5.00% | 08/15/24 | 1,105,781 | |
1,000,000 | Harris Cnty TX Cultural Edu Facs Fin Corp Rev Var Ref Memorial Hermann Hlth Sys, Ser C-2 (Mandatory put 12/01/24) | 5.00% | 06/01/32 | 1,010,072 | |
1,140,000 | Harris Cnty TX Met Transit Auth Sales & Use Tax, Ser D | 5.00% | 11/01/24 | 1,145,517 | |
1,000,000 | Harris Cnty TX Toll Road Rev Ref, Ser A | 5.00% | 08/15/25 | 1,020,221 | |
600,000 | Houston TX Util Sys Rev Rev Ref First Lien, Ser A | 5.00% | 11/15/24 | 603,298 | |
700,000 | Love Field TX Arpt Modernization Corp Gen Arpt Rev, AMT | 5.00% | 11/01/24 | 702,505 | |
275,000 | Mansfield TX Indep Sch Dist Ref, Ser B | 5.00% | 02/15/25 | 278,083 | |
430,000 | Montgomery Cnty TX Muni Util Dist #105, BAM | 4.63% | 09/01/24 | 430,295 | |
1,200,000 | N TX St Muni Wtr Dist Wtr Sys Rev Ref & Impt | 5.00% | 09/01/24 | 1,202,037 | |
1,000,000 | New Hope Cultural Edu Facs Fin Corp TX Stdt Hsg Rev Chf Collegiate Hsg Tarleton St Univ Proj, Ser A (Pre-refunded maturity 04/01/25) | 5.00% | 04/01/47 | 1,011,887 | |
1,010,000 | Pasadena Indep Sch Dist | 5.00% | 02/15/25 | 1,020,833 | |
400,000 | Port Auth of Houston of Harris Cnty TX Ref First Lien | 5.00% | 10/01/24 | 401,273 | |
1,000,000 | Socorro TX Indep Sch Dist Ref, Ser A (Pre-refunded maturity 08/15/24) | 5.00% | 08/15/30 | 1,000,699 | |
1,500,000 | Spring Branch TX Indep Sch Dist | 5.00% | 02/01/26 | 1,545,352 | |
495,000 | Tarrant Cnty TX Cultural Edu Facs Fin Corp Rev Ref Trinity Terrace Proj (c) | 5.00% | 10/01/25 | 504,206 | |
965,000 | Tarrant Cnty TX Hosp Dist | 5.00% | 08/15/24 | 965,698 | |
875,000 | Travis Cnty TX Hsg Fin Corp Mf Hsg Rev Var Kensington Apts (Mandatory put 08/01/25) | 3.75% | 08/01/26 | 877,311 | |
1,000,000 | TX St Dept of Hsg & Cmnty Affairs Mf Hsg Rev Var Nts Aspen Park (Mandatory put 03/01/26) | 5.00% | 03/01/41 | 1,009,500 | |
650,000 | TX St Turnpike Auth Centrl TX Turnpike Sys Rev Unrefunded 1st Tier, Ser A, AMBAC, CABS | (d) | 08/15/24 | 649,099 | |
2,000,000 | United TX Indep Sch Dist Sch Bldg (Pre-refunded maturity 08/15/24) | 5.00% | 08/15/44 | 2,001,358 | |
1,500,000 | Univ of TX TX Univ Revs Ref, Ser B (Pre-refunded maturity 08/15/24) | 5.00% | 08/15/28 | 1,501,019 | |
34,557,706 | |||||
See Notes to Financial Statements
Page 23
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
MUNICIPAL BONDS (Continued) | |||||
Virginia — 0.4% | |||||
$845,000 | Richmond VA Redev & Hsg Auth Mf Rev Var Townes at River South (Mandatory put 03/01/25) | 4.25% | 03/01/26 | $848,445 | |
Washington — 3.0% | |||||
1,100,000 | Centrl Puget Sound WA Regl Transit Auth Sales Tax & Motor Ve Sustainable Bonds, Ser S-1 | 5.00% | 11/01/25 | 1,128,969 | |
1,790,000 | Seattle WA Wtr Sys Rev Sustainable Bond Ref | 5.00% | 08/01/24 | 1,790,000 | |
1,000,000 | WA St Bid Grp 1, Ser B | 5.00% | 02/01/25 | 1,010,250 | |
1,700,000 | WA St Hlth Care Facs Auth Ref Commonspirit Hlth, Ser B1 (Mandatory put 08/01/24) | 5.00% | 08/01/49 | 1,700,000 | |
345,000 | WA St Hsg Fin Commn Nonprofit Hsg Rev Ref Emerald Heights Proj, Ser A | 5.00% | 07/01/25 | 348,374 | |
5,977,593 | |||||
Wisconsin — 0.2% | |||||
410,000 | Milwaukee WI Ref Prom Nts, Ser N2 | 4.00% | 03/15/25 | 411,413 | |
Total Investments — 100.5% | 200,188,449 | ||||
(Cost $199,958,935) | |||||
Net Other Assets and Liabilities — (0.5)% | (972,817 ) | ||||
Net Assets — 100.0% | $199,215,632 | ||||
(a) | 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, 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 July 31, 2024, securities noted as such amounted to $8,890,334 or 4.5% of net assets. |
(b) | Variable rate demand bond. Interest rate is reset periodically by the agent based on current market conditions. |
(c) | When-issued security. The interest rate shown reflects the rate in effect at July 31, 2024. Interest will begin accruing on the security’s first settlement date. |
(d) | Zero coupon security. |
Abbreviations throughout the Portfolio of Investments: | |
AGM | – Assured Guaranty Municipal Corp. |
AMBAC | – American Municipal Bond Assurance Corp. |
AMT | – Alternative Minimum Tax |
BAM | – Build America Mutual |
BANS | – Bond Anticipation Notes |
CABS | – Capital Appreciation Bonds |
COPS | – Certificates of Participation |
GARVEE | – Grant Anticipation Revenue Vehicle |
See Notes to Financial Statements
Page 24
First Trust Ultra Short Duration Municipal ETF (FUMB)Portfolio of Investments (Continued)July 31, 2024
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Municipal Bonds* | $200,188,449 | $— | $200,188,449 | $— |
* | See Portfolio of Investments for state and territory breakout. |
See Notes to Financial Statements
Page 25
First Trust Exchange-Traded Fund III
Statements of Assets and Liabilities
July 31, 2024First Trust Short Duration Managed Municipal ETF (FSMB) | First Trust Ultra Short Duration Municipal ETF (FUMB) | |
ASSETS: | ||
Investments, at value | $419,081,706 | $200,188,449 |
Cash | 4,489,363 | 553,428 |
Interest receivable | 4,395,095 | 2,646,230 |
Total Assets | 427,966,164 | 203,388,107 |
LIABILITIES: | ||
Payables: | ||
Investment securities purchased | 8,606,628 | 4,096,310 |
Investment advisory fees | 194,526 | 76,165 |
Total Liabilities | 8,801,154 | 4,172,475 |
NET ASSETS | $419,165,010 | $199,215,632 |
NET ASSETS consist of: | ||
Paid-in capital | $427,027,744 | $198,385,982 |
Par value | 211,000 | 99,000 |
Accumulated distributable earnings (loss) | (8,073,734) | 730,650 |
NET ASSETS | $419,165,010 | $199,215,632 |
NET ASSET VALUE, per share | $19.87 | $20.12 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 21,100,002 | 9,900,002 |
Investments, at cost | $418,719,982 | $199,958,935 |
See Notes to Financial Statements
Page 26
First Trust Exchange-Traded Fund III
Statements of Operations
For the Year Ended July 31, 2024First Trust Short Duration Managed Municipal ETF (FSMB) | First Trust Ultra Short Duration Municipal ETF (FUMB) | |
INVESTMENT INCOME: | ||
Interest | $13,657,224 | $7,379,445 |
Total investment income | 13,657,224 | 7,379,445 |
EXPENSES: | ||
Investment advisory fees | 2,268,433 | 1,023,599 |
Total expenses | 2,268,433 | 1,023,599 |
NET INVESTMENT INCOME (LOSS) | 11,388,791 | 6,355,846 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on investments | (3,062,373) | (15,941) |
Net change in unrealized appreciation (depreciation) on investments | 5,326,775 | 1,214,090 |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 2,264,402 | 1,198,149 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $13,653,193 | $7,553,995 |
See Notes to Financial Statements
Page 27
First Trust Exchange-Traded Fund III
Statements of Changes in Net Assets
First Trust Short Duration Managed Municipal ETF (FSMB) | First Trust Ultra Short Duration Municipal ETF (FUMB) | |||
Year Ended 7/31/2024 | Year Ended 7/31/2023 | Year Ended 7/31/2024 | Year Ended 7/31/2023 | |
OPERATIONS: | ||||
Net investment income (loss) | $11,388,791 | $8,762,819 | $6,355,846 | $6,184,991 |
Net realized gain (loss) | (3,062,373) | (5,127,926) | (15,941) | 5,122 |
Net change in unrealized appreciation (depreciation) | 5,326,775 | 96,999 | 1,214,090 | (190,325) |
Net increase (decrease) in net assets resulting from operations | 13,653,193 | 3,731,892 | 7,553,995 | 5,999,788 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||
Investment operations | (11,123,001) | (8,538,673) | (5,749,751) | (6,108,951) |
Return of capital | — | (113,528) | — | — |
Total distributions to shareholders | (11,123,001) | (8,652,201) | (5,749,751) | (6,108,951) |
SHAREHOLDER TRANSACTIONS: | ||||
Proceeds from shares sold | 52,328,872 | 178,360,260 | 17,060,947 | 83,686,597 |
Cost of shares redeemed | (61,825,785) | (50,275,222) | (89,194,264) | (99,839,409) |
Net increase (decrease) in net assets resulting from shareholder transactions | (9,496,913) | 128,085,038 | (72,133,317) | (16,152,812) |
Total increase (decrease) in net assets | (6,966,721) | 123,164,729 | (70,329,073) | (16,261,975) |
NET ASSETS: | ||||
Beginning of period | 426,131,731 | 302,967,002 | 269,544,705 | 285,806,680 |
End of period | $419,165,010 | $426,131,731 | $199,215,632 | $269,544,705 |
CHANGES IN SHARES OUTSTANDING: | ||||
Shares outstanding, beginning of period | 21,600,002 | 15,100,002 | 13,500,002 | 14,300,002 |
Shares sold | 2,650,000 | 9,050,000 | 850,000 | 4,200,000 |
Shares redeemed | (3,150,000) | (2,550,000) | (4,450,000) | (5,000,000) |
Shares outstanding, end of period | 21,100,002 | 21,600,002 | 9,900,002 | 13,500,002 |
See Notes to Financial Statements
Page 28
First Trust Exchange-Traded Fund III
Financial Highlights
For a share outstanding throughout each periodFirst Trust Short Duration Managed Municipal ETF (FSMB)
Year Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $19.73 | $20.06 | $20.96 | $20.66 | $20.48 |
Income from investment operations: | |||||
Net investment income (loss) | 0.54 (a) | 0.43 (a) | 0.21 | 0.27 | 0.38 |
Net realized and unrealized gain (loss) | 0.13 | (0.34 ) | (0.88 ) | 0.33 | 0.22 |
Total from investment operations | 0.67 | 0.09 | (0.67 ) | 0.60 | 0.60 |
Distributions paid to shareholders from: | |||||
Net investment income | (0.53 ) | (0.41 ) | (0.21 ) | (0.27 ) | (0.41 ) |
Return of capital | — | (0.01 ) | (0.02 ) | (0.03 ) | (0.01 ) |
Total distributions | (0.53 ) | (0.42 ) | (0.23 ) | (0.30 ) | (0.42 ) |
Net asset value, end of period | $19.87 | $19.73 | $20.06 | $20.96 | $20.66 |
Total return (b) | 3.46 % | 0.45 % | (3.19 )% | 2.92 % | 2.98 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $419,165 | $426,132 | $302,967 | $129,931 | $61,967 |
Ratio of total expenses to average net assets | 0.55 % | 0.55 % | 0.55 % | 0.55 % | 0.55 % |
Ratio of net expenses to average net assets | 0.55 % | 0.49 % | 0.35 % | 0.43 % | 0.45 % |
Ratio of net investment income (loss) to average net assets | 2.76 % | 2.18 % | 1.14 % | 1.33 % | 2.00 % |
Portfolio turnover rate (c) | 51 % | 50 % | 35 % | 16 % | 58 % |
(a) | Based on average shares outstanding. |
(b) | 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. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. |
(c) | 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
Page 29
First Trust Exchange-Traded Fund III
Financial Highlights (Continued)
For a share outstanding throughout each periodFirst Trust Ultra Short Duration Municipal ETF (FUMB)
Year Ended July 31, | |||||
2024 | 2023 | 2022 | 2021 | 2020 | |
Net asset value, beginning of period | $19.97 | $19.99 | $20.18 | $20.16 | $20.10 |
Income from investment operations: | |||||
Net investment income (loss) | 0.56 (a) | 0.39 (a) | 0.10 | 0.12 | 0.25 |
Net realized and unrealized gain (loss) | 0.10 | (0.03 ) | (0.19 ) | 0.02 | 0.07 |
Total from investment operations | 0.66 | 0.36 | (0.09 ) | 0.14 | 0.32 |
Distributions paid to shareholders from: | |||||
Net investment income | (0.51 ) | (0.38 ) | (0.10 ) | (0.12 ) | (0.26 ) |
Net realized gain | — | — | — | — | (0.00 ) (b) |
Return of capital | — | — | — | — | (0.00 ) (b) |
Total distributions | (0.51 ) | (0.38 ) | (0.10 ) | (0.12 ) | (0.26 ) |
Net asset value, end of period | $20.12 | $19.97 | $19.99 | $20.18 | $20.16 |
Total return (c) | 3.37 % | 1.83 % | (0.45 )% | 0.72 % | 1.61 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $199,216 | $269,545 | $285,807 | $165,474 | $83,661 |
Ratio of total expenses to average net assets | 0.45 % | 0.45 % | 0.45 % | 0.45 % | 0.45 % |
Ratio of net expenses to average net assets | 0.45 % | 0.39 % | 0.25 % | 0.26 % | 0.35 % |
Ratio of net investment income (loss) to average net assets | 2.79 % | 1.93 % | 0.56 % | 0.61 % | 1.20 % |
Portfolio turnover rate (d) | 112 % | 121 % | 79 % | 44 % | 149 % |
(a) | Based on average shares outstanding. |
(b) | Amount represents less than $0.01. |
(c) | 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. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. |
(d) | 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
Page 30
Notes to Financial Statements
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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”).
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 Short Duration Managed Municipal ETF – (ticker “FSMB”) |
First Trust Ultra Short Duration Municipal ETF – (ticker “FUMB”) |
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 to provide federally tax-exempt income consistent with capital preservation. Under normal market conditions, each Fund seeks to achieve its investment objective 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 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.
A. Portfolio Valuation
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. 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:
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:
1)
benchmark yields;
2)
reported trades;
3)
broker/dealer quotes;
4)
issuer spreads;
5)
benchmark securities;
6)
bids and offers; and
7)
reference data including market research publications.
Page 31
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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.
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) 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 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;
10)
the coupon payments;
11)
the quality, value and salability of collateral, if any, securing the security; and
12)
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.
Page 32
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 July 31, 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. 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. Each 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 July 31, 2024, FSMB and FUMB held $6,307,167 and $1,817,993, respectively, of when-issued or delayed-delivery securities.
C. 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 July 31, 2024 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Tax-Exempt Income | Distributions paid from Return of Capital | |
First Trust Short Duration Managed Municipal ETF | $103,106 | $— | $11,019,895 | $— |
First Trust Ultra Short Duration Municipal ETF | 35,565 | — | 5,714,186 | — |
The tax character of distributions paid by each Fund during the fiscal year ended July 31, 2023 was as follows:
Distributions paid from Ordinary Income | Distributions paid from Capital Gains | Distributions paid from Tax-Exempt Income | Distributions paid from Return of Capital | |
First Trust Short Duration Managed Municipal ETF | $44,281 | $— | $8,494,392 | $113,528 |
First Trust Ultra Short Duration Municipal ETF | 32,046 | — | 6,076,905 | — |
Page 33
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
As of July 31, 2024, 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 Short Duration Managed Municipal ETF | $222,558 | $(8,991,319 ) | $695,027 |
First Trust Ultra Short Duration Municipal ETF | 670,806 | (224,106 ) | 283,950 |
D. Income Taxes
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (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, 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.
In addition, each Fund intends to invest in municipal securities to allow it to pay shareholders “exempt dividends” as defined in the Code.
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 2021, 2022, 2023, and 2024 remain open to federal and state audit. As of July 31, 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 July 31, 2024, 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 Short Duration Managed Municipal ETF | $8,991,319 |
First Trust Ultra Short Duration Municipal ETF | 224,106 |
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 July 31, 2024, the Funds had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended July 31, 2024, the adjustments for each Fund were as follows:
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) on Investments | Paid-In Capital | |
First Trust Short Duration Managed Municipal ETF | $(10,892 ) | $10,892 | $— |
First Trust Ultra Short Duration Municipal ETF | (1,203 ) | 1,203 | — |
Page 34
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
As of July 31, 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:
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |
First Trust Short Duration Managed Municipal ETF | $418,386,679 | $2,563,365 | $(1,868,338 ) | $695,027 |
First Trust Ultra Short Duration Municipal ETF | 199,904,499 | 416,312 | (132,362 ) | 283,950 |
E. Expenses
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 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 the Trust and the Advisor, First Trust manages the investment of each Fund’s assets and is responsible for the expenses of each Fund, 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, and extraordinary expenses, which are paid by each respective Fund. Prior to October 16, 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:
Breakpoints | FSMB | FUMB |
Fund net assets up to and including $2.5 billion | 0.55000 % | 0.45000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.53625 % | 0.43875 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.52250 % | 0.42750 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.50875 % | 0.41625 % |
Fund net assets greater than $10 billion | 0.49500 % | 0.40500 % |
Effective October 16, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNY”). Under the service agreements, BNY performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNY is responsible for custody of each Fund’s assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of each Fund’s securities and cash. As transfer agent, BNY is responsible for maintaining shareholder records for each Fund. BNY is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to October 16, 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
Page 35
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 fiscal year ended July 31, 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:
Purchases | Sales | |
First Trust Short Duration Managed Municipal ETF | $205,318,437 | $203,380,439 |
First Trust Ultra Short Duration Municipal ETF | 210,216,920 | 242,556,040 |
For the fiscal year ended July 31, 2024, the Funds had no in-kind transactions.
5. 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 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.
6. Distribution Plan
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.
Page 36
Notes to Financial Statements (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024
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 November 30, 2025.
7. Indemnification
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust’s maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. Subsequent Events
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.
Page 37
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of First Trust Short Duration Managed Municipal ETF and First Trust Ultra Short Duration Municipal ETF (the “Funds”), each a series of the First Trust Exchange-Traded Fund III, including the portfolios of investments, as of July 31, 2024, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the Funds as of July 31, 2024, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2024, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, LLP
Chicago, Illinois
September 24, 2024
September 24, 2024
We have served as the auditor of one or more First Trust investment companies since 2001.
Page 38
Other Information
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
Changes in and Disagreements with Accountants (Item 8 of Form N-CSR)
There were no changes in or disagreements with the Funds’ accountants during the fiscal year ended July 31, 2024.
Proxy Disclosures (Item 9 of Form N-CSR)
There were no matters submitted for vote by shareholders of any Fund during the fiscal year ended July 31, 2024.
Remuneration Paid to Directors, Officers, and Others (Item 10 of Form N-CSR)
Independent Trustees and any member of any advisory board of each Fund are compensated through the unitary management fee paid by each Fund to the advisor and not directly by each Fund. The investment advisory fee paid is included in the Statements of Operations.
Statement Regarding the Basis for the Board’s Approval of Investment Advisory Contract (Item 11 of Form N-CSR)
The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the “Agreement”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the following series of the Trust (each a “Fund” and collectively, the “Funds”):
First Trust Short Duration Managed Municipal ETF (FSMB)
First Trust Ultra Short Duration Municipal ETF (FUMB)
First Trust Ultra Short Duration Municipal ETF (FUMB)
The Board approved the continuation of the Agreement for each Fund for a one-year period ending June 30, 2025 at a meeting held on June 2–3, 2024. The Board determined for each Fund that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 16, 2024, April 25, 2024 and June 2–3, 2024, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate schedule payable by each Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the expense ratio of each Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for each Fund, including comparisons of each Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to each Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. (“FTP”); and information on the Advisor’s compliance program. The Board reviewed initial materials with the Advisor at the meeting held on April 25, 2024, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the April 25, 2024 meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 2–3, 2024 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from each Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in a Fund knowing that the Advisor manages the Fund and knowing the Fund’s unitary fee.
In reviewing the Agreement for each Fund, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the
Page 39
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
Trust and each Fund and reviewed all of the services provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. The Board noted that each Fund is an actively-managed ETF and noted that the Advisor’s Municipal Securities Team is responsible for the day-to-day management of the Funds’ investments. The Board considered the background and experience of the members of the Municipal Securities Team and noted the Board’s prior meetings with members of the Team. The Board considered the Advisor’s statement that it applies the same oversight model internally with its Municipal Securities Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s and each Fund’s compliance with the 1940 Act, as well as each Fund’s compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Funds. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 25, 2024 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Funds and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and each Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed each Fund consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate schedule payable by each Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for each Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because each Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the total expense ratio for each Fund was above the median total (net) expense ratio of the peer funds in its respective Expense Group. With respect to the Expense Groups, the Board discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Funds and other non-ETF clients that limited their comparability. In considering the unitary fee rate schedules overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to each Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for each Fund. The Board noted the process it has established for monitoring each Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Funds. The Board determined that this process continues to be effective for reviewing each Fund’s performance. The Board received and reviewed information comparing each Fund’s performance for periods ended December 31, 2023 to the performance of the funds in its Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that FSMB underperformed its Performance Universe median and benchmark index for the one-year period ended December 31, 2023, underperformed its Performance Universe median and outperformed its benchmark index for the three-year period ended December 31, 2023 and outperformed its Performance Universe median and benchmark index for the five-year period ended December 31, 2023. The Board noted that FUMB underperformed its Performance Universe median and benchmark index for the one-year period ended December 31, 2023 and outperformed its Performance Universe median and underperformed its benchmark index for the three- and five-year periods ended December 31, 2023.
On the basis of all the information provided on the unitary fee and performance of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to each Fund under the Agreement.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Funds at current asset levels and whether the Funds may benefit from any economies of scale. The Board noted that the unitary fee rate schedule for each Fund includes breakpoints pursuant to which the unitary fee rate will be reduced as assets of the Fund meet certain thresholds. The Board considered the Advisor’s statement that it believes that its expenses relating to providing advisory services to the Funds will increase during the next twelve months as the Advisor continues to build
Page 40
Other Information (Continued)
First Trust Exchange-Traded Fund IIIJuly 31, 2024 (Unaudited)
infrastructure and add new staff. The Board also noted that under the unitary fee structure, any reduction in expenses associated with the management and operations of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for shareholders of the Funds. The Board concluded that the unitary fee rate schedule for each Fund reflects an appropriate level of sharing of any economies of scale that may be realized in the management of the Fund at current asset levels. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to each Fund for the twelve months ended December 31, 2023 and the estimated profitability level for each Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for each Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of each Fund. No single factor was determinative in the Board’s analysis.
Federal Tax Information
For the taxable year ended July 31, 2024, the following distribution information is being provided as required by the Internal Revenue Code of 1986, as amended, or to meet a specific state’s requirement. The Funds designate the following percentages or, if subsequently determined to be different, the maximum amount allowable for their fiscal year ended July 31, 2024:
Tax Exempt Interest Dividends | Alternative Minimum Tax (AMT) | |
First Trust Short Duration Managed Municipal ETF | 99.07 % | 16.44 % |
First Trust Ultra Short Duration Municipal ETF | 99.38 % | 16.13 % |
Page 41
Annual Financial Statements and Other Information |
For the Year Ended July 31, 2024 |
First Trust Exchange-Traded Fund III
First Trust Merger Arbitrage ETF (MARB) |
Table of Contents
First Trust Merger Arbitrage ETF (MARB)
Annual Financial Statements and Other Information
July 31, 2024
Annual Financial Statements and Other Information
July 31, 2024
1 | |
3 | |
4 | |
5 | |
6 | |
7 | |
13 | |
14 |
Performance and Risk Disclosure
There is no assurance that First Trust Merger Arbitrage ETF (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.
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.
First Trust Advisors L.P., the Fund’s advisor, may also periodically provide additional information on Fund performance on the Fund’s webpage at www.ftportfolios.com.
How to Read This Report
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data that provides insight into the Fund’s performance and investment approach.
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 Merger Arbitrage ETF (MARB)Portfolio of InvestmentsJuly 31, 2024
Shares | Description | Value | |||
COMMON STOCKS — 89.8% | |||||
Banks — 8.1% | |||||
34,944 | Heartland Financial USA, Inc. (a) | $1,905,147 | |||
10,062 | Independent Bank Group, Inc. | 594,262 | |||
2,499,409 | |||||
Biotechnology — 3.2% | |||||
22,182 | Cerevel Therapeutics Holdings, Inc. (a) (b) | 997,303 | |||
Capital Markets — 5.0% | |||||
44,762 | AssetMark Financial Holdings, Inc. (b) | 1,544,289 | |||
Commercial Services & Supplies — 2.5% | |||||
13,204 | Stericycle, Inc. (b) | 773,094 | |||
Communications Equipment — 3.5% | |||||
28,974 | Juniper Networks, Inc. (a) | 1,092,030 | |||
Consumer Finance — 3.6% | |||||
7,753 | Discover Financial Services | 1,116,354 | |||
Consumer Staples Distribution & Retail — 4.9% | |||||
76,431 | Albertsons Cos., Inc., Class A (a) | 1,515,626 | |||
Energy Equipment & Services — 5.0% | |||||
26,003 | ChampionX Corp. | 890,863 | |||
39,866 | Diamond Offshore Drilling, Inc. (b) | 654,599 | |||
1,545,462 | |||||
Entertainment — 4.6% | |||||
51,921 | Endeavor Group Holdings, Inc., Class A | 1,423,674 | |||
Financial Services — 4.0% | |||||
37,650 | Nuvei Corp. | 1,246,215 | |||
Health Care Equipment & Supplies — 8.4% | |||||
18,223 | Axonics, Inc. (a) (b) | 1,247,911 | |||
22,555 | Silk Road Medical, Inc. (b) | 609,211 | |||
18,163 | Surmodics, Inc. (b) | 751,948 | |||
2,609,070 | |||||
Health Care Providers & Services — 4.9% | |||||
15,361 | Amedisys, Inc. (a) (b) | 1,506,146 | |||
Household Durables — 3.0% | |||||
83,405 | Vizio Holding Corp., Class A (a) (b) | 915,787 | |||
IT Services — 2.5% | |||||
10,370 | Perficient, Inc. (b) | 782,002 | |||
Shares | Description | Value | |||
Metals & Mining — 3.8% | |||||
29,063 | United States Steel Corp. (a) | $1,194,199 | |||
Oil, Gas & Consumable Fuels — 5.1% | |||||
6,445 | Hess Corp. | 988,792 | |||
21,156 | Marathon Oil Corp. | 593,426 | |||
1,582,218 | |||||
Pharmaceuticals — 3.1% | |||||
16,355 | Catalent, Inc. (a) (b) | 970,506 | |||
Software — 10.8% | |||||
3,298 | ANSYS, Inc. (b) | 1,034,352 | |||
50,595 | HashiCorp, Inc., Class A (b) | 1,707,581 | |||
27,194 | PowerSchool Holdings, Inc., Class A (b) | 613,497 | |||
3,355,430 | |||||
Textiles, Apparel & Luxury Goods — 1.4% | |||||
12,664 | Capri Holdings Ltd. (a) (b) | 424,750 | |||
Trading Companies & Distributors — 2.4% | |||||
6,774 | McGrath RentCorp | 743,988 | |||
Total Common Stocks | 27,837,552 | ||||
(Cost $27,340,789) | |||||
RIGHTS — 0.0% | |||||
Biotechnology — 0.0% | |||||
43,869 | Chinook Therapeutics, Inc., expiring December 21, 2029 (b) (c) (d) (e) | 0 | |||
100,745 | Icosavax, Inc., expiring January 1, 2029 (b) (c) (d) (e) | 0 | |||
0 | |||||
Health Care Equipment & Supplies — 0.0% | |||||
7,137 | ABIOMED, Inc., expiring December 31, 2029 (b) (c) (d) (e) | 0 | |||
Pharmaceuticals — 0.0% | |||||
39,856 | Mirati Therapeutics, Inc., expiring October 8, 2024 (b) (c) (d) (e) | 0 | |||
Total Rights | 0 | ||||
(Cost $0) | |||||
MONEY MARKET FUNDS — 7.4% | |||||
2,281,213 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.21% (f) | 2,281,213 | |||
(Cost $2,281,213) | |||||
Total Investments — 97.2% | 30,118,765 | ||||
(Cost $29,622,002) | |||||
See Notes to Financial Statements
Page 1
First Trust Merger Arbitrage ETF (MARB)Portfolio of Investments (Continued)July 31, 2024
Shares | Description | Value | |||
COMMON STOCKS SOLD SHORT — (26.7)% | |||||
Banks — (8.4)% | |||||
(6,041) | South State Corp. | $(597,878 ) | |||
(19,558) | UMB Financial Corp. | (1,995,307 ) | |||
(2,593,185 ) | |||||
Construction & Engineering — (1.0)% | |||||
(7,839) | WillScot Holdings Corp. (b) | (321,399 ) | |||
Consumer Finance — (4.0)% | |||||
(8,098) | Capital One Financial Corp. | (1,226,037 ) | |||
Energy Equipment & Services — (5.7)% | |||||
(9,236) | Noble Corp. PLC | (436,124 ) | |||
(27,682) | Schlumberger N.V. | (1,336,764 ) | |||
(1,772,888 ) | |||||
Oil, Gas & Consumable Fuels — (5.5)% | |||||
(6,772) | Chevron Corp. | (1,086,703 ) | |||
(5,397) | ConocoPhillips | (600,146 ) | |||
(572) | EQT Corp. | (19,740 ) | |||
(1,706,589 ) | |||||
Software — (2.1)% | |||||
(1,175) | Synopsys, Inc. (b) | (656,026 ) | |||
Total Investments Sold Short — (26.7)% | (8,276,124 ) | ||||
(Proceeds $7,626,651) | |||||
Net Other Assets and Liabilities — 29.5% | 9,139,296 | ||||
Net Assets — 100.0% | $30,981,937 | ||||
(a) | This security or a portion of this security is segregated as collateral for investments sold short. At July 31, 2024, the segregated value of these securities amounts to $9,910,603. |
(b) | Non-income producing security. |
(c) | 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. |
(d) | 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 July 31, 2024, securities noted as such are valued at $0 or 0.0% of net assets. |
(e) | This security’s value was determined using significant unobservable inputs (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). |
(f) | Rate shown reflects yield as of July 31, 2024. |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of July 31, 2024 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE | ||||
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks* | $ 27,837,552 | $ 27,837,552 | $ — | $ — |
Rights* | —** | — | — | —** |
Money Market Funds | 2,281,213 | 2,281,213 | — | — |
Total Investments | $30,118,765 | $30,118,765 | $— | $—** |
LIABILITIES TABLE | ||||
Total Value at 7/31/2024 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Common Stocks Sold Short* | $ (8,276,124) | $ (8,276,124) | $ — | $ — |
* | See Portfolio of Investments for industry 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
Page 2
First Trust Merger Arbitrage ETF (MARB)
Statement of Assets and Liabilities
July 31, 2024ASSETS: | |
Investments, at value | $30,118,765 |
Cash | 773 |
Restricted Cash | 9,111,662 |
Receivables: | |
Margin interest rebate | 41,320 |
Dividends | 18,844 |
Reclaims | 510 |
Total Assets | 39,291,874 |
LIABILITIES: | |
Investments sold short, at value | 8,276,124 |
Investment advisory fees payable | 33,813 |
Total Liabilities | 8,309,937 |
NET ASSETS | $30,981,937 |
NET ASSETS consist of: | |
Paid-in capital | $31,175,295 |
Par value | 15,500 |
Accumulated distributable earnings (loss) | (208,858) |
NET ASSETS | $30,981,937 |
NET ASSET VALUE, per share | $19.99 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 1,550,002 |
Investments, at cost | $29,622,002 |
Investments sold short, proceeds | $7,626,651 |
See Notes to Financial Statements
Page 3
First Trust Merger Arbitrage ETF (MARB)
Statement of Operations
For the Year Ended July 31, 2024INVESTMENT INCOME: | |
Dividends | $973,108 |
Margin interest rebate | 435,158 |
Interest | 144,563 |
Foreign withholding tax | (765) |
Total investment income | 1,552,064 |
EXPENSES: | |
Investment advisory fees | 669,122 |
Dividend expense on investments sold short | 238,435 |
Total expenses | 907,557 |
NET INVESTMENT INCOME (LOSS) | 644,507 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
Investments | (315,861) |
In-kind redemptions | (268,060) |
Investments sold short | 290,832 |
Net realized gain (loss) | (293,089) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | 1,982,031 |
Investments sold short | (1,166,571) |
Net change in unrealized appreciation (depreciation) | 815,460 |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 522,371 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $1,166,878 |
See Notes to Financial Statements
Page 4
First Trust Merger Arbitrage ETF (MARB)
Statements of Changes in Net Assets
Year Ended 7/31/2024 | Year Ended 7/31/2023 | |
OPERATIONS: | ||
Net investment income (loss) | $644,507 | $979,728 |
Net realized gain (loss) | (293,089) | 751,739 |
Net change in unrealized appreciation (depreciation) | 815,460 | (1,149,107) |
Net increase (decrease) in net assets resulting from operations | 1,166,878 | 582,360 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||
Investment operations | (1,423,250) | (1,115,075) |
SHAREHOLDER TRANSACTIONS: | ||
Proceeds from shares sold | 6,965,011 | 80,588,123 |
Cost of shares redeemed | (44,721,426) | (55,091,737) |
Net increase (decrease) in net assets resulting from shareholder transactions | (37,756,415) | 25,496,386 |
Total increase (decrease) in net assets | (38,012,787) | 24,963,671 |
NET ASSETS: | ||
Beginning of period | 68,994,724 | 44,031,053 |
End of period | $30,981,937 | $68,994,724 |
CHANGES IN SHARES OUTSTANDING: | ||
Shares outstanding, beginning of period | 3,450,002 | 2,200,002 |
Shares sold | 350,000 | 4,000,000 |
Shares redeemed | (2,250,000) | (2,750,000) |
Shares outstanding, end of period | 1,550,002 | 3,450,002 |
See Notes to Financial Statements
Page 5
First Trust Merger Arbitrage ETF (MARB)
Financial Highlights
For a share outstanding throughout each periodYear Ended July 31, | Period Ended 7/31/2020 (a) | ||||
2024 | 2023 | 2022 | 2021 | ||
Net asset value, beginning of period | $20.00 | $20.01 | $19.55 | $19.46 | $20.01 |
Income from investment operations: | |||||
Net investment income (loss) | 0.24 (b) | 0.23 (b) | (0.24 ) (b) | (0.26 ) | (0.07 ) |
Net realized and unrealized gain (loss) | 0.21 | 0.01 (c) | 0.70 | 0.35 | (0.48 ) |
Total from investment operations | 0.45 | 0.24 | 0.46 | 0.09 | (0.55 ) |
Distributions paid to shareholders from: | |||||
Net investment income | (0.28 ) | (0.15 ) | — | — | — |
Net realized gain | (0.18 ) | (0.10 ) | — | — | — |
Total distributions | (0.46 ) | (0.25 ) | — | — | — |
Net asset value, end of period | $19.99 | $20.00 | $20.01 | $19.55 | $19.46 |
Total return (d) | 2.26 % | 1.17 % | 2.35 % | 0.46 % | (2.75 )% |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $30,982 | $68,995 | $44,031 | $10,752 | $12,649 |
Ratio of total expenses to average net assets | 1.70 % | 1.80 % | 1.87 % | 2.23 % | 2.30 % (e) |
Ratio of total expenses to average net assets excluding dividend expense and margin interest expense | 1.25 % | 1.25 % | 1.25 % | 1.25 % | 1.25 % (e) |
Ratio of net investment income (loss) to average net assets | 1.20 % | 1.17 % | (1.23 )% | (1.15 )% | (1.71 )% (e) |
Portfolio turnover rate (f) | 301 % | 367 % | 246 % | 280 % | 137 % |
(a) | Inception date is February 4, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
(b) | Based on average shares outstanding. |
(c) | 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. |
(d) | 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. |
(e) | Annualized. |
(f) | 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
Page 6
Notes to Financial Statements
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
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”).
This report covers the First Trust Merger Arbitrage ETF (the “Fund”), a non-diversified series of the Trust, which trades under the ticker “MARB” 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 Fund is an actively managed exchange-traded fund. The investment objective of the Fund is to seek to provide investors with capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by establishing long and short positions in the equity securities of companies that are involved in a publicly-announced significant corporate event, such as a merger or acquisition. The Fund’s portfolio may include equity securities issued by U.S. and non-U.S. companies, including American Depositary Receipts, and derivatives, including total return swaps. The Fund may invest in securities issued by small, mid and large capitalization issuers.
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.
A. Portfolio Valuation
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. 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 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.
Shares of open-end funds are valued based on NAV per share.
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
Page 7
Notes to Financial Statements (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
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;
2)
the type of security;
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 July 31, 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.
Page 8
Notes to Financial Statements (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
C. Short Sales
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 BNP Paribas Prime Brokerage International, Ltd. 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 plus 85 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 Overnight Bank Funding Rate less 35 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 fiscal year ended July 31, 2024, the Fund had margin interest rebate of $435,158 as shown on the Statement of Operations. Restricted cash in the amount of $9,111,662, as shown on the Statement of Assets and Liabilities, is associated with collateral at the broker as of July 31, 2024.
D. 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 years ended July 31, 2024 and 2023 was as follows:
Distributions paid from: | 2024 | 2023 |
Ordinary income | $1,423,250 | $1,115,075 |
Capital gains | — | — |
Return of capital | — | — |
As of July 31, 2024, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income | $217,547 |
Accumulated capital and other gain (loss) | (247,009 ) |
Net unrealized appreciation (depreciation) | (179,396 ) |
E. Income Taxes
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.
Page 9
Notes to Financial Statements (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
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. Taxable period ended 2020 and taxable years ended 2021, 2022, and 2023 remain open to federal and state audit. As of July 31, 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 July 31, 2024, for federal income tax purposes, the Fund had $247,009 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 July 31, 2024, the Fund had no net late year ordinary or capital losses.
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended July 31, 2024, the adjustments for the Fund were as follows:
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) on Investments | Paid-In Capital |
$211,784 | $68,539 | $(280,323 ) |
As of July 31, 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:
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) |
$22,021,051 | $1,165,370 | $(1,343,780 ) | $(178,410 ) |
F. Expenses
Expenses, other than the investment advisory fee, dividend and interest expenses 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 supervising 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 an investment management agreement between First Trust and the Trust, on behalf of the Fund (the “Investment Management Agreement”), First Trust oversees First Trust Capital Management L.P.’s (“First Trust Capital Management” or the “Sub-Advisor”) management of the Fund’s assets. First Trust Capital Management receives a sub-advisory fee equal to 0.625% 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 will be reduced to reflect the reduction in First Trust’s management fee. First Trust is responsible for the expenses of the Fund including the
Page 10
Notes to Financial Statements (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
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, expenses associated with short sales transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Prior to October 16, 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. 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:
Breakpoints | |
Fund net assets up to and including $2.5 billion | 1.25000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 1.21875 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 1.18750 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 1.15625 % |
Fund net assets greater than $10 billion | 1.12500 % |
First Trust Capital Partners, LLC, an affiliate of First Trust, owns a 52.88% ownership interest in First Trust Capital Management through First Trust Capital Solutions L.P.
Effective October 16, 2023, the Trust has multiple service agreements with The Bank of New York Mellon (“BNY”). Under the service agreements, BNY performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNY is responsible for custody of the Fund’s assets. As fund accountant and administrator, BNY is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BNY is responsible for maintaining shareholder records for the Fund. BNY is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Prior to October 16, 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.
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 fiscal year ended July 31, 2024, the cost of purchases and proceeds from sales of investments, excluding short-term investments, investments sold short, and in-kind transactions, were $97,670,577 and $101,874,962, respectively. The cost of purchases to cover short sales and the proceeds of short sales were $22,213,544 and $21,703,793, respectively.
For the fiscal year ended July 31, 2024, the cost of in-kind purchases and proceeds from in-kind sales were $2,940,278 and $22,925,283, respectively. The cost of in-kind purchases to cover short sales and the proceeds from in-kind sales were $0 and $0, respectively.
5. 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.
Page 11
Notes to Financial Statements (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024
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.
6. Distribution Plan
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 November 30, 2025.
7. Indemnification
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.
8. Subsequent Events
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.
Page 12
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of First Trust Merger Arbitrage ETF (the “Fund”), one of the funds constituting the First Trust Exchange-Traded Fund III, as of July 31, 2024, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for the years ended July 31, 2024, 2023, 2022, 2021, and the period from February 4, 2020 (commencement of investment operations) through July 31, 2020, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of July 31, 2024 and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the years ended July 31, 2024, 2023, 2022, 2021, and the period from February 4, 2020 (commencement of investment operations) through July 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of July 31, 2024, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche, LLP
Chicago, Illinois
September 24, 2024
September 24, 2024
We have served as the auditor of one or more First Trust investment companies since 2001.
Page 13
Other Information
First Trust Merger Arbitrage ETF (MARB)July 31, 2024 (Unaudited)
Changes in and Disagreements with Accountants (Item 8 of Form N-CSR)
There were no changes in or disagreements with the Fund’s accountants during the fiscal year ended July 31, 2024.
Proxy Disclosures (Item 9 of Form N-CSR)
There were no matters submitted for vote by shareholders of the Fund during the fiscal year ended July 31, 2024.
Remuneration Paid to Directors, Officers, and Others (Item 10 of Form N-CSR)
Independent Trustees and any member of any advisory board of the Fund are compensated through the unitary management fee paid by the Fund to the advisor and not directly by the Fund. The investment advisory fee paid is included in the Statement of Operations.
Statement Regarding the Basis for the Board’s Approval of Investment Advisory Contract (Item 11 of Form N-CSR)
The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the “Advisory Agreement”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the First Trust Merger Arbitrage ETF (the “Fund”) and the Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement” and together with the Advisory Agreement, the “Agreements”) among the Trust, on behalf of the Fund, the Advisor and First Trust Capital Management L.P. (the “Sub-Advisor”). The Board approved the continuation of the Agreements for a one-year period ending June 30, 2025 at a meeting held on June 2–3, 2024. The Board determined that the continuation of the Agreements is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.
To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 16, 2024, April 25, 2024 and June 2–3, 2024, the Board, including the Independent Trustees, reviewed materials provided by the Advisor and the Sub-Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor and the Sub-Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate schedule payable by the Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the sub-advisory fee as compared to fees charged to other clients of the Sub-Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor and the Sub-Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; financial data for the Sub-Advisor; any indirect benefits to the Advisor and its affiliates, First Trust Portfolios L.P. (“FTP”) and First Trust Capital Partners, LLC (“FTCP”), and the Sub-Advisor; and information on the Advisor’s and the Sub-Advisor’s compliance programs. The Board reviewed initial materials with the Advisor at the meeting held on April 25, 2024, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor and the Sub-Advisor. Following the April 25, 2024 meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 2–3, 2024 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor and among the Trust, the Advisor and the Sub-Advisor continue to be reasonable business arrangements from the Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreements, the Board had received sufficient information to renew the Agreements. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor and the Sub-Advisor manage the Fund and knowing the Fund’s unitary fee.
In reviewing the Agreements, the Board considered the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory Agreement, the Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the
Page 14
Other Information (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024 (Unaudited)
Fund, including the oversight of the Sub-Advisor, as well as the background and experience of the persons responsible for such services. The Board noted that the Advisor oversees the Sub-Advisor’s day-to-day management of the Fund’s investments, including portfolio risk monitoring and performance review. In reviewing the services provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s, the Sub-Advisor’s and the Fund’s compliance with the 1940 Act, as well as the Fund’s compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 25, 2024 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. With respect to the Sub-Advisory Agreement, the Board noted that the Fund is an actively-managed ETF and the Sub-Advisor actively manages the Fund’s investments. The Board reviewed the materials provided by the Sub-Advisor and considered the services that the Sub-Advisor provides to the Fund, including the Sub-Advisor’s day-to-day management of the Fund’s investments. In considering the Sub-Advisor’s management of the Fund, the Board noted the background and experience of the Sub-Advisor’s portfolio management team, including the Board’s prior meetings with members of the portfolio management team. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor and the Sub-Advisor under the Agreements have been and are expected to remain satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has managed the Fund consistent with its investment objective, policies and restrictions.
The Board considered the unitary fee rate schedule payable by the Fund under the Advisory Agreement for the services provided. The Board noted that the sub-advisory fee is paid by the Advisor from the unitary fee. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund’s expenses, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Advisory Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was above the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including the limited number of actively-managed ETFs following a merger arbitrage strategy, and different business models that may affect the pricing of services among ETF sponsors. The Board also noted that not all peer funds employ an advisor/sub-advisor management structure. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate schedule overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex.
The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor and the Sub-Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund’s performance. The Board received and reviewed information comparing the Fund’s performance for periods ended December 31, 2023 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund underperformed the Performance Universe median and the benchmark index for the one-year period ended December 31, 2023 and outperformed the Performance Universe median and underperformed the benchmark index for the three-year period ended December 31, 2023.
On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund (out of which the Sub-Advisor is compensated) continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor to the Fund under the Agreements.
The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund at current asset levels and whether the Fund may benefit from any economies of scale. The Board noted that the unitary fee rate schedule for the Fund includes breakpoints pursuant to which the unitary fee rate will be reduced
Page 15
Other Information (Continued)
First Trust Merger Arbitrage ETF (MARB)July 31, 2024 (Unaudited)
as assets of the Fund meet certain thresholds. The Board considered the Advisor’s statement that it believes that its expenses relating to providing advisory services to the Fund will increase during the next twelve months as the Advisor continues to build infrastructure and add new staff. The Board also noted that under the unitary fee structure, any reduction in expenses associated with the management and operations of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for shareholders of the Fund. The Board concluded that the unitary fee rate schedule for the Fund reflects an appropriate level of sharing of any economies of scale that may be realized in the management of the Fund at current asset levels. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2023 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for the Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board noted that FTCP has an ownership interest in the Sub-Advisor and considered potential indirect benefits to the Advisor from such ownership interest. The Board also considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.
The Board considered the Sub-Advisor’s statement that it believes that the sub-advisory fee is appropriate based on expected economies of scale. The Board noted the Sub-Advisor’s statements that the majority of its expenses are fixed and are shared and allocated across various funds advised or sub-advised by the Sub-Advisor and that it has added additional personnel over the past year. The Board noted that the Advisor pays the Sub-Advisor from the unitary fee, that the sub-advisory fee will be reduced consistent with the breakpoints in the unitary fee rate schedule and its understanding that the Fund’s sub-advisory fee was the product of an arm’s length negotiation. The Board did not review the profitability of the Sub-Advisor with respect to the Fund. The Board concluded that the profitability analysis for the Advisor was more relevant. The Board considered the potential indirect benefits to the Sub-Advisor from being associated with the Advisor and the Fund, and noted the Sub-Advisor’s statement that, although it benefits from the name recognition associated with its role as sub-advisor to the Fund, it has not received and does not anticipate receiving any reduction in fees incurred for research or other services as a result of its management of the Fund. The Board also noted the Sub-Advisor’s statement that the Sub-Advisor did not use soft dollars for the Fund during the year ended December 31, 2023 and does not intend to in the near future. The Board noted the potential indirect benefits to the Sub-Advisor from the ownership interest of FTCP in the Sub-Advisor. The Board concluded that the character and amount of potential indirect benefits to the Sub-Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements continue to be fair and reasonable and that the continuation of the Agreements is in the best interests of the Fund. No single factor was determinative in the Board’s analysis.
Federal Tax Information
For the taxable year ended July 31, 2024, the following percentages of income dividends paid by the Fund qualify for the dividends received deduction available to corporations and are hereby designated as qualified dividend income:
Dividends Received Deduction | Qualified Dividend Income |
35.07 % | 35.07 % |
A portion of the ordinary dividends (including short-term capital gains) that the Fund paid to its shareholders during the fiscal year ended July 31, 2024, may be eligible for the Qualified Business Income (QBI) Deduction under the Internal Revenue Code of 1986, as amended, Section 199A for the aggregate dividends the Fund received from the underlying Real Estate Investment Trusts (REITs) it invests in.
Page 16
(b) The Financial Highlights is included in the Financial Statements and Other Information filed under Item 7(a) of this Form N-CSR.
Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not applicable to the Registrant.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable to the Registrant.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies
This information is included in the Financial Statements and Other Information filed under Item 7(a) of this Form N-CSR.
Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.
This statement is included in the Financial Statements and Other Information filed under Item 7(a) of this Form N-CSR.
Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to the Registrant.
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to the Registrant.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to the Registrant.
Item 15. 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 16. Controls and Procedures.
| (a) | The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
| (a) | Not applicable to the Registrant. |
| (b) | Not applicable to the Registrant. |
Item 18. Recovery of Erroneously Awarded Compensation.
| (a) | Not applicable to the Registrant. |
| (b) | Not applicable to the Registrant. |
Item 19. Exhibits.
| (a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | Not applicable to the Registrant. |
| (a)(3) | The certifications required by Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2022 are attached hereto. |
| (a)(4) | Not applicable to the Registrant. |
| (a)(5) | Not applicable to the Registrant. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | First Trust Exchange-Traded Fund III |
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | October 8, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | /s/ James M. Dykas | |
| James M. Dykas, President and Chief Executive Officer (principal executive officer) |
| Date: | October 8, 2024 |
| By (Signature and Title)* | /s/ Derek D. Maltbie | |
| Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
| Date: | October 8, 2024 |
* Print the name and title of each signing officer under his or her signature.