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 811-22559
First Trust Exchange-Traded Fund IV
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant’s telephone number, including area code: (630) 765-8000
Date of fiscal year end:October 31
Date of reporting period:April 30, 2019
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust Exchange-Traded Fund IV
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First Trust North American
Energy Infrastructure Fund
(EMLP)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
Energy Income Partners, LLC
---------------------------
<PAGE>
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TABLE OF CONTENTS
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 8
Statement of Operations...................................................... 9
Statements of Changes in Net Assets.......................................... 10
Financial Highlights......................................................... 11
Notes to Financial Statements................................................ 12
Additional Information....................................................... 18
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust North American Energy Infrastructure Fund; hereinafter
referred to as the "Fund") to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. When evaluating the information included in this report, you are
cautioned not to place undue reliance on these forward-looking statements, which
reflect the judgment of the Advisor and/or Sub-Advisor and their respective
representatives only as of the date hereof. We undertake no obligation to
publicly revise or update these forward-looking statements to reflect events and
circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
<PAGE>
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SHAREHOLDER LETTER
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust North American Energy Infrastructure Fund (the "Fund"), which contains
detailed information about the Fund for the six months ended April 30, 2019. We
encourage you to read this report carefully and discuss it with your financial
advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
The investment objective of the First Trust North American Energy Infrastructure
Fund (the "Fund") is to seek total return. The Fund pursues its objective by
investing, under normal market conditions, at least 80% of its net assets
(including investment borrowings) in equity securities of companies deemed by
Energy Income Partners, LLC ("EIP" or the "Sub-Advisor") to be engaged in the
energy infrastructure sector. These companies principally include publicly
traded master limited partnerships and limited liability companies taxed as
partnerships ("MLPs"), MLP affiliates, pipeline companies, utilities and other
companies that derive the majority of their revenues from operating or providing
services in support of infrastructure assets such as pipelines, power
transmission and petroleum and natural gas storage in the petroleum, natural gas
and power generation industries (collectively, "Energy Infrastructure
Companies"). The Fund will invest principally in Energy Infrastructure
Companies. Under normal market conditions, the Fund will invest at least 80% of
its net assets (including investment borrowings) in equity securities of
companies headquartered or incorporated in the United States and Canada. There
can be no assurance that the Fund's investment objective will be achieved. The
Fund may not be appropriate for all investors.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended 5 Years Ended Inception (6/20/12) 5 Years Ended Inception (6/20/12)
4/30/19 4/30/19 4/30/19 to 4/30/19 4/30/19 to 4/30/19
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 11.97% 14.04% 3.53% 6.96% 18.93% 58.69%
Market Price 12.02% 13.84% 3.49% 6.95% 18.73% 58.60%
INDEX PERFORMANCE
Blended Benchmark(1) 7.72% 12.13% 2.63% 6.30% 13.86% 52.08%
S&P 500(R) Index 9.76% 13.49% 11.63% 14.33% 73.32% 150.68%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
-----------------------------
(1) The Blended Benchmark consists of the following two indices: 50% of the
PHLX Utility Sector Index which is a market capitalization weighted index
composed of geographically diverse public U.S. utility stocks; and 50% of
the Alerian MLP Total Return Index which is a float-adjusted,
capitalization-weighted composite of the 50 most prominent energy Master
Limited Partnerships (MLPs). Indices are unmanaged and an investor cannot
invest directly in an index. All index returns assume that distributions
are reinvested when they are received.
Page 2
<PAGE>
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
-----------------------------------------------------------
Electric Power & Transmission 38.57%
Natural Gas Transmission 32.29
Petroleum Product Transmission 12.86
Crude Oil Transmission 12.31
Propane 2.25
Coal 0.93
Other 0.79
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
TransCanada Corp. 7.88%
Enterprise Products Partners, L.P. 6.38
Kinder Morgan, Inc. 5.66
Williams (The) Cos., Inc. 5.12
NextEra Energy, Inc. 4.74
Exelon Corp. 4.71
NextEra Energy Partners, L.P. 4.08
Plains GP Holdings L.P., Class A 4.06
Enbridge, Inc. 4.01
Public Service Enterprise Group, Inc. 3.99
-------
Total 50.63%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 20, 2012 - APRIL 30, 2019
First Trust North American Blended S&P 500(R)
Energy Infrastructure Fund Benchmark Index
<S> <C> <C> <C>
6/20/12 $10,000 $10,000 $10,000
10/31/12 10,690 10,609 10,495
4/30/13 12,379 12,218 12,008
10/31/13 12,138 12,041 13,347
4/30/14 13,341 13,356 14,463
10/31/14 14,861 14,356 15,652
4/30/15 15,005 13,777 16,341
10/31/15 12,793 12,018 16,467
4/30/16 13,004 12,510 16,538
10/31/16 14,330 13,065 17,209
4/30/17 14,896 14,102 19,501
10/31/17 14,768 13,874 21,276
4/30/18 13,914 13,562 22,089
10/31/18 14,171 14,117 22,840
4/30/19 15,869 15,208 25,068
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 1, 2013, through
April 30, 2019. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/1/13 - 10/31/14 231 0 0 0 21 0 0 0
11/1/14 - 10/31/15 158 0 0 0 93 0 0 0
11/1/15 - 10/31/16 213 0 0 0 39 0 0 0
11/1/16 - 10/31/17 209 0 0 0 43 0 0 0
11/1/17 - 10/31/18 156 0 0 0 96 0 0 0
11/1/18 - 4/30/19 70 3 0 1 47 1 0 0
</TABLE>
Page 3
<PAGE>
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PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors, L.P. ("First Trust") is the investment advisor to the
First Trust North American Energy Infrastructure Fund (the "Fund"). First Trust
is responsible for the ongoing monitoring of the Fund's investment portfolio,
managing the Fund's business affairs and providing certain administrative
services necessary for the management of the Fund.
SUB-ADVISOR
ENERGY INCOME PARTNERS, LLC
Energy Income Partners, LLC ("EIP"), located in Westport, CT, was founded in
2003 to provide professional asset management services in the area of
energy-related master limited partnerships ("MLPs") and other high-payout
securities such as pipeline companies, power utilities, YieldCos and energy
infrastructure real estate investment trusts ("REITs"). EIP mainly focuses on
investments in energy-related infrastructure assets such as pipelines, power
transmission and distribution, petroleum storage and terminals that receive
fee-based or regulated income from their corporate and individual customers. EIP
manages or supervises approximately $6.2 billion of assets as of April 30, 2019.
EIP advises two privately offered partnerships for U.S. high net worth
individuals and an open-end mutual fund. EIP also manages separately managed
accounts and provides its model portfolio to unified managed accounts. Finally,
in addition to the Fund, EIP serves as a sub-advisor to four closed-end
management investment companies, a sleeve of an actively managed exchange-traded
fund, a sleeve of a series of a variable insurance trust, and an open-end UCITS
fund incorporated in Ireland. EIP is a registered investment advisor with the
Securities and Exchange Commission.
PORTFOLIO MANAGEMENT TEAM
JAMES J. MURCHIE -- CO-PORTFOLIO MANAGER, FOUNDER AND CEO OF ENERGY INCOME
PARTNERS, LLC
EVA PAO -- CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
JOHN TYSSELAND -- CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund.
Page 4
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust North American Energy Infrastructure Fund (the
"Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing
costs, including management fees, distribution and/or service fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Fund and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD PERIOD (a)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NORTH AMERICAN ENERGY
INFRASTRUCTURE FUND (EMLP)
Actual $1,000.00 $1,119.70 0.95% $4.99
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 5
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 65.2%
ELECTRIC UTILITIES -- 23.2%
953,009 Alliant Energy Corp. $ 45,010,615
900,986 American Electric Power Co.,
Inc. 77,079,352
14,773 Duke Energy Corp. 1,346,116
662,706 Emera, Inc. (CAD) 24,886,720
602,444 Eversource Energy 43,171,137
2,188,170 Exelon Corp. 111,487,262
960,877 Fortis, Inc. (CAD) 35,517,376
82,136 Hydro One Ltd. (CAD) (a) 1,329,185
240,591 IDACORP, Inc. 23,823,321
577,351 NextEra Energy, Inc. 112,260,128
1,356,705 PPL Corp. 42,342,763
54,937 Southern (The) Co. 2,923,747
772,086 Xcel Energy, Inc. 43,622,859
---------------
564,800,581
---------------
EQUITY REAL ESTATE INVESTMENT
TRUSTS -- 0.3%
215,018 CorEnergy Infrastructure
Trust, Inc. 8,125,530
---------------
GAS UTILITIES -- 1.7%
188,819 Atmos Energy Corp. 19,323,737
13,835 Chesapeake Utilities Corp. 1,281,674
398,858 New Jersey Resources Corp. 19,974,809
---------------
40,580,220
---------------
MULTI-UTILITIES -- 11.2%
623,159 ATCO Ltd., Class I (CAD) 21,373,558
1,014,014 Canadian Utilities Ltd.,
Class A (CAD) 27,952,181
814,445 CMS Energy Corp. 45,242,420
645,101 NiSource, Inc. 17,920,906
1,583,413 Public Service Enterprise
Group, Inc. 94,450,585
163,258 Sempra Energy 20,888,861
579,139 WEC Energy Group, Inc. 45,421,872
---------------
273,250,383
---------------
OIL, GAS & CONSUMABLE FUELS
-- 28.5%
2,569,393 Enbridge, Inc. 94,913,377
1,777,664 Equitrans Midstream Corp. 37,028,741
1,431,535 Inter Pipeline Ltd. (CAD) 23,315,738
1,217,776 Keyera Corp. (CAD) 28,142,379
6,753,757 Kinder Morgan, Inc. 134,197,152
709,342 ONEOK, Inc. 48,185,602
454,668 Targa Resources Corp. 18,254,920
3,909,994 TransCanada Corp. 186,741,313
4,283,103 Williams (The) Cos., Inc. 121,340,308
---------------
692,119,530
---------------
WATER UTILITIES -- 0.3%
70,858 American Water Works Co., Inc. 7,666,127
---------------
TOTAL COMMON STOCKS
-- 65.2% 1,586,542,371
(Cost $1,351,971,985) ---------------
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS
-- 32.2%
CHEMICALS -- 0.1%
129,880 Westlake Chemical Partners,
L.P. $ 2,909,312
---------------
GAS UTILITIES -- 2.2%
1,472,299 AmeriGas Partners, L.P. 53,385,562
---------------
INDEPENDENT POWER AND
RENEWABLE ELECTRICITY
PRODUCERS -- 4.0%
2,100,259 NextEra Energy Partners,
L.P. (b) 96,674,922
---------------
OIL, GAS & CONSUMABLE FUELS
-- 25.9%
1,138,912 Alliance Resource Partners,
L.P. 21,946,834
840,889 BP Midstream Partners, L.P. 12,159,255
5,395,443 Energy Transfer, L.P. 81,579,098
5,276,057 Enterprise Products Partners,
L.P. 151,053,512
1,196,066 Holly Energy Partners, L.P. 32,521,034
1,175,643 Magellan Midstream Partners,
L.P. 72,901,622
700,787 MPLX, L.P. 22,607,389
612,321 Phillips 66 Partners, L.P. 30,328,259
4,074,796 Plains GP Holdings L.P.,
Class A (b) 96,165,186
604,980 Shell Midstream Partners,
L.P. 12,166,148
977,291 Tallgrass Energy, L.P. (b) 23,591,805
2,035,262 TC PipeLines, L.P. 72,658,853
---------------
629,678,995
---------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 32.2% 782,648,791
(Cost $727,982,987) ---------------
MONEY MARKET FUNDS -- 2.2%
54,022,785 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 2.32% (c) 54,022,785
(Cost $54,022,785) ---------------
TOTAL INVESTMENTS -- 99.6% 2,423,213,947
(Cost $2,133,977,757) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.4% 9,595,517
---------------
NET ASSETS -- 100.0% $ 2,432,809,464
===============
Page 6 See Notes to Financial Statements
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
(a) This security is restricted in the U.S. and cannot be offered for public
sale without first being registered under the Securities Act of 1933, as
amended. This security is not restricted on the foreign exchange where it
trades freely without any additional registration. As such, it does not
require the additional disclosure required of restricted securities.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
(c) Rate shown reflects yield as of April 30, 2019.
(d) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $321,817,799 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $32,581,609. The net unrealized appreciation
was $289,236,190.
CAD - Canadian Dollar - Security is denominated in Canadian Dollars and is
translated into U.S. Dollars based upon the current exchange rate.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
LEVEL 1 SIGNIFICANT SIGNIFICANT
QUOTED OBSERVABLE UNOBSERVABLE
PRICES INPUTS INPUTS
------------------------------------------
Common Stocks* $1,586,542,371 $ -- $ --
Master Limited
Partnerships* 782,648,791 -- --
Money Market
Funds 54,022,785 -- --
------------------------------------------
Total Investments $2,423,213,947 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................... $ 2,423,213,947
Cash..................................................................... 1,842,419
Dividends receivable..................................................... 9,648,924
----------------
Total Assets.......................................................... 2,434,705,290
----------------
LIABILITIES:
Investment advisory fees payable......................................... 1,895,826
----------------
Total Liabilities..................................................... 1,895,826
----------------
NET ASSETS............................................................... $ 2,432,809,464
================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 2,379,806,978
Par value................................................................ 981,550
Accumulated distributable earnings (loss)................................ 52,020,936
----------------
NET ASSETS............................................................... $ 2,432,809,464
================
NET ASSET VALUE, per share............................................... $ 24.79
================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................ 98,155,000
================
Investments, at cost..................................................... $ 2,133,977,757
================
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends................................................................ $ 37,683,922
Foreign withholding tax.................................................. (1,573,415)
----------------
Total investment income............................................... 36,110,507
----------------
EXPENSES:
Investment advisory fees................................................. 10,683,522
----------------
Total expenses........................................................ 10,683,522
----------------
NET INVESTMENT INCOME (LOSS)............................................. 25,426,985
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments........................................................... (101,871,456)
In-kind redemptions................................................... 26,594,765
Foreign currency transactions......................................... (331,448)
----------------
Net realized gain (loss)................................................. (75,608,139)
----------------
Net change in unrealized appreciation (depreciation) on:
Investments........................................................... 303,418,822
Foreign currency translation.......................................... 1,174
----------------
Net change in unrealized appreciation (depreciation)..................... 303,419,996
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 227,811,857
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 253,238,842
================
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
4/30/2019 YEAR ENDED
(UNAUDITED) 10/31/2018
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)............................................. $ 25,426,985 $ 30,933,982
Net realized gain (loss)................................................. (75,608,139) 24,990,313
Net change in unrealized appreciation (depreciation)..................... 303,419,996 (153,746,567)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations....................................................... 253,238,842 (97,822,272)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................... (49,691,578) (42,353,642)
Return of capital........................................................ -- (45,995,871)
-------------- --------------
Total distributions to shareholders...................................... (49,691,578) (88,349,513)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 229,823,106 587,184,789
Cost of shares redeemed.................................................. (118,366,268) (194,184,205)
-------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................................... 111,456,838 393,000,584
-------------- --------------
Total increase (decrease) in net assets.................................. 315,004,102 206,828,799
NET ASSETS:
Beginning of period...................................................... 2,117,805,362 1,910,976,563
-------------- --------------
End of period............................................................ $2,432,809,464 $2,117,805,362
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. 93,555,000 77,855,000
Shares sold.............................................................. 9,800,000 24,150,000
Shares redeemed.......................................................... (5,200,000) (8,450,000)
-------------- --------------
Shares outstanding, end of period........................................ 98,155,000 93,555,000
============== ==============
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2019 ------------------------------------------------------------------------
(UNAUDITED) 2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.64 $ 24.55 $ 24.76 $ 23.03 $ 27.72 $ 23.40
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.26 0.35 0.44 0.30 0.39 0.45
Net realized and unrealized gain (loss) 2.40 (1.33) 0.32 2.37 (4.18) 4.71
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.66 (0.98) 0.76 2.67 (3.79) 5.16
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.51) (0.45) (0.48) (0.30) (0.90) (0.84)
Return of capital -- (0.48) (0.49) (0.64) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.51) (0.93) (0.97) (0.94) (0.90) (0.84)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 24.79 $ 22.64 $ 24.55 $ 24.76 $ 23.03 $ 27.72
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 11.97% (4.03)% 3.06% 12.01% (13.92)% 22.44%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,432,809 $2,117,805 $1,910,977 $1,379,029 $ 952,609 $ 946,947
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss) to
average net assets 2.26% (b) 1.40% 1.59% 1.44% 1.47% 1.11%
Portfolio turnover rate (c) 21% 35% 24% 40% 34% 7%
</TABLE>
(a) 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.
(b) Annualized.
(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 11
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust North American Energy Infrastructure Fund (the "Fund"),
which trades under the ticker "EMLP" on the NYSE Arca, Inc. ("NYSE Arca").
Unlike conventional mutual funds, the Fund issues and redeems shares on a
continuous basis, at net asset value ("NAV"), only in large specified blocks
consisting of 50,000 shares called a "Creation Unit." Creation Units are
generally issued and redeemed in-kind for securities in which the Fund invests
and, in certain circumstances, for cash, and only to and from broker-dealers and
large institutional investors that have entered into participation agreements.
Except when aggregated in Creation Units, the Fund's shares are not redeemable
securities.
The Fund is an actively managed exchange-traded fund. The investment objective
of the Fund is to seek total return. Under normal market conditions, the Fund
will invest at least 80% of its net assets (including investment borrowings) in
energy infrastructure companies, which principally include publicly-traded
master limited partnerships and limited liability companies taxed as
partnerships ("MLPs"), MLP affiliates, pipeline companies, utilities, and other
companies that derive the majority of their revenues from operating or providing
services in support of infrastructure assets such as pipelines, power
transmission and petroleum and natural gas storage in the petroleum, natural gas
and power generation industries (collectively, "Energy Infrastructure
Companies"). In addition, under normal market conditions, the Fund will invest
at least 80% of its net assets (including investment borrowings) in equity
securities of companies headquartered or incorporated in the United States or
Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
The Fund's NAV is calculated by dividing the value of all assets of the Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
the market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Common stocks, MLPs and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Page 12
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of 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 type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of the 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 securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE.
The 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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
Page 13
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
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 on the accrual basis.
Distributions received from the Fund's investments in MLPs generally are
comprised of return of capital and investment income. The Fund records estimated
return of capital and investment income based on historical information
available from each MLP. These estimates may subsequently be revised based on
information received from the MLPs after their tax reporting periods are
concluded.
C. FOREIGN CURRENCY
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statement of Operations.
D. DIVIDENDS AND DISTRIBUTION 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 gains earned by the Fund, if any, are distributed
at least annually.
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 significantly modified portfolio securities
held by the Fund and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 42,353,642
Capital gains................................... --
Return of capital............................... 45,995,871
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (127,085,041)
Net unrealized appreciation (depreciation)...... (24,441,287)
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 14
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2018, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $127,085,041.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
net ordinary losses.
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 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, 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.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
G. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Fund has early adopted ASU 2018-13 for these financial statements, which did
not result in a material impact.
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 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.
The Fund and First Trust have retained Energy Income Partners, LLC ("EIP" or the
"Sub-Advisor"), an affiliate of First Trust, to serve as the Fund's investment
sub-advisor. In this capacity, EIP is responsible for the selection and ongoing
monitoring of the securities in the Fund's investment portfolio. Pursuant to the
Investment Management Agreement between the Trust and the Advisor, First Trust
will supervise EIP and its management of the investment of the Fund's assets and
will pay EIP for its services as the Fund's sub-advisor. First Trust will also
be 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.
The Fund has agreed to pay First Trust an annual unitary management fee equal to
0.95% of its average daily net assets. EIP receives a sub-advisory fee from
First Trust equal to 45% of any remaining monthly investment management fee paid
to First Trust after the average Fund expenses accrued during the most recent
twelve months are subtracted from the investment management fee in a given
month.
First Trust Capital Partners, LLC ("FTCP"), an affiliate of First Trust, owns,
through a wholly-owned subsidiary, a 15% ownership interest in each of EIP and
EIP Partners, LLC, an affiliate of EIP.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 2019, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $462,285,530 and $459,823,469, respectively.
For the six months ended April 30, 2019, the cost of in-kind purchases and
proceeds from in-kind sales were $215,014,521 and $112,523,845, respectively.
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of the Fund, an
Authorized Participant must deposit (i) a designated portfolio of equity
securities determined by First Trust (the "Deposit Securities") and generally
make or receive a cash payment referred to as the "Cash Component," which is an
amount equal to the difference between the NAV of the Fund Shares (per Creation
Unit Aggregation) and the market value of the Deposit Securities, and/or (ii)
cash in lieu of all or a portion of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the Authorized Participant will deliver the Cash
Component. If the Cash Component is a negative number (i.e., the NAV per
Creation Unit Aggregation is less than the Deposit Amount), the Authorized
Participant will receive the Cash Component. Authorized Participants purchasing
Creation Units must pay to BNYM, as transfer agent, a creation transaction fee
(the "Creation Transaction Fee") regardless of the number of Creation Units
purchased in the transaction. The Creation Transaction Fee is based on the
composition of the securities included in the Fund's portfolio and the countries
in which the transactions are settled. The Creation Transaction Fee is currently
$500. The price for each Creation Unit will equal the daily NAV per share 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 or
stamp taxes. When the Fund permits an Authorized Participant to substitute cash
or a different security in lieu of depositing one or more of the requisite
Deposit Securities, the Authorized Participant may also be assessed an amount to
cover the cost of purchasing the Deposit Securities and/or disposing of the
substituted securities, including 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 such Deposit Securities and/or
substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $500. The
Fund reserves the right to effect redemptions in cash. An Authorized Participant
may request cash redemption in lieu of securities; however, the Fund may, in its
discretion, reject any such request.
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
Page 16
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
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 March 31, 2020.
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 17
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
Page 18
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
Page 19
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
APRIL 30, 2019 (UNAUDITED)
lack of liquidity; currency exchange rates; excessive taxation; government
seizure of assets; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 20
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT ADVISOR
Energy Income Partners, LLC
10 Wright Street
Westport, CT 06880
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Senior Loan Fund (FTSL)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 19
Statement of Operations...................................................... 20
Statements of Changes in Net Assets.......................................... 21
Financial Highlights......................................................... 22
Notes to Financial Statements................................................ 23
Additional Information....................................................... 30
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Senior Loan Fund; hereinafter referred to as the
"Fund") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Senior Loan Fund (the "Fund"), which contains detailed information about
the Fund for the six months ended April 30, 2019. We encourage you to read this
report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
The First Trust Senior Loan Fund's (the "Fund") primary investment objective is
to provide high current income. The Fund's secondary investment objective is the
preservation of capital. Under normal market conditions, the Fund seeks to
outperform each of the S&P/LSTA U.S. Leveraged Loan 100 Index and the Markit
iBoxx USD Liquid Leveraged Loan Index by investing at least 80% of its net
assets (including investment borrowings) in first lien senior floating rate bank
loans ("Senior Loans"). The S&P/LSTA U.S. Leveraged Loan 100 Index (the "Primary
Index") is a market value-weighted index designed to measure the performance of
the largest segment of the U.S. syndicated leveraged loan market. The Primary
Index consists of 100 loan facilities drawn from a larger benchmark, the
S&P/LSTA Leveraged Loan Index. The Markit iBoxx USD Liquid Leveraged Loan Index
(the "Secondary Index") selects the 100 most liquid Senior Loans in the market.
The Fund does not seek to track either the Primary or Secondary Index, but
rather seeks to outperform each of the Indices. It is anticipated that the Fund,
in accordance with its principal investment strategy, will invest approximately
50% to 75% of its net assets in Senior Loans that are eligible for inclusion in
and meet the liquidity thresholds of the Primary and/or the Secondary Indices at
the time of investment.
A Senior Loan is an advance or commitment of funds made by one or more banks or
similar financial institutions to one or more corporations, partnerships or
other business entities and typically pays interest at a floating or adjusting
rate that is determined periodically at a designated premium above a base
lending rate, most commonly the London Interbank Offered Rate ("LIBOR"). The
Fund invests primarily in Senior Loans that are below investment grade quality
at the time of investment. The Fund invests in Senior Loans made predominantly
to businesses operating in North America, but may also invest in Senior Loans
made to businesses operating outside of North America.
The Fund invests primarily in Senior Loans that are below investment grade
quality at the time of investment. Securities rated below investment grade,
commonly referred to as "junk" or "high-yield" securities, include securities
that are rated Ba1/BB+/BB+ or below by Moody's Investors Service, Inc., Fitch,
Inc., or Standard & Poor's Ratings Group, respectively. The Fund invests in
Senior Loans made predominantly to businesses operating in North America, but
may also invest in Senior Loans made to businesses operating outside of North
America. The Senior Loans included in the Fund's portfolio often maintain a
duration of less than 90 days; however, the inclusion of LIBOR floors on certain
Senior Loans or other factors may cause interest rate duration to be longer than
90 days. The Fund may also invest up to 20% of its net assets in (1) non-Senior
Loan debt securities, which may be fixed- rate or floating-rate income-producing
securities (including, without limitation, U.S. government debt securities and
corporate debt securities which may include convertible bonds), (2) warrants,
U.S. equity and equity-like positions and interests and other securities issued
by or with respect to a borrower or its affiliates, and/or (3) securities of
other investment companies.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 years Inception 5 Years Inception
Ended Ended Ended (5/1/13) Ended (5/1/13)
4/30/19 4/30/19 4/30/19 to 4/30/19 4/30/19 to 4/30/19
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 2.42% 3.90% 3.23% 3.15% 17.23% 20.45%
Market Price 2.55% 4.08% 3.29% 3.19% 17.57% 20.74%
INDEX PERFORMANCE
Markit iBoxx USD Liquid Leveraged Loan
Index 2.37% 4.15% 2.84% 2.91% 15.05% 18.78%
S&P/LSTA U.S. Leveraged Loan 100 Index 2.79% 4.76% 3.48% 3.46% 18.64% 22.64%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the period
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
INDUSTRY CLASSIFICATION SECURITIES(1)
-------------------------------------------------------
Hotels, Restaurants & Leisure 14.1%
Health Care Providers & Services 12.0
Software 11.3
Media 8.5
Pharmaceuticals 7.1
Insurance 7.1
Diversified Financial Services 5.2
Life Sciences Tools & Services 3.7
Auto Components 3.1
Food & Staples Retailing 2.9
Capital Markets 2.8
Building Products 2.7
Containers & Packaging 2.5
Diversified Telecommunication Services 2.3
Diversified Consumer Services 2.1
Health Care Technology 1.8
Electric Utilities 1.6
Commercial Services & Supplies 1.3
Technology Hardware, Storage &
Peripherals 1.1
Entertainment 1.0
Chemicals 0.9
Real Estate Management & Development 0.9
Professional Services 0.7
Food Products 0.6
Household Durables 0.5
Oil, Gas & Consumable Fuels 0.5
Health Care Equipment & Supplies 0.4
Industrial Conglomerates 0.4
Aerospace & Defense 0.4
Communications Equipment 0.3
Semiconductors & Semiconductor
Equipment 0.1
Trading Companies & Distributors 0.1
Mortgage Real Estate Investment Trust
(REITs) 0.0*
--------
Total 100.0%
========
* Amount represents less than 0.1%.
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
ASSET CLASSIFICATION SECURITIES(1)
-------------------------------------------------------
Senior Floating-Rate Loan Interests 90.3%
Corporate Bonds 6.7
Exchange-Traded Funds 2.0
Foreign Corporate Bonds 1.0
Rights 0.0*
--------
Total 100.0%
========
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1)
-------------------------------------------------------
BBB- 6.8%
BB+ 7.3
BB 6.2
BB- 17.8
B+ 25.7
B 24.6
B- 9.9
CCC+ 0.8
CCC 0.2
Not Rated 0.7
--------
Total 100.0%
========
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
TOP 10 ISSUERS SECURITIES(1)
-------------------------------------------------------
Bausch Health Cos., Inc. 3.7%
AmWINS Group, Inc. 2.8
AlixPartners, LLP 2.2
Reynolds Group Holdings, Inc. 2.2
Stars Group Holdings B.V. 2.1
Asurion, LLC 2.1
Quikrete Holdings, Inc. 2.0
First Trust Enhanced Short Maturity ETF 2.0
CHG Healthcare Services, Inc. 2.0
Duff & Phelps Corp. 1.9
--------
Total 23.0%
========
(1) Percentages are based on long-term positions. Money market funds are
excluded.
(2) The ratings are by Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO) of the
creditworthiness of an issuer with respect to debt obligations except for
those debt obligations that are privately rated. Ratings are measured on a
scale that generally ranges from AAA (highest) to D (lowest). Investment
grade is defined as those issuers that have a long-term credit rating of
BBB- or higher. The credit ratings shown relate to the credit worthiness
of the issuers of the underlying securities in the Fund, and not to the
Fund or its shares. Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 1, 2013 - APRIL 30, 2019
First Trust Senior Markit iBoxx USD Liquid S&P/LSTA U.S. Leveraged
Loan Fund Leveraged Loan Index Loan 100 Index
<S> <C> <C> <C>
5/1/13 $10,000 $10,000 $10,000
10/31/13 10,092 10,103 10,122
4/30/14 10,275 10,323 10,338
10/31/14 10,385 10,389 10,434
4/30/15 10,637 10,594 10,589
10/31/15 10,567 10,280 10,268
4/30/16 10,763 10,484 10,527
10/31/16 11,034 10,826 10,968
4/30/17 11,247 11,026 11,260
10/31/17 11,414 11,161 11,452
4/30/18 11,592 11,404 11,708
10/31/18 11,760 11,602 11,929
4/30/19 12,044 11,877 12,262
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 1, 2013 through
April 30, 2019. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/1/13 - 10/31/14 197 0 0 0 54 1 0 0
11/1/14 - 10/31/15 180 20 1 0 50 0 0 0
11/1/15 - 10/31/16 185 2 0 0 65 0 0 0
11/1/16 - 10/31/17 231 0 0 0 21 0 0 0
11/1/17 - 10/31/18 242 0 0 0 10 0 0 0
11/1/18 - 4/30/19 55 0 0 0 62 5 0 0
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
The First Trust Advisors L.P. ("First Trust") Leveraged Finance Team is
comprised of 15 experienced investment professionals specializing in below
investment grade securities. The team is comprised of portfolio management,
research, trading and operations personnel. As of April 30, 2019, the First
Trust Leveraged Finance Team managed or supervised approximately $4.10 billion
in senior secured bank loans and high-yield bonds. These assets are managed
across various strategies, including two closed-end funds, an open-end fund,
four exchange-traded funds, and a series of unit investment trusts on behalf of
retail and institutional clients.
PORTFOLIO MANAGEMENT TEAM
WILLIAM HOUSEY, CFA - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER
SCOTT D. FRIES, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Senior Loan Fund (the "Fund"), you incur two
types of costs: (1) transaction costs; and (2) ongoing costs, including
management fees, distribution and/or service fees, if any, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST SENIOR LOAN FUND (FTSL)
Actual $1,000.00 $1,024.20 0.85% $4.27
Hypothetical (5% return before expenses) $1,000.00 $1,020.58 0.85% $4.26
</TABLE>
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 88.6%
AEROSPACE & DEFENSE -- 0.3%
$ 2,959,282 Transdigm, Inc., Term Loan F, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.98% 06/09/23 $ 2,948,007
2,586,101 Transdigm, Inc., Tranche E Term Loan, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.98% 05/30/25 2,573,274
---------------
5,521,281
---------------
ALTERNATIVE CARRIERS -- 0.9%
14,998,972 Level 3 Financing, Inc., Tranche B 2024 Term Loan,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 02/22/24 15,002,722
---------------
APPLICATION SOFTWARE -- 5.3%
7,978,288 CCC Information Services, Inc., Term Loan B, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.24% 04/26/24 7,948,369
3,097,858 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.75% Floor.................................................. 5.98% 07/01/24 3,110,126
3,402,087 Infor (US), Inc. (fka Lawson Software, Inc.), Term Loan B-6,
1 Mo. LIBOR + 2.75%, 1.00% Floor............................. 5.23% 02/02/22 3,402,699
8,443,036 Informatica Corp., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 08/06/22 8,467,689
2,708,838 Kronos, Inc., Term Loan B, 3 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.74% 11/01/23 2,710,816
2,714,316 Micro Focus International (MA Financeco LLC), Miami Escrow
Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 4.98% 06/21/24 2,704,138
18,330,449 Micro Focus International (MA Financeco LLC), Seattle Spinco
Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor................ 4.98% 06/21/24 18,261,711
4,893,960 Micro Focus International (MA Financeco LLC), Term Loan B2,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 11/30/21 4,860,338
12,248,630 Mitchell International, Inc., Term Loan (First Lien),
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.73% 11/30/24 12,080,211
5,681,808 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor................ 6.37% 04/26/24 5,642,774
2,312,180 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
2019 Incremental Term Loan B, 3 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 6.78% 04/26/24 2,322,308
14,015,223 RP Crown Parent (JDA Software Group), Term Loan B,
1 Mo. LIBOR + 2.75%, 1.00% Floor............................. 5.23% 10/12/23 13,997,704
307,144 Ultimate Software Group, Inc., Term Loan B, 1 Mo. LIBOR +
3.75%, 0.00% Floor........................................... 6.27% 04/15/26 309,141
---------------
85,818,024
---------------
ASSET MANAGEMENT & CUSTODY BANKS -- 0.2%
2,471,382 Harbourvest Partners L.P., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 4.72% 03/01/25 2,471,382
---------------
AUTO PARTS & EQUIPMENT -- 2.6%
5,265,145 American Axle & Manufacturing Holdings, Inc., Term Loan B,
1 Mo. LIBOR + 2.25%, 0.75% Floor............................. 4.73% 04/06/24 5,178,481
2,671,403 American Axle & Manufacturing Holdings, Inc., Term Loan B,
3 Mo. LIBOR + 2.25%, 0.75% Floor............................. 4.84% 04/06/24 2,627,432
23,439,175 Gates Global LLC, Initial B-2 Dollar Term Loan, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.23% 03/31/24 23,463,553
2,794,557 Lumileds (Bright Bidco B.V.), Term Loan B, 1 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 5.98% 06/30/24 2,099,914
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
AUTO PARTS & EQUIPMENT (CONTINUED)
$ 5,809,962 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 6.10% 06/30/24 $ 4,365,780
4,089,600 Power Solutions (Panther BF Aggregator 2 LP), Term Loan B,
1 Mo. LIBOR + 3.50%, 0.00% Floor............................. 5.98% 04/30/26 4,102,400
224,088 Tower Automotive Holdings USA LLC, Term Loan B,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 5.25% 03/07/24 220,821
---------------
42,058,381
---------------
BROADCASTING -- 2.9%
5,378,672 Cumulus Media Holdings, Inc., Exit Term Loan, 1 Mo. LIBOR +
4.50%, 1.00% Floor........................................... 6.99% 05/15/22 5,327,575
6,177,899 E.W. Scripps Co., Incremental Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.24% 05/01/26 6,193,344
6,444,429 Gray Television, Inc., Term Loan C, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.98% 01/02/26 6,454,096
1,285,480 Nexstar Broadcasting, Inc., Mission Term Loan B-3,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.75% 01/17/24 1,277,985
7,260,717 Nexstar Broadcasting, Inc., Nexstar Term Loan B-3,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 01/17/24 7,218,387
4,349,875 Sinclair Television Group, Inc., Term Loan B-2, 1 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 4.75% 01/03/24 4,345,786
16,426,653 Tribune Media Co. (fka Tribune Co.), Extended Term Loan C,
1 Mo. LIBOR + 3.00%, 0.75% Floor............................. 5.48% 01/27/24 16,421,561
---------------
47,238,734
---------------
BUILDING PRODUCTS -- 2.5%
2,344,702 Beacon Roofing Supply, Inc., Term Loan B, 1 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 4.73% 01/02/25 2,325,851
6,295,140 Jeld-Wen, Inc., Term Loan B-4, 3 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.60% 12/07/24 6,255,795
32,679,904 Quikrete Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 11/15/23 32,510,622
---------------
41,092,268
---------------
CABLE & SATELLITE -- 2.9%
5,290,486 Cablevision (aka CSC Holdings, Inc.), March 2017 Term
Loan B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor................... 4.72% 07/17/25 5,263,293
10,465,714 Cablevision (aka CSC Holdings, Inc.), January 2018 Term
Loans B-2, 1 Mo. LIBOR + 2.50%, 0.00% Floor.................. 4.97% 01/25/26 10,443,946
11,410,403 Cablevision (aka CSC Holdings, Inc.), October 2018 Incremental
Term Loan B-3, 1 Mo. LIBOR + 2.25%, 0.00% Floor.............. 4.72% 01/15/26 11,350,498
982,575 Mediacom Broadband, Term Loan N, 1 Week LIBOR + 1.75%,
0.00% Floor.................................................. 4.18% 02/15/24 976,925
19,521,500 Virgin Media Investment Holdings Ltd., Term Loan K,
1 Mo. LIBOR + 2.50%, 0.00% Floor............................. 4.97% 01/15/26 19,567,961
---------------
47,602,623
---------------
CASINOS & GAMING -- 10.3%
10,918,315 Aristocrat Technologies, Term Loan B-3, 3 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 4.34% 10/19/24 10,891,019
24,907,332 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.23% 12/22/24 24,974,831
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
CASINOS & GAMING (CONTINUED)
$ 28,702,100 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.73% 04/18/24 $ 28,675,120
13,477,822 Golden Nugget, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.75% Floor.................................................. 5.22% - 5.23% 10/04/23 13,483,887
21,351,645 Las Vegas Sands LLC, Term Loan B, 1 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 4.23% 03/27/25 21,319,404
2,914,905 MGM Growth Properties Operating Partnership LP, Term Loan B,
1 Mo. LIBOR + 2.00%, 0.00% Floor............................. 4.48% 03/23/25 2,912,311
9,630,257 Scientific Games International, Inc., Term Loan B5,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 5.23% 08/14/24 9,600,789
33,884,382 Stars Group Holdings B.V. (Amaya), Term Loan B, 3 Mo. LIBOR
+ 3.50%, 0.00% Floor......................................... 6.10% 07/10/25 34,024,325
15,152,330 Station Casinos, Inc. (Red Rocks), Term Loan B, 1 Mo. LIBOR +
2.50%, 0.75% Floor........................................... 4.99% 06/08/23 15,159,906
6,488,296 VICI Properties (Caesars), Term Loan B, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.49% 12/20/24 6,474,800
---------------
167,516,392
---------------
COAL & CONSUMABLE FUELS -- 0.2%
3,000,000 Peabody Energy, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00%
Floor........................................................ 5.23% 03/31/25 2,985,000
---------------
COMMUNICATIONS EQUIPMENT -- 0.3%
4,510,660 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00%
Floor........................................................ 5.73% 02/15/26 4,545,888
---------------
ELECTRIC UTILITIES -- 1.6%
15,236,580 Vistra Operations Co. LLC (TEX/TXU), 2016 Incremental Term
Loan B2, 1 Mo. LIBOR + 2.25%, 0.00% Floor.................... 4.73% 12/14/23 15,263,244
10,189,708 Vistra Operations Co. LLC (TEX/TXU), 2018 Incremental Term
Loan B3, 1 Mo. LIBOR + 2.00%, 0.00% Floor.................... 4.47% - 4.48% 12/31/25 10,185,123
---------------
25,448,367
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 1.1%
8,456,783 GFL Environmental, Inc., 2018 Incremental Term Loan B,
1 Mo. LIBOR + 3.00%, 1.00% Floor............................. 5.48% 05/31/25 8,378,812
10,198,576 Packers Holdings LLC, Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.47% 12/04/24 10,071,093
---------------
18,449,905
---------------
FOOD RETAIL -- 1.4%
7,961,577 Albertson's LLC, Term Loan B5, 3 Mo. LIBOR + 3.00%,
0.75% Floor.................................................. 5.61% 12/21/22 7,967,946
14,776,549 Albertson's LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%,
0.75% Floor.................................................. 5.48% 06/22/23 14,784,233
---------------
22,752,179
---------------
HEALTH CARE EQUIPMENT -- 0.4%
5,713,490 Acelity L.P., Inc. (Kinetic Concepts), Term Loan B, 3 Mo. LIBOR
+ 3.25%, 1.00% Floor......................................... 5.85% 01/31/24 5,726,003
---------------
HEALTH CARE FACILITIES -- 0.8%
257,891 Acadia Healthcare Co., Inc., Term Loan B3, 1 Mo. LIBOR +
2.50%, 0.00% Floor........................................... 4.98% 02/11/22 257,086
5,115,297 Acadia Healthcare Co., Inc., Term Loan B4, 1 Mo. LIBOR +
2.50%, 0.00% Floor........................................... 4.98% 02/16/23 5,099,338
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE FACILITIES (CONTINUED)
$ 2,137,487 Gentiva Health Services, Inc. (Kindred at Home), Term Loan B,
1 Mo. LIBOR + 3.75%, 0.00% Floor............................. 6.25% 06/30/25 $ 2,141,505
5,251,823 Select Medical Corp., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.99% 03/06/25 5,251,823
---------------
12,749,752
---------------
HEALTH CARE SERVICES -- 7.1%
1,160,365 21st Century Oncology Holdings, Inc. (21st Century Oncology
Inc.), Tranche B Term Loan, 3 Mo. LIBOR + 6.13%,
1.00% Floor.................................................. 8.74% 01/16/23 956,140
1,595,190 Air Medical Group Holdings, Inc. (Global Medical Response),
2018 New Term Loan, 1 Mo. LIBOR + 4.25%, 1.00% Floor......... 6.73% 03/14/25 1,566,285
3,660,637 Air Medical Group Holdings, Inc. (Global Medical Response),
Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor................ 5.72% 04/28/22 3,566,522
6,999,782 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 6.10% 04/21/24 6,017,293
766,780 athenahealth, Inc., Term Loan B, 3 Mo. LIBOR + 4.50%,
0.00% Floor.................................................. 7.20% 02/15/26 770,292
3,188,719 CDRH Parent, Inc. (Healogics, Inc.), Initial Term Loan (First
Lien), 3 Mo. LIBOR + 4.25%, 1.00% Floor...................... 6.85% 07/01/21 2,698,453
31,051,578 CHG Healthcare Services, Inc., Term Loan, 1 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 5.48% 06/07/23 31,032,326
11,710,033 Dupage Medical Group (Midwest Physician), Term Loan B,
1 Mo. LIBOR + 2.75%, 0.75% Floor............................. 5.23% 08/15/24 11,461,195
22,964,012 Envision Healthcare Corp., Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 6.23% 10/10/25 22,168,080
9,008,069 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 5.74% 08/31/24 8,887,992
9,152,494 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 5.23% 02/06/24 8,569,022
13,409,761 U.S. Renal Care, Inc., Term Loan B, 3 Mo. LIBOR + 4.25%,
1.00% Floor.................................................. 6.85% 12/30/22 13,418,209
2,834,399 Verscend Technologies, Inc., Term Loan B, 1 Mo. LIBOR +
4.50%, 0.00% Floor........................................... 6.98% 08/27/25 2,848,571
571,560 Vizient, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.22% 04/30/26 573,703
---------------
114,534,083
---------------
HEALTH CARE SUPPLIES -- 0.0%
427,447 ConvaTec, Inc., Term Loan B, 3 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.85% 10/31/23 426,647
---------------
HEALTH CARE TECHNOLOGY -- 1.8%
29,055,698 Change Healthcare Holdings, Term Loan B, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.23% 03/01/24 29,040,008
---------------
HOTELS, RESORTS & CRUISE LINES -- 0.3%
3,628,969 Four Seasons, Term Loan B, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.48% 11/30/23 3,627,662
551,448 Wyndham Hotels & Resorts, Term Loan B, 1 Mo. LIBOR +
1.75%, 0.00% Floor........................................... 4.23% 03/28/25 550,670
---------------
4,178,332
---------------
HOUSEHOLD APPLIANCES -- 0.5%
9,267,017 Traeger Grills (TGP Holdings III LLC), Term Loan B,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 6.85% 09/25/24 8,548,823
---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.6%
$ 9,509,334 Alight Inc. (fka Tempo Acq.), Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 5.48% 05/01/24 $ 9,511,330
---------------
HYPERMARKETS & SUPER CENTERS -- 1.4%
22,953,695 BJ's Wholesale Club, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.47% 02/03/24 23,048,494
---------------
INDUSTRIAL CONGLOMERATES -- 0.3%
4,474,775 Accudyne Industries LLC, Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.48% 08/18/24 4,471,598
1,208,930 Gardner Denver, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 07/30/24 1,210,598
---------------
5,682,196
---------------
INDUSTRIAL GASES -- 0.2%
2,917,369 Messer Industries USA, Inc., Initial Term B-1, 3 Mo. LIBOR +
2.50%, 0.00% Floor........................................... 5.10% 09/30/25 2,908,267
---------------
INSURANCE BROKERS -- 6.6%
16,880,902 Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.24% 05/09/25 16,566,242
39,137,524 AmWINS Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.23% 01/25/24 39,088,603
56,205 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.29% 04/25/25 55,586
22,257,110 HUB International Ltd., Term Loan B, 3 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.34% 04/25/25 22,012,282
10,441,528 National Financial Partners Corp. (NFP), Term Loan B,
1 Mo. LIBOR + 3.00%, 0.00% Floor............................. 5.48% 01/06/24 10,308,398
19,430,758 USI, Inc. (fka Compass Investors, Inc.), Term Loan B,
3 Mo. LIBOR + 3.00%, 0.00% Floor............................. 5.60% 05/15/24 19,226,735
---------------
107,257,846
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 1.0%
16,273,561 Century Link (Qwest), Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 01/31/25 16,160,623
---------------
INVESTMENT BANKING & BROKERAGE -- 0.7%
10,524,827 Citadel Securities LP, Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 5.98% 02/28/26 10,577,451
---------------
LEISURE FACILITIES -- 1.0%
17,088,204 ClubCorp Club Operations, Inc., Term Loan B, 3 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.35% 09/18/24 16,529,762
---------------
LIFE SCIENCES TOOLS & SERVICES -- 3.7%
12,905,111 Ortho-Clinical Diagnostics Holdings Luxembourg, Term Loan B,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.73% 05/31/25 12,652,429
13,914,651 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.23% 09/27/24 13,627,731
19,553,212 Pharmaceutical Product Development, Inc. (PPDI),
Term Loan B, 1 Mo. LIBOR + 2.50%, 1.00% Floor................ 4.98% 08/18/22 19,416,339
13,991,375 Sotera Health Holdings LLC (Sterigenics), Term Loan B,
1 Mo. LIBOR + 3.00%, 1.00% Floor............................. 5.48% 05/15/22 13,868,951
---------------
59,565,450
---------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
MANAGED HEALTH CARE -- 2.4%
$ 30,043,286 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 5.35% 06/07/23 $ 29,729,334
8,772,970 Versant Health (Wink Holdco, Inc.), Initial Term Loan,
1 Mo. LIBOR + 3.00%, 1.00% Floor............................. 5.48% 12/02/24 8,630,409
---------------
38,359,743
---------------
METAL & GLASS CONTAINERS -- 0.3%
4,506,205 Berlin Packaging LLC, Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.49% - 5.51% 11/07/25 4,445,191
107,735 Berlin Packaging LLC, Term Loan B, 3 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.61% 11/07/25 106,277
---------------
4,551,468
---------------
MORTGAGE REITS -- 0.0%
306,240 Blackstone Mortgage Trust, Inc., Term Loan B, 1 Mo. LIBOR
+ 2.50%, 0.00% Floor......................................... 4.98% 04/30/26 306,240
---------------
MOVIES & ENTERTAINMENT -- 0.9%
8,437,000 AMC Entertainment, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.49% 04/22/26 8,458,093
6,192,212 Cineworld Group PLC (Crown), Term Loan B, 1 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 4.73% 02/05/25 6,160,631
---------------
14,618,724
---------------
OTHER DIVERSIFIED FINANCIAL SERVICES -- 5.1%
35,655,180 AlixPartners LLP, Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 04/04/24 35,666,233
31,012,494 Duff & Phelps Corp. (Deerfield Dakota), Initial Term Loan,
1 Mo. LIBOR + 3.25%, 1.00% Floor............................. 5.73% 02/13/25 30,569,325
14,961,351 Refinitiv US Holdings, Inc., Initial Dollar Term Loan,
1 Mo. LIBOR + 3.75%, 0.00% Floor............................. 6.23% 10/01/25 14,793,036
913,515 RPI Finance Trust, Term Loan B-6, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.48% 03/27/23 914,090
1,122,230 Wex, Inc., Term Loan B, 1 Mo. LIBOR + 2.25%, 0.00% Floor........ 4.73% 07/01/23 1,123,285
---------------
83,065,969
---------------
PACKAGED FOODS & MEATS -- 0.6%
3,908,406 Hostess Brands LLC, Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.73% 08/03/22 3,899,612
24,275 Hostess Brands LLC, Term Loan B, 2 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.79% 08/03/22 24,221
5,656,012 Hostess Brands LLC, Term Loan B, 3 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.83% 08/03/22 5,643,285
---------------
9,567,118
---------------
PAPER PACKAGING -- 2.1%
33,596,670 Reynolds Group Holdings, Inc., U.S. Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.23% 02/05/23 33,639,674
---------------
PHARMACEUTICALS -- 6.3%
1,128,313 Akorn, Inc., Loan, 1 Mo. LIBOR + 5.50%, 1.00% Floor............. 8.00% 04/16/21 977,402
47,937,097 Bausch Health Cos., Inc. (Valeant), Term Loan B, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.47% 06/01/25 48,126,927
23,858,295 Endo LLC, Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor......... 6.75% 04/29/24 23,560,066
6,785,633 GoodRX, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.47% 10/15/25 6,785,633
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 5,576,422 Grifols Worldwide Operations Ltd., Tranche B Term Loan,
1 Week LIBOR + 2.25%, 0.00% Floor............................ 4.67% 01/31/25 $ 5,581,999
13,049,538 Horizon Pharma, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.50% 03/29/24 13,095,734
2,361,406 Mallinckrodt International Finance S.A., 2017 Term Loan B,
3 Mo. LIBOR + 2.75%, 0.75% Floor............................. 5.35% 09/24/24 2,113,884
1,567,008 Mallinckrodt International Finance S.A., 2018 Incremental Term
Loan, 3 Mo. LIBOR + 3.00%, 0.75% Floor....................... 5.69% 02/24/25 1,418,800
---------------
101,660,445
---------------
REAL ESTATE SERVICES -- 0.2%
1,965,505 Cushman & Wakefield (DTZ U.S. Borrower LLC), Term Loan,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.73% 08/21/25 1,965,505
1,929,610 Realogy Corp., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 4.73% 02/08/25 1,881,968
---------------
3,847,473
---------------
RESEARCH & CONSULTING SERVICES -- 0.1%
1,624,405 TransUnion LLC, Term Loan B4, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.48% 06/30/25 1,623,057
---------------
RESTAURANTS -- 2.0%
21,897,394 1011778 B.C. Unlimited Liability Co. (Restaurant Brands) (aka
Burger King/Tim Horton's), Term Loan B-3, 1 Mo. LIBOR +
2.25%, 1.00% Floor........................................... 4.73% 02/15/24 21,824,476
1,897,935 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B,
1 Mo. LIBOR + 3.25%, 1.00% Floor............................. 5.72% 01/18/25 1,892,507
8,306,079 Portillo's Holdings LLC, Term B Loan (First Lien), 3 Mo. LIBOR
+ 4.50%, 1.00% Floor......................................... 7.10% 08/02/21 8,306,079
---------------
32,023,062
---------------
SECURITY & ALARM SERVICES -- 0.2%
2,738,312 Garda World Security Corp., Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 6.12% 05/26/24 2,731,466
---------------
SEMICONDUCTORS -- 0.1%
2,335,458 Western Digital Corp., US, Term Loan B-4, 1 Mo. LIBOR +
1.75%, 0.00% Floor........................................... 4.23% 04/29/23 2,311,520
---------------
SPECIALIZED CONSUMER SERVICES -- 2.0%
6,547,400 Asurion LLC (fka Asurion Corp.), Replacement B-2 Term Loan
(Second Lien), 1 Mo. LIBOR + 6.50%, 0.00% Floor.............. 8.98% 07/31/25 6,670,164
1,204,342 Asurion LLC (fka Asurion Corp.), Term Loan B4, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 08/04/22 1,208,112
16,678,698 Asurion LLC (fka Asurion Corp.), Term Loan B6, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 11/03/23 16,723,062
8,212,938 Asurion LLC (fka Asurion Corp.), Term Loan B7, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 11/03/24 8,232,320
---------------
32,833,658
---------------
SPECIALTY CHEMICALS -- 0.7%
12,017,138 H.B. Fuller Co., Term Loan B, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 4.49% 10/20/24 11,962,700
---------------
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SYSTEMS SOFTWARE -- 5.7%
$ 15,979,231 Applied Systems, Inc., Term Loan (First Lien), 1 Mo. LIBOR
+ 3.00%, 1.00% Floor......................................... 5.48% 09/13/24 $ 15,951,427
2,331,175 Applied Systems, Inc., Term Loan (Second Lien), 1 Mo. LIBOR
+ 7.00%, 1.00% Floor......................................... 9.48% 09/13/25 2,368,474
2,657,632 Avast Software B.V. (Sybil), Term Loan B, 3 Mo. LIBOR +
2.25%, 1.00% Floor........................................... 4.85% 09/30/23 2,667,598
13,558,892 Dynatrace LLC, Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 08/22/25 13,592,789
10,529,769 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor..................... 6.10% 06/13/24 10,433,211
14,751,219 Riverbed Technology, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 5.74% 04/24/22 12,997,151
8,285,973 SS&C European Holdings, S.A.R.L., Term Loan B-3,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 04/16/25 8,287,051
5,923,042 SS&C European Holdings, S.A.R.L., Term Loan B-4,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 04/16/25 5,923,812
6,295,264 SS&C European Holdings, S.A.R.L., Term Loan B-5,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 4.73% 04/16/25 6,294,509
4,997,061 SUSE (Marcel Lux IV S.A.R.L.), Facility Term Loan B1,
3 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.89% 03/15/26 4,984,569
8,884,637 Vertafore, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 06/15/25 8,802,276
---------------
92,302,867
---------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.0%
17,040,717 Dell International LLC, Term Loan B, 1 Mo. LIBOR + 2.00%,
0.75% Floor.................................................. 4.49% 09/07/23 17,040,717
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 1,437,394,114
(Cost $1,447,366,150) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 6.5%
ALTERNATIVE CARRIERS -- 0.3%
500,000 Level 3 Financing, Inc.......................................... 5.13% 05/01/23 507,010
4,669,000 Level 3 Parent LLC.............................................. 5.75% 12/01/22 4,720,032
---------------
5,227,042
---------------
APPLICATION SOFTWARE -- 0.1%
1,070,000 Infor US, Inc................................................... 6.50% 05/15/22 1,093,069
533,000 RP Crown Parent LLC (c)......................................... 7.38% 10/15/24 556,319
---------------
1,649,388
---------------
AUTO PARTS & EQUIPMENT -- 0.4%
6,939,000 American Axle & Manufacturing, Inc.............................. 6.63% 10/15/22 7,120,177
---------------
BROADCASTING -- 2.1%
7,343,000 Gray Television, Inc. (c)....................................... 5.13% 10/15/24 7,489,860
2,148,000 Gray Television, Inc. (c)....................................... 5.88% 07/15/26 2,219,163
2,125,000 Nexstar Broadcasting, Inc....................................... 5.88% 11/15/22 2,178,125
7,249,000 Nexstar Broadcasting, Inc. (c).................................. 5.63% 08/01/24 7,377,307
14,626,000 Sinclair Television Group, Inc. (c)............................. 5.63% 08/01/24 14,822,866
791,000 Sinclair Television Group, Inc. (c)............................. 5.88% 03/15/26 797,921
---------------
34,885,242
---------------
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
CABLE & SATELLITE -- 0.2%
$ 125,000 CCO Holdings LLC / CCO Holdings Capital Corp. (c)............... 5.88% 04/01/24 $ 130,901
1,724,000 CSC Holdings LLC (c)............................................ 5.13% 12/15/21 1,732,620
1,621,000 CSC Holdings LLC (c)............................................ 5.50% 05/15/26 1,668,617
---------------
3,532,138
---------------
CASINOS & GAMING -- 0.1%
949,000 Boyd Gaming Corp................................................ 6.88% 05/15/23 986,960
1,350,000 Eldorado Resorts, Inc........................................... 7.00% 08/01/23 1,414,125
---------------
2,401,085
---------------
COAL & CONSUMABLE FUELS -- 0.3%
4,900,000 Peabody Energy Corp. (c)........................................ 6.00% 03/31/22 4,991,875
---------------
DIVERSIFIED REAL ESTATE ACTIVITIES -- 0.1%
250,000 KB Home......................................................... 7.00% 12/15/21 268,438
626,000 PulteGroup, Inc................................................. 5.50% 03/01/26 662,778
---------------
931,216
---------------
HEALTH CARE EQUIPMENT -- 0.1%
926,000 Kinetic Concepts, Inc. / KCI USA, Inc. (c)...................... 7.88% 02/15/21 946,604
---------------
HEALTH CARE FACILITIES -- 0.8%
3,478,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 3,530,170
170,000 Tenet Healthcare Corp........................................... 6.00% 10/01/20 176,375
8,080,000 Tenet Healthcare Corp........................................... 8.13% 04/01/22 8,651,337
---------------
12,357,882
---------------
HEALTH CARE SERVICES -- 0.1%
1,608,000 DaVita, Inc..................................................... 5.13% 07/15/24 1,612,020
---------------
INSURANCE BROKERS -- 0.3%
4,717,000 AmWINS Group, Inc. (c).......................................... 7.75% 07/01/26 4,775,963
893,000 HUB International Ltd. (c)...................................... 7.00% 05/01/26 903,046
---------------
5,679,009
---------------
MANAGED HEALTH CARE -- 0.7%
10,000,000 MPH Acquisition Holdings LLC (c)................................ 7.13% 06/01/24 10,077,000
976,000 Polaris Intermediate Corp. (c) (d).............................. 8.50% 12/01/22 974,780
---------------
11,051,780
---------------
MOVIES & ENTERTAINMENT -- 0.1%
1,497,000 AMC Entertainment Holdings, Inc................................. 5.75% 06/15/25 1,448,497
---------------
PAPER PACKAGING -- 0.1%
1,000,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu (c)................................. 7.00% 07/15/24 1,035,625
---------------
REAL ESTATE SERVICES -- 0.6%
9,853,000 Realogy Group LLC / Realogy Co-Issuer Corp. (c)................. 4.88% 06/01/23 9,443,706
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.1%
250,000 United Rentals North America, Inc............................... 5.88% 09/15/26 262,188
1,099,000 United Rentals North America, Inc............................... 6.50% 12/15/26 1,178,677
---------------
1,440,865
---------------
TOTAL CORPORATE BONDS........................................................................ 105,754,151
(Cost $104,526,457) ---------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 2.0%
CAPITAL MARKETS -- 2.0%
533,500 First Trust Enhanced Short Maturity ETF (e).................................................. $ 32,010,000
---------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 32,010,000
(Cost $31,993,995) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS -- 1.0%
BUILDING PRODUCTS -- 0.1%
$ 1,700,000 Masonite International Corp. (c)................................ 5.63% 03/15/23 1,744,625
---------------
CABLE & SATELLITE -- 0.1%
1,500,000 Virgin Media Secured Finance PLC (c)............................ 5.50% 08/15/26 1,541,295
---------------
DIVERSIFIED REAL ESTATE ACTIVITIES -- 0.0%
250,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (c)........................................ 5.88% 04/15/23 258,458
---------------
PHARMACEUTICALS -- 0.7%
11,001,000 Bausch Health Cos., Inc. (c).................................... 5.88% 05/15/23 11,126,961
250,000 Mallinckrodt International Finance SA / Mallinckrodt
CB LLC (c)................................................... 5.63% 10/15/23 196,250
---------------
11,323,211
---------------
RESTAURANTS -- 0.1%
1,000,000 1011778 BC ULC / New Red Finance, Inc. (c)...................... 5.00% 10/15/25 995,000
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 15,862,589
(Cost $15,670,601) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
4,887 Vistra Energy Corp. (f)...................................................................... 3,758
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.0%
1 New Millennium Holdco, Inc., Corporate Claim Trust (f) (g) (h) (i)........................... 0
1 New Millennium Holdco, Inc., Corporate Claim Trust (f) (g) (h) (i)........................... 0
---------------
0
---------------
TOTAL RIGHTS................................................................................. 3,758
(Cost $8,491) ---------------
MONEY MARKET FUNDS -- 3.7%
60,790,112 Morgan Stanley Institutional Liquidity Funds - Treasury
Portfolio - Institutional Class - 2.32% (j)............................................... 60,790,112
(Cost $60,790,112) ---------------
TOTAL INVESTMENTS -- 101.8%.................................................................. 1,651,814,724
(Cost $1,660,355,806) (k)
NET OTHER ASSETS AND LIABILITIES -- (1.8)%................................................... (29,651,767)
---------------
NET ASSETS -- 100.0%......................................................................... $ 1,622,162,957
===============
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
-----------------------------
(a) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund
invests generally pay interest at rates which are periodically
predetermined by reference to a base lending rate plus a premium. These
base lending rates are generally (i) the lending rate offered by one or
more major European banks, such as the LIBOR, (ii) the prime rate offered
by one or more United States banks or (iii) the certificate of deposit
rate. Certain Senior Loans are subject to a LIBOR floor that establishes a
minimum LIBOR rate. When a range of rates is disclosed, the Fund holds
more than one contract within the same tranche with identical LIBOR
period, spread and floor, but different LIBOR reset dates.
(b) Senior Loans generally are subject to mandatory and/or optional
prepayment. As a result, the actual remaining maturity of Senior Loans may
be substantially less than the stated maturities shown.
(c) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P., (the
"Advisor"). Although market instability can result in periods of increased
overall market illiquidity, liquidity for each security is determined
based on security specific factors and assumptions, which require
subjective judgment. At April 30, 2019, securities noted as such amounted
to $85,806,762 or 5.3% of net assets.
(d) Senior Payment-in-kind ("PIK") Toggle Note. The issuer may, at its option,
elect to pay interest on the notes (1) entirely in cash or (2) entirely in
PIK interest. Interest paid in cash will accrue at the rate of 8.50% per
annum ("Cash Interest Rate") and PIK interest will accrue on the notes at
a rate per annum equal to the Cash Interest Rate plus 75 basis points. For
the six months ended April 30, 2019, this security paid all of its
interest in cash.
(e) Investment in an affiliated fund.
(f) Non-income producing security.
(g) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Trust's Board of Trustees, and
in accordance with provisions of the Investment Company Act of 1940, as
amended. At April 30, 2019, securities noted as such are valued at $0 or
0.0% of net assets.
(h) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(i) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(j) Rate shown reflects yield as of April 30, 2019.
(k) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $4,870,857 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $13,411,939. The net unrealized depreciation
was $8,541,082.
LIBOR - London Interbank Offered Rate
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Senior Floating-Rate Loan Interests*.............. $1,437,394,114 $ -- $1,437,394,114 $ --
Corporate Bonds*.................................. 105,754,151 -- 105,754,151 --
Exchange-Traded Funds*............................ 32,010,000 32,010,000 -- --
Foreign Corporate Bonds*.......................... 15,862,589 -- 15,862,589 --
Rights
Electric Utilities............................. 3,758 -- 3,758 --
Life Science Tools & Services.................. --** -- -- --**
Money Market Funds................................ 60,790,112 60,790,112 -- --
-------------- -------------- -------------- --------------
Total Investments................................. $1,651,814,724 $ 92,800,112 $1,559,014,612 $ --**
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
** Investment is valued at $0.
Level 3 Rights are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments. These values are based on
unobservable and non-quantitative inputs.
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated..................................... $1,619,804,724
Investments, at value - Affiliated....................................... 32,010,000
--------------
Total investments, at value.............................................. 1,651,814,724
Cash..................................................................... 301,934
Receivables:
Investment securities sold............................................ 27,008,200
Capital shares sold................................................... 7,177,926
Interest.............................................................. 3,791,924
Dividends............................................................. 167,842
--------------
Total Assets....................................................... 1,690,262,550
--------------
LIABILITIES:
Payables:
Investment securities purchased....................................... 66,922,649
Investment advisory fees.............................................. 1,118,973
Other liabilities........................................................ 57,971
--------------
Total Liabilities.................................................. 68,099,593
--------------
NET ASSETS............................................................... $1,622,162,957
==============
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $1,657,023,086
Par value................................................................ 339,500
Accumulated distributable earnings (loss)................................ (35,199,629)
--------------
NET ASSETS............................................................... $1,622,162,957
==============
NET ASSET VALUE, per share............................................... $ 47.78
==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................ 33,950,002
==============
Investments, at cost - Unaffiliated...................................... $1,628,361,811
==============
Investments, at cost - Affiliated........................................ $ 31,993,995
==============
Total investments, at cost............................................... $1,660,355,806
==============
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest................................................................. $ 44,030,536
Dividends - Unaffiliated................................................. 707,405
Dividends - Affiliated................................................... 283,192
--------------
Total investment income............................................... 45,021,133
--------------
EXPENSES:
Investment advisory fees................................................. 7,068,772
--------------
Total expenses........................................................ 7,068,772
--------------
NET INVESTMENT INCOME (LOSS)............................................. 37,952,361
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................ (10,412,281)
Investments - Affiliated.............................................. (246,494)
--------------
Net realized gain (loss)................................................. (10,658,775)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................ 3,236,285
Investments - Affiliated.............................................. 153,505
--------------
Net change in unrealized appreciation (depreciation)..................... 3,389,790
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. (7,268,985)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 30,683,376
==============
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
4/30/2019 YEAR ENDED
(UNAUDITED) 10/31/2018
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 37,952,361 $ 60,462,917
Net realized gain (loss).................................................. (10,658,775) (7,452,518)
Net change in unrealized appreciation (depreciation)...................... 3,389,790 (7,589,605)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 30,683,376 45,420,794
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (38,716,877) (62,145,936)
Return of capital......................................................... -- (939,193)
-------------- --------------
Total distributions to shareholders....................................... (38,716,877) (63,085,129)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 115,066,591 559,969,294
Cost of shares redeemed................................................... (368,773,609) --
-------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... (253,707,018) 559,969,294
-------------- --------------
Total increase (decrease) in net assets................................... (261,740,519) 542,304,959
NET ASSETS:
Beginning of period....................................................... 1,883,903,476 1,341,598,517
-------------- --------------
End of period............................................................. $1,622,162,957 $1,883,903,476
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 39,450,002 27,800,002
Shares sold............................................................... 2,400,000 11,650,000
Shares redeemed........................................................... (7,900,000) --
-------------- --------------
Shares outstanding, end of period......................................... 33,950,002 39,450,002
============== ==============
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2019 ------------------------------------------------------------------------
(UNAUDITED) 2018 2017 2016 2015 2014
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 47.75 $ 48.26 $ 48.32 $ 48.07 $ 49.09 $ 49.45
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 1.08 1.87 1.68 1.80 1.90 1.77
Net realized and unrealized gain (loss).. 0.05 (0.43) (0.04) 0.27 (1.03) (0.36)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... 1.13 1.44 1.64 2.07 0.87 1.41
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (1.10) (1.92) (1.70) (1.82) (1.89) (1.77)
Return of capital........................ -- (0.03) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions...................... (1.10) (1.95) (1.70) (1.82) (1.89) (1.77)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period........... $ 47.78 $ 47.75 $ 48.26 $ 48.32 $ 48.07 $ 49.09
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a)......................... 2.42% 3.03% 3.43% 4.43% 1.75% 2.91%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $1,622,163 $1,883,903 $1,341,599 $ 594,277 $ 362,899 $ 196,342
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets (b)........................ 0.85% (c) 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income (loss) to
average net assets.................... 4.56% (c) 3.94% 3.53% 3.84% 3.97% 3.61%
Portfolio turnover rate (d).............. 22% 88% 110% 67% 71% 97%
</TABLE>
(a) 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.
(b) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(c) Annualized.
(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.
Page 22 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Senior Loan Fund (the "Fund"), which trades under the
ticker "FTSL" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional
mutual funds, the Fund issues and redeems shares on a continuous basis, at net
asset value ("NAV"), only in large specified blocks consisting of 50,000 shares
called a "Creation Unit." Creation Units are generally issued and redeemed for
cash and, in certain circumstances, in-kind for securities in which the Fund
invests. Except when aggregated in Creation Units, the shares are not redeemable
securities of the Fund.
The Fund's primary investment objective is to provide high current income. The
Fund's secondary investment objective is the preservation of capital. Under
normal market conditions, the Fund seeks to outperform each of the S&P/LSTA U.S.
Leveraged Loan 100 Index and the Markit iBoxx USD Liquid Leveraged Loan Index by
investing at least 80% of its net assets (including investment borrowings) in
first lien senior floating rate bank loans ("Senior Loans")(1). The S&P/LSTA
U.S. Leveraged Loan 100 Index (the "Primary Index") is a market value-weighted
index designed to measure the performance of the largest segment of the U.S.
syndicated leveraged loan market. The Primary Index consists of 100 loan
facilities drawn from a larger benchmark, the S&P/LSTA Leveraged Loan Index. The
Markit iBoxx USD Liquid Leveraged Loan Index (the "Secondary Index") selects the
100 most liquid Senior Loans in the market. The Fund does not seek to track
either the Primary or Secondary Index, but rather seeks to outperform each of
the Indices. It is anticipated that the Fund, in accordance with its principal
investment strategy, will invest approximately 50% to 75% of its net assets in
Senior Loans that are eligible for inclusion in and meet the liquidity
thresholds of the Primary and/or the Secondary Indices at the time of
investment.
A Senior Loan is an advance or commitment of funds made by one or more banks or
similar financial institutions to one or more corporations, partnerships or
other business entities and typically pays interest at a floating or adjusting
rate that is determined periodically at a designated premium above a base
lending rate, most commonly the London Interbank Offered Rate. The Fund invests
primarily in Senior Loans that are below investment grade quality at the time of
investment. The Fund invests in Senior Loans made predominantly to businesses
operating in North America, but may also invest in Senior Loans made to
businesses operating outside of North America.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent 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
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 23
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Senior Loans in which the Fund invests are not listed on any securities
exchange or board of trade. Senior Loans are typically bought and sold by
institutional investors in individually negotiated private transactions
that function in many respects like an over-the-counter secondary market,
although typically no formal market-makers exist. This market, while
having grown substantially since its inception, generally has fewer trades
and less liquidity than the secondary market for other types of
securities. Some Senior Loans have few or no trades, or trade
infrequently, and information regarding a specific Senior Loan may not be
widely available or may be incomplete. Accordingly, determinations of the
market value of Senior Loans may be based on infrequent and dated
information. Because there is less reliable, objective data available,
elements of judgment may play a greater role in valuation of Senior Loans
than for other types of securities. Typically, Senior Loans are valued
using information provided by a third-party pricing service. The
third-party pricing service primarily uses over-the-counter pricing from
dealer runs and broker quotes from indicative sheets to value the Senior
Loans.
Corporate bonds, corporate notes and other debt securities are fair valued
on the basis of valuations provided by dealers who make markets in such
securities or by a third-party pricing service approved by the Trust's
Board of Trustees, 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.
Exchange-traded funds and other equity securities listed on any national
or foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
Page 24
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
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 fundamental business data relating to the borrower/issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the borrower/issuer;
5) the credit quality and cash flow of the borrower/issuer, based on
the Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the borrower/issuer, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the borrower/issuer, including any ability
to obtain money or resources from a parent or affiliate and an
assessment of the borrower's/issuer's management;
11) the prospects for the borrower's/issuer's industry, and multiples
(of earnings and/or cash flows) being paid for similar businesses in
that industry;
12) borrower's/issuer's competitive position within the industry;
13) borrower's/issuer's ability to access additional liquidity through
public and/or private markets; and
14) 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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, 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-date. Interest income is recorded daily on
the accrual basis. Amortization of premiums and accretion of discounts are
recorded using the effective interest method over the expected life of each
respective borrowing for loans and bonds.
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. Due
to the nature of the Senior Loan market, the actual settlement date may not be
Page 25
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
certain at the time of the purchase or sale for some of the Senior Loans.
Interest income on such Senior Loans is not accrued until settlement date. 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. The Fund
had no when-issued, delayed-delivery, or forward purchase commitments as of
April 30, 2019.
C. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrower's discretion. The Fund had no unfunded loan commitments as of April 30,
2019.
D. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. Dividend income and realized
gains and losses, and change in appreciation (depreciation) from affiliated
funds are presented on the Statement of Operations. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Amounts related to these investments at April 30, 2019, and for the six month
period then ended are as follows:
<TABLE>
<CAPTION>
CHANGES IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 4/30/2019 10/31/2018 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2019 INCOME
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust Enhanced
Short Maturity ETF 533,500 $74,975,000 $31,993,995 $(74,866,006) $ 153,505 $ (246,494) $32,010,000 $283,192
===============================================================================================
</TABLE>
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 62,145,936
Capital gains................................... --
Return of capital............................... 939,193
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (14,084,236)
Net unrealized appreciation (depreciation)...... (13,081,892)
Page 26
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
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, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, 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. As of October 31, 2018, the
Fund had $14,084,236 of non-expiring capital loss carryforwards that may be
carried forward indefinitely.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
net ordinary losses.
G. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
H. NEW ACCOUNTING PRONOUNCEMENTS
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities", which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the paramount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. The ASU 2017-08 is effective for
public business entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Earlier application is
permitted for all entities, including adoption in an interim period. If an
entity early adopts the ASU in an interim period, any adjustments must be
reflected as of the beginning of the fiscal year that includes that interim
period. Management is still assessing the impact of the adoption of ASU 2017-08
on the financial statements but does not expect it to have a material impact.
On August 28, 2018, the FASB issued ASU 2018-13, "Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement," which amends the
fair value measurement disclosure requirements of ASC 820. The amendments of ASU
2018-13 include new, eliminated, and modified disclosure requirements of ASC
820. In addition, the amendments clarify that materiality is an appropriate
consideration of entities when evaluating disclosure requirements. The ASU is
effective for fiscal years beginning after December 15, 2019, including interim
periods therein. Early adoption is permitted for any eliminated or modified
disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13
for these financial statements, which did not result in a material impact.
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
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, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), 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. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.85% of its average daily net assets. In addition, the
Fund incurs acquired fund fees and expenses. The total of the unitary management
fee and acquired fund fees and expenses represents the Fund's total annual
operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and the Valuation Committee are
paid annual fees to serve in such capacities, with such compensation allocated
pro rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 2019, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $355,353,841 and $631,768,955, respectively.
For the six months ended April 30 2019, there were no in-kind transactions.
5. BORROWINGS
The Trust, on behalf of the Fund, along with First Trust Exchange-Traded Fund
III and First Trust Series Fund have a $385 million Credit Agreement with The
Bank of Nova Scotia ("Scotia") as administrative agent for a group of lenders.
Prior to March 6, 2019, the commitment amount was $360 million. Scotia charges a
commitment fee of 0.25% of the daily amount of the excess of the commitment
amount over the outstanding principal balance of the loans and an agency fee.
First Trust allocates the commitment fee and agency fee amongst the funds that
have access to the credit line. To the extent that the Fund accesses the credit
line, there would also be an interest fee charged. The Fund did not have any
borrowings outstanding during the six months ended April 30, 2019.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Due to the nature of the Fund's investments, the
Fund's Creation Units are generally issued and redeemed for cash, although
Creation Units may be issued in-kind for securities in which the Fund invests in
limited circumstances. Authorized Participants purchasing Creation Units must
pay to BNYM, as transfer agent, a creation transaction fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in the Fund's portfolio and/or the
countries in which the transactions are settled. The Creation Transaction Fee is
currently $500. The price for each Creation Unit will equal the daily NAV per
share 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 or stamp taxes. When Creation Units are issued for cash, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing portfolio securities, including 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 such securities. Authorized
Participants redeeming Creation Units must pay to BNYM, as transfer agent, a
standard redemption transaction fee (the "Redemption Transaction Fee"),
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and/or the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $500. When
shares are redeemed for cash, the Authorized Participant may also be assessed an
amount to cover other costs, including 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 portfolio securities sold
in connection with the redemption.
7. 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 March 31, 2020.
8. 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.
9. 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.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2019 (UNAUDITED)
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
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[BLANK BACK COVER]
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FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Tactical High
Yield ETF (HYLS)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
<PAGE>
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TABLE OF CONTENTS
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 20
Statement of Operations...................................................... 21
Statements of Changes in Net Assets.......................................... 22
Statement of Cash Flows...................................................... 23
Financial Highlights......................................................... 24
Notes to Financial Statements................................................ 25
Additional Information....................................................... 32
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Tactical High Yield ETF; hereinafter referred to as the
"Fund") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com. or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS) SEMI-ANNUAL
LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Tactical High Yield ETF (the "Fund"), which contains detailed information
about the Fund for the six months ended April 30, 2019. We encourage you to read
this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
The primary investment objective of the First Trust Tactical High Yield ETF (the
"Fund") is to provide current income. The Fund's secondary investment objective
is to provide capital appreciation. Under normal market conditions, the Fund
invests at least 80% of its net assets (including investment borrowings) in high
yield debt securities that are rated below investment grade at the time of
purchase or unrated securities deemed by the Fund's advisor to be of comparable
quality. Below investment grade securities are those that, at the time of
purchase, are rated lower than "BBB-" by Standard & Poor's Ratings Group, a
division of the McGraw Hill Companies, Inc., or lower than "Baa3" by Moody's
Investors Service, Inc., or comparably rated by another nationally recognized
statistical rating organization. High yield debt securities that are rated below
investment grade are commonly referred to as "junk" debt. Such securities may
include U.S. and non-U.S. corporate debt obligations, bank loans and convertible
bonds. For purposes of determining whether a security is below investment grade,
the lowest available rating will be considered. The Fund may invest up to 10% of
its net assets (including investment borrowings) in non-U.S. securities
denominated in non-U.S. currencies. The Fund may invest in non-income producing
securities including Distressed Securities (defined below) and common stocks.
Companies whose financial condition is troubled or uncertain and that may be
involved in bankruptcy proceedings, reorganizations or financial restructurings
are referred to herein as "Distressed Securities." The Fund invests no more than
15% of its net assets in Distressed Securities, as determined at the time of the
investment. The Fund may also invest in investment grade corporate debt
obligations and government securities to manage overall credit and duration
risk. The Fund does not have any portfolio maturity limitation and may invest
its assets in securities with short-term, medium-term or long-term maturities.
The Fund may, under normal market conditions, invest up to 40% of its net assets
(including investment borrowings) in bank loans; however the Fund invests no
more than 15% of its net assets (including investment borrowings) in junior
loans, and all other bank loans in which the Fund invests are first lien senior
secured floating rate bank loans. The Fund may, under normal market conditions,
invest up to 30% of its net assets (including investment borrowings) in U.S.
exchange-traded options on futures contracts and U.S. exchange-traded futures
contracts. There can be no assurance that the Fund's investment objective will
be achieved. The Fund may not be appropriate for all investors.
<TABLE>
<CAPTION>
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PERFORMANCE
------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (2/25/13) Ended (2/25/13)
4/30/19 4/30/19 4/30/19 to 4/30/19 4/30/19 to 4/30/19
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 5.42% 7.08% 4.10% 5.17% 22.23% 36.50%
Market Price 5.56% 7.20% 4.10% 5.17% 22.24% 36.52%
INDEX PERFORMANCE
ICE BofAML US High Yield
Constrained Index 5.55% 6.71% 4.85% 5.46% 26.73% 38.84%
------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Annual
Total Returns" represent the total change in value of an investment over the
periods indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of the shares of
the Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
-----------------------------------------------------------
% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
Health Care Providers & Services 15.4%
Hotels, Restaurants & Leisure 13.5
Media 12.9
Software 7.6
Pharmaceuticals 6.1
Insurance 5.3
Real Estate Management &
Development 3.9
Diversified Financial Services 3.5
Building Products 3.2
Auto Components 2.8
Diversified Telecommunication
Services 2.7
Oil, Gas & Consumable Fuels 2.0
Containers & Packaging 1.9
Food & Staples Retailing 1.9
Technology Hardware, Storage &
Peripherals 1.9
Life Sciences Tools & Services 1.8
Diversified Consumer Services 1.8
Food Products 1.8
Trading Companies & Distributors 1.2
Capital Markets 1.1
Health Care Technology 1.1
Entertainment 1.0
Wireless Telecommunication Services 0.9
Metals & Mining 0.7
Commercial Services & Supplies 0.7
Household Durables 0.6
Professional Services 0.5
Equity Real Estate Investment Trusts
(REITs) 0.4
Health Care Equipment & Supplies 0.4
Speciality Retail 0.3
Consumer Finance 0.3
Electric Utilities 0.2
Industrial Conglomerates 0.2
Aerospace & Defense 0.2
Communications Equipment 0.1
IT Services 0.1
Independent Power and Renewable
Electricity Producers 0.0*
Chemicals 0.0*
--------
Total 100.0%
========
* Amount is less than 0.1%.
-----------------------------------------------------------
% OF TOTAL LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
Corporate Bonds 55.1%
Senior Floating-Rate Loan Interests 37.1
Foreign Corporate Bonds 7.8
Rights 0.0*
--------
Total 100.0%
========
-----------------------------------------------------------
% OF SENIOR LOANS AND
CREDIT QUALITY (S&P RATINGS)(2) OTHER DEBT SECURITIES(1)
-----------------------------------------------------------
BBB- 3.6%
BB+ 3.8
BB 9.3
BB- 15.5
B+ 20.7
B 20.7
B- 19.7
CCC+ 5.0
CCC 1.1
CCC- 0.1
Not Rated 0.5
--------
Total 100.0%
========
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP 10 ISSUERS INVESTMENTS(1)
-----------------------------------------------------------
Bausch Health Cos., Inc. 3.5%
Sinclair Television Group, Inc. 2.7
Polaris Merger Sub. Corp. (Multiplan, Inc.) 2.7
Cablevision (aka CSC Holdings, Inc.) 2.6
Gray Television, Inc. 2.4
AmWINS Group, Inc. 2.4
Tenet Healthcare Corp. 2.2
Stars Group Holdings B.V. (Amaya) 2.1
Six Flags Theme Parks, Inc. 1.9
Diamond 1/2 Finance Corp. (Dell) 1.9
--------
Total 24.4%
========
(1) Percentages are based on the long positions only. Money market funds and
short positions are excluded.
(2) The ratings are by Standard & Poor's Rating Group, a division of the
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO) of the
creditworthiness of an issuer with respect to debt obligations except for
those debt obligations that are only privately rated. Ratings are measured
on a scale that generally ranges from AAA (highest) to D (lowest).
Investment grade is defined as those issuers that have a long-term credit
rating of BBB- or higher. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 25, 2013 - APRIL 30, 2018
First Trust Tactical ICE BofAML US High
High Yield ETF Yield Constrained Index
<S> <C> <C>
2/25/13 $10,000 $10,000
4/30/13 10,403 10,308
10/31/13 10,676 10,458
4/30/14 11,167 10,956
10/31/14 11,285 11,070
4/30/15 11,493 11,238
10/31/15 11,376 10,845
4/30/16 11,519 11,089
10/31/16 11,933 11,950
4/30/17 12,431 12,602
10/31/17 12,744 13,042
4/30/18 12,748 13,012
10/31/18 12,948 13,155
4/30/19 13,650 13,884
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 1, 2013 through
April 30, 2019. Shareholders may pay more than NAV when they buy Fund shares and
receive less than NAV when they sell those shares because shares are bought and
sold at current market price. Data presented represents past performance and
cannot be used to predict future results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/1/13 - 10/31/14 158 29 0 0 63 2 0 0
11/1/14 - 10/31/15 177 8 2 0 60 4 0 0
11/1/15 - 10/31/16 201 7 0 0 42 2 0 0
11/1/16 - 10/31/17 197 1 0 0 53 1 0 0
11/1/17 - 10/31/18 133 1 0 0 118 0 0 0
11/1/18 - 4/30/19 56 0 0 0 62 4 0 0
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") Leveraged Finance Team is comprised of
15 experienced investment professionals specializing in below investment grade
securities. The team is comprised of portfolio management, research, trading and
operations personnel. As of April 30, 2019, the First Trust Leveraged Finance
Team managed or supervised approximately $4.10 billion in senior secured bank
loans and high-yield bonds. These assets are spread across various strategies,
including two closed-end funds, an open-end fund, four exchange-traded funds,
and a series of unit investment trusts on behalf of retail and institutional
clients.
PORTFOLIO MANAGEMENT TEAM
WILLIAM HOUSEY, CFA - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER
SCOTT D. FRIES, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER
ORLANDO PURPURA, CFA, CMT - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Tactical High Yield ETF (the "Fund"), you incur
two types of costs: (1) transaction costs; and (2) ongoing costs, including
management fees, distribution and/or service fees, if any, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO
BEGINNING ENDING BASED ON THE EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD SIX-MONTH PERIOD (a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
Actual $1,000.00 $1,054.20 1.38% $7.03
Hypothetical (5% return before expenses) $1,000.00 $1,017.95 1.38% $6.90
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 61.8%
ALTERNATIVE CARRIERS -- 0.9%
$ 500,000 Level 3 Financing, Inc.......................................... 5.38% 08/15/22 $ 503,125
500,000 Level 3 Financing, Inc.......................................... 5.13% 05/01/23 507,010
2,000,000 Level 3 Financing, Inc.......................................... 5.38% 01/15/24 2,030,000
7,437,000 Level 3 Parent LLC (a).......................................... 5.75% 12/01/22 7,518,286
---------------
10,558,421
---------------
APPLICATION SOFTWARE -- 1.1%
9,320,000 Infor US, Inc. (a).............................................. 6.50% 05/15/22 9,520,939
3,822,000 RP Crown Parent LLC (b)......................................... 7.38% 10/15/24 3,989,213
---------------
13,510,152
---------------
AUTO PARTS & EQUIPMENT -- 1.6%
7,061,000 American Axle & Manufacturing, Inc. (a)......................... 6.63% 10/15/22 7,245,363
5,000,000 American Axle & Manufacturing, Inc.............................. 6.25% 04/01/25 5,044,300
7,514,000 Cooper-Standard Automotive, Inc. (b)............................ 5.63% 11/15/26 6,951,201
---------------
19,240,864
---------------
AUTOMOTIVE RETAIL -- 0.3%
3,819,000 KAR Auction Services, Inc. (b).................................. 5.13% 06/01/25 3,838,095
---------------
BROADCASTING -- 7.5%
26,086,000 Gray Television, Inc. (a) (b)................................... 5.88% 07/15/26 26,950,229
4,000,000 Gray Television, Inc. (b)....................................... 7.00% 05/15/27 4,328,750
4,200,000 Nexstar Broadcasting, Inc. (b).................................. 6.13% 02/15/22 4,268,250
1,375,000 Nexstar Broadcasting, Inc....................................... 5.88% 11/15/22 1,409,375
16,392,000 Nexstar Broadcasting, Inc. (a) (b).............................. 5.63% 08/01/24 16,682,138
495,000 Sinclair Television Group, Inc.................................. 5.38% 04/01/21 496,238
19,421,000 Sinclair Television Group, Inc. (a) (b)......................... 5.63% 08/01/24 19,682,406
10,599,000 Sinclair Television Group, Inc. (a) (b)......................... 5.88% 03/15/26 10,691,741
5,394,000 Sinclair Television Group, Inc. (b)............................. 5.13% 02/15/27 5,205,210
---------------
89,714,337
---------------
BUILDING PRODUCTS -- 1.5%
3,789,000 CEMEX Finance LLC (b)........................................... 6.00% 04/01/24 3,913,658
235,000 Jeld-Wen, Inc. (b).............................................. 4.63% 12/15/25 224,425
2,085,000 Jeld-Wen, Inc. (b).............................................. 4.88% 12/15/27 1,996,388
6,785,000 Lennar Corp. (a)................................................ 5.25% 06/01/26 7,064,881
2,500,000 Standard Industries, Inc. (b)................................... 5.50% 02/15/23 2,543,749
417,000 Standard Industries, Inc. (b)................................... 5.38% 11/15/24 426,383
295,000 Standard Industries, Inc. (b)................................... 6.00% 10/15/25 309,443
892,000 Standard Industries, Inc. (b)................................... 5.00% 02/15/27 878,620
---------------
17,357,547
---------------
CABLE & SATELLITE -- 4.2%
2,133,000 Cablevision Systems Corp........................................ 8.00% 04/15/20 2,227,449
10,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.75% 01/15/24 10,275,000
2,175,000 CCO Holdings LLC / CCO Holdings Capital Corp. (b)............... 5.88% 04/01/24 2,277,682
5,076,000 CCO Holdings LLC / CCO Holdings Capital Corp. (b)............... 5.75% 02/15/26 5,314,571
1,500,000 CCO Holdings LLC / CCO Holdings Capital Corp. (b)............... 5.50% 05/01/26 1,551,750
2,828,000 CCO Holdings LLC / CCO Holdings Capital Corp. (b)............... 5.13% 05/01/27 2,877,490
12,107,000 CSC Holdings LLC (a) (b)........................................ 7.75% 07/15/25 13,041,508
9,183,000 CSC Holdings LLC (a) (b)........................................ 5.50% 05/15/26 9,452,751
819,000 CSC Holdings LLC (b)............................................ 5.50% 04/15/27 845,724
1,800,000 CSC Holdings LLC (b)............................................ 5.38% 02/01/28 1,833,750
800,000 CSC Holdings LLC (b)............................................ 7.50% 04/01/28 877,000
26,000 Mediacom Broadband LLC / Mediacom Broadband Corp................ 5.50% 04/15/21 26,098
---------------
50,600,773
---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
CASINOS & GAMING -- 6.4%
$ 2,100,000 Boyd Gaming Corp................................................ 6.38% 04/01/26 $ 2,218,125
22,270,000 Caesars Resort Collection LLC / CRC Finco, Inc. (a) (b)......... 5.25% 10/15/25 21,824,600
3,863,000 Eldorado Resorts, Inc........................................... 6.00% 04/01/25 4,008,007
426,000 Eldorado Resorts, Inc........................................... 6.00% 09/15/26 444,105
3,000,000 Golden Nugget, Inc. (b)......................................... 6.75% 10/15/24 3,075,000
1,500,000 MGM Growth Properties Operating Partnership LP / MGP
Finance Co. Issuer, Inc. (b)................................. 5.75% 02/01/27 1,580,625
8,600,000 MGM Resorts International (a)................................... 7.75% 03/15/22 9,535,250
5,100,000 MGM Resorts International (a)................................... 6.00% 03/15/23 5,457,000
5,950,000 MGM Resorts International....................................... 5.75% 06/15/25 6,321,875
1,000,000 MGM Resorts International....................................... 5.50% 04/15/27 1,033,750
4,439,000 Penn National Gaming, Inc. (b).................................. 5.63% 01/15/27 4,394,610
10,045,000 Station Casinos LLC (a) (b)..................................... 5.00% 10/01/25 9,894,325
4,500,000 Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. (b)........... 5.50% 03/01/25 4,567,500
2,410,000 Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. (b)........... 5.25% 05/15/27 2,355,775
---------------
76,710,547
---------------
COAL & CONSUMABLE FUELS -- 0.1%
483,000 Peabody Energy Corp. (b)........................................ 6.00% 03/31/22 492,056
967,000 Peabody Energy Corp. (b)........................................ 6.38% 03/31/25 962,165
---------------
1,454,221
---------------
CONSUMER FINANCE -- 0.3%
3,406,000 FirstCash, Inc. (b)............................................. 5.38% 06/01/24 3,499,665
---------------
DIVERSIFIED METALS & MINING -- 0.8%
9,256,000 Freeport-McMoRan, Inc. (a)...................................... 6.88% 02/15/23 9,799,790
---------------
DIVERSIFIED REAL ESTATE ACTIVITIES -- 2.5%
5,810,000 KB Home (a)..................................................... 7.00% 12/15/21 6,238,487
1,883,000 KB Home......................................................... 7.63% 05/15/23 2,085,423
1,000,000 Meritage Homes Corp............................................. 7.00% 04/01/22 1,073,750
4,302,000 PulteGroup, Inc................................................. 5.50% 03/01/26 4,554,743
5,500,000 Taylor Morrison Communities, Inc................................ 6.63% 05/15/22 5,685,625
9,914,000 TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. (a)............. 5.88% 06/15/24 10,070,939
---------------
29,708,967
---------------
ELECTRIC UTILITIES -- 0.3%
3,000,000 Vistra Operations Co. LLC (b)................................... 5.63% 02/15/27 3,090,000
---------------
FERTILIZERS & AGRICULTURAL CHEMICALS -- 0.0%
100,000 Scotts Miracle-Gro (The) Co..................................... 6.00% 10/15/23 104,500
---------------
HEALTH CARE EQUIPMENT -- 0.1%
405,000 Hill-Rom Holdings, Inc. (b)..................................... 5.75% 09/01/23 421,706
1,178,000 Kinetic Concepts, Inc. / KCI USA, Inc. (b)...................... 7.88% 02/15/21 1,204,211
---------------
1,625,917
---------------
HEALTH CARE FACILITIES -- 6.3%
3,000,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 3,045,000
2,318,000 Acadia Healthcare Co., Inc...................................... 6.50% 03/01/24 2,410,720
250,000 Encompass Health Corp........................................... 5.13% 03/15/23 254,063
14,303,000 Encompass Health Corp. (a)...................................... 5.75% 11/01/24 14,553,302
250,000 Encompass Health Corp........................................... 5.75% 09/15/25 257,870
1,000,000 HCA, Inc........................................................ 5.38% 02/01/25 1,055,000
6,530,000 HCA, Inc........................................................ 5.88% 02/15/26 7,052,400
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
HEALTH CARE FACILITIES (CONTINUED)
$ 16,587,000 Select Medical Corp. (a)........................................ 6.38% 06/01/21 $ 16,628,467
27,514,000 Tenet Healthcare Corp. (a)...................................... 8.13% 04/01/22 29,459,514
1,000,000 Universal Health Services, Inc. (b)............................. 5.00% 06/01/26 1,028,750
---------------
75,745,086
---------------
HEALTH CARE SERVICES -- 2.2%
5,800,000 DaVita, Inc..................................................... 5.13% 07/15/24 5,814,500
1,976,000 DaVita, Inc..................................................... 5.00% 05/01/25 1,940,807
11,225,000 MEDNAX, Inc. (a) (b)............................................ 5.25% 12/01/23 11,449,500
5,000,000 MEDNAX, Inc. (b)................................................ 6.25% 01/15/27 5,112,500
1,751,000 Vizient, Inc. (b)............................................... 6.25% 05/15/27 1,812,285
---------------
26,129,592
---------------
HEALTH CARE TECHNOLOGY -- 1.2%
14,663,000 Change Healthcare Holdings LLC / Change Healthcare Finance,
Inc. (a) (b)................................................. 5.75% 03/01/25 14,589,685
---------------
HOTELS, RESORTS & CRUISE LINES -- 0.3%
3,600,000 ESH Hospitality, Inc. (b)....................................... 5.25% 05/01/25 3,622,500
---------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.0%
270,000 Calpine Corp.................................................... 5.38% 01/15/23 272,700
---------------
INDUSTRIAL CONGLOMERATES -- 0.0%
235,000 RBS Global, Inc. / Rexnord LLC (b).............................. 4.88% 12/15/25 236,459
---------------
INSURANCE BROKERS -- 2.3%
21,319,000 AmWINS Group, Inc. (a) (b)...................................... 7.75% 07/01/26 21,585,488
5,769,000 HUB International Ltd. (b)...................................... 7.00% 05/01/26 5,833,901
---------------
27,419,389
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 0.9%
10,851,000 Zayo Group LLC / Zayo Capital, Inc. (a) (b)..................... 5.75% 01/15/27 11,040,893
---------------
INVESTMENT BANKING & BROKERAGE -- 0.5%
5,740,000 LPL Holdings, Inc. (b).......................................... 5.75% 09/15/25 5,854,800
---------------
IT CONSULTING & OTHER SERVICES -- 0.1%
725,000 CDK Global, Inc................................................. 5.88% 06/15/26 766,688
---------------
LEISURE FACILITIES -- 3.3%
1,850,000 Cedar Fair LP / Canada's Wonderland Co. / Magnum
Management Corp. / Millennium Op............................. 5.38% 04/15/27 1,896,602
12,320,000 Constellation Merger Sub, Inc. (a) (b).......................... 8.50% 09/15/25 11,704,000
18,250,000 Six Flags Entertainment Corp. (a) (b)........................... 4.88% 07/31/24 18,295,625
7,354,000 Six Flags Entertainment Corp. (a) (b)........................... 5.50% 04/15/27 7,526,819
---------------
39,423,046
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.8%
800,000 IQVIA, Inc. (b)................................................. 5.00% 10/15/26 820,000
7,683,000 Jaguar Holding Co. II / Pharmaceutical Product Development
LLC (a) (b).................................................. 6.38% 08/01/23 7,855,868
360,000 Syneos Health, Inc. / inVentiv Health, Inc. / inVentiv Health
Clinical, Inc. (b)........................................... 7.50% 10/01/24 378,900
---------------
9,054,768
---------------
MANAGED HEALTH CARE -- 3.2%
2,667,000 Centene Corp.................................................... 6.13% 02/15/24 2,797,016
27,702,000 MPH Acquisition Holdings LLC (a) (b)............................ 7.13% 06/01/24 27,915,306
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
MANAGED HEALTH CARE (CONTINUED)
$ 8,124,000 Polaris Intermediate Corp. (b) (c).............................. 8.50% 12/01/22 $ 8,113,845
---------------
38,826,167
---------------
METAL & GLASS CONTAINERS -- 0.3%
2,000,000 Berry Global, Inc............................................... 5.50% 05/15/22 2,035,000
961,000 Berry Global, Inc. (b).......................................... 4.50% 02/15/26 934,573
350,000 Owens-Brockway Glass Container, Inc. (b)........................ 6.38% 08/15/25 373,625
---------------
3,343,198
---------------
MOVIES & ENTERTAINMENT -- 0.9%
5,603,000 AMC Entertainment Holdings, Inc. (a)............................ 5.75% 06/15/25 5,421,463
4,254,000 Cinemark USA, Inc. (a).......................................... 4.88% 06/01/23 4,308,621
828,000 Live Nation Entertainment, Inc. (b)............................. 5.63% 03/15/26 865,260
---------------
10,595,344
---------------
OIL & GAS EXPLORATION & PRODUCTION -- 0.8%
3,700,000 Murphy Oil Corp................................................. 6.88% 08/15/24 3,879,442
3,250,000 Sanchez Energy Corp............................................. 7.75% 06/15/21 455,000
3,125,000 Sanchez Energy Corp............................................. 6.13% 01/15/23 433,594
4,785,000 Tallgrass Energy Partners LP / Tallgrass Energy Finance
Corp. (b).................................................... 5.50% 01/15/28 4,898,644
---------------
9,666,680
---------------
OIL & GAS REFINING & MARKETING -- 0.0%
415,000 Murphy Oil USA, Inc............................................. 5.63% 05/01/27 433,675
---------------
OIL & GAS STORAGE & TRANSPORTATION -- 1.2%
14,533,000 Crestwood Midstream Partners LP / Crestwood Midstream
Finance Corp. (a)............................................ 6.25% 04/01/23 14,968,990
---------------
PACKAGED FOODS & MEATS -- 1.8%
2,190,000 B&G Foods, Inc.................................................. 5.25% 04/01/25 2,157,041
6,315,000 Post Holdings, Inc. (b)......................................... 5.50% 03/01/25 6,488,663
8,996,000 Post Holdings, Inc. (a) (b)..................................... 5.00% 08/15/26 8,995,999
3,240,000 Post Holdings, Inc. (b)......................................... 5.75% 03/01/27 3,337,200
---------------
20,978,903
---------------
PAPER PACKAGING -- 1.4%
16,543,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu (a) (b)............................. 7.00% 07/15/24 17,132,344
---------------
PHARMACEUTICALS -- 0.9%
4,028,000 Eagle Holding Co. II LLC (b) (d)................................ 7.63% 05/15/22 4,058,210
6,248,000 Horizon Pharma USA, Inc......................................... 6.63% 05/01/23 6,439,345
---------------
10,497,555
---------------
REAL ESTATE SERVICES -- 1.0%
12,680,000 Realogy Group LLC / Realogy Co-Issuer Corp. (a) (b)............. 4.88% 06/01/23 12,153,273
---------------
RESTAURANTS -- 0.1%
661,000 Brinker International, Inc. (b)................................. 5.00% 10/01/24 662,653
---------------
SECURITY & ALARM SERVICES -- 0.0%
291,000 Brink's (The) Co. (b)........................................... 4.63% 10/15/27 281,543
---------------
SPECIALIZED CONSUMER SERVICES -- 0.2%
2,000,000 Aramark Services, Inc........................................... 4.75% 06/01/26 2,035,000
481,000 Aramark Services, Inc. (b)...................................... 5.00% 02/01/28 490,764
---------------
2,525,764
---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.1%
$ 1,850,000 Dell International LLC / EMC Corp. (b).......................... 5.88% 06/15/21 $ 1,884,627
15,150,000 Dell International LLC / EMC Corp. (a) (b)...................... 7.13% 06/15/24 16,028,001
6,440,000 Dell International LLC / EMC Corp. (b).......................... 6.02% 06/15/26 6,983,053
---------------
24,895,681
---------------
TRADING COMPANIES & DISTRIBUTORS -- 1.4%
940,000 Ashtead Capital, Inc. (b)....................................... 4.13% 08/15/25 937,650
10,325,000 United Rentals North America, Inc. (a).......................... 5.75% 11/15/24 10,639,913
250,000 United Rentals North America, Inc............................... 5.50% 07/15/25 259,500
2,948,000 United Rentals North America, Inc............................... 5.88% 09/15/26 3,091,715
764,000 United Rentals North America, Inc............................... 6.50% 12/15/26 819,390
945,000 United Rentals North America, Inc............................... 5.50% 05/15/27 975,713
---------------
16,723,881
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 1.0%
7,769,000 SBA Communications Corp. (a).................................... 4.88% 09/01/24 7,919,621
2,000,000 Sprint Capital Corp............................................. 6.90% 05/01/19 2,000,000
1,180,000 T-Mobile USA, Inc............................................... 5.13% 04/15/25 1,219,825
416,000 T-Mobile USA, Inc............................................... 4.50% 02/01/26 419,291
---------------
11,558,737
---------------
TOTAL CORPORATE BONDS........................................................................ 740,213,790
(Cost $732,988,019) ---------------
FOREIGN CORPORATE BONDS -- 8.8%
APPLICATION SOFTWARE -- 0.1%
1,000,000 Open Text Corp. (b)............................................. 5.88% 06/01/26 1,050,000
---------------
AUTO PARTS & EQUIPMENT -- 0.2%
965,000 Delphi Technologies PLC (b)..................................... 5.00% 10/01/25 887,800
1,000,000 Panther BF Aggregator 2 LP / Panther Finance Co., Inc. (b)...... 6.25% 05/15/26 1,043,750
---------------
1,931,550
---------------
BUILDING PRODUCTS -- 1.8%
9,000,000 Cemex SAB de C.V. (a) (b)....................................... 7.75% 04/16/26 9,855,000
11,158,000 Masonite International Corp. (a) (b)............................ 5.63% 03/15/23 11,450,898
100,000 Masonite International Corp. (b)................................ 5.75% 09/15/26 102,500
---------------
21,408,398
---------------
CABLE & SATELLITE -- 1.5%
200,000 Unitymedia GmbH (b)............................................. 6.13% 01/15/25 208,000
6,183,000 Virgin Media Finance PLC (b).................................... 6.00% 10/15/24 6,422,591
1,654,000 Virgin Media Finance PLC (b).................................... 5.75% 01/15/25 1,695,350
2,000,000 Virgin Media Secured Finance PLC (b)............................ 5.25% 01/15/26 2,041,920
7,073,000 Virgin Media Secured Finance PLC (a) (b)........................ 5.50% 08/15/26 7,267,720
---------------
17,635,581
---------------
CASINOS & GAMING -- 0.3%
300,000 International Game Technology PLC (b)........................... 6.25% 02/15/22 314,250
200,000 International Game Technology PLC (b)........................... 6.25% 01/15/27 210,638
1,673,000 Melco Resorts Finance Ltd. (b).................................. 4.88% 06/06/25 1,676,229
2,000,000 Wynn Macau Ltd. (b)............................................. 4.88% 10/01/24 1,980,000
---------------
4,181,117
---------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
DIVERSIFIED REAL ESTATE ACTIVITIES -- 0.6%
$ 1,275,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (a) (b).................................... 5.25% 04/15/21 $ 1,280,572
5,346,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (b)........................................ 5.88% 04/15/23 5,526,859
804,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (b)........................................ 5.63% 03/01/24 816,060
---------------
7,623,491
---------------
DIVERSIFIED SUPPORT SERVICES -- 0.1%
950,000 Ritchie Bros Auctioneers, Inc. (b).............................. 5.38% 01/15/25 980,875
---------------
PHARMACEUTICALS -- 3.4%
12,667,000 Bausch Health Cos., Inc. (a) (b)................................ 5.88% 05/15/23 12,812,037
22,000,000 Bausch Health Cos., Inc. (b).................................... 6.13% 04/15/25 22,302,500
4,250,000 Mallinckrodt International Finance SA/Mallinckrodt CB
LLC (b)...................................................... 5.75% 08/01/22 3,941,875
1,000,000 Mallinckrodt International Finance SA/Mallinckrodt CB
LLC (b)...................................................... 5.63% 10/15/23 785,000
1,750,000 Mallinckrodt International Finance SA/Mallinckrodt CB
LLC (b)...................................................... 5.50% 04/15/25 1,268,750
---------------
41,110,162
---------------
RESTAURANTS -- 0.8%
9,458,000 1011778 BC ULC / New Red Finance, Inc. (a) (b).................. 5.00% 10/15/25 9,410,710
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 105,331,884
(Cost $102,765,128) ---------------
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
SENIOR FLOATING-RATE LOAN INTERESTS -- 41.7%
AEROSPACE & DEFENSE -- 0.2%
281,048 Transdigm, Inc., Term Loan F, 1 Mo. LIBOR + 2.50%, 0.00%
Floor........................................................ 4.98% 06/09/23 279,977
2,142,218 Transdigm, Inc., Tranche E Term Loan, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.98% 05/30/25 2,131,593
---------------
2,411,570
---------------
APPLICATION SOFTWARE -- 4.6%
1,559,670 CCC Information Services, Inc., Term Loan B, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.24% 04/26/24 1,553,822
2,472,831 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.75% Floor.................................................. 5.98% 07/01/24 2,482,624
6,263,811 Informatica Corp., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00%
Floor........................................................ 5.73% 08/06/22 6,282,101
5,090,748 Kronos, Inc., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.00%
Floor........................................................ 5.74% 11/01/23 5,094,464
2,082,097 Micro Focus International (MA Financeco, LLC), Miami Escrow
Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 4.98% 06/21/24 2,074,289
14,060,914 Micro Focus International (MA Financeco, LLC), Seattle Spinco
Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00%
Floor........................................................ 4.98% 06/21/24 14,008,185
4,482,974 Micro Focus International (MA Financeco, LLC), Term
Loan B2, 1 Mo. LIBOR + 2.25%, 0.00% Floor.................... 4.73% 11/30/21 4,452,176
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
APPLICATION SOFTWARE (CONTINUED)
$ 10,735,349 Mitchell International, Inc., 1st Lien Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 5.73% 11/30/24 $ 10,587,738
4,803,662 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 6.37% 04/26/24 4,770,661
1,000,000 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor................ 6.37% 04/26/24 993,130
1,870,075 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
2019 Incremental Term Loan B, 3 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 6.78% 04/26/24 1,878,266
458,141 RP Crown Parent (JDA Software Group), Term Loan B, 1 Mo.
LIBOR + 2.75%, 1.00% Floor................................... 5.23% 10/12/23 457,569
---------------
54,635,025
---------------
ASSET MANAGEMENT & CUSTODY BANKS -- 0.2%
2,000,000 Victory Capital Holdings, Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 02/15/25 1,998,760
---------------
AUTO PARTS & EQUIPMENT -- 1.4%
10,892,645 Gates Global LLC, Initial B-2 Dollar Term Loans, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.23% 03/31/24 10,903,973
2,259,427 Lumileds (Bright Bidco B.V.), Term Loan B, 1 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 5.98% 06/30/24 1,697,801
4,697,410 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 6.10% 06/30/24 3,529,775
---------------
16,131,549
---------------
BROADCASTING -- 0.8%
3,255,117 Cumulus Media Holdings, Inc., Exit Term Loan, 1 Mo. LIBOR +
4.50%, 1.00% Floor........................................... 6.99% 05/15/22 3,224,193
745,021 Gray Television, Inc., Term Loan C, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 4.98% 01/02/26 746,138
5,363,556 Tribune Media Co., (fka Tribune Co.), Extended Term Loan C,
1 Mo. LIBOR + 3.00%, 0.75% Floor............................. 5.48% 01/27/24 5,361,893
---------------
9,332,224
---------------
BUILDING PRODUCTS -- 0.4%
4,321,726 Quikrete Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 11/15/23 4,299,340
---------------
CABLE & SATELLITE -- 0.5%
6,363,636 Cablevision (aka CSC Holdings, Inc.), March 2017 Term Loan
B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor........................ 4.72% 07/17/25 6,330,927
---------------
CASINOS & GAMING -- 3.2%
845,029 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.23% 12/22/24 847,319
4,655,200 Golden Nugget, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.75% Floor.................................................. 5.22% - 5.23% 10/04/23 4,657,295
4,425,439 Scientific Games International, Inc., Term Loan B5,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 5.23% 08/14/24 4,411,897
28,475,832 Stars Group Holdings B.V. (Amaya), Term Loan B,
3 Mo. LIBOR + 3.50%, 0.00% Floor............................. 6.10% 07/10/25 28,593,437
---------------
38,509,948
---------------
COMMUNICATIONS EQUIPMENT -- 0.1%
1,314,710 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 02/15/26 1,324,978
---------------
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
ENVIRONMENTAL & FACILITIES SERVICES -- 0.6%
$ 6,500,000 GFL Environmental, Inc., 2018 Incremental Term Loan B,
1 Mo. LIBOR + 3.00%, 0.00% Floor............................. 5.48% 05/31/25 $ 6,440,070
1,076,647 Packers Holdings, LLC, Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.47% 12/04/24 1,063,189
---------------
7,503,259
---------------
FOOD RETAIL -- 1.1%
5,532,021 Albertson's LLC, Term Loan B5, 3 Mo. LIBOR + 3.00%,
0.75% Floor.................................................. 5.61% 12/21/22 5,536,446
7,499,360 Albertson's LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%,
0.75% Floor.................................................. 5.48% 06/22/23 7,503,260
---------------
13,039,706
---------------
HEALTH CARE EQUIPMENT -- 0.3%
3,928,300 Acelity L.P., Inc. (Kinetic Concepts), Term Loan B,
3 Mo. LIBOR + 3.25%, 1.00% Floor............................. 5.85% 01/31/24 3,936,903
---------------
HEALTH CARE FACILITIES -- 0.4%
944,491 Acadia Healthcare Co., Inc., Term Loan B4, 1 Mo. LIBOR +
2.50%, 0.00% Floor........................................... 4.98% 02/16/23 941,544
4,258,995 Gentiva Health Services, Inc. (Kindred at Home), Term Loan B,
1 Mo. LIBOR + 3.75%, 0.00% Floor............................. 6.25% 06/30/25 4,267,002
---------------
5,208,546
---------------
HEALTH CARE SERVICES -- 4.8%
2,181,930 21st Century Oncology Holdings, Inc. (21st Century Oncology
Inc.), Tranche B Term Loan, 3 Mo. LIBOR + 6.13%,
1.00% Floor.................................................. 8.74% 01/16/23 1,797,911
1,067,244 Air Medical Group Holdings, Inc. (Global Medical Response),
2018 New Term Loan, 1 Mo. LIBOR + 4.25%, 1.00% Floor......... 6.73% 03/14/25 1,047,906
3,063,333 Air Medical Group Holdings, Inc. (Global Medical Response),
Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor................ 5.72% 04/28/22 2,984,575
2,468,639 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 6.10% 04/21/24 2,122,141
667,119 athenahealth, Inc., Term Loan B, 3 Mo. LIBOR + 4.50%,
0.00% Floor.................................................. 7.20% 02/15/26 670,174
3,407,364 CDRH Parent, Inc. (Healogics, Inc.), Initial Term Loan (First
Lien), 3 Mo. LIBOR + 4.25%, 1.00% Floor...................... 6.85% 07/01/21 2,883,481
14,440,017 CHG Healthcare Services, Inc., Term Loan, 1 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 5.48% 06/07/23 14,431,063
1,795,500 Dupage Medical Group (Midwest Physician), Term Loan B,
1 Mo. LIBOR + 2.75%, 0.75% Floor............................. 5.23% 08/15/24 1,757,346
12,444,428 Envision Healthcare Corp., Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 6.23% 10/10/25 12,013,103
241,979 Exam Works (Gold Merger Co., Inc.), Term Loan B,
1 Mo. LIBOR + 3.25%, 1.00% Floor............................. 5.73% 07/27/23 241,979
4,831,591 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 5.74% 08/31/24 4,767,186
3,874,087 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 5.23% 02/06/24 3,627,114
9,681,606 U.S. Renal Care, Inc., Term Loan B, 3 Mo. LIBOR + 4.25%,
1.00% Floor.................................................. 6.85% 12/30/22 9,687,705
---------------
58,031,684
---------------
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HOUSEHOLD APPLIANCES -- 0.7%
$ 8,757,198 Traeger Grills (TGP Holdings III LLC), Term Loan B,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 6.85% 09/25/24 $ 8,078,515
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.6%
7,082,300 Alight Inc. (fka Tempo Acq.), Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 5.48% 05/01/24 7,083,788
---------------
HYPERMARKETS & SUPER CENTERS -- 1.0%
12,173,448 BJ's Wholesale Club, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.47% 02/03/24 12,223,725
---------------
INDUSTRIAL CONGLOMERATES -- 0.2%
2,792,090 Accudyne Industries LLC, Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.48% 08/18/24 2,790,108
---------------
INSURANCE BROKERS -- 3.7%
12,744,047 Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.24% 05/09/25 12,506,498
10,302,049 Amwins Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 5.23% 01/25/24 10,289,171
40,527 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.29% 04/25/25 40,081
16,048,623 HUB International Ltd., Term Loan B, 3 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.34% 04/25/25 15,872,089
5,811,292 USI, Inc. (fka Compass Investors, Inc.), Term Loan B,
3 Mo. LIBOR + 3.00%, 0.00% Floor............................. 5.60% 05/15/24 5,750,273
---------------
44,458,112
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 1.2%
14,531,138 Century Link (Qwest), Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 01/31/25 14,430,292
---------------
INVESTMENT BANKING & BROKERAGE -- 0.6%
7,141,500 Citadel Securities LP, Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 5.98% 02/28/26 7,177,208
---------------
LIFE SCIENCES TOOLS & SERVICES -- 1.3%
1,690,389 Ortho-Clinical Diagnostics Holdings Luxembourg, Term Loan B,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.73% 05/31/25 1,657,291
11,364,883 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 5.23% 09/27/24 11,130,540
2,992,366 Sotera Health Holdings, LLC (Sterigenics), Term
Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor..................... 5.48% 05/15/22 2,966,183
---------------
15,754,014
---------------
MANAGED HEALTH CARE -- 0.3%
374,870 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 5.35% 06/07/23 370,953
2,877,436 Versant Health (Wink Holdco, Inc.), Initial Term Loan,
1 Mo. LIBOR + 3.00%, 1.00% Floor............................. 5.48% 12/02/24 2,830,677
---------------
3,201,630
---------------
MOVIES & ENTERTAINMENT -- 0.2%
2,633,187 Cineworld Group PLC (Crown), Term Loan B, 1 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 4.73% 02/05/25 2,619,758
---------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
OTHER DIVERSIFIED FINANCIAL SERVICES -- 3.9%
$ 14,101,955 AlixPartners LLP, Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 5.23% 04/04/24 $ 14,106,327
18,955,043 Duff & Phelps Corp. (Deerfield Dakota), Initial Term Loan,
1 Mo. LIBOR + 3.25%, 1.00% Floor............................. 5.73% 02/13/25 18,684,175
14,405,866 Refinitiv US Holdings, Inc., Initial Dollar Term Loan,
1 Mo. LIBOR + 3.75%, 0.00% Floor............................. 6.23% 10/01/25 14,243,800
---------------
47,034,302
---------------
PACKAGED FOODS & MEATS -- 0.3%
1,217,059 Hostess Brands, LLC (HB Holdings), Term Loan B,
1 Mo. LIBOR + 2.25%, 0.75% Floor............................. 4.73% 08/03/22 1,214,321
7,559 Hostess Brands, LLC (HB Holdings), Term Loan B,
2 Mo. LIBOR + 2.25%, 0.75% Floor............................. 4.79% 08/03/22 7,542
1,761,255 Hostess Brands, LLC (HB Holdings), Term Loan B,
3 Mo. LIBOR + 2.25%, 0.75% Floor............................. 4.83% 08/03/22 1,757,292
---------------
2,979,155
---------------
PAPER PACKAGING -- 0.5%
5,687,893 Reynolds Group Holdings, Inc., U.S. Term Loan, 1 Mo. LIBOR
+ 2.75%, 0.00% Floor......................................... 5.23% 02/05/23 5,695,174
---------------
PHARMACEUTICALS -- 2.6%
11,770,042 Bausch Health Cos., Inc. (Valeant), Term Loan B, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.47% 06/01/25 11,816,652
11,092,691 Endo LLC, Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor......... 6.75% 04/29/24 10,954,033
2,000,000 GoodRX, Inc., Term Loan B, 3 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 5.47% 10/15/25 2,000,000
5,351,791 Horizon Pharma, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
1.00% Floor.................................................. 5.50% 03/29/24 5,370,736
274,499 Mallinckrodt International Finance S.A., 2017 Term Loan B,
3 Mo. LIBOR + 2.75%, 0.75% Floor............................. 5.35% 09/24/24 245,726
196,910 Mallinckrodt International Finance S.A., 2018 Incremental
Term Loan, 3 Mo. LIBOR + 3.00%, 0.75% Floor.................. 5.69% 02/24/25 178,286
---------------
30,565,433
---------------
REAL ESTATE SERVICES -- 0.3%
1,572,404 Cushman & Wakefield (DTZ U.S. Borrower, LLC), Term Loan,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 5.73% 08/21/25 1,572,404
1,428,571 Realogy Corp., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 4.73% 02/08/25 1,393,300
---------------
2,965,704
---------------
RESTAURANTS -- 0.7%
1,685,000 Portillo's Holdings LLC, Second Lien Term Loan, 3 Mo. LIBOR
+ 8.00%, 1.00% Floor......................................... 10.60% 08/15/22 1,663,938
7,120,534 Portillo's Holdings LLC, Term B Loan (First Lien), 3 Mo. LIBOR
+ 4.50%, 1.00% Floor......................................... 7.10% 08/02/21 7,120,534
---------------
8,784,472
---------------
RETAIL REIT'S -- 0.5%
5,765,255 Capital Automotive L.P., 2nd Lien Term Loan, 1 Mo. LIBOR +
6.00%, 1.00% Floor........................................... 8.48% 03/15/25 5,778,227
---------------
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (e) MATURITY (f) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SPECIALIZED CONSUMER SERVICES -- 1.8%
$ 10,184,000 Asurion, LLC (fka Asurion Corp.), Second Lien Replacement
B-2 Term Loan, 1 Mo. LIBOR + 6.50%, 0.00% Floor.............. 8.98% 07/31/25 $ 10,374,950
1,208,389 Asurion, LLC (fka Asurion Corp.), Term Loan B4, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 08/04/22 1,212,171
4,932,509 Asurion, LLC (fka Asurion Corp.), Term Loan B6, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 11/03/23 4,945,629
4,974,937 Asurion, LLC (fka Asurion Corp.), Term Loan B7, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 5.48% 11/03/24 4,986,678
---------------
21,519,428
---------------
SYSTEMS SOFTWARE -- 2.7%
3,784,311 Applied Systems, Inc., Term Loan (First Lien), 1 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 5.48% 09/13/24 3,777,727
1,262,391 Applied Systems, Inc., Term Loan (Second Lien), 1 Mo. LIBOR
+ 7.00%, 1.00% Floor......................................... 9.48% 09/13/25 1,282,590
1,828,051 Dynatrace LLC, Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 08/22/25 1,832,621
14,388,327 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor..................... 6.10% 06/13/24 14,256,385
9,252,136 Riverbed Technology, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 5.74% 04/24/22 8,151,965
1,560,874 SUSE (Marcel Lux IV S.A.R.L.), Facility B1 USD, 3 Mo. LIBOR
+ 3.25%, 0.00% Floor......................................... 5.89% 03/15/26 1,556,972
1,987,551 Vertafore, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 5.73% 06/15/25 1,969,127
---------------
32,827,387
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 498,660,851
(Cost $502,556,244) ---------------
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
1,629 Vistra Energy Corp. (g)...................................................................... 1,253
(Cost $2,831) ---------------
MONEY MARKET FUNDS -- 1.0%
12,342,065 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class -
2.32% (h)................................................................................ 12,342,065
(Cost $12,342,065) ---------------
TOTAL INVESTMENTS -- 113.3%.................................................................. 1,356,549,843
(Cost $1,350,654,287) (i) ---------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
U.S. TREASURY BILLS SOLD SHORT -- (13.3%)
$ (159,000,000) U.S. Treasury Bill (a)........................................ (j) 05/14/19 (158,863,406)
(Proceeds $158,863,261) ---------------
NET OTHER ASSETS AND LIABILITIES -- 0.0%..................................................... 58,716
---------------
NET ASSETS -- 100.0%......................................................................... $ 1,197,745,153
===============
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
(a) This security or a portion of this security is segregated as collateral
for investments sold short.
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P. ("First Trust"
or the "Advisor"). Although market instability can result in periods of
increased overall market illiquidity, liquidity for each security is
determined based on security-specific factors and assumptions, which
require subjective judgment. At April 30, 2019, securities noted as such
amounted to $564,929,453 or 47.2% of net assets.
(c) These notes are Senior Payment-In-Kind ("PIK") Toggle Notes whereby the
issuer may, at its option, elect to pay interest on the notes (1) entirely
in cash or (2) entirely in PIK interest. Interest paid in cash will accrue
at the rate of 8.50% per annum ("Cash Interest Rate") and PIK interest
will accrue on the notes at a rate per annum equal to the Cash Interest
Rate plus 75 basis points. For the six months ended April 30, 2019, this
security paid all of its interest in cash.
(d) These notes are Senior PIK Toggle Notes whereby the issuer may, at its
option, elect to pay interest on the notes (1) entirely in cash or (2)
entirely in PIK interest. Interest paid in cash will accrue at the rate of
7.63% per annum ("Cash Interest Rate") and PIK interest will accrue on the
notes at a rate per annum equal to the Cash Interest Rate plus 75 basis
points. For the six months ended April 30, 2019, this security paid all of
its interest in cash.
(e) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund
invests generally pay interest at rates which are periodically
predetermined by reference to a base lending rate plus a premium. These
base lending rates are generally (i) the lending rate offered by one or
more major European banks, such as the LIBOR, (ii) the prime rate offered
by one or more United States banks or (iii) the certificate of deposit
rate. Certain Senior Loans are subject to a LIBOR floor that establishes a
minimum LIBOR rate. When a range of rates is disclosed, the Fund holds
more than one contract within the same tranche with identical LIBOR
period, spread and floor, but different LIBOR reset dates.
(f) Senior Loans generally are subject to mandatory and/or optional
prepayment. As a result, the actual remaining maturity of Senior Loans may
be substantially less than the stated maturities shown.
(g) Non-income producing security.
(h) Rate shown reflects yield as of April 30, 2019.
(i) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $21,597,072 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $15,701,661. The net unrealized appreciation
was $5,895,411. The amounts presented are inclusive of investments sold
short.
(j) Zero coupon security.
LIBOR - London Interbank Offered Rate
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Corporate Bonds*.................................. $ 740,213,790 $ -- $ 740,213,790 $ --
Foreign Corporate Bonds*.......................... 105,331,884 -- 105,331,884 --
Senior Floating-Rate Loan Interests*.............. 498,660,851 -- 498,660,851 --
Rights:
Electric Utilities............................. 1,253 -- 1,253 --
Money Market Funds................................ 12,342,065 12,342,065 -- --
-------------- -------------- -------------- --------------
Total Investments................................. $1,356,549,843 $ 12,342,065 $1,344,207,778 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
U.S. Treasury Bills Sold Short.................... $ (158,863,406) $ -- $ (158,863,406) $ --
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $1,356,549,843
Cash...................................................................... 111,422
Restricted cash........................................................... 10,282,420
Receivables:
Investment securities sold............................................. 19,336,916
Interest............................................................... 13,947,694
Margin interest rebate................................................. 97,025
Dividends.............................................................. 12,192
--------------
Total Assets........................................................ 1,400,337,512
--------------
LIABILITIES:
Investments sold short, at value (proceeds $158,863,261).................. 158,863,406
Payables:
Investment securities purchased........................................ 42,669,104
Investment advisory fees............................................... 919,197
Margin interest expense................................................ 140,652
--------------
Total Liabilities................................................... 202,592,359
--------------
NET ASSETS................................................................ $1,197,745,153
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $1,218,955,883
Par value................................................................. 248,500
Accumulated distributable earnings (loss)................................. (21,459,230)
--------------
NET ASSETS................................................................ $1,197,745,153
==============
NET ASSET VALUE, per share................................................ $ 48.20
==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 24,850,002
==============
Investments, at cost...................................................... $1,350,654,287
==============
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 38,893,804
Margin interest rebate.................................................... 1,409,701
Dividends................................................................. 77,644
--------------
Total investment income................................................ 40,381,149
--------------
EXPENSES:
Investment advisory fees.................................................. 5,596,544
Margin interest expense................................................... 2,428,713
Interest on investments sold short........................................ 87,606
--------------
Total expenses......................................................... 8,112,863
--------------
NET INVESTMENT INCOME (LOSS).............................................. 32,268,286
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................................ (3,258,942)
Investments sold short................................................. 594,945
--------------
Net realized gain (loss).................................................. (2,663,997)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................ 28,322,824
Investments sold short................................................. (997,768)
--------------
Net change in unrealized appreciation (depreciation)...................... 27,325,056
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 24,661,059
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 56,929,345
==============
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2019 ENDED
(UNAUDITED) 10/31/2018
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 32,268,286 $ 64,170,585
Net realized gain (loss).................................................. (2,663,997) (8,990,764)
Net change in unrealized appreciation (depreciation)...................... 27,325,056 (36,753,553)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 56,929,345 18,426,268
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (33,277,003) (68,615,288)
Return of capital......................................................... -- (7,218)
-------------- --------------
Total distributions to shareholders....................................... (33,277,003) (68,622,506)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 140,301,029 117,296,114
Cost of shares redeemed................................................... (219,243,496) (64,629,748)
-------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... (78,942,467) 52,666,366
-------------- --------------
Total increase (decrease) in net assets................................... (55,290,125) 2,470,128
NET ASSETS:
Beginning of period....................................................... 1,253,035,278 1,250,565,150
-------------- --------------
End of period............................................................. $1,197,745,153 $1,253,035,278
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 26,650,002 25,550,002
Shares sold............................................................... 2,950,000 2,450,000
Shares redeemed........................................................... (4,750,000) (1,350,000)
-------------- --------------
Shares outstanding, end of period......................................... 24,850,002 26,650,002
============== ==============
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net increase (decrease) in net assets resulting from operations........... $ 56,929,345
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash provided by operating activities:
Purchases of investments............................................ (591,379,268)
Borrowed investments sold short..................................... 1,471,857,598
Cost to cover short positions....................................... (1,312,146,714)
Sales, maturities and paydowns of investments....................... 513,610,406
Net amortization/accretion of premiums/discounts on investments..... 2,917,256
Net realized gain/loss on investments............................... 3,258,942
Net realized gain/loss on investments sold short.................... (594,945)
Net change in unrealized appreciation/depreciation on investments... (28,322,824)
Net change in unrealized appreciation/depreciation on investments
sold short....................................................... 997,768
Increase in restricted cash......................................... (5,953,698)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable..................................... 1,070,569
Increase in dividends receivable.................................... (200)
Increase in margin interest rebate receivable....................... (61,933)
Decrease in interest payable on investments sold short.............. (48,260)
Increase in margin interest expense payable......................... 94,078
Decrease in investment advisory fees payable........................ (92,992)
--------------
CASH PROVIDED BY OPERATING ACTIVITIES..................................... $ 112,135,128
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold........................................... 140,301,029
Cost of shares redeemed............................................. (219,243,496)
Distributions to shareholders from investment operations............ (33,277,003)
--------------
CASH USED IN FINANCING ACTIVITIES......................................... (112,219,470)
--------------
Decrease in cash.......................................................... (84,342)
Cash at beginning of period............................................... 195,764
--------------
CASH AT END OF PERIOD..................................................... $ 111,422
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................................. $ 2,334,635
==============
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2019 ------------------------------------------------------------------------------
(UNAUDITED) 2018 2017 2016 2015 2014
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 47.02 $ 48.95 $ 48.31 $ 48.69 $ 51.30 $ 51.16
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.28 2.52 2.56 2.41 2.64 2.58
Net realized and unrealized gain (loss) 1.22 (1.76) 0.66 (0.14) (2.23) (a) 0.29
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.50 0.76 3.22 2.27 0.41 2.87
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.32) (2.69) (2.58) (2.48) (2.84) (2.73)
Net realized gain -- -- -- -- (0.14) --
Return of capital -- (0.00) (b) -- (0.17) (0.04) --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (1.32) (2.69) (2.58) (2.65) (3.02) (2.73)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 48.20 $ 47.02 $ 48.95 $ 48.31 $ 48.69 $ 51.30
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) 5.42% 1.60% 6.79% 4.89% 0.80% (a) 5.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,197,745 $1,253,035 $1,250,565 $1,077,297 $ 520,954 $ 179,533
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 1.38% (d) 1.16% 1.10% 1.11% 1.23% 1.29%
Ratio of net expenses to average net
assets excluding interest expense 0.95% (d) 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss) to
average net assets 5.48% (d) 5.26% 5.25% 5.04% 5.49% 5.02%
Portfolio turnover rate (e) 31% 52% 75% 45% 34% 54%
</TABLE>
(a) The Fund received a payment from the advisor in the amount of $24,541 in
connection with a trade error. The payment from the advisor represents
less than $0.01 per share and had no effect on the Fund's total return.
(b) Amount represents less than $0.01 per share.
(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.
(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.
Page 24 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Tactical High Yield ETF (the "Fund"), a diversified
series of the Trust which trades under the ticker "HYLS" on The Nasdaq Stock
Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and
redeems shares on a continuous basis, at net asset value ("NAV"), only in large
specified blocks consisting of 50,000 shares called a "Creation Unit." Creation
Units are generally issued and redeemed for cash and, in certain circumstances,
in-kind for securities in which the Fund invests. Except when aggregated in
Creation Units, the Fund's shares are not redeemable securities.
The primary investment objective of the Fund is to provide current income. The
Fund's secondary investment objective is to provide capital appreciation. Under
normal market conditions, the Fund invests at least 80% of its net assets
(including investment borrowings) in high yield debt securities that are rated
below investment grade at the time of purchase or unrated securities deemed by
the Fund's advisor to be of comparable quality. Below investment grade
securities are those that, at the time of purchase, are rated lower than "BBB-"
by Standard & Poor's Ratings Group, a division of the McGraw Hill Companies,
Inc., or lower than "Baa3" by Moody's Investors Service, Inc., or comparably
rated by another nationally recognized statistical rating organization. High
yield debt securities that are rated below investment grade are commonly
referred to as "junk" debt. Such securities may include U.S. and non-U.S.
corporate debt obligations, bank loans and convertible bonds. For purposes of
determining whether a security is below investment grade, the lowest available
rating will be considered.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee of the
Fund's investment advisor, First Trust Advisors L.P. ("First Trust" or the
"Advisor"), in accordance with valuation procedures adopted by the Trust's Board
of Trustees, and in accordance with provisions of the 1940 Act. Investments
valued by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Corporate bonds, corporate notes, U.S. government securities and other
debt securities are fair valued on the basis of valuations provided by
dealers who make markets in such securities or by a third-party pricing
service approved by the Trust's Board of Trustees, 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Senior Floating-Rate Loan Interests ("Senior Loans")(1) are not listed on
any securities exchange or board of trade. Senior Loans are typically
bought and sold by institutional investors in individually negotiated
private transactions that function in many respects like an
over-the-counter secondary market, although typically no formal
market-makers exist. This market, while having grown substantially since
its inception, generally has fewer trades and less liquidity than the
secondary market for other types of securities. Some Senior Loans have few
or no trades, or trade infrequently, and information regarding a specific
Senior Loan may not be widely available or may be incomplete. Accordingly,
determinations of the market value of Senior Loans may be based on
infrequent and dated information. Because there is less reliable,
objective data available, elements of judgment may play a greater role in
valuation of Senior Loans than for other types of securities. Typically,
Senior Loans are fair valued using information provided by a third-party
pricing service. The third-party pricing service primarily uses
over-the-counter pricing from dealer runs and broker quotes from
indicative sheets to value the Senior Loans.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of 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 fundamental business data relating to the borrower/issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the borrower/issuer;
5) the credit quality and cash flow of the borrower/issuer, based on
the Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities of the
issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the borrower/issuer, including any ability
to obtain money or resources from a parent or affiliate and an
assessment of the issuer's management;
11) the prospects for the borrower's/issuer's industry, and multiples
(of earnings and/or cash flows) being paid for similar businesses in
that industry;
12) borrower's/issuer's competitive position within the industry;
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
13) borrower's/issuer's ability to access additional liquidity through
public and/or private markets; and
14) 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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method over the expected life of each
respective borrowing for loans and bonds.
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. Due
to the nature of the Senior Loan market, the actual settlement date may not be
certain at the time of the purchase or sale for some of the Senior Loans.
Interest income on such Senior Loans is not accrued until settlement date. The
Fund maintains liquid assets with current value at least equal to the amount of
its when-issued, delayed-delivery or forward purchase commitments. The Fund had
no when-issued, delayed-delivery, or forward purchase commitments as of April
30, 2019.
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 that 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 is charged 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 effected 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 it may be
unable to reacquire a security to terminate a short position except at a price
substantially in excess of the last quoted price. Also, there is the risk that
the counterparty to a short sale may fail to honor its contractual terms,
causing a loss to the Fund.
The Fund has established an account with Pershing, LLC for the purpose of
purchasing or borrowing securities on margin. The Fund pays interest on any
margin balance, which is calculated as the daily margin account balance times
the broker's margin interest rate. At April 30, 2019, the Fund had $10,282,420
in restricted cash associated with investments sold short and $158,863,406 of
investments sold short as shown on the Statement of Asset and Liabilities. The
Fund is charged interest on debit margin balance at a rate equal to the
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
Overnight Bank Funding Rate plus 75 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. At April 30,
2019, the Fund had a debit margin balance of $148,568,120 with an interest rate
of 3.17%. For the six months ended April 30, 2019, the Fund had margin interest
rebate of $1,409,701 and margin interest expense of $2,428,713, as shown on the
Statement of Operations. For the six months ended April 30, 2019, the average
margin balance and interest rates were $155,085,514 and 3.09%, respectively.
D. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrower's discretion. The Fund had no unfunded loan commitments as of April 30,
2019.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
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 significantly modified portfolio securities
held by the Fund and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 68,615,288
Capital gains................................... --
Return of capital............................... 7,218
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (19,840,820)
Net unrealized appreciation (depreciation)...... (25,270,752)
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, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. As of October 31, 2018, the
Fund had $19,840,820 of non-expiring capital loss carryforwards that may be
carried forward indefinitely.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
net ordinary losses.
G. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3). The Fund is subject to an interest expense
due to the costs associated with the Fund's short positions in securities.
H. NEW ACCOUNTING PRONOUNCEMENTS
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities," which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. The ASU 2017-08 is effective for
public business entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Earlier application is
permitted for all entities, including adoption in an interim period. If an
entity early adopts the ASU in an interim period, any adjustments must be
reflected as of the beginning of the fiscal year that includes that interim
period. Management is still assessing the impact of the adoption of ASU 2017-08
on the financial statements but does not expect it to have a material impact.
On August 28, 2018, the FASB issued ASU 2018-13, "Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement," which amends the
fair value measurement disclosure requirements of ASC 820. The amendments of ASU
2018-13 include new, eliminated, and modified disclosure requirements of ASC
820. In addition, the amendments clarify that materiality is an appropriate
consideration of entities when evaluating disclosure requirements. The ASU is
effective for fiscal years beginning after December 15, 2019, including interim
periods therein. Early adoption is permitted for any eliminated or modified
disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13
for these financial statements, which did not result in a material impact.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, brokerage
commissions and other expenses connected with the execution of portfolio
transactions, distribution and service fees payable pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust
an annual unitary management fee equal to 0.95% of its average daily net assets.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 2019, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, investments sold short
and in-kind transactions, were $435,091,571 and $413,769,160, respectively. The
cost of purchases to cover short sales and the proceeds of short sales were
$61,562,422 and $41,193,750, respectively.
For the six months ended April 30, 2019, there were no in-kind transactions.
5. BORROWINGS
The Trust, on behalf of the Fund, along with the First Trust Series Fund and
First Trust Variable Insurance Trust, entered into a $200 million Credit
Agreement ("Line of Credit") with BNYM, to be a liquidity backstop during
periods of high redemption volume. A commitment fee of 0.15% of the daily amount
of the excess of the commitment amount over the outstanding principal balance of
the loans will be charged by BNYM, which First Trust allocates amongst the funds
that had access to the Line of Credit. To the extent that the Fund accesses the
Line of Credit, there would also be an interest fee charged. The Fund did not
have any borrowings outstanding during the six months ended April 30, 2019.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Due to the nature of the Fund's investments, the
Fund's Creation Units are generally issued and redeemed for cash, although
Creation Units may be issued in-kind for securities in which the Fund invests in
limited circumstances. Authorized Participants purchasing Creation Units must
pay to BNYM, as transfer agent, a creation transaction fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in the Fund's portfolio and/or the
countries in which the transactions are settled. The Creation Transaction Fee is
currently $500. The price for each Creation Unit will equal the daily NAV per
share 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 or stamp taxes. When Creation Units are issued for cash, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing portfolio securities, including 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 such securities. Authorized
Participants redeeming Creation Units must pay to BNYM, as transfer agent, a
standard redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and/or the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $500. When
shares are redeemed for cash, the Authorized Participant may also be assessed an
amount to cover other costs, including 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 portfolio securities sold
in connection with the redemption.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
7. 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 March 31, 2020.
8. 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.
9. 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.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
Page 32
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--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2019 (UNAUDITED)
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 33
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Enhanced Short
Maturity ETF (FTSM)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 31
Statement of Operations...................................................... 32
Statements of Changes in Net Assets.......................................... 33
Financial Highlights......................................................... 34
Notes to Financial Statements................................................ 35
Additional Information....................................................... 41
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Enhanced Short Maturity ETF; hereinafter referred to as
the "Fund") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Enhanced Short Maturity ETF (the "Fund"), which contains detailed
information about the Fund for the six months ended April 30, 2019. We encourage
you to read this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
The investment objective of First Trust Enhanced Short Maturity ETF (the "Fund")
is to seek current income, consistent with preservation of capital and daily
liquidity. Under normal market conditions, the Fund intends to achieve its
investment objective by investing at least 80% of its net assets in a portfolio
of U.S. dollar-denominated fixed- and variable-rate debt securities, including
securities issued or guaranteed by the U.S. government or its agencies,
instrumentalities or U.S. government-sponsored entities, residential and
commercial mortgage-backed securities, asset-backed securities, U.S. corporate
bonds, fixed income securities issued by non-U.S. corporations and governments,
municipal obligations, privately issued securities and other debt securities
bearing fixed or floating interest rates. The Fund may also invest in money
market securities. Shares of the Fund are listed on The Nasdaq Stock Market LLC
under the ticker symbol "FTSM."
The Fund's investment advisor, First Trust Advisors L.P. (the "Advisor"),
selects securities for the portfolio by evaluating fixed income sectors and
macro market trends while completing bottom-up analysis of individual
securities. Portfolio securities are selected based upon relative value in the
context of overall portfolio duration. Key inputs for the screens in the
securities selection process include, but are not limited to, credit quality,
yield, interest rate sensitivity and liquidity. The Fund's holdings are
systematically monitored for meaningful changes in performance and risk
measures. A security will generally be sold when the Advisor believes that a
security can be substituted for a similar investment that represents better
relative value; it lacks adequate compensation for embedded credit risk; or when
rebalancing the portfolio to maintain diversification. Under normal market
conditions, the Fund's average duration is expected to be less than one year and
the average maturity of the Fund's portfolio is expected to be less than three
years.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------------------------------------------------
ANNUAL AVERAGE CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/5/14) Inception (8/5/14)
4/30/19 4/30/19 to 4/30/19 to 4/30/19
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 1.31% 2.43% 1.29% 6.24%
Market Price 1.29% 2.43% 1.29% 6.24%
INDEX PERFORMANCE
ICE BofAML 0-1 Year U.S. Treasury Index 1.34% 2.37% 0.93% 4.49%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the period
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
--------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS & CASH
--------------------------------------------------------
Commercial Paper 37.19%
Corporate Bonds 31.96
Foreign Corporate Bonds 14.19
Asset-Backed Securities 12.26
U.S. Government Notes 2.29
U.S. Government Agency Mortgage-
Backed Securities 1.74
Mortgage-Backed Securities 0.13
Cash 0.12
Certificates of Deposit 0.12
-------
Total 100.00%
=======
--------------------------------------------------------
% OF TOTAL
CREDIT QUALITY(1) INVESTMENTS & CASH
--------------------------------------------------------
Government and Agency 4.03%
AAA 7.88
AA+ 0.39
AA 0.15
AA- 3.71
A+ 6.45
A 7.24
A- 8.45
BBB+ 9.46
BBB 8.77
BBB- 2.39
A-1 (Short Term) 1.39
A-2 (Short Term) 23.18
A-3 (Short Term) 12.62
Not Rated 3.77
Cash 0.12
-------
Total 100.00%
=======
--------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
--------------------------------------------------------
U.S. Treasury Note 1.50%, 6/15/2020 1.27%
U.S. Treasury Note 1.50%, 8/15/2020 0.85
AerCap Ireland Capital DAC / AerCap
Global Aviation Trust 0.60
WGL Holdings, Inc. 0.58
Williams Cos., (The) Inc. 0.55
NBCUniversal Enterprise Inc. 0.53
Constellation Brands, Inc. 0.51
PNC Bank N.A. 0.47
ETP Legacy L.P. 0.47
Lloyds Bank PLC 0.47
-------
Total 6.30%
=======
-----------------------------
(1) The ratings are by Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO) of the
creditworthiness of an issuer with respect to debt obligations. Ratings
are measured highest to lowest on a scale that generally ranges from AAA
to D for long-term ratings and A-1+ to C for short-term ratings.
Investment grade is defined as those issuers that have a long-term credit
rating of BBB- or higher or a short-term credit rating of A-3 or higher.
The credit ratings shown relate to the credit worthiness of the issuers of
the underlying securities in the Fund, and not to the Fund or its shares.
U.S. Treasury and U.S. Agency mortgage-backed securities appear under
"Government". Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 5, 2014 - APRIL 30, 2019
First Trust Enhanced ICE BofAML 0-1 Year
Short Maturity ETF U.S. Treasury Index
<S> <C> <C>
8/5/14 $10,000 $10,000
10/31/14 10,016 10,002
4/30/15 10,047 10,011
10/31/15 10,045 10,020
4/30/16 10,079 10,045
10/31/16 10,139 10,073
4/30/17 10,206 10,096
10/31/17 10,289 10,147
4/30/18 10,371 10,207
10/31/18 10,486 10,311
4/30/19 10,624 10,449
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 6, 2014 (commencement
of trading) through April 30, 2019. Shareholders may pay more than NAV when they
buy Fund shares and receive less than NAV when they sell those shares because
shares are bought and sold at current market price. Data presented represents
past performance and cannot be used to predict future results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
8/6/14 - 10/31/14 47 0 0 0 15 0 0 0
11/1/14 - 10/31/15 54 0 0 0 197 0 0 0
11/1/15 - 10/31/16 101 0 0 0 151 0 0 0
11/1/16 - 10/31/17 173 0 0 0 79 0 0 0
11/1/17 - 10/31/18 179 0 0 0 73 0 0 0
11/1/18 - 4/30/19 63 0 0 0 59 0 0 0
</TABLE>
Page 4
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--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to the First
Trust Enhanced Short Maturity ETF (the "Fund" or "FTSM"). In this capacity,
First Trust is responsible for the selection and ongoing monitoring of the
investments in the Fund's portfolio and certain other services necessary for the
management of the portfolio.
PORTFOLIO MANAGEMENT TEAM
TODD LARSON, CFA - VICE PRESIDENT, PORTFOLIO MANAGER
JEREMIAH CHARLES - VICE PRESIDENT, PORTFOLIO MANAGER
JAMES SNYDER - VICE PRESIDENT, PORTFOLIO MANAGER
ERIC MAISEL, CFA - VICE PRESIDENT, PORTFOLIO MANAGER
CHRISTINA L. FLETCHER - PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Enhanced Short Maturity ETF (the "Fund"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Fund and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD (a) PERIOD (b)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
Actual $1,000.00 $1,013.10 0.37% $1.85
Hypothetical (5% return before expenses) $1,000.00 $1,022.96 0.37% $1.86
</TABLE>
(a) These expense ratios reflect expense waivers. See Note 3 in the Notes to
the Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 37.9%
AEROSPACE/DEFENSE -- 0.4%
$ 15,000,000 Northrop Grumman Corp........................................... 3.10% 05/01/19 $ 15,000,000
2,250,000 Northrop Grumman Corp........................................... 2.97% 06/19/19 2,241,058
---------------
17,241,058
---------------
AGRICULTURE -- 0.8%
12,000,000 BAT International Finance PLC................................... 2.83% 05/03/19 11,998,120
12,000,000 BAT International Finance PLC................................... 2.96% 07/02/19 11,939,975
10,000,000 BAT International Finance PLC................................... 2.97% 07/11/19 9,942,506
---------------
33,880,601
---------------
AUTO MANUFACTURERS -- 3.6%
8,150,000 Ford Motor Credit Co. LLC....................................... 3.11% 06/05/19 8,125,790
19,900,000 Ford Motor Credit Co. LLC....................................... 3.08% 07/22/19 19,763,053
20,000,000 Ford Motor Credit Co. LLC....................................... 3.19% 08/26/19 19,797,814
5,000,000 General Motors Financial Co., Inc............................... 2.86% 05/01/19 5,000,000
5,000,000 General Motors Financial Co., Inc............................... 3.01% 05/07/19 4,997,528
10,000,000 General Motors Financial Co., Inc............................... 3.08% 05/09/19 9,993,244
5,000,000 General Motors Financial Co., Inc............................... 2.93% 05/30/19 4,988,398
15,000,000 Nissan Motor Acceptance Corp.................................... 2.80% 05/14/19 14,985,066
15,000,000 Nissan Motor Acceptance Corp.................................... 2.79% 05/23/19 14,974,818
7,500,000 VW Credit, Inc.................................................. 2.79% 05/09/19 7,495,409
20,000,000 VW Credit, Inc.................................................. 2.89% 06/24/19 19,914,872
5,500,000 VW Credit, Inc.................................................. 2.80% 07/01/19 5,474,356
15,000,000 VW Credit, Inc.................................................. 3.06% 10/18/19 14,789,521
---------------
150,299,869
---------------
BANKS -- 0.5%
20,000,000 Lloyds Bank PLC, 3 Mo. LIBOR + 0.10% (a)........................ 2.70% 12/20/19 20,000,000
---------------
BEVERAGES -- 1.1%
10,000,000 Constellation Brands, Inc....................................... 2.91% 05/01/19 10,000,000
22,000,000 Constellation Brands, Inc....................................... 2.90% 05/28/19 21,952,956
10,000,000 Constellation Brands, Inc....................................... 2.90% 05/30/19 9,977,038
5,000,000 Constellation Brands, Inc....................................... 2.95% 05/31/19 4,987,901
---------------
46,917,895
---------------
CHEMICALS -- 3.5%
8,000,000 Albemarle Corp.................................................. 2.80% 05/14/19 7,992,037
20,000,000 Dow Chemical (The) Co........................................... 2.75% 05/17/19 19,975,952
20,000,000 Dow Chemical (The) Co........................................... 2.76% 05/23/19 19,966,810
10,000,000 EI du Pont de Nemours & Co...................................... 2.77% 06/26/19 9,957,663
10,000,000 FMC Corp........................................................ 3.05% 05/02/19 9,999,165
15,200,000 FMC Corp........................................................ 3.00% - 3.05% 05/10/19 15,188,647
10,000,000 FMC Corp........................................................ 3.05% 05/13/19 9,989,984
12,500,000 FMC Corp........................................................ 3.05% 05/22/19 12,478,109
20,000,000 Sherwin-Williams (The) Co....................................... 2.84% - 2.85% 05/06/19 19,992,213
7,800,000 Sherwin-Williams (The) Co....................................... 2.79% 05/14/19 7,792,253
15,000,000 Sherwin-Williams (The) Co....................................... 2.93% 05/28/19 14,967,532
---------------
148,300,365
---------------
COMMERCIAL SERVICES -- 0.2%
10,000,000 Tyco International Holding Sarl................................. 2.89% 05/01/19 10,000,000
---------------
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
10,000,000 CNPC Finance HK Ltd............................................. 2.89% 07/03/19 9,950,444
10,000,000 Hitachi Capital America Corp.................................... 2.81% 05/03/19 9,998,458
---------------
19,948,902
---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
ELECTRIC -- 3.7%
$ 5,000,000 CenterPoint Energy, Inc......................................... 2.88% 05/07/19 $ 4,997,634
15,000,000 CenterPoint Energy, Inc......................................... 2.88% 05/10/19 14,989,345
10,000,000 CenterPoint Energy, Inc......................................... 2.81% 05/13/19 9,990,782
16,450,000 CenterPoint Energy, Inc......................................... 2.79% 05/29/19 16,414,927
15,000,000 Enel Finance America LLC........................................ 2.90% 05/06/19 14,994,042
15,000,000 Enel Finance America LLC........................................ 2.95% 05/20/19 14,976,975
10,000,000 Entergy Corp.................................................... 2.87% 05/02/19 9,999,214
10,000,000 Entergy Corp.................................................... 2.88% 05/07/19 9,995,233
3,403,000 Entergy Corp.................................................... 2.86% 05/08/19 3,401,134
12,698,000 Entergy Corp.................................................... 2.91% 06/03/19 12,664,681
10,000,000 Entergy Corp.................................................... 2.87% 07/10/19 9,945,276
15,000,000 Public Service Enterprise Group, Inc............................ 2.90% 05/20/19 14,977,428
10,000,000 Public Service Enterprise Group, Inc............................ 2.96% 05/21/19 9,983,835
10,000,000 Public Service Enterprise Group, Inc............................ 2.95% 05/22/19 9,983,034
---------------
157,313,540
---------------
ELECTRONICS -- 1.6%
10,000,000 Arrow Electronics, Inc.......................................... 2.96% 05/01/19 10,000,000
10,000,000 Arrow Electronics, Inc.......................................... 3.00% 05/03/19 9,998,357
10,000,000 Arrow Electronics, Inc.......................................... 3.00% 05/09/19 9,993,429
10,000,000 Arrow Electronics, Inc.......................................... 2.95% 05/14/19 9,989,511
10,000,000 Arrow Electronics, Inc.......................................... 2.95% 05/16/19 9,987,897
5,000,000 Arrow Electronics, Inc.......................................... 2.95% 05/17/19 4,993,548
5,000,000 Arrow Electronics, Inc.......................................... 3.00% 05/21/19 4,991,800
8,500,000 Arrow Electronics, Inc.......................................... 2.95% - 3.00% 05/28/19 8,481,258
---------------
68,435,800
---------------
FOOD -- 1.4%
12,500,000 Campbell Soup Co................................................ 2.91% 05/02/19 12,499,004
15,000,000 Campbell Soup Co................................................ 3.06% 05/08/19 14,991,204
15,000,000 Campbell Soup Co................................................ 3.04% 06/03/19 14,958,937
15,000,000 Smithfield Foods, Inc........................................... 2.99% 05/06/19 14,993,850
---------------
57,442,995
---------------
GAS -- 1.2%
8,000,000 WGL Holdings, Inc............................................... 3.25% 05/08/19 7,995,016
10,000,000 WGL Holdings, Inc............................................... 3.25% 05/16/19 9,986,650
10,000,000 WGL Holdings, Inc............................................... 3.05% 05/29/19 9,976,667
25,000,000 WGL Holdings, Inc............................................... 3.16% 06/07/19 24,920,298
---------------
52,878,631
---------------
HEALTH CARE PRODUCTS -- 1.0%
12,000,000 Boston Scientific Corp.......................................... 2.95% 05/20/19 11,981,580
15,000,000 Boston Scientific Corp.......................................... 2.91% 06/11/19 14,951,107
14,000,000 Boston Scientific Corp.......................................... 2.91% 06/12/19 13,953,253
---------------
40,885,940
---------------
HEALTH CARE SERVICES -- 0.9%
10,000,000 Humana, Inc..................................................... 2.97% 05/16/19 9,987,790
9,200,000 Humana, Inc..................................................... 3.06% 05/21/19 9,184,615
10,000,000 Humana, Inc..................................................... 2.92% 06/03/19 9,973,633
10,000,000 Humana, Inc..................................................... 2.96% 06/14/19 9,964,501
---------------
39,110,539
---------------
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
HOUSEHOLD PRODUCTS/WARES -- 0.5%
$ 20,000,000 Reckitt Benckiser Treasury Services PLC......................... 2.81% 05/24/19 $ 19,964,633
---------------
HOUSEWARES -- 0.3%
11,100,000 Newell Brands, Inc.............................................. 2.96% 05/07/19 11,094,596
---------------
LEISURE TIME -- 1.7%
14,000,000 Royal Caribbean Cruises Ltd..................................... 3.05% 05/01/19 14,000,000
14,000,000 Royal Caribbean Cruises Ltd..................................... 3.05% 05/06/19 13,994,152
8,000,000 Royal Caribbean Cruises Ltd..................................... 3.05% 05/09/19 7,994,657
10,000,000 Royal Caribbean Cruises Ltd..................................... 3.02% 05/17/19 9,986,785
7,000,000 Royal Caribbean Cruises Ltd..................................... 2.96% 05/22/19 6,987,954
7,000,000 Royal Caribbean Cruises Ltd..................................... 3.02% 06/04/19 6,980,350
10,000,000 Royal Caribbean Cruises Ltd..................................... 2.98% 06/07/19 9,969,475
---------------
69,913,373
---------------
LODGING -- 0.9%
12,000,000 Marriott International, Inc..................................... 2.94% 05/13/19 11,988,401
15,000,000 Marriott International, Inc..................................... 2.90% 05/29/19 14,966,660
12,000,000 Marriott International, Inc..................................... 2.89% 06/04/19 11,967,775
---------------
38,922,836
---------------
MINING -- 1.4%
20,000,000 Glencore Funding LLC............................................ 3.16% 05/16/19 19,974,103
20,000,000 Glencore Funding LLC............................................ 3.14% 06/18/19 19,917,775
20,000,000 Glencore Funding LLC............................................ 3.14% 06/19/19 19,916,057
---------------
59,807,935
---------------
MISCELLANEOUS MANUFACTURING -- 1.0%
10,000,000 Parker-Hannifin Corp............................................ 2.80% 06/04/19 9,973,972
5,000,000 Pentair Finance Sarl............................................ 3.15% 05/02/19 4,999,568
5,000,000 Pentair Finance Sarl............................................ 3.10% 05/07/19 4,997,457
5,000,000 Pentair Finance Sarl............................................ 3.06% 05/09/19 4,996,654
5,000,000 Pentair Finance Sarl............................................ 3.11% 05/13/19 4,994,833
5,000,000 Pentair Finance Sarl............................................ 3.15% 05/16/19 4,993,538
5,000,000 Pentair Finance Sarl............................................ 3.13% 05/17/19 4,993,155
4,000,000 Pentair Finance Sarl............................................ 3.15% 05/21/19 3,993,111
---------------
43,942,288
---------------
OFFICE/BUSINESS EQUIPMENT -- 0.5%
5,000,000 Ricoh Finance Corp.............................................. 3.26% 05/08/19 4,996,875
5,000,000 Ricoh Finance Corp.............................................. 3.15% 05/23/19 4,990,523
10,000,000 Ricoh Finance Corp.............................................. 3.15% 05/24/19 9,980,182
---------------
19,967,580
---------------
OIL & GAS -- 2.9%
15,000,000 Eni Finance USA, Inc............................................ 2.88% 05/13/19 14,985,792
8,000,000 Eni Finance USA, Inc............................................ 2.87% 05/20/19 7,987,946
10,000,000 Eni Finance USA, Inc............................................ 2.86% - 2.87% 06/06/19 9,971,773
4,750,000 Eni Finance USA, Inc............................................ 2.82% 07/05/19 4,726,229
10,000,000 Eni Finance USA, Inc............................................ 2.85% 07/23/19 9,935,635
6,800,000 Noble Energy, Inc............................................... 2.96% 05/02/19 6,799,448
20,000,000 Sinopec Century Bright Capital Investment Ltd................... 2.88% 07/08/19 19,893,274
10,000,000 Suncor Energy, Inc.............................................. 3.00% 05/08/19 9,994,244
8,000,000 Suncor Energy, Inc.............................................. 2.96% 05/14/19 7,991,569
8,000,000 Suncor Energy, Inc.............................................. 2.90% 05/29/19 7,982,241
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
OIL & GAS (CONTINUED)
$ 8,000,000 Suncor Energy, Inc.............................................. 2.90% 06/10/19 $ 7,974,648
15,000,000 Suncor Energy, Inc.............................................. 2.88% 06/20/19 14,941,061
---------------
123,183,860
---------------
OIL & GAS SERVICES -- 0.2%
7,000,000 FMC Technologies, Inc........................................... 2.77% 05/07/19 6,996,809
---------------
PIPELINES -- 4.5%
8,000,000 Enbridge U.S., Inc.............................................. 2.84% 05/06/19 7,996,894
15,000,000 Enbridge U.S., Inc.............................................. 3.13% 05/07/19 14,992,294
7,000,000 Enbridge U.S., Inc.............................................. 2.79% 05/10/19 6,995,135
7,000,000 Enbridge U.S., Inc.............................................. 2.83% 05/17/19 6,991,338
7,000,000 Enterprise Products Operating LLC............................... 2.75% 05/07/19 6,996,833
20,000,000 ETP Legacy L.P.................................................. 3.00% 05/01/19 20,000,001
20,000,000 ETP Legacy L.P.................................................. 3.10% 05/03/19 19,996,609
20,000,000 ETP Legacy L.P.................................................. 3.05% 05/07/19 19,989,833
3,000,000 TransCanada PipeLine USA Ltd.................................... 2.87% 05/09/19 2,998,113
10,000,000 TransCanada PipeLine USA Ltd.................................... 2.87% 05/29/19 9,978,006
8,000,000 TransCanada PipeLines Ltd....................................... 2.98% 05/06/19 7,996,733
10,000,000 TransCanada PipeLines Ltd....................................... 2.89% 05/08/19 9,994,456
5,000,000 TransCanada PipeLines Ltd....................................... 2.85% 05/09/19 4,996,877
15,000,000 TransCanada PipeLines Ltd....................................... 2.95% 06/17/19 14,943,222
10,000,000 Williams Cos., (The) Inc........................................ 2.93% 05/02/19 9,999,197
23,476,000 Williams Cos., (The) Inc........................................ 2.95% 05/03/19 23,472,206
---------------
188,337,747
---------------
REAL ESTATE INVESTMENT TRUSTS -- 0.5%
20,000,000 Crown Castle International Corp................................. 3.02% 05/23/19 19,963,679
---------------
RETAIL -- 1.4%
15,000,000 AutoNation, Inc................................................. 2.95% 05/08/19 14,991,531
15,000,000 AutoNation, Inc................................................. 2.95% 05/15/19 14,983,074
15,000,000 AutoNation, Inc................................................. 2.95% 05/20/19 14,977,032
15,000,000 AutoNation, Inc................................................. 2.95% 05/21/19 14,975,829
---------------
59,927,466
---------------
SEMICONDUCTORS -- 0.5%
20,000,000 Broadcom, Inc................................................... 3.01% 05/02/19 19,998,333
---------------
TELECOMMUNICATIONS -- 1.2%
5,000,000 AT&T, Inc....................................................... 2.96% 05/28/19 4,989,125
10,000,000 Bell Canada, Inc................................................ 2.94% 05/13/19 9,990,340
10,000,000 Bell Canada, Inc................................................ 2.80% 06/04/19 9,973,968
10,000,000 Bell Canada, Inc................................................ 2.80% 06/05/19 9,973,202
8,000,000 Bell Canada, Inc................................................ 2.89% 06/10/19 7,974,740
10,000,000 Bell Canada, Inc................................................ 2.90% 08/08/19 9,921,075
---------------
52,822,450
---------------
TOTAL COMMERCIAL PAPER....................................................................... 1,597,499,720
(Cost $1,597,499,720) ---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 32.6%
AEROSPACE/DEFENSE -- 0.5%
$ 1,000,000 BAE Systems Holdings, Inc. (b).................................. 6.38% 06/01/19 $ 1,002,641
1,058,000 Lockheed Martin Corp............................................ 4.25% 11/15/19 1,066,503
7,415,000 Rockwell Collins, Inc........................................... 1.95% 07/15/19 7,402,918
715,000 United Technologies Corp., 3 Mo. LIBOR + 0.35% (a).............. 2.93% 11/01/19 715,842
10,000,000 United Technologies Corp., 3 Mo. LIBOR + 0.65% (a).............. 3.33% 08/16/21 10,010,465
---------------
20,198,369
---------------
AGRICULTURE -- 0.5%
6,000,000 BAT Capital Corp................................................ 2.30% 08/14/20 5,955,273
12,929,000 BAT Capital Corp., 3 Mo. LIBOR + 0.59% (a)...................... 3.28% 08/14/20 12,914,320
---------------
18,869,593
---------------
AIRLINES -- 0.1%
4,430,000 Southwest Airlines Co........................................... 2.75% 11/06/19 4,429,745
---------------
AUTO MANUFACTURERS -- 3.1%
6,000,000 American Honda Finance Corp.,
3 Mo. LIBOR + 0.26% (a)...................................... 2.87% 06/16/20 6,012,087
2,000,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.15% (a)...................................... 2.84% 11/13/19 2,001,557
1,000,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.34% (a)...................................... 3.03% 02/14/20 1,002,709
3,800,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.47% (a)...................................... 3.06% 01/08/21 3,818,430
1,000,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.37% (a) (b)................. 3.06% 08/14/20 1,002,965
10,000,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.41% (a) (b)................. 3.01% 04/12/21 10,020,763
4,400,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.50% (a) (b)................. 3.19% 08/13/21 4,413,618
1,400,000 Daimler Finance North America LLC (b)........................... 1.50% 07/05/19 1,396,807
1,417,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.74% (a) (b).................................. 3.34% 07/05/19 1,418,542
5,075,000 Daimler Finance North America LLC (b)........................... 1.75% 10/30/19 5,048,763
4,000,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.62% (a) (b).................................. 3.20% 10/30/19 4,005,764
5,000,000 Daimler Finance North America LLC (b)........................... 2.25% 03/02/20 4,975,715
10,000,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.39% (a) (b).................................. 3.13% 05/04/20 9,995,666
1,500,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.53% (a) (b).................................. 3.26% 05/05/20 1,501,480
4,000,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.43% (a) (b).................................. 3.13% 02/12/21 3,993,247
5,000,000 Daimler Finance North America LLC,
3 Mo. LIBOR + 0.67% (a) (b).................................. 3.40% 11/05/21 5,012,230
1,061,000 General Motors Co., 3 Mo. LIBOR + 0.80% (a)..................... 3.54% 08/07/20 1,060,648
7,845,000 General Motors Financial Co., Inc............................... 2.40% 05/09/19 7,844,623
1,000,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 1.45% (a)...................................... 4.15% 05/09/19 1,000,285
2,000,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 1.27% (a)...................................... 3.87% 10/04/19 2,007,250
5,588,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 0.93% (a)...................................... 3.53% 04/13/20 5,605,975
3,000,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 0.54% (a)...................................... 3.27% 11/06/20 2,985,048
8,000,000 General Motors Financial Co., Inc.,
3 Mo. LIBOR + 1.10% (a)...................................... 3.83% 11/06/21 8,003,330
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
AUTO MANUFACTURERS (CONTINUED)
$ 2,220,000 Nissan Motor Acceptance Corp. (b)............................... 1.55% 09/13/19 $ 2,209,562
4,500,000 Nissan Motor Acceptance Corp.,
3 Mo. LIBOR + 0.52% (a) (b).................................. 3.13% 09/13/19 4,500,869
2,700,000 Nissan Motor Acceptance Corp.,
3 Mo. LIBOR + 0.39% (a) (b).................................. 2.99% 09/28/20 2,687,617
3,000,000 Nissan Motor Acceptance Corp.,
3 Mo. LIBOR + 0.69% (a) (b).................................. 3.29% 09/28/22 2,963,400
2,000,000 PACCAR Financial Corp., Medium-Term Note,
3 Mo. LIBOR + 0.26% (a)...................................... 2.96% 05/10/21 2,002,748
500,000 Toyota Motor Credit Corp., 3 Mo. LIBOR + 0.26% (a).............. 2.85% 04/17/20 500,980
1,000,000 Toyota Motor Credit Corp., Medium-Term Note,
3 Mo. LIBOR + 0.44% (a)...................................... 3.04% 10/18/19 1,002,411
4,000,000 Toyota Motor Credit Corp., Medium-Term Note,
3 Mo. LIBOR + 0.28% (a)...................................... 2.88% 04/13/21 4,010,433
17,370,000 Volkswagen Group of America Finance LLC,
3 Mo. LIBOR + 0.77% (a) (b).................................. 3.46% 11/13/20 17,437,014
---------------
131,442,536
---------------
BANKS -- 9.2%
4,289,000 Bank of America Corp., 3 Mo. LIBOR + 0.38% (a).................. 2.97% 01/23/22 4,284,903
5,000,000 Bank of America Corp., Global Medium-Term Note,
3 Mo. LIBOR + 1.42% (a)...................................... 4.01% 04/19/21 5,102,197
4,000,000 Bank of America Corp., Global Medium-Term Note,
3 Mo. LIBOR + 0.66% (a)...................................... 3.25% 07/21/21 4,017,298
5,000,000 Bank of America Corp., Medium-Term Note......................... 2.63% 10/19/20 5,004,808
4,225,000 Bank of America Corp., Medium-Term Note,
3 Mo. LIBOR + 0.65% (a)...................................... 3.25% 06/25/22 4,235,607
10,417,000 Bank of America N.A., 3 Mo. LIBOR + 0.25% (a)................... 2.88% 08/28/20 10,422,111
4,000,000 Bank of New York Mellon (The),
3 Mo. LIBOR + 0.30% (a)...................................... 2.92% 12/04/20 4,004,946
5,000,000 BB&T Corp., Medium-Term Note.................................... 2.45% 01/15/20 4,991,538
1,031,000 BB&T Corp., Medium-Term Note,
3 Mo. LIBOR + 0.57% (a)...................................... 3.18% 06/15/20 1,035,212
260,000 Branch Banking & Trust Co., 3 Mo. LIBOR + 0.22% (a)............. 2.85% 06/01/20 260,174
2,269,000 Capital One N.A................................................. 2.40% 09/05/19 2,265,997
4,370,000 Capital One N.A., 3 Mo. LIBOR + 0.77% (a)....................... 3.37% 09/13/19 4,377,140
7,005,000 Capital One N.A................................................. 1.85% 09/13/19 6,982,971
7,000,000 Capital One N.A................................................. 2.35% 01/31/20 6,977,713
7,000,000 Citibank N.A., 3 Mo. LIBOR + 0.32% (a).......................... 2.90% 05/01/20 7,013,469
3,000,000 Citibank N.A., 3 Mo. LIBOR + 0.30% (a).......................... 2.89% 10/20/20 3,004,557
10,760,000 Citibank N.A., 3 Mo. LIBOR + 0.35% (a).......................... 3.05% 02/12/21 10,769,541
8,998,000 Citibank N.A., 3 Mo. LIBOR + 0.57% (a).......................... 3.16% 07/23/21 9,041,171
4,675,000 Citigroup, Inc., 3 Mo. LIBOR + 0.79% (a)........................ 3.37% 01/10/20 4,695,064
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.19% (a)........................ 3.93% 08/02/21 1,014,614
2,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (a)........................ 3.66% 12/08/21 2,026,169
9,959,000 Citigroup, Inc., 3 Mo. LIBOR + 0.96% (a)........................ 3.54% 04/25/22 10,071,164
6,952,000 Citizens Bank N.A./Providence RI................................ 2.25% 03/02/20 6,924,239
1,000,000 Citizens Bank N.A./Providence RI,
3 Mo. LIBOR + 0.54% (a)...................................... 3.16% 03/02/20 1,002,494
6,425,000 Citizens Bank N.A./Providence RI,
3 Mo. LIBOR + 0.57% (a)...................................... 3.22% 05/26/20 6,437,940
8,000,000 Comerica Bank................................................... 2.50% 06/02/20 7,978,391
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
$ 5,325,000 Discover Bank................................................... 3.10% 06/04/20 $ 5,340,695
4,000,000 Fifth Third Bank/Cincinnati OH.................................. 1.63% 09/27/19 3,983,053
7,725,000 Fifth Third Bank/Cincinnati OH,
3 Mo. LIBOR + 0.44% (a)...................................... 3.03% 07/26/21 7,733,789
6,540,000 Goldman Sachs Group, (The), Inc................................. 2.55% 10/23/19 6,537,449
3,000,000 Goldman Sachs Group, (The), Inc.,
3 Mo. LIBOR + 0.80% (a)...................................... 3.41% 12/13/19 3,010,400
6,000,000 Goldman Sachs Group, (The), Inc................................. 2.60% 04/23/20 5,988,741
6,500,000 Goldman Sachs Group, (The), Inc.,
3 Mo. LIBOR + 1.16% (a)...................................... 3.75% 04/23/20 6,553,706
2,000,000 Goldman Sachs Group, (The), Inc.,
3 Mo. LIBOR + 1.20% (a)...................................... 3.81% 09/15/20 2,021,776
3,000,000 Goldman Sachs Group, (The), Inc.,
3 Mo. LIBOR + 0.73% (a)...................................... 3.34% 12/27/20 3,008,099
7,308,000 Goldman Sachs Group, (The), Inc.,
3 Mo. LIBOR + 1.17% (a)...................................... 3.85% 11/15/21 7,372,683
6,710,000 Huntington National Bank (The).................................. 2.38% 03/10/20 6,696,525
5,000,000 JPMorgan Chase & Co............................................. 2.25% 01/23/20 4,985,294
15,470,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.55% (a)................... 3.15% 03/09/21 15,507,601
5,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.68% (a)................... 3.31% 06/01/21 5,023,069
2,625,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.23% (a)............... 2.86% 09/01/20 2,626,819
6,500,000 JPMorgan Chase Bank N.A., SOFR + 0.55% (a)...................... 3.03% 10/19/20 6,504,101
2,562,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.29% (a)............... 2.87% 02/01/21 2,563,393
5,000,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.37% (a)............... 3.05% 02/19/21 5,007,162
10,000,000 JPMorgan Chase Bank N.A., 3 Mo. LIBOR + 0.34% (a)............... 2.93% 04/26/21 10,012,548
4,435,000 KeyBank N.A./Cleveland OH....................................... 1.60% 08/22/19 4,421,465
6,000,000 KeyBank N.A./Cleveland OH....................................... 2.50% 12/15/19 5,993,334
3,300,000 KeyBank N.A./Cleveland OH,
3 Mo. LIBOR + 0.81% (a)...................................... 3.47% 11/22/21 3,326,412
7,057,000 Morgan Stanley, 3 Mo. LIBOR + 1.14% (a)......................... 3.72% 01/27/20 7,104,729
8,950,000 Morgan Stanley, 3 Mo. LIBOR + 1.18% (a)......................... 3.77% 01/20/22 9,049,582
18,224,000 Morgan Stanley, Global Medium-Term Note,
3 Mo. LIBOR + 0.55% (a)...................................... 3.25% 02/10/21 18,250,742
11,000,000 Morgan Stanley, Global Medium-Term Note,
3 Mo. LIBOR + 1.40% (a)...................................... 3.99% 04/21/21 11,200,777
7,750,000 PNC Bank N.A., 3 Mo. LIBOR + 0.36% (a).......................... 3.04% 05/19/20 7,769,188
20,000,000 PNC Bank N.A., 3 Mo. LIBOR + 0.35% (a).......................... 2.95% 03/12/21 20,035,077
2,315,000 PNC Financial Services Group, (The), Inc........................ 6.70% 06/10/19 2,324,613
12,050,000 Regions Bank/Birmingham AL,
3 Mo. LIBOR + 0.38% (a)...................................... 2.97% 04/01/21 12,000,237
7,000,000 Regions Bank/Birmingham AL,
3 Mo. LIBOR + 0.50% (a)...................................... 3.19% 08/13/21 6,980,908
5,916,000 SunTrust Bank/Atlanta GA........................................ 2.25% 01/31/20 5,895,645
7,000,000 SunTrust Bank/Atlanta GA, 3 Mo. LIBOR + 0.50% (a)............... 3.09% 10/26/21 7,009,590
5,000,000 US Bank N.A./Cincinnati OH,
3 Mo. LIBOR + 0.25% (a)...................................... 2.83% 07/24/20 5,013,821
2,000,000 US Bank N.A./Cincinnati OH,
3 Mo. LIBOR + 0.32% (a)...................................... 2.91% 04/26/21 2,005,017
2,500,000 Wells Fargo & Co., Medium-Term Note, Series N,
3 Mo. LIBOR + 0.68% (a)...................................... 3.26% 01/30/20 2,510,727
1,735,000 Wells Fargo & Co., Medium-Term Note, Series N................... 2.15% 01/30/20 1,728,225
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
$ 4,105,000 Wells Fargo Bank N.A............................................ 1.75% 05/24/19 $ 4,102,904
3,793,000 Wells Fargo Bank N.A., 3 Mo. LIBOR + 0.50% (a).................. 3.09% 07/23/21 3,801,990
2,890,000 Wells Fargo Bank N.A., Medium-Term Note,
3 Mo. LIBOR + 0.65% (a)...................................... 3.26% 12/06/19 2,900,421
---------------
387,843,735
---------------
BEVERAGES -- 0.3%
3,000,000 Constellation Brands, Inc....................................... 2.00% 11/07/19 2,987,568
10,000,000 Constellation Brands, Inc., 3 Mo. LIBOR + 0.70% (a)............. 3.38% 11/15/21 10,008,421
585,000 Molson Coors Brewing Co......................................... 1.45% 07/15/19 583,542
---------------
13,579,531
---------------
BIOTECHNOLOGY -- 0.5%
4,500,000 Amgen, Inc., 3 Mo. LIBOR + 0.32% (a)............................ 3.02% 05/10/19 4,500,475
6,391,000 Amgen, Inc...................................................... 2.20% 05/22/19 6,389,774
4,345,000 Amgen, Inc., 3 Mo. LIBOR + 0.60% (a)............................ 3.26% 05/22/19 4,346,556
4,000,000 Gilead Sciences, Inc., 3 Mo. LIBOR + 0.25% (a).................. 2.88% 09/20/19 4,003,102
---------------
19,239,907
---------------
BUILDING MATERIALS -- 0.1%
2,000,000 Martin Marietta Materials, Inc.,
3 Mo. LIBOR + 0.50% (a)...................................... 3.13% 12/20/19 2,000,961
2,000,000 Vulcan Materials Co., 3 Mo. LIBOR + 0.60% (a)................... 3.21% 06/15/20 1,998,278
---------------
3,999,239
---------------
CHEMICALS -- 0.4%
2,000,000 Chevron Phillips Chemical Co. LLC / Chevron Phillips
Chemical Co., L.P., 3 Mo. LIBOR + 0.75% (a) (b).............. 3.33% 05/01/20 2,005,321
5,934,000 DowDuPont, Inc., 3 Mo. LIBOR + 0.71% (a)........................ 3.39% 11/15/20 5,982,335
8,385,000 EI du Pont de Nemours & Co.,
3 Mo. LIBOR + 0.53% (a)...................................... 3.11% 05/01/20 8,414,242
---------------
16,401,898
---------------
COMMERCIAL SERVICES -- 0.2%
5,650,000 ERAC USA Finance LLC (b)........................................ 2.35% 10/15/19 5,639,885
1,016,000 ERAC USA Finance LLC (b)........................................ 5.25% 10/01/20 1,048,252
---------------
6,688,137
---------------
COMPUTERS -- 0.2%
9,287,000 Hewlett Packard Enterprise Co. (b).............................. 2.10% 10/04/19 9,259,746
---------------
DIVERSIFIED FINANCIAL SERVICES -- 2.0%
11,176,000 Air Lease Corp.................................................. 2.13% 01/15/20 11,121,223
7,400,000 American Express Co., 3 Mo. LIBOR + 0.33% (a)................... 2.91% 10/30/20 7,409,081
6,000,000 American Express Co., 3 Mo. LIBOR + 0.53% (a)................... 3.21% 05/17/21 6,027,737
3,000,000 American Express Co., 3 Mo. LIBOR + 0.60% (a)................... 3.33% 11/05/21 3,014,826
3,000,000 American Express Co., 3 Mo. LIBOR + 0.75% (a)................... 3.49% 08/03/23 3,020,501
3,000,000 American Express Credit Corp., Global Medium-Term
Note......................................................... 2.25% 08/15/19 2,997,183
1,700,000 American Express Credit Corp., Global Medium-Term
Note, 3 Mo. LIBOR + 0.49% (a)................................ 3.17% 08/15/19 1,702,113
2,000,000 American Express Credit Corp., Medium-Term Note,
3 Mo. LIBOR + 0.57% (a)...................................... 3.15% 10/30/19 2,003,904
17,000,000 Capital One Financial Corp., 3 Mo. LIBOR + 0.76% (a)............ 3.46% 05/12/20 17,087,684
2,870,000 Capital One Financial Corp., 3 Mo. LIBOR + 0.45% (a)............ 3.03% 10/30/20 2,871,982
9,480,000 Charles Schwab (The) Corp., 3 Mo. LIBOR + 0.32% (a)............. 2.96% 05/21/21 9,489,986
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
$ 3,000,000 International Lease Finance Corp................................ 6.25% 05/15/19 $ 3,003,464
7,000,000 Nasdaq, Inc..................................................... 5.55% 01/15/20 7,136,905
6,633,000 TD Ameritrade Holding Corp.,
3 Mo. LIBOR + 0.43% (a)...................................... 3.01% 11/01/21 6,658,110
---------------
83,544,699
---------------
ELECTRIC -- 2.0%
11,000,000 Consolidated Edison Co. of New York Inc., Series C,
3 Mo. LIBOR + 0.40% (a)...................................... 3.00% 06/25/21 11,015,931
10,655,000 Dominion Energy, Inc., Series B................................. 1.60% 08/15/19 10,619,488
2,590,000 DTE Energy Co................................................... 1.50% 10/01/19 2,575,495
194,250 Duke Energy Florida LLC......................................... 2.10% 12/15/19 193,750
5,439,000 Exelon Generation Co. LLC....................................... 5.20% 10/01/19 5,484,088
8,363,000 Exelon Generation Co. LLC....................................... 2.95% 01/15/20 8,367,629
5,000,000 NextEra Energy Capital Holdings, Inc............................ 2.40% 09/15/19 4,993,118
5,000,000 NextEra Energy Capital Holdings, Inc............................ 2.70% 09/15/19 4,995,513
10,000,000 Progress Energy, Inc............................................ 4.88% 12/01/19 10,116,178
6,000,000 Public Service Co. of Oklahoma.................................. 5.15% 12/01/19 6,085,207
13,155,000 Public Service Enterprise Group, Inc............................ 1.60% 11/15/19 13,076,222
4,000,000 Sempra Energy................................................... 1.63% 10/07/19 3,979,941
2,500,000 Southern (The) Co., 3 Mo. LIBOR + 0.70% (a) (b)................. 3.29% 09/30/20 2,501,629
---------------
84,004,189
---------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0%
525,000 Molex Electronic Technologies LLC (b)........................... 2.88% 04/15/20 524,302
---------------
ENVIRONMENTAL CONTROL -- 0.1%
6,000,000 Republic Services, Inc.......................................... 5.50% 09/15/19 6,058,538
---------------
FOOD -- 1.0%
13,000,000 Conagra Brands, Inc., 3 Mo. LIBOR + 0.75% (a)................... 3.34% 10/22/20 13,005,515
10,368,000 General Mills, Inc.............................................. 2.20% 10/21/19 10,335,099
2,472,000 General Mills, Inc, 3 Mo. LIBOR + 0.54% (a)..................... 3.14% 04/16/21 2,476,476
4,000,000 Kroger (The) Co................................................. 6.15% 01/15/20 4,092,235
3,930,000 Kroger (The) Co., Global Medium-Term Note....................... 1.50% 09/30/19 3,910,611
6,084,000 Tyson Foods, Inc., 3 Mo. LIBOR + 0.55% (a)...................... 3.17% 06/02/20 6,088,916
---------------
39,908,852
---------------
GAS -- 0.1%
4,103,000 Dominion Energy Gas Holdings LLC................................ 2.80% 11/15/20 4,108,832
---------------
HEALTH CARE PRODUCTS -- 0.3%
3,000,000 Becton Dickinson and Co......................................... 2.13% 06/06/19 2,997,529
8,595,000 Zimmer Biomet Holdings, Inc..................................... 4.63% 11/30/19 8,678,052
---------------
11,675,581
---------------
HEALTH CARE SERVICES -- 0.5%
8,500,000 Anthem, Inc..................................................... 2.25% 08/15/19 8,487,655
2,800,000 Roche Holdings, Inc., 3 Mo. LIBOR + 0.34% (a) (b)............... 2.94% 09/30/19 2,803,472
4,000,000 UnitedHealth Group, Inc......................................... 2.30% 12/15/19 3,992,179
1,000,000 UnitedHealth Group, Inc., 3 Mo. LIBOR + 0.07% (a)............... 2.67% 10/15/20 998,249
5,000,000 UnitedHealth Group, Inc., 3 Mo. LIBOR + 0.26% (a)............... 2.87% 06/15/21 5,001,094
---------------
21,282,649
---------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
INSURANCE -- 2.2%
$ 1,000,000 Allstate (The) Corp., 3 Mo. LIBOR + 0.43% (a)................... 3.03% 03/29/21 $ 1,001,651
2,782,000 Allstate (The) Corp., 3 Mo. LIBOR + 0.63% (a)................... 3.23% 03/29/23 2,771,405
11,074,000 American International Group, Inc............................... 2.30% 07/16/19 11,066,142
5,490,000 Jackson National Life Global Funding,
3 Mo. LIBOR + 0.30% (a) (b).................................. 2.88% 04/27/20 5,497,792
3,750,000 Jackson National Life Global Funding,
3 Mo. LIBOR + 0.30% (a) (b)................................. 2.90% 10/15/20 3,748,681
6,510,000 Jackson National Life Global Funding,
3 Mo. LIBOR + 0.48% (a) (b).................................. 3.08% 06/11/21 6,535,926
6,000,000 Lincoln National Corp........................................... 6.25% 02/15/20 6,157,069
4,273,000 Marsh & McLennan Cos., Inc...................................... 2.35% 09/10/19 4,267,759
1,730,000 Metropolitan Life Global Funding I (b).......................... 1.55% 09/13/19 1,722,763
5,000,000 Metropolitan Life Global Funding I,
SOFR + 0.57% (a) (b)......................................... 3.05% 09/07/20 4,998,461
10,000,000 Metropolitan Life Global Funding I,
3 Mo. LIBOR + 0.23% (a) (b).................................. 2.82% 01/08/21 9,994,082
2,000,000 New York Life Global Funding,
3 Mo. LIBOR + 0.28% (a) (b).................................. 2.86% 01/28/21 2,005,781
2,900,000 Principal Life Global Funding II (b)............................ 2.20% 04/08/20 2,887,141
1,435,000 Protective Life Global Funding (b).............................. 1.56% 09/13/19 1,429,084
14,300,000 Protective Life Global Funding,
3 Mo. LIBOR + 0.52% (a) (b).................................. 3.12% 06/28/21 14,328,820
7,462,000 Prudential Financial, Inc., Medium-Term Note.................... 2.35% 08/15/19 7,454,622
7,306,000 Hartford Financial Services Group (The), Inc.................... 5.50% 03/30/20 7,480,629
---------------
93,347,808
---------------
INTERNET -- 0.0%
1,000,000 eBay, Inc., 3 Mo. LIBOR + 0.48% (a)............................. 3.06% 08/01/19 1,000,798
---------------
LODGING -- 0.4%
13,405,000 Marriott International, Inc., Series Y,
3 Mo. LIBOR + 0.60% (a)...................................... 3.23% 12/01/20 13,453,084
1,850,000 Marriott International, Inc., 3 Mo. LIBOR + 0.65% (a)........... 3.24% 03/08/21 1,858,628
---------------
15,311,712
---------------
MACHINERY-CONSTRUCTION & MINING -- 0.5%
1,700,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.51% (a)...................................... 3.09% 01/10/20 1,704,733
2,571,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.18% (a)...................................... 2.86% 05/15/20 2,574,615
2,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.25% (a)...................................... 2.90% 08/26/20 2,003,493
6,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.23% (a)...................................... 2.84% 03/15/21 6,007,957
9,879,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.28% (a)...................................... 2.89% 09/07/21 9,883,104
---------------
22,173,902
---------------
MEDIA -- 1.4%
14,980,000 Comcast Corp, 3 Mo. LIBOR + 0.33% (a)........................... 2.92% 10/01/20 15,012,702
4,271,000 Discovery Communications LLC.................................... 2.20% 09/20/19 4,259,669
14,910,000 Discovery Communications LLC,
3 Mo. LIBOR + 0.71% (a)...................................... 3.34% 09/20/19 14,931,295
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
MEDIA (CONTINUED)
$ 22,810,000 NBCUniversal Enterprise, Inc.,
3 Mo. LIBOR + 0.40% (a) (b).................................. 2.99% 04/01/21 $ 22,887,853
---------------
57,091,519
---------------
OIL & GAS -- 1.1%
5,000,000 BP Capital Markets America, Inc.,
3 Mo. LIBOR + 0.65% (a)...................................... 3.28% 09/19/22 5,009,182
3,500,000 Chevron Corp., 3 Mo. LIBOR + 0.95% (a).......................... 3.63% 05/16/21 3,556,801
9,883,000 ConocoPhillips Co., 3 Mo. LIBOR + 0.90% (a)..................... 3.58% 05/15/22 10,003,214
5,000,000 EOG Resources, Inc.............................................. 2.45% 04/01/20 4,988,769
4,075,000 EOG Resources, Inc.............................................. 4.40% 06/01/20 4,150,970
3,000,000 EQT Corp., 3 Mo. LIBOR + 0.77% (a).............................. 3.36% 10/01/20 2,991,410
4,507,000 Marathon Petroleum Corp......................................... 3.40% 12/15/20 4,544,405
3,250,000 Phillips 66, 3 Mo. LIBOR + 0.75% (a) (b)........................ 3.35% 04/15/20 3,250,785
7,419,000 Phillips 66, 3 Mo. LIBOR + 0.60% (a)............................ 3.25% 02/26/21 7,419,575
---------------
45,915,111
---------------
PHARMACEUTICALS -- 1.6%
4,000,000 AbbVie, Inc..................................................... 2.50% 05/14/20 3,987,842
5,000,000 Bayer US Finance II LLC (b)..................................... 2.13% 07/15/19 4,987,464
5,000,000 Bayer US Finance II LLC, 3 Mo. LIBOR + 0.63% (a) (b)............ 3.23% 06/25/21 4,973,437
7,000,000 Cigna Corp., 3 Mo. LIBOR + 0.35% (a) (b)........................ 2.96% 03/17/20 7,003,864
11,000,000 Cigna Corp., 3 Mo. LIBOR + 0.65% (a) (b)........................ 3.26% 09/17/21 11,003,671
3,000,000 CVS Health Corp................................................. 2.25% 08/12/19 2,995,272
15,600,000 CVS Health Corp., 3 Mo. LIBOR + 0.63% (a)....................... 3.23% 03/09/20 15,654,077
6,000,000 CVS Health Corp., 3 Mo. LIBOR + 0.72% (a)....................... 3.32% 03/09/21 6,026,063
9,000,000 Express Scripts Holding Co...................................... 2.25% 06/15/19 8,993,172
2,500,000 Express Scripts Holding Co., 3 Mo. LIBOR + 0.75% (a)............ 3.38% 11/30/20 2,500,240
---------------
68,125,102
---------------
PIPELINES -- 1.9%
4,415,000 Andeavor Logistics L.P. / Tesoro Logistics Finance Corp. ....... 5.50% 10/15/19 4,453,623
14,097,000 Boardwalk Pipelines L.P......................................... 5.75% 09/15/19 14,192,768
5,000,000 Enbridge Energy Partners, L.P................................... 4.38% 10/15/20 5,100,050
12,817,000 Enterprise Products Operating LLC............................... 2.55% 10/15/19 12,799,695
5,225,000 Enterprise Products Operating LLC............................... 5.25% 01/31/20 5,311,848
1,973,000 Enterprise Products Operating LLC............................... 5.20% 09/01/20 2,035,003
6,000,000 Kinder Morgan Energy Partners L.P............................... 6.50% 04/01/20 6,190,160
14,491,000 Kinder Morgan, Inc.............................................. 3.05% 12/01/19 14,501,802
3,000,000 ONEOK Partners, L.P............................................. 3.80% 03/15/20 3,016,831
6,000,000 Plains All American Pipeline LP / PAA Finance Corp.............. 2.60% 12/15/19 5,986,537
4,085,000 Spectra Energy Partners, L.P., 3 Mo. LIBOR + 0.70% (a).......... 3.30% 06/05/20 4,094,187
3,000,000 Williams Cos. (The), Inc........................................ 5.25% 03/15/20 3,058,463
---------------
80,740,967
---------------
RETAIL -- 0.4%
9,421,000 Dollar Tree, Inc., 3 Mo. LIBOR + 0.70% (a)...................... 3.29% 04/17/20 9,421,804
8,675,000 Walgreens Boots Alliance, Inc................................... 2.70% 11/18/19 8,672,007
---------------
18,093,811
---------------
SEMICONDUCTORS -- 0.1%
3,000,000 Lam Research Corp............................................... 2.75% 03/15/20 2,999,087
---------------
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS -- 1.2%
$ 18,000,000 AT&T, Inc., 3 Mo. LIBOR + 0.65% (a)............................. 3.25% 01/15/20 $ 18,063,895
2,000,000 AT&T, Inc., 3 Mo. LIBOR + 0.93% (a)............................. 3.53% 06/30/20 2,015,720
7,940,000 AT&T, Inc., 3 Mo. LIBOR + 0.75% (a)............................. 3.38% 06/01/21 7,995,626
8,000,000 AT&T, Inc., 3 Mo. LIBOR + 0.95% (a)............................. 3.55% 07/15/21 8,091,686
1,000,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 0.37% (a)...................................... 3.05% 08/15/19 1,000,896
9,000,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 0.55% (a)...................................... 3.21% 05/22/20 9,036,698
6,000,000 Verizon Communications, Inc.,
3 Mo. LIBOR + 1.00% (a)...................................... 3.61% 03/16/22 6,116,540
---------------
52,321,061
---------------
TRANSPORTATION -- 0.3%
10,612,000 Ryder System, Inc., Medium-Term Note............................ 2.55% 06/01/19 10,606,584
4,000,000 Ryder System, Inc., Medium-Term Note............................ 2.45% 09/03/19 3,994,997
---------------
14,601,581
---------------
TRUCKING & LEASING -- 0.4%
2,000,000 Aviation Capital Group LLC,
3 Mo. LIBOR + 0.95% (a) (b).................................. 3.58% 06/01/21 2,007,323
15,813,000 Penske Truck Leasing Co., L.P. / PTL Finance Corp. (b).......... 2.50% 06/15/19 15,802,858
---------------
17,810,181
---------------
TOTAL CORPORATE BONDS........................................................................ 1,372,592,718
(Cost $1,371,183,464) ---------------
FOREIGN CORPORATE BONDS -- 14.5%
BANKS -- 11.3%
14,885,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.41% (a) (b)................. 3.00% 01/19/21 14,915,068
3,900,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.57% (a) (b)................. 3.21% 08/27/21 3,915,994
2,000,000 ANZ New Zealand Int'l Ltd/London (b)............................ 2.85% 08/06/20 2,002,891
5,000,000 ANZ New Zealand Int'l Ltd/London (b)............................ 2.75% 01/22/21 4,991,953
2,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.66% (a) (b).................................. 3.26% 09/23/19 2,005,226
3,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.50% (a) (b).................................. 3.18% 08/19/20 3,011,967
12,090,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.46% (a) (b).................................. 3.14% 05/17/21 12,126,717
3,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.99% (a) (b).................................. 3.62% 06/01/21 3,038,653
3,000,000 Bank of Montreal, Medium-Term Note.............................. 1.50% 07/18/19 2,993,173
3,750,000 Bank of Montreal, Medium-Term Note,
3 Mo. LIBOR + 0.44% (a)...................................... 3.05% 06/15/20 3,765,862
1,222,000 Bank of Montreal, Medium-Term Note,
3 Mo. LIBOR + 0.34% (a)...................................... 2.94% 07/13/20 1,225,097
11,526,000 Bank of Montreal, Medium-Term Note, Series D,
3 Mo. LIBOR + 0.46% (a)...................................... 3.06% 04/13/21 11,581,080
2,000,000 Bank of Montreal, Medium-Term Note,
3 Mo. LIBOR + 0.79% (a)...................................... 3.43% 08/27/21 2,021,423
8,740,000 Bank of Nova Scotia (The), 3 Mo. LIBOR + 0.39% (a).............. 2.99% 07/14/20 8,774,573
17,867,000 Bank of Nova Scotia (The), 3 Mo. LIBOR + 0.44% (a).............. 3.03% 04/20/21 17,944,079
5,500,000 Barclays Bank PLC............................................... 5.13% 01/08/20 5,579,817
1,770,000 Barclays Bank PLC, 3 Mo. LIBOR + 0.46% (a)...................... 3.04% 01/11/21 1,763,584
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
$ 13,080,000 Barclays PLC.................................................... 2.75% 11/08/19 $ 13,079,254
6,000,000 Barclays PLC.................................................... 2.88% 06/08/20 5,990,394
380,000 BPCE S.A. (b)................................................... 3.15% 07/31/20 381,467
2,970,000 Commonwealth Bank of Australia (b).............................. 5.00% 10/15/19 3,002,914
2,000,000 Commonwealth Bank of Australia,
3 Mo. LIBOR + 0.64% (a) (b).................................. 3.38% 11/07/19 2,006,555
3,780,000 Cooperatieve Rabobank UA/NY..................................... 1.38% 08/09/19 3,767,165
5,200,000 Cooperatieve Rabobank UA/NY,
3 Mo. LIBOR + 0.43% (a)...................................... 3.02% 04/26/21 5,217,769
20,000,000 Credit Agricole Corporate & Investment Bank S.A.,
Medium-Term Note, 3 Mo. LIBOR + 0.40% (a) (b)................ 2.98% 05/03/21 19,994,400
10,000,000 Credit Agricole Corporate & Investment Bank S.A.,
Medium-Term Note, 3 Mo. LIBOR + 0.63% (a).................... 3.22% 10/03/21 10,034,327
500,000 Credit Agricole S.A./London (b)................................. 2.75% 06/10/20 500,196
1,400,000 Credit Agricole S.A./London,
3 Mo. LIBOR + 0.97% (a) (b).................................. 3.57% 06/10/20 1,411,648
3,000,000 Credit Agricole S.A./London,
3 Mo. LIBOR + 1.18% (a) (b).................................. 3.77% 07/01/21 3,045,939
5,696,000 Credit Suisse AG/New York NY, Global Medium-Term
Note......................................................... 2.30% 05/28/19 5,694,866
5,000,000 Credit Suisse AG/New York NY, Medium-Term Note.................. 4.38% 08/05/20 5,099,119
6,000,000 Credit Suisse Group Funding Guernsey Ltd........................ 2.75% 03/26/20 5,989,550
5,000,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.13% 12/10/20 5,014,636
1,125,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.45% 04/16/21 1,137,206
3,000,000 Credit Suisse Group Funding Guernsey Ltd.,
3 Mo. LIBOR + 2.29% (a)...................................... 4.89% 04/16/21 3,102,197
3,000,000 Danske Bank A/S, 3 Mo. LIBOR + 0.58% (a) (b).................... 3.19% 09/06/19 2,998,207
1,200,000 Danske Bank A/S, 3 Mo. LIBOR + 0.51% (a) (b).................... 3.13% 03/02/20 1,195,557
2,000,000 Deutsche Bank AG, 3 Mo. LIBOR + 1.91% (a)....................... 4.61% 05/10/19 2,000,720
6,000,000 HSBC Holdings PLC............................................... 3.40% 03/08/21 6,062,831
2,000,000 HSBC Holdings PLC, 3 Mo. LIBOR + 2.24% (a)...................... 4.83% 03/08/21 2,064,201
19,262,000 HSBC Holdings PLC, 3 Mo. LIBOR + 0.60% (a)...................... 3.28% 05/18/21 19,295,149
6,000,000 HSBC Holdings PLC, 3 Mo. LIBOR + 0.65% (a)...................... 3.25% 09/11/21 6,011,769
3,000,000 ING Bank N.V., 3 Mo. LIBOR + 0.61% (a) (b)...................... 3.29% 08/15/19 3,005,057
7,310,000 Lloyds Bank PLC, 3 Mo. LIBOR + 0.49% (a)........................ 3.23% 05/07/21 7,316,991
4,866,000 Lloyds Bank PLC................................................. 3.30% 05/07/21 4,912,249
19,221,000 Mitsubishi UFJ Financial Group, Inc.,
3 Mo. LIBOR + 0.65% (a)...................................... 3.24% 07/26/21 19,323,733
1,500,000 Mitsubishi UFJ Financial Group, Inc.,
3 Mo. LIBOR + 0.92% (a)...................................... 3.58% 02/22/22 1,514,128
1,720,000 Mitsubishi UFJ Trust & Banking Corp. (b)........................ 2.45% 10/16/19 1,718,380
5,000,000 Mizuho Financial Group, Inc. (b)................................ 2.63% 04/12/21 4,981,347
500,000 Mizuho Financial Group, Inc.,
3 Mo. LIBOR + 1.48% (a) (b).................................. 4.08% 04/12/21 508,749
2,400,000 MUFG Bank Ltd. (b).............................................. 2.35% 09/08/19 2,396,913
250,000 National Australia Bank Ltd.,
3 Mo. LIBOR + 0.59% (a) (b).................................. 3.17% 01/10/20 250,911
4,223,000 National Australia Bank Ltd.,
3 Mo. LIBOR + 0.51% (a) (b).................................. 3.17% 05/22/20 4,243,519
785,000 National Australia Bank Ltd./New York........................... 1.38% 07/12/19 783,195
4,075,000 National Bank of Canada......................................... 2.20% 11/02/20 4,045,259
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
$ 1,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.62% (a) (b).................... 3.22% 09/30/19 $ 1,002,099
250,000 Nordea Bank Abp (b)............................................. 2.13% 05/29/20 248,406
3,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.47% (a) (b).................... 3.10% 05/29/20 3,011,097
5,000,000 Nordea Bank Abp (b)............................................. 2.50% 09/17/20 4,980,954
1,000,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.48% (a)...................................... 3.06% 07/29/19 1,001,130
2,900,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.38% (a)...................................... 3.00% 03/02/20 2,908,848
13,445,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.39% (a)...................................... 2.97% 04/30/21 13,502,701
8,000,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.47% (a)...................................... 3.05% 04/29/22 8,008,921
1,042,000 Royal Bank of Canada, Medium-Term Note,
3 Mo. LIBOR + 0.40% (a)...................................... 2.98% 01/25/21 1,044,908
2,015,000 Santander UK Group Holdings PLC................................. 2.88% 10/16/20 2,014,569
6,250,000 Santander UK Group Holdings PLC................................. 3.13% 01/08/21 6,258,269
3,400,000 Santander UK PLC................................................ 2.13% 11/03/20 3,363,349
9,900,000 Santander UK PLC, 3 Mo. LIBOR + 0.62% (a)....................... 3.25% 06/01/21 9,917,250
2,200,000 Skandinaviska Enskilda Banken AB,
3 Mo. LIBOR + 0.57% (a) (b).................................. 3.18% 09/13/19 2,203,780
4,800,000 Skandinaviska Enskilda Banken AB (b)............................ 2.63% 11/17/20 4,786,138
1,000,000 Skandinaviska Enskilda Banken AB................................ 2.63% 03/15/21 998,005
9,000,000 Skandinaviska Enskilda Banken AB,
3 Mo. LIBOR + 0.43% (a) (b).................................. 3.11% 05/17/21 9,021,087
410,000 Societe Generale S.A. (b)....................................... 2.63% 09/16/20 409,259
1,000,000 Societe Generale S.A., 3 Mo. LIBOR + 1.33% (a) (b).............. 3.92% 04/08/21 1,016,846
3,000,000 Sumitomo Mitsui Banking Corp.................................... 2.09% 10/18/19 2,991,510
7,525,000 Sumitomo Mitsui Banking Corp.,
3 Mo. LIBOR + 0.31% (a)...................................... 2.91% 10/18/19 7,534,369
4,475,000 Sumitomo Mitsui Banking Corp.,
3 Mo. LIBOR + 0.35% (a)...................................... 2.94% 01/17/20 4,484,592
2,000,000 Sumitomo Mitsui Banking Corp.,
3 Mo. LIBOR + 0.37% (a)...................................... 2.97% 10/16/20 2,003,019
8,000,000 Sumitomo Mitsui Banking Corp., Global Medium-Term
Note......................................................... 2.25% 07/11/19 7,993,830
2,712,000 Sumitomo Mitsui Financial Group, Inc.,
3 Mo. LIBOR + 1.68% (a)...................................... 4.28% 03/09/21 2,775,331
5,000,000 Sumitomo Mitsui Financial Group, Inc.,
3 Mo. LIBOR + 1.11% (a)...................................... 3.71% 07/14/21 5,070,920
1,000,000 Sumitomo Mitsui Trust Bank Ltd.,
3 Mo. LIBOR + 0.44% (a) (b).................................. 3.07% 09/19/19 1,001,060
1,000,000 Svenska Handelsbanken AB, Medium-Term Note,
3 Mo. LIBOR + 0.49% (a)...................................... 3.10% 09/06/19 1,001,591
3,500,000 Svenska Handelsbanken AB, Medium-Term Note,
3 Mo. LIBOR + 0.47% (a)...................................... 3.12% 05/24/21 3,515,614
7,000,000 Toronto-Dominion Bank (The)..................................... 1.45% 08/13/19 6,978,669
4,804,000 Toronto-Dominion Bank (The), Global Medium-Term Note,
3 Mo. LIBOR + 0.26% (a)...................................... 2.87% 09/17/20 4,815,819
2,000,000 UBS AG/London, 3 Mo. LIBOR + 0.32% (a) (b)...................... 2.95% 05/28/19 2,000,584
15,000,000 UBS AG/London (b)............................................... 2.20% 06/08/20 14,925,870
7,000,000 UBS AG/London, 3 Mo. LIBOR + 0.58% (a) (b)...................... 3.17% 06/08/20 7,032,032
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
BANKS (CONTINUED)
$ 6,800,000 UBS AG/London, 3 Mo. LIBOR + 0.48% (a) (b)...................... 3.11% 12/01/20 $ 6,817,150
8,150,000 UBS AG/Stamford CT, Global Medium-Term Note..................... 2.38% 08/14/19 8,144,895
6,000,000 UBS Group Funding Switzerland AG,
3 Mo. LIBOR + 1.78% (a) (b).................................. 4.38% 04/14/21 6,145,824
350,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.71% (a).................. 3.40% 05/13/19 350,094
4,035,000 Westpac Banking Corp............................................ 1.60% 08/19/19 4,022,708
8,261,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.34% (a).................. 2.93% 01/25/21 8,274,064
---------------
474,332,785
---------------
BEVERAGES -- 0.1%
2,457,000 Pernod Ricard S.A. (b).......................................... 5.75% 04/07/21 2,585,711
---------------
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
25,808,000 AerCap Ireland Capital DAC / AerCap Global Aviation
Trust........................................................ 3.75% 05/15/19 25,815,057
---------------
ELECTRONICS -- 0.0%
1,000,000 Tyco Electronics Group S.A., 3 Mo. LIBOR + 0.45% (a)............ 3.05% 06/05/20 1,001,921
---------------
FOOD -- 0.4%
8,000,000 Mondelez International Holdings Netherlands BV (b).............. 1.63% 10/28/19 7,955,471
8,000,000 Mondelez International Holdings Netherlands BV,
3 Mo. LIBOR + 0.61% (a) (b).................................. 3.19% 10/28/19 8,014,888
---------------
15,970,359
---------------
MISCELLANEOUS MANUFACTURING -- 0.1%
3,000,000 Siemens Financieringsmaatschappij N.V.,
3 Mo. LIBOR + 0.32% (a) (b).................................. 2.93% 09/13/19 3,004,573
2,000,000 Siemens Financieringsmaatschappij N.V.,
3 Mo. LIBOR + 0.34% (a) (b).................................. 2.95% 03/16/20 2,005,649
---------------
5,010,222
---------------
OIL & GAS -- 0.6%
3,000,000 BP Capital Markets PLC.......................................... 1.68% 05/03/19 2,999,919
7,000,000 BP Capital Markets PLC.......................................... 2.52% 01/15/20 6,993,949
2,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.87% (a)................. 3.48% 09/16/21 2,027,703
13,595,000 Encana Corp..................................................... 6.50% 05/15/19 13,612,434
1,440,000 Shell International Finance BV,
3 Mo. LIBOR + 0.35% (a)...................................... 2.95% 09/12/19 1,442,245
---------------
27,076,250
---------------
PHARMACEUTICALS -- 0.6%
4,490,000 Allergan Funding SCS............................................ 3.00% 03/12/20 4,491,794
2,000,000 Allergan Funding SCS, 3 Mo. LIBOR + 1.26% (a)................... 3.85% 03/12/20 2,016,129
1,500,000 Mylan N.V....................................................... 2.50% 06/07/19 1,499,197
16,285,000 Shire Acquisitions Investments Ireland DAC...................... 1.90% 09/23/19 16,223,946
---------------
24,231,066
---------------
PIPELINES -- 0.6%
7,965,000 Enbridge, Inc., 3 Mo. LIBOR + 0.40% (a)......................... 2.98% 01/10/20 7,967,132
8,500,000 TransCanada Pipelines Ltd....................................... 2.13% 11/15/19 8,468,530
6,840,000 TransCanada PipeLines Ltd., 3 Mo. LIBOR + 0.28% (a)............. 2.96% 11/15/19 6,848,594
---------------
23,284,256
---------------
TELECOMMUNICATIONS -- 0.2%
5,000,000 Deutsche Telekom International Finance BV (b)................... 1.50% 09/19/19 4,973,878
2,875,000 Deutsche Telekom International Finance BV,
3 Mo. LIBOR + 0.45% (a) (b).................................. 3.08% 09/19/19 2,877,978
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
$ 1,000,000 Deutsche Telekom International Finance BV,
3 Mo. LIBOR + 0.58% (a) (b).................................. 3.17% 01/17/20 $ 1,001,936
1,145,000 Telefonica Emisiones SA......................................... 5.88% 07/15/19 1,151,727
---------------
10,005,519
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 609,313,146
(Cost $608,464,138) ---------------
ASSET-BACKED SECURITIES -- 12.5%
Ameriquest Mortgage Securities, Inc.
53,982 Series 2004-R9, Class M2, 1 Mo. LIBOR + 0.98% (a)............ 3.45% 10/25/34 54,323
BMW Vehicle Lease Trust
309,509 Series 2017-2, Class A2A..................................... 1.80% 02/20/20 309,306
11,269,000 Series 2017-2, Class A3...................................... 2.07% 10/20/20 11,251,436
120,000 Series 2017-2, Class A4...................................... 2.19% 03/22/21 119,536
6,250,000 Series 2018-1, Class A3...................................... 3.26% 07/20/21 6,310,820
BMW Vehicle Owner Trust
2,500,000 Series 2018-A, Class A3...................................... 2.35% 04/25/22 2,493,910
California Republic Auto Receivables Trust
276,801 Series 2015-1, Class A4...................................... 1.82% 09/15/20 276,687
3,130,000 Series 2015-1, Class B....................................... 2.51% 02/16/21 3,127,660
1,332,973 Series 2015-2, Class A4...................................... 1.75% 01/15/21 1,329,914
2,101,370 Series 2015-3, Class A4...................................... 2.13% 05/17/21 2,097,109
5,349,000 Series 2015-3, Class B....................................... 2.70% 09/15/21 5,339,858
1,530,376 Series 2016-1, Class A4...................................... 2.24% 10/15/21 1,526,541
5,284,836 Series 2016-2, Class A4...................................... 1.83% 12/15/21 5,257,453
6,389,001 Series 2017-1, Class A3...................................... 1.90% 03/15/21 6,381,450
1,870,000 Series 2017-1, Class A4...................................... 2.28% 06/15/22 1,863,732
7,523,162 Series 2018-1, Class A2...................................... 2.86% 03/15/21 7,524,965
Canadian Pacer Auto Receivables Trust
5,933,766 Series 2017-1A, Class A3 (b)................................. 2.05% 03/19/21 5,916,494
2,079,894 Series 2018-1A, Class A2A (b)................................ 2.70% 08/19/20 2,079,628
18,307,000 Series 2018-1A, Class A3 (b)................................. 3.00% 11/19/21 18,361,737
4,665,725 Series 2018-2A, Class A2A (b)................................ 3.00% 06/21/21 4,674,894
9,500,000 Series 2019-1A, Class A2 (b)................................. 2.78% 03/21/22 9,510,271
Carmax Auto Owner Trust
881,498 Series 2016-1, Class A3...................................... 1.61% 11/16/20 879,759
2,613,886 Series 2016-3, Class A3...................................... 1.39% 05/17/21 2,603,135
4,026,342 Series 2017-1, Class A3...................................... 1.98% 11/15/21 4,010,451
1,907,000 Series 2017-3, Class A3...................................... 1.97% 04/15/22 1,897,194
690,000 Series 2018-4, Class A2A..................................... 3.11% 02/15/22 692,239
7,305,000 Series 2019-1, Class A2A..................................... 3.02% 07/15/22 7,330,841
Chrysler Capital Auto Receivables Trust
3,850,000 Series 2016-AA, Class C (b).................................. 3.25% 06/15/22 3,859,317
7,369,221 Series 2016-BA, Class A3 (b)................................. 1.64% 07/15/21 7,351,419
Countrywide Asset-Backed Certificates
1,560,698 Series 2005-BC3, Class M3,
1 Mo. LIBOR + 1.08% (a)................................... 3.56% 06/25/35 1,570,699
Dell Equipment Finance Trust
107,269 Series 2017-2, Class A2A (b)................................. 1.97% 02/24/20 107,180
9,000,000 Series 2019-1, Class A2 (b).................................. 2.78% 08/23/21 9,025,538
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Element Rail Leasing I LLC
$ 3,126,886 Series 2014-1A, Class A1 (b)................................. 2.30% 04/19/44 $ 3,118,976
Encore Credit Receivables Trust
503,217 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.69% (a)............. 3.17% 11/25/35 505,959
Exeter Automobile Receivables Trust
93,021 Series 2018-3A, Class A (b).................................. 2.90% 01/18/22 93,075
174,278 Series 2018-4A, Class A (b).................................. 3.05% 12/15/21 174,401
3,316,402 Series 2019-1A, Class A (b).................................. 3.20% 04/15/22 3,322,639
Ford Credit Auto Lease Trust
1,840,392 Series 2017-A, Class A3...................................... 1.88% 04/15/20 1,839,824
1,435,000 Series 2017-A, Class A4...................................... 2.02% 06/15/20 1,433,617
919,132 Series 2017-B, Class A2A..................................... 1.80% 06/15/20 918,569
34,639 Series 2017-B, Class A2B, 1 Mo. LIBOR + 0.16% (a)............ 2.63% 06/15/20 34,639
4,167,558 Series 2018-A, Class A2A..................................... 2.71% 12/15/20 4,168,324
850,000 Series 2018-A, Class A4...................................... 3.05% 08/15/21 854,696
8,885,000 Series 2018-B, Class A2A..................................... 2.93% 04/15/21 8,895,449
4,780,000 Series 2018-B, Class A3...................................... 3.19% 12/15/21 4,817,405
12,825,000 Series 2019-A, Class A2A..................................... 2.84% 09/15/21 12,840,342
9,000,000 Series 2019-A, Class A3...................................... 2.90% 05/15/22 9,055,327
Ford Credit Auto Owner Trust
13,536 Series 2016-A, Class A3...................................... 1.39% 07/15/20 13,529
GM Financial Automobile Leasing Trust
748,926 Series 2016-3, Class B....................................... 1.97% 05/20/20 748,601
8,731,000 Series 2016-3, Class C....................................... 2.38% 05/20/20 8,727,731
1,440,000 Series 2017-1, Class A4...................................... 2.26% 08/20/20 1,437,162
11,088,000 Series 2017-1, Class B....................................... 2.48% 08/20/20 11,065,999
906,155 Series 2017-2, Class A3...................................... 2.02% 09/21/20 904,294
1,700,000 Series 2017-2, Class A4...................................... 2.18% 06/21/21 1,694,441
346,000 Series 2017-2, Class B....................................... 2.43% 06/21/21 344,612
22,145 Series 2017-3, Class A2A..................................... 1.72% 01/21/20 22,133
5,060,000 Series 2017-3, Class A3...................................... 2.01% 11/20/20 5,049,170
500,000 Series 2017-3, Class B....................................... 2.40% 09/20/21 497,698
6,977,417 Series 2018-1, Class A2A..................................... 2.39% 04/20/20 6,973,326
3,503,976 Series 2018-1, Class A2B, 1 Mo. LIBOR + 0.20% (a)............ 2.69% 04/20/20 3,504,332
6,449,000 Series 2018-1, Class A3...................................... 2.61% 01/20/21 6,447,655
7,202,149 Series 2018-2, Class A2A..................................... 2.83% 07/20/20 7,205,375
4,490,000 Series 2018-2, Class A3...................................... 3.06% 06/21/21 4,508,147
7,113,071 Series 2018-3, Class A2A..................................... 2.89% 09/21/20 7,119,111
4,393,000 Series 2018-3, Class A3...................................... 3.18% 06/21/21 4,422,362
10,000,000 Series 2019-1, Class A2A..................................... 2.91% 04/20/21 10,024,696
7,500,000 Series 2019-1, Class A3...................................... 2.98% 12/20/21 7,544,806
10,000,000 Series 2019-2, Class A2A..................................... 2.67% 06/21/21 9,999,307
GM Financial Consumer Automobile Receivables Trust
7,422,348 Series 2017-1A, Class A3 (b)................................. 1.78% 10/18/21 7,388,515
GSAA Home Equity Trust
1,548,243 Series 2005-MTR1, Class A4,
1 Mo. LIBOR + 0.37% (a)................................... 2.85% 10/25/35 1,545,084
Honda Auto Receivables Owner Trust
805,257 Series 2016-2, Class A3...................................... 1.39% 04/15/20 804,342
8,446,484 Series 2018-3, Class A2...................................... 2.67% 12/21/20 8,447,509
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Hyundai Auto Lease Securitization Trust
$ 6,900,000 Series 2018-A, Class A3 (b).................................. 2.81% 04/15/21 $ 6,911,939
11,362,482 Series 2018-B, Class A2 (b).................................. 2.81% 12/15/20 11,371,842
1,100,000 Series 2018-B, Class A4 (b).................................. 3.20% 06/15/22 1,108,322
5,000,000 Series 2019-A, Class A2 (b).................................. 2.92% 07/15/21 5,014,574
Master Asset Backed Securities Trust
555,843 Series 2005-OPT1, Class M2,
1 Mo. LIBOR + 0.63% (a)................................... 3.11% 03/25/35 557,751
Mercedes-Benz Auto Lease Trust
508,052 Series 2017-A, Class A3...................................... 1.79% 04/15/20 507,463
4,900,000 Series 2017-A, Class A4...................................... 2.01% 01/17/23 4,888,363
1,803,542 Series 2018-A, Class A2...................................... 2.20% 04/15/20 1,804,658
11,000,000 Series 2019-A, Class A2...................................... 3.01% 02/16/21 11,022,919
Nationstar Home Equity Loan Trust
2,928,583 Series 2006-B, Class AV4, 1 Mo. LIBOR + 0.28% (a)............ 2.76% 09/25/36 2,924,876
Nissan Auto Lease Trust
11,499,936 Series 2017-A, Class A3...................................... 1.91% 04/15/20 11,485,291
8,500,000 Series 2018-A, Class A3...................................... 3.25% 09/15/21 8,574,666
Nissan Auto Receivables Owner Trust
2,177,166 Series 2015-B, Class A4...................................... 1.79% 01/17/22 2,170,539
553,270 Series 2015-C, Class A3...................................... 1.37% 05/15/20 552,921
391,973 Series 2016-A, Class A3...................................... 1.34% 10/15/20 391,141
3,644,106 Series 2016-B, Class A3...................................... 1.32% 01/15/21 3,629,572
1,310,895 Series 2016-C, Class A3...................................... 1.18% 01/15/21 1,303,643
250,000 Series 2017-B, Class A3...................................... 1.75% 10/15/21 248,476
OSCAR US Funding Trust II
2,218,423 Series 2015-1A, Class A4 (b)................................. 2.44% 06/15/22 2,215,823
OSCAR US Funding Trust V
4,705,635 Series 2016-2A, Class A3 (b)................................. 2.73% 12/15/20 4,703,753
18,010,000 Series 2016-2A, Class A4 (b)................................. 2.99% 12/15/23 18,040,850
OSCAR US Funding Trust VI LLC
1,152,095 Series 2017-1A, Class A3 (b)................................. 2.82% 06/10/21 1,151,769
7,700,000 Series 2017-1A, Class A4 (b)................................. 3.30% 05/10/24 7,765,866
OSCAR US Funding Trust VII LLC
666,800 Series 2017-2A, Class A2A (b)................................ 2.13% 11/10/20 665,733
5,480,000 Series 2017-2A, Class A3 (b)................................. 2.45% 12/10/21 5,457,751
OSCAR US Funding Trust VIII LLC
9,700,000 Series 2018-1A, Class A3 (b)................................. 3.23% 05/10/22 9,742,438
OSCAR US Funding X LLC
8,800,000 Series 2019-1A, Class A2 (b)................................. 3.10% 04/11/22 8,799,094
Securitized Term Auto Receivables Trust
8,303,610 Series 2017-1A, Class A3 (b)................................. 1.89% 08/25/20 8,285,603
1,000,000 Series 2017-1A, Class A4 (b)................................. 2.21% 06/25/21 996,845
2,086,363 Series 2017-2A, Class A3 (b)................................. 2.04% 04/26/21 2,078,096
4,095,000 Series 2017-2A, Class A4 (b)................................. 2.29% 03/25/22 4,066,888
10,483,803 Series 2018-2A, Class A2A (b)................................ 3.06% 02/25/21 10,507,697
Sierra Timeshare Receivables Funding LLC
1,114,046 Series 2014-3A, Class A (b).................................. 2.30% 10/20/31 1,110,783
4,181,601 Series 2016-3A, Class A (b).................................. 2.43% 10/20/33 4,161,342
Structured Asset Investment Loan Trust
101,308 Series 2004-10, Class A7, 1 Mo. LIBOR + 1.06% (a)............ 3.54% 11/25/34 102,039
</TABLE>
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Toyota Auto Receivables Owner Trust
$ 1,954,309 Series 2018-A, Class A2A..................................... 2.10% 10/15/20 $ 1,951,514
4,719,293 Series 2018-C, Class A2A..................................... 2.77% 08/16/21 4,724,733
Verizon Owner Trust
3,009,798 Series 2016-1A, Class A (b).................................. 1.42% 01/20/21 3,004,939
6,445,653 Series 2016-2A, Class A (b).................................. 1.68% 05/20/21 6,426,829
3,047,667 Series 2017-1A, Class A (b).................................. 2.06% 09/20/21 3,041,408
3,914,000 Series 2017-2A, Class A (b).................................. 1.92% 12/20/21 3,896,785
World Omni Auto Receivables Trust
9,000,000 Series 2019-A, Class A2...................................... 3.02% 04/15/22 9,036,041
World Omni Automobile Lease Securitization Trust
3,265,607 Series 2017-A, Class A3...................................... 2.13% 04/15/20 3,260,213
3,438,536 Series 2018-A, Class A2...................................... 2.59% 11/16/20 3,437,385
8,762,402 Series 2018-B, Class A2A..................................... 2.96% 06/15/21 8,777,457
11,060,000 Series 2019-A, Class A2...................................... 2.89% 11/15/21 11,087,350
---------------
TOTAL ASSET-BACKED SECURITIES................................................................ 526,614,655
(Cost $525,027,409) ---------------
U.S. GOVERNMENT NOTES -- 2.3%
7,200,000 U.S. Treasury Note.............................................. 1.38% 04/30/20 7,127,297
55,200,000 U.S. Treasury Note.............................................. 1.50% 06/15/20 54,671,719
36,800,000 U.S. Treasury Note.............................................. 1.50% 08/15/20 36,411,875
---------------
TOTAL U.S. GOVERNMENT NOTES.................................................................. 98,210,891
(Cost $98,044,141) ---------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 1.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.0%
Federal Home Loan Mortgage Corporation
2,779,659 Series 2003-2723, Class KN................................... 5.00% 12/15/23 2,870,629
3,881,882 Series 2004-2783, Class YB................................... 5.00% 04/15/24 4,014,884
1,497 Series 2004-2828, Class JE................................... 4.50% 07/15/19 1,496
1,918 Series 2004-2861, Class BL................................... 4.00% 09/15/19 1,916
5,024 Series 2004-2874, Class BC................................... 5.00% 10/15/19 5,026
4,484 Series 2004-2885, Class PY................................... 4.50% 11/15/19 4,481
10,189 Series 2004-2895, Class EK................................... 4.00% 11/15/19 10,196
6,296 Series 2004-2900, Class PC................................... 4.50% 12/15/19 6,294
6 Series 2005-2920, Class HD................................... 4.50% 01/15/20 6
55,247 Series 2005-2931, Class DE................................... 4.00% 02/15/20 55,368
2,975 Series 2005-2945, Class HB................................... 5.00% 03/15/20 2,978
35 Series 2007-3266, Class D.................................... 5.00% 01/15/22 35
7,789 Series 2007-3294, Class DB................................... 4.50% 03/15/22 7,791
710,744 Series 2009-3539, Class YA................................... 4.00% 02/15/24 714,279
32,345 Series 2010-3705, Class CA................................... 3.00% 08/15/20 32,274
24,304 Series 2010-3724, Class NC................................... 2.50% 07/15/38 24,273
1,199,853 Series 2010-3726, Class ND................................... 3.50% 06/15/39 1,200,192
4,637,505 Series 2010-3737, Class DA................................... 2.00% 12/15/39 4,590,805
35,055 Series 2010-3755, Class AJ................................... 2.00% 11/15/20 34,809
42,106 Series 2010-3766, Class HE................................... 3.00% 11/15/20 42,031
434,647 Series 2010-3770, Class EB................................... 2.00% 01/15/38 432,957
51,577 Series 2010-3773, Class GK................................... 2.50% 12/15/20 51,341
206,225 Series 2011-3790, Class AP................................... 4.50% 01/15/37 209,475
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 77,486 Series 2011-3820, Class NA................................... 4.50% 02/15/38 $ 77,536
124 Series 2011-3825, Class AB................................... 3.00% 08/15/20 123
65,157 Series 2011-3841, Class JK................................... 3.00% 10/15/38 65,105
73,894 Series 2011-3852, Class CA................................... 3.00% 10/15/39 73,904
2,061,643 Series 2011-3925, Class VB................................... 4.00% 09/15/31 2,075,261
27 Series 2011-3977, Class GA................................... 1.50% 07/15/19 27
542,229 Series 2012-4001, Class A.................................... 3.50% 11/15/38 546,493
156,306 Series 2012-4011, Class KM................................... 2.00% 03/15/22 155,155
660,043 Series 2014-4305, Class KN................................... 2.50% 03/15/38 657,935
6,733 Series 2014-4419, Class TB................................... 3.00% 02/15/40 6,725
60,367 Series 2015-4459, Class NC................................... 5.00% 07/15/25 60,460
Federal National Mortgage Association
1,494,160 Series 2003-48, Class TC..................................... 5.00% 06/25/23 1,541,408
211 Series 2004-27, Class HB..................................... 4.00% 05/25/19 210
9,980 Series 2004-79, Class FA, 1 Mo. LIBOR + 0.29% (a)............ 2.77% 08/25/32 9,981
1,038,216 Series 2006-60, Class DF, 1 Mo. LIBOR + 0.43% (a)............ 2.91% 04/25/35 1,040,084
13,838 Series 2008-53, Class CA..................................... 5.00% 07/25/23 13,838
13,922 Series 2008-59, Class KB..................................... 4.50% 07/25/23 13,928
84,477 Series 2009-14, Class EB..................................... 4.50% 03/25/24 84,703
29,340 Series 2009-52, Class AJ..................................... 4.00% 07/25/24 29,424
733,963 Series 2009-71, Class BA..................................... 4.00% 08/25/24 737,995
662 Series 2009-78, Class LE..................................... 4.00% 09/25/19 662
19,426 Series 2009-96, Class JA..................................... 3.50% 10/25/24 19,392
2,560,466 Series 2010-99, Class UK..................................... 3.00% 10/25/38 2,562,022
41,522 Series 2010-116, Class AD.................................... 2.00% 08/25/20 41,314
111,274 Series 2010-145, Class MA.................................... 2.00% 12/25/20 110,556
6,556 Series 2011-3, Class EG...................................... 2.00% 05/25/20 6,519
78,686 Series 2011-13, Class AD..................................... 2.00% 07/25/21 77,940
1 Series 2011-15, Class AB..................................... 9.75% 08/25/19 1
30,660 Series 2011-15, Class HT..................................... 5.50% 03/25/26 30,966
1,849,746 Series 2011-32, Class CV..................................... 3.50% 04/25/24 1,849,603
174,798 Series 2011-36, Class QC..................................... 3.00% 12/25/28 174,455
61,500 Series 2011-60, Class UC..................................... 2.50% 09/25/39 61,672
5,066 Series 2011-68, Class AH..................................... 4.50% 12/25/20 5,078
40,971 Series 2011-71, Class KC..................................... 1.75% 08/25/21 40,541
6,678 Series 2011-79, Class AD..................................... 3.00% 11/25/37 6,671
43,349 Series 2011-86, Class DC..................................... 2.00% 09/25/21 42,890
150,718 Series 2011-111, Class DA.................................... 3.00% 12/25/38 150,735
1,387,484 Series 2012-20, Class AB..................................... 2.50% 07/25/39 1,382,824
3,749,849 Series 2012-103, Class LE.................................... 1.75% 05/25/39 3,728,016
3,488,653 Series 2013-1, Class KC...................................... 2.00% 07/25/40 3,439,227
30,344 Series 2014-76, Class AC..................................... 2.50% 02/25/34 30,299
Government National Mortgage Association
117,138 Series 2009-10, Class MD..................................... 4.50% 12/16/36 118,738
16,405 Series 2009-52, Class PA..................................... 5.00% 04/16/39 16,443
1,315,481 Series 2009-79, Class AE..................................... 3.75% 02/16/39 1,317,485
65,495 Series 2010-4, Class JC...................................... 3.00% 08/16/39 65,527
578 Series 2010-47, Class CL..................................... 4.00% 08/20/38 577
35,687 Series 2010-85, Class NK..................................... 3.25% 01/20/38 35,658
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 98,802 Series 2010-87, Class HE..................................... 3.00% 11/20/38 $ 99,035
23,196 Series 2010-125, Class BA.................................... 2.08% 05/16/37 23,158
101,772 Series 2010-125, Class TE.................................... 3.00% 06/20/39 101,835
30,368 Series 2010-142, Class AJ.................................... 3.00% 09/20/39 30,322
17,586 Series 2010-164, Class LE.................................... 3.00% 10/20/38 17,573
83,600 Series 2010-164, Class LH.................................... 3.50% 10/20/38 83,624
53,928 Series 2011-24, Class NE..................................... 3.50% 04/20/39 53,920
95,561 Series 2011-37, Class PG..................................... 3.00% 05/20/40 95,344
45,190 Series 2011-40, Class CA..................................... 3.00% 12/16/25 45,175
33,524 Series 2011-115, Class PD.................................... 2.00% 10/20/38 33,381
119,335 Series 2014-180, Class PA.................................... 2.50% 04/20/43 119,059
5,116,085 Series 2018-89, Class A...................................... 3.50% 06/20/39 5,143,505
NCUA Guaranteed Notes Trust
1,036,828 Series 2010-R1, Class 1A, 1 Mo. LIBOR + 0.45% (a)............ 2.93% 10/07/20 1,038,821
---------------
43,704,394
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.5%
Federal Home Loan Mortgage Corporation Multifamily
Structured Pass Through Certificates
9,134,380 Series 2010-K007, Class A2................................... 4.22% 03/25/20 9,225,568
697,852 Series 2014-K716, Class A1................................... 2.41% 01/25/21 695,888
FREMF Mortgage Trust
8,689,005 Series 2012-K710, Class B (b) (c)............................ 3.98% 06/25/47 8,673,057
Government National Mortgage Association
23,575 Series 2014-28, Class A...................................... 2.00% 01/16/46 23,196
---------------
18,617,709
---------------
PASS-THROUGH SECURITIES -- 0.3%
Federal Home Loan Mortgage Corporation
3,060 Pool B15139.................................................. 4.50% 06/01/19 3,124
2,010 Pool B18688.................................................. 5.00% 02/01/20 2,040
1,403 Pool E01654.................................................. 5.00% 06/01/19 1,424
2,568 Pool G11588.................................................. 5.50% 06/01/19 2,566
22,976 Pool G11728.................................................. 5.50% 02/01/20 23,015
48,707 Pool G11777.................................................. 5.00% 10/01/20 49,488
11,933 Pool G11820.................................................. 5.50% 12/01/20 12,070
18,650 Pool G11879.................................................. 5.00% 10/01/20 19,128
64,919 Pool G11902.................................................. 5.00% 08/01/20 66,252
53,508 Pool G11966.................................................. 5.50% 11/01/20 53,884
5,287 Pool G12255.................................................. 5.50% 07/01/21 5,390
44,742 Pool G12673.................................................. 5.00% 09/01/21 45,802
49,232 Pool G13204.................................................. 6.00% 11/01/22 50,488
25,954 Pool G13235.................................................. 4.50% 08/01/20 26,508
277 Pool G13395.................................................. 4.50% 12/01/19 283
10,001 Pool G13761.................................................. 5.50% 12/01/20 10,050
148,721 Pool G13812.................................................. 5.00% 12/01/20 151,833
56,449 Pool G14030.................................................. 4.50% 12/01/20 57,656
77,589 Pool G14035.................................................. 5.50% 12/01/21 78,443
209,383 Pool G14187.................................................. 5.50% 12/01/20 210,085
1,797,114 Pool G15435.................................................. 5.00% 11/01/24 1,841,844
100,223 Pool G15821.................................................. 5.00% 07/01/25 102,674
653,260 Pool G15874.................................................. 5.00% 06/01/26 669,149
</TABLE>
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 8,537 Pool G18010.................................................. 5.50% 09/01/19 $ 8,549
91,430 Pool G18056.................................................. 5.00% 06/01/20 93,627
102,548 Pool J02535.................................................. 5.00% 09/01/20 104,107
33,533 Pool P60959.................................................. 4.50% 09/01/20 33,528
Federal National Mortgage Association
7,658 Pool 255547.................................................. 4.50% 01/01/20 7,797
1,620 Pool 310097.................................................. 5.00% 10/01/20 1,652
30 Pool 725445.................................................. 4.50% 05/01/19 30
2,095 Pool 725793.................................................. 5.50% 09/01/19 2,093
4,747 Pool 725934.................................................. 5.00% 11/01/19 4,841
926 Pool 735208.................................................. 6.00% 10/01/19 925
2,280 Pool 735439.................................................. 6.00% 09/01/19 2,279
1,081 Pool 735512.................................................. 6.00% 03/01/20 1,082
29,036 Pool 735646.................................................. 4.50% 07/01/20 29,563
11,432 Pool 735920.................................................. 4.50% 10/01/20 11,641
96,259 Pool 745119.................................................. 5.50% 12/01/19 96,255
35,590 Pool 745238.................................................. 6.00% 12/01/20 35,766
225,807 Pool 745735.................................................. 5.00% 03/01/21 230,326
50,234 Pool 745749.................................................. 5.50% 03/01/21 50,791
538,101 Pool 745832.................................................. 6.00% 04/01/21 546,049
3,288 Pool 773440.................................................. 5.00% 07/01/19 3,353
5,944 Pool 814708.................................................. 6.00% 04/01/20 5,968
8,652 Pool 815098.................................................. 6.00% 05/01/20 8,687
7,649 Pool 839226.................................................. 4.00% 09/01/20 7,648
32,422 Pool 844915.................................................. 4.50% 11/01/20 33,052
39,683 Pool 847919.................................................. 5.50% 11/01/20 40,015
37,903 Pool 888932.................................................. 4.50% 11/01/22 38,628
916 Pool 889191.................................................. 4.50% 04/01/21 933
47,607 Pool 889318.................................................. 5.50% 07/01/20 47,614
8,076 Pool 889531.................................................. 4.50% 05/01/22 8,223
5,600 Pool 889847.................................................. 4.50% 04/01/21 5,703
112,796 Pool 890403.................................................. 6.00% 05/01/23 114,010
20,121 Pool 898044.................................................. 4.50% 12/01/20 20,486
545,910 Pool 901931.................................................. 6.00% 10/01/21 555,229
12,045 Pool 931592.................................................. 5.00% 09/01/20 12,040
238,634 Pool 962078.................................................. 4.50% 03/01/23 245,677
24,640 Pool 995158.................................................. 4.50% 12/01/20 25,122
1,191 Pool 995886.................................................. 6.00% 04/01/21 1,200
348,923 Pool AD0285.................................................. 5.00% 09/01/22 355,864
48,473 Pool AD0402.................................................. 5.00% 02/01/23 49,437
385,854 Pool AE0126.................................................. 5.00% 06/01/20 393,499
112,201 Pool AE0237.................................................. 5.50% 11/01/23 112,759
499,748 Pool AE0314.................................................. 5.00% 08/01/21 509,649
136,603 Pool AE0792.................................................. 5.00% 12/01/20 139,309
281,604 Pool AE0812.................................................. 5.00% 07/01/25 287,205
797,037 Pool AL5764.................................................. 5.00% 09/01/25 812,891
579,782 Pool AL5812.................................................. 5.50% 05/01/25 588,033
423,371 Pool AL6212.................................................. 4.50% 01/01/27 431,102
38,321 Pool AL6725.................................................. 4.50% 09/01/20 39,016
708,902 Pool AL6798.................................................. 5.00% 09/01/25 723,003
</TABLE>
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 1,191 Pool AL8539.................................................. 4.50% 01/01/27 $ 1,213
1,040,111 Pool BM1299.................................................. 5.00% 03/01/27 1,065,808
4,209 Pool MA0125.................................................. 4.50% 07/01/19 4,285
24,317 Pool MA0323.................................................. 4.50% 02/01/20 24,758
32,977 Pool MA0358.................................................. 4.50% 03/01/20 33,575
35,485 Pool MA0419.................................................. 4.50% 05/01/20 36,129
37,142 Pool MA0772.................................................. 4.00% 06/01/21 38,251
823,943 Pool MA1030.................................................. 3.00% 04/01/22 828,521
Government National Mortgage Association
4,013 Pool 781783.................................................. 5.50% 08/15/19 4,014
12,875 Pool 781820.................................................. 5.00% 11/15/19 12,857
66,440 Pool 783524.................................................. 5.00% 09/15/24 67,623
---------------
12,476,486
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 74,798,589
(Cost $74,710,496) ---------------
MORTGAGE-BACKED SECURITIES -- 0.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0%
RBSSP Resecuritization Trust
3,187 Series 2009-12, Class 20A1 (b) (c)........................... 4.22% 12/25/35 3,204
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.2%
DBCG Mortgage Trust
5,775,000 Series 2017-BBG, Class A,
1 Mo. LIBOR + 0.70% (a) (b)............................... 3.17% 06/15/34 5,773,502
---------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 5,776,706
(Cost $5,779,084) ---------------
CERTIFICATES OF DEPOSIT -- 0.1%
BANKS -- 0.1%
5,000,000 Intesa Sanpaolo SpA/New York NY,
3 Mo. LIBOR + 0.63% (a)...................................... 3.22% 07/17/19 5,000,638
---------------
TOTAL CERTIFICATES OF DEPOSIT................................................................ 5,000,638
(Cost $5,000,000) ---------------
TOTAL INVESTMENTS -- 101.9%.................................................................. 4,289,807,063
(Cost $4,285,708,452) (d)
NET OTHER ASSETS AND LIABILITIES -- (1.9)%................................................... (77,926,264)
---------------
NET ASSETS -- 100.0%......................................................................... $ 4,211,880,799
===============
</TABLE>
-----------------------------
(a) Floating or variable rate security.
(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 April 30, 2019, securities noted as such amounted
to $647,068,370 or 15.4% of net assets.
(c) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
(d) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $4,644,383 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $545,772. The net unrealized appreciation was
$4,098,611.
LIBOR - London Interbank Offered Rate
SOFR - Secured Overnight Financing Rate
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Commercial Paper*.................................. $1,597,499,720 $ -- $1,597,499,720 $ --
Corporate Bonds*................................... 1,372,592,718 -- 1,372,592,718 --
Foreign Corporate Bonds*........................... 609,313,146 -- 609,313,146 --
Asset-Backed Securities............................ 526,614,655 -- 526,614,655 --
U.S. Government Notes.............................. 98,210,891 -- 98,210,891 --
U.S. Government Agency Mortgage-Backed
Securities...................................... 74,798,589 -- 74,798,589 --
Mortgage-Backed Securities......................... 5,776,706 -- 5,776,706 --
Certificates of Deposit*........................... 5,000,638 -- 5,000,638 --
-------------- -------------- -------------- --------------
Total Investments.................................. $4,289,807,063 $ -- $4,289,807,063 $ --
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................... $ 4,289,807,063
Cash..................................................................... 5,310,967
Receivables:
Interest.............................................................. 11,903,259
Reclaims.............................................................. 24,337
----------------
Total Assets....................................................... 4,307,045,626
----------------
LIABILITIES:
Payables:
Investment securities purchased ...................................... 78,912,306
Distributions payable................................................. 8,845,165
Capital shares purchased.............................................. 6,011,824
Investment advisory fees.............................................. 1,395,532
----------------
Total Liabilities.................................................. 95,164,827
----------------
NET ASSETS............................................................... $ 4,211,880,799
================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 4,210,575,296
Par value................................................................ 701,997
Accumulated distributable earnings (loss)................................ 603,506
----------------
NET ASSETS............................................................... $ 4,211,880,799
================
NET ASSET VALUE, per share............................................... $ 60.00
================
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................ 70,199,724
================
Investments, at cost..................................................... $ 4,285,708,452
================
</TABLE>
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest................................................................. $ 57,380,642
----------------
Total investment income............................................... 57,380,642
----------------
EXPENSES:
Investment advisory fees................................................. 8,792,842
----------------
Total expenses........................................................ 8,792,842
Less fees waived by the investment advisor............................ (1,600,610)
----------------
Net expenses.......................................................... 7,192,232
----------------
NET INVESTMENT INCOME (LOSS)............................................. 50,188,410
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments.................................. (1,324,194)
Net change in unrealized appreciation (depreciation) on investments...... 4,199,966
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 2,875,772
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 53,064,182
================
</TABLE>
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2019 ENDED
(UNAUDITED) 10/31/2018
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)............................................. $ 50,188,410 $ 39,134,269
Net realized gain (loss)................................................. (1,324,194) 76,244
Net change in unrealized appreciation (depreciation)..................... 4,199,966 (1,285,379)
-------------- --------------
Net increase (decrease) in net assets resulting from operations.......... 53,064,182 37,925,134
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................... (49,571,693) (39,922,395)
Return of capital........................................................ -- (159,526)
-------------- --------------
Total distributions to shareholders...................................... (49,571,693) (40,081,921)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 1,494,905,884 2,058,338,158
Cost of shares redeemed.................................................. (356,971,582) (144,051,601)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions.............................................. 1,137,934,302 1,914,286,557
-------------- --------------
Total increase (decrease) in net assets.................................. 1,141,426,791 1,912,129,770
NET ASSETS:
Beginning of period...................................................... 3,070,454,008 1,158,324,238
-------------- --------------
End of period............................................................ $4,211,880,799 $3,070,454,008
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. 51,199,724 19,299,724
Shares sold.............................................................. 24,950,000 34,300,000
Shares redeemed.......................................................... (5,950,000) (2,400,000)
-------------- --------------
Shares outstanding, end of period........................................ 70,199,724 51,199,724
============== ==============
</TABLE>
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2019 ------------------------------------------------- ENDED
(UNAUDITED) 2018 2017 2016 2015 10/31/2014 (a) (b)
------------ ---------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 59.97 $ 60.02 $ 59.93 $ 59.94 $ 60.04 $ 60.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.76 1.15 0.76 0.47 0.43 0.06
Net realized and unrealized gain (loss)... 0.02 (0.01) 0.12 0.09 (0.26) 0.04
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... 0.78 1.14 0.88 0.56 0.17 0.10
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income..................... (0.75) (1.19) (0.79) (0.57) (0.27) (0.06)
Return of capital......................... -- (0.00)(c) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.75) (1.19) (0.79) (0.57) (0.27) (0.06)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 60.00 $ 59.97 $ 60.02 $ 59.93 $ 59.94 $ 60.04
========== ========== ========== ========== ========== ==========
TOTAL RETURN (d).......................... 1.31% 1.92% 1.48% 0.94% 0.29% 0.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $4,211,881 $3,070,454 $1,158,324 $ 458,413 $ 149,829 $ 567,353
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets................................. 0.45% (e) 0.45% 0.45% 0.45% 0.45% 0.45% (e)
Ratio of net expenses to average net
assets................................. 0.37% (e) 0.33% 0.25% 0.25% 0.23% 0.26% (e)
Ratio of net investment income (loss) to
average net assets..................... 2.57% (e) 2.04% 1.33% 1.06% 0.51% 0.64% (e)
Portfolio turnover rate (f)............... 42% 45% 56% 115% 406% 0%
</TABLE>
(a) Inception date is August 5, 2014, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) All per share amounts and net asset values have been adjusted to reflect
the impact of the 1-for-2 reverse share split on November 10, 2014. The
net asset value reported on October 31, 2014 prior to the reverse share
split restatement was $30.02.
(c) Amount represents less than $0.01 per share.
(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. The total returns would have been lower if certain
fees had not been waived by the investment advisor.
(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.
Page 34 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Enhanced Short Maturity ETF (the "Fund"), a
non-diversified series of the Trust, which trades under the ticker "FTSM" on The
Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund
issues and redeems shares on a continuous basis, at net asset value ("NAV"),
only in large specified blocks consisting of 50,000 shares called a "Creation
Unit." Creation Units are generally issued and redeemed for cash and, in certain
circumstances, in-kind for securities in which the Fund invests, and only to and
from broker-dealers and large institutional investors that have entered into
participation agreements. Except when aggregated in Creation Units, the Fund's
shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's
investment objective is to seek current income, consistent with preservation of
capital and daily liquidity. Under normal market conditions, the Fund intends to
achieve its investment objective by investing at least 80% of its net assets in
a portfolio of U.S. dollar-denominated fixed- and variable-rate debt securities,
including securities issued or guaranteed by the U.S. government or its
agencies, instrumentalities or U.S. government-sponsored entities, residential
and commercial mortgage-backed securities, asset-backed securities, U.S.
corporate bonds, fixed income securities issued by non-U.S. corporations and
governments, municipal obligations, privately issued securities and other debt
securities bearing fixed or floating interest rates. The Fund may also invest in
money market securities. The Fund may also invest in investment companies, such
as ETFs, that invest primarily in Fixed Income Securities. The Fund intends to
limit its investments in privately-issued, non-agency sponsored mortgage- and
asset-backed securities to 20% of its net assets. The Fund may also invest up to
20% of its net assets in floating rate loans. The floating rate loans
representing amounts borrowed by companies or other entities from banks and
other lenders. A significant portion of these loans may be rated below
investment grade or unrated. Floating rate loans held by the Fund may be senior
or subordinate obligations of the borrower and may or may not be secured by
collateral. Under normal market conditions, the Fund's average duration is
expected to be less than one year and the average maturity of the Fund's
portfolio is expected to be less than three years. There can be no assurance
that the Fund will achieve its investment objective. The Fund may not be
appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent 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 adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Corporate bonds, corporate notes, municipal securities, U.S. government
securities, mortgage-backed securities, asset-backed securities and other
debt securities are fair valued on the basis of valuations provided by
dealers who make markets in such securities or by a third-party pricing
service approved by the Trust's Board of Trustees, which may use the
following valuation inputs when available:
Page 35
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
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.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Commercial paper, fixed income and other debt securities having a
remaining maturity of sixty days or less when purchased are fair valued at
cost adjusted for amortization of premiums and accretion of discounts
(amortized cost), provided the Advisor's Pricing Committee has determined
that the use of amortized cost is an appropriate reflection of fair value
given market and issuer-specific conditions existing at the time of the
determination. Factors that may be considered in determining the
appropriateness of the use of amortized cost include, but are not limited
to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of 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 fundamental business data relating to the borrower/issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the borrower/issuer;
5) the credit quality and cash flow of the borrower/issuer, based on
the Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities of the
borrower/issuer, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the borrower/issuer, including any
ability to obtain money or resources from a parent or affiliate and
an assessment of the borrower's/issuer's management (for corporate
debt only);
11) the prospects for the borrower's/issuer's industry, and multiples
(of earnings and/or cash flows) being paid for similar businesses
in that industry (for corporate debt only);
12) the borrower's/issuer's competitive position within the industry;
13) the borrower's/issuer's ability to access additional liquidity
through public and/or private markets; and
14) 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:
Page 36
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 39,922,395
Capital gains................................... --
Return of capital............................... 159,526
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (2,787,419)
Net unrealized appreciation (depreciation)...... (101,564)
D. 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 37
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
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 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, management has evaluated the application of these standards to the Fund
and has determined that no provision for income tax is required in the Fund's
financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2018, the
Fund had $2,787,419 of non-expiring capital loss carryforwards that may be
carried forward indefinitely. During the taxable year ended October 31, 2018,
the Fund utilized post-enactment capital loss carryforwards in the amount of
$68,455.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
qualified late year ordinary or capital losses.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
F. NEW ACCOUNTING PRONOUNCEMENTS
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities", which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. The ASU 2017-08 is effective for
public business entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Earlier application is
permitted for all entities, including adoption in an interim period. If an
entity early adopts the ASU in an interim period, any adjustments must be
reflected as of the beginning of the fiscal year that includes that interim
period. Management is still assessing the impact of the adoption of ASU 2017-08
on the financial statements but does not expect it to have a material impact.
On August 28, 2018, the FASB issued ASU 2018-13, "Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement," which amends the
fair value measurement disclosure requirements of ASC 820. The amendments of ASU
2018-13 include new, eliminated, and modified disclosure requirements of ASC
820. In addition, the amendments clarify that materiality is an appropriate
consideration of entities when evaluating disclosure requirements. The ASU is
effective for fiscal years beginning after December 15, 2019, including interim
periods therein. Early adoption is permitted for any eliminated or modified
disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13
for these financial statements, which did not result in a material impact.
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 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 with the exception of those attributable to affiliated funds,
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. The Fund has agreed to pay First Trust
an annual unitary management fee equal to 0.45% of its average daily net assets.
Pursuant to a contractual agreement, First Trust has agreed to waive management
fees of 0.05% of average daily net assets until March 1, 2020 and, pursuant to a
separate contractual agreement, First Trust waived an additional 0.10% of
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
average daily net assets until March 1, 2019. The waiver agreement may be
terminated by action of the Trust's Board of Trustees at any time upon 60 days'
written notice by the Trust on behalf of the Fund or by the Fund's investment
advisor only after March 1, 2020. Pursuant to a contractual agreement between
the Trust, on behalf of the Fund, and First Trust, the management fees paid to
First Trust will be reduced by the portion of the management fees earned by
First Trust from the Fund for assets invested in other investment companies
advised by First Trust. This contractual agreement shall continue until the
earlier of (i) its termination at the direction of the Trust's Board of Trustees
or (ii) upon termination of the Fund's management agreement with First Trust;
however, it is expected to remain in place at least until March 1, 2020. First
Trust does not have the right to recover the fees waived that are attributable
to the assets invested in other investment companies advised by First Trust.
During the six months ended April 30, 2019, the Advisor waived fees of
$1,600,610.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases of U.S. Government securities and non-U.S. Government
securities, excluding short-term investments, for the six months ended April 30,
2019, were $343,674,883 and $1,076,187,765, respectively. The proceeds from
sales and paydowns of U.S. Government securities and non-U.S. Government
securities, excluding short-term investments, for the six months ended April 30,
2019, were $256,164,484 and $514,537,392, respectively.
For the six months ended April 30, 2019, the Fund had no in-kind transactions.
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Due to the nature of the Fund's investments, the
Fund's Creation Units are generally issued and redeemed for cash, although
Creation Units may be issued in-kind for securities in which the Fund invests in
limited circumstances. Authorized Participants purchasing Creation Units must
pay to BNYM, as transfer agent, a creation transaction fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in the Fund's portfolio and/or the
countries in which the transactions are settled. The Creation Transaction Fee is
currently $100. The price for each Creation Unit will equal the daily NAV per
share 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 or stamp taxes. When Creation Units are issued for cash, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing portfolio securities, including 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 such securities. Authorized
Participants redeeming Creation Units must pay to BNYM, as transfer agent, a
standard redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and/or the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $100. When
shares are redeemed for cash, the Authorized Participant may also be assessed an
amount to cover other costs, including 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 portfolio securities sold
in connection with the redemption.
Page 39
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
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 March 31, 2020.
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 40
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2019 (UNAUDITED)
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
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FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Strategic Income
ETF (FDIV)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
<PAGE>
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TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 13
Statement of Operations...................................................... 14
Statements of Changes in Net Assets.......................................... 15
Financial Highlights......................................................... 16
Notes to Financial Statements................................................ 17
Additional Information....................................................... 27
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or First Trust Global Portfolios Ltd. ("FTGP");
Energy Income Partners, LLC ("EIP"); Stonebridge Advisors LLC ("Stonebridge");
and/or Richard Bernstein Advisors LLC ("RBA") (each, a "Sub-Advisor" and
together, the "Sub-Advisors") and their respective representatives, taking into
account the information currently available to them. Forward-looking statements
include all statements that do not relate solely to current or historical fact.
For example, forward-looking statements include the use of words such as
"anticipate," "estimate," "intend," "expect," "believe," "plan," "may,"
"should," "would" or other words that convey uncertainty of future events or
outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Strategic Income ETF; hereinafter referred to as the
"Fund") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and/or Sub-Advisors and their respective representatives
only as of the date hereof. We undertake no obligation to publicly revise or
update these forward-looking statements to reflect events and circumstances that
arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment 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
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisors are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
<PAGE>
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Strategic Income ETF (the "Fund"), which contains detailed information
about the Fund for the six months ended April 30, 2019. We encourage you to read
this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
The primary investment objective of the First Trust Strategic Income ETF (the
"Fund") is to seek risk-adjusted income. The Fund's secondary investment
objective is capital appreciation. The Fund is a multi-manager, multi-strategy
actively managed exchange-traded fund. First Trust Advisors L.P. ("First Trust"
or the "Advisor") serves as the Fund's investment advisor. The Advisor's
Investment Committee determines the Fund's strategic allocation among various
general investment categories and allocates the Fund's assets to portfolio
management teams comprised of personnel of the Advisor and/or a sub-advisor
(each, a "Management Team"), which employ their respective investment
strategies. Shares of the Fund are listed on The Nasdaq Stock Market LLC under
the ticker symbol "FDIV."
The Fund's investment categories are: (i) high yield corporate bonds, commonly
referred to as "junk" bonds, and first lien senior secured floating rate bank
loans; (ii) mortgage-related investments; (iii) preferred securities; (iv)
international sovereign bonds, including securities issued by emerging market
countries; (v) equity securities of Energy Infrastructure Companies(1), certain
of which are master limited partnerships ("MLPs"); and (vi) dividend paying U.S.
exchange-traded equity securities and depositary receipts. The Management Teams
may utilize a related option overlay strategy and/or derivative instruments in
implementing their respective investment strategies for the Fund. Additionally,
the Management Teams may seek to gain exposure to the Fund's investment
categories through investments in exchange-traded funds. The Advisor expects
that the Fund may at times invest significantly in other exchange-traded funds,
including but not limited to, other exchange-traded funds that are advised by
the Advisor, accordingly, the Fund may operate principally as a "fund of funds"
but will not necessarily operate as such at all times. The Fund seeks to achieve
its objectives by having each Management Team focus on those instruments within
its respective investment category. The Fund may add or remove investment
categories or Management Teams at the discretion of the Advisor.
<TABLE>
<CAPTION>
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PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/13/14) Inception (8/13/14)
4/30/19 4/30/19 to 4/30/19 to 4/30/19
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 7.05% 6.70% 4.13% 20.99%
Market Price 7.09% 6.77% 4.15% 21.10%
INDEX PERFORMANCE
Blended Index(2) 6.07% 6.69% 3.51% 17.67%
Bloomberg Barclays U.S. Aggregate Bond Index 5.49% 5.29% 2.40% 11.83%
Russell 3000(R) Index 9.71% 12.68% 11.04% 63.80%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the period
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after the Fund's inception, for the period from inception
to the first day of secondary market trading in shares of the Fund, the NAV of
the Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
-----------------------------
(1) Energy Infrastructure Companies are publicly-traded MLPs or limited
liability companies that are taxed as partnerships; entities that control
MLPs, entities that own general partner interests in an MLP, or MLP
affiliates (such as I-shares or I-units); U.S. and Canadian energy yield
corporations ("yieldcos"); pipeline companies; utilities; and other
companies that are involved in operating or providing services in support
of infrastructure assets such as pipeline, power transmission,
terminalling and petroleum and natural gas storage in the petroleum,
natural gas and power generation industries.
(2) The Blended Index is equally weighted to include these six indices: the
Alerian MLP Index, Dow Jones U.S. Select Dividend Index, ICE BofAML Fixed
Rate Preferred Securities Index, ICE BofAML U.S. High Yield Index,
Bloomberg Barclays EM USD Aggregate Index and Bloomberg Barclays U.S. MBS
Index. An index does not charge management fees or brokerage expenses, and
no such fees or expenses were deducted from the index performance shown.
Indices are unmanaged and an investor cannot invest directly in an index.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
-----------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
-----------------------------------------------------------
Exchange-Traded Funds 54.52%
Common Stocks 25.03
Master Limited Partnerships 10.33
U.S. Government Agency Mortgage-Backed
Securities 7.80
Real Estate Investment Trusts 2.25
Mortgage-Backed Securities 0.04
Asset-Backed Securities 0.03
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
First Trust Preferred Securities and
Income ETF 11.85%
First Trust Emerging Markets Local
Currency Bond ETF 0.86
First Trust Senior Loan Fund 7.92
First Trust Tactical High Yield ETF 7.87
iShares MBS ETF 6.40
iShares J.P. Morgan USD Emerging
Markets Bond ETF 4.64
First Trust Institutional Preferred Securities
and Income ETF 3.95
Enterprise Products Partners, L.P. 2.15
Magellan Midstream Partners, L.P. 1.38
TransCanada Corp. 1.26
-------
Total 58.28%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 13, 2014 - APRIL 30, 2019
First Trust Strategic Blended Bloomberg Barclays U.S. Russell 3000(R)
Income ETF Index Aggregate Bond Index Index
<S> <C> <C> <C> <C>
8/13/14 $10,000 $10,002 $10,003 $10,000
10/31/14 10,177 10,129 10,080 10,371
4/30/15 10,330 10,191 10,288 10,863
10/31/15 9,989 9,735 10,280 10,837
4/30/16 10,436 10,006 10,571 10,844
10/31/16 10,856 10,446 10,731 11,297
4/30/17 11,275 10,981 10,659 12,859
10/31/17 11,442 11,058 10,827 14,006
4/30/18 11,340 11,029 10,625 14,537
10/31/18 11,303 11,093 10,605 14,929
4/30/19 12,100 11,766 11,187 16,379
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the indices do
not actually hold a portfolio of securities and therefore do not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period August 14, 2014 (commencement
of trading) through April 30, 2019. Shareholders may pay more than NAV when they
buy Fund shares and receive less than NAV when they sell those shares because
shares are bought and sold at current market price. Data presented represents
past performance and cannot be used to predict future results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
8/14/14 - 10/31/14 16 0 0 0 35 5 0 0
11/1/14 - 10/31/15 36 6 6 2 152 33 9 7
11/1/15 - 10/31/16 69 16 7 3 125 27 3 2
11/1/16 - 10/31/17 142 14 0 0 95 1 0 0
11/1/17 - 10/31/18 91 0 1 2 156 1 1 0
11/1/18 - 4/30/19 54 0 0 0 68 0 0 0
</TABLE>
Page 3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Strategic Income ETF ("FDIV" or the "Fund"). The
following serve as investment sub-advisors (each, a "Sub-Advisor") to the Fund:
First Trust Global Portfolios Ltd. ("FTGP"); Energy Income Partners, LLC
("EIP"); Stonebridge Advisors LLC ("Stonebridge"); and Richard Bernstein
Advisors LLC ("RBA"). The Advisor's Investment Committee determines the Fund's
strategic allocation among various general investment categories and allocates
the Fund's assets to portfolio management teams comprised of personnel of the
Advisor and/or a Sub-Advisor, which employ their respective investment
strategies.
ADVISOR'S INVESTMENT COMMITTEE
ADVISOR'S INVESTMENT COMMITTEE
The Advisor's Investment Committee, which determines the Fund's strategic
allocation among various general investment categories and allocates the Fund's
assets, consists of:
o DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING
DIRECTOR OF FIRST TRUST;
o DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND
MANAGING DIRECTOR OF FIRST TRUST;
o JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST;
o ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST;
o TODD LARSON, CFA, VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST;
o JOHN GAMBLA, CFA, FRM, PRM, SENIOR PORTFOLIO MANAGER OF FIRST TRUST;
o ROB A. GUTTSCHOW, CFA, SENIOR PORTFOLIO MANAGER OF FIRST TRUST; AND
o CHRIS A. PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST.
ADVISOR PORTFOLIO MANAGERS
o WILLIAM HOUSEY, CFA, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF
FIRST TRUST, LEVERAGED FINANCE TEAM;
o SCOTT D. FRIES, CFA, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST
TRUST, LEVERAGED FINANCE TEAM;
o JEREMIAH CHARLES, VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST,
SECURITIZED PRODUCTS GROUP; AND
o JAMES SNYDER, VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST,
SECURITIZED PRODUCTS GROUP.
SUB-ADVISOR PORTFOLIO MANAGERS
o JAMES J. MURCHIE, FOUNDER, CHIEF EXECUTIVE OFFICER, CO-PORTFOLIO MANAGER
AND PRINCIPAL OF EIP.
o EVA PAO, PORTFOLIO MANAGER AND PRINCIPAL OF EIP.
o JOHN K. TYSSELAND, PORTFOLIO MANAGER AND PRINCIPAL OF EIP.
o DEREK FULTON, DIRECTOR AND CHIEF EXECUTIVE OFFICER OF FTGP.
o LEONARDO DACOSTA, DIRECTOR AND PORTFOLIO MANAGER OF FTGP.
o ANTHONY BEEVERS, PORTFOLIO MANAGER OF FTGP.
o RICHARD BERNSTEIN, CHIEF EXECUTIVE OFFICER AND CHIEF INVESTMENT OFFICER OF
RBA.
o HENRY TIMMONS, CFA, DIRECTOR OF ETFS OF RBA.
o MATTHEW GRISWOLD, CFA, DIRECTOR OF INVESTMENTS OF RBA.
o SCOTT T. FLEMING, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STONEBRIDGE.
o ROBERT WOLF, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER OF
STONEBRIDGE.
Page 4
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Strategic Income ETF (the "Fund"), you incur two
types of costs: (1) transaction costs; and (2) ongoing costs, including
management fees, distribution and/or service fees, if any, and other Fund
expenses. This Example is intended to help you understand your ongoing costs of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD (a) (b) PERIOD (b) (c)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
Actual $1,000.00 $1,070.50 0.53% $2.72
Hypothetical (5% return before expenses) $1,000.00 $1,022.17 0.53% $2.66
</TABLE>
(a) These expense ratios reflect expense waivers. See Note 3 in the Notes to
Financial Statements.
(b) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(c) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 5
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 54.1%
CAPITAL MARKETS -- 54.1%
244,182 First Trust Emerging Markets Local Currency Bond ETF (a)..................................... $ 9,149,500
173,136 First Trust Institutional Preferred Securities and Income ETF (a)............................ 3,324,211
5,106 First Trust Long Duration Opportunities ETF (a).............................................. 132,220
518,455 First Trust Preferred Securities and Income ETF (a).......................................... 9,985,443
139,197 First Trust Senior Loan Fund (a)............................................................. 6,668,928
137,573 First Trust Tactical High Yield ETF (a)...................................................... 6,631,019
4,731 iShares 20+ Year Treasury Bond ETF........................................................... 584,988
1,495 iShares 7-10 Year Treasury Bond ETF.......................................................... 158,321
35,589 iShares J.P. Morgan USD Emerging Markets Bond ETF............................................ 3,907,672
50,890 iShares MBS ETF.............................................................................. 5,393,831
---------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 45,936,133
(Cost $46,043,864) ---------------
COMMON STOCKS -- 24.8%
BANKS -- 5.1%
6,348 Bancolombia S.A., ADR........................................................................ 321,971
9,493 Cathay General Bancorp....................................................................... 349,247
9,901 Columbia Banking System, Inc................................................................. 371,684
2,679 Community Trust Bancorp, Inc................................................................. 113,188
7,662 First Busey Corp............................................................................. 197,986
3,924 First Interstate BancSystem, Inc., Class A................................................... 165,828
20,750 Fulton Financial Corp........................................................................ 357,937
24,669 Hope Bancorp, Inc............................................................................ 346,846
1,985 Park National Corp........................................................................... 193,895
19,594 People's United Financial, Inc............................................................... 338,780
22,849 Regions Financial Corp....................................................................... 354,845
8,482 Sandy Spring Bancorp, Inc.................................................................... 295,937
6,752 U.S. Bancorp................................................................................. 360,017
8,879 United Bankshares, Inc....................................................................... 348,412
5,619 WesBanco, Inc................................................................................ 226,558
---------------
4,343,131
---------------
DISTRIBUTORS -- 0.7%
5,818 Genuine Parts Co............................................................................. 596,578
---------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6%
10,379 China Telecom Corp., Ltd., ADR............................................................... 538,047
---------------
ELECTRIC UTILITIES -- 4.8%
3,245 Alliant Energy Corp.......................................................................... 153,261
1,823 American Electric Power Co., Inc............................................................. 155,958
2,030 Emera, Inc. (CAD)............................................................................ 76,233
11,210 Evergy, Inc.................................................................................. 648,162
2,162 Eversource Energy............................................................................ 154,929
9,178 Exelon Corp.................................................................................. 467,619
6,188 Fortis, Inc. (CAD)........................................................................... 228,730
2,380 NextEra Energy, Inc.......................................................................... 462,767
12,106 Otter Tail Corp.............................................................................. 621,038
6,826 Pinnacle West Capital Corp................................................................... 650,313
7,221 PPL Corp..................................................................................... 225,367
4,079 Xcel Energy, Inc............................................................................. 230,464
---------------
4,074,841
---------------
</TABLE>
Page 6 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT -- 0.8%
5,517 Hubbell, Inc................................................................................. $ 703,969
---------------
GAS UTILITIES -- 0.1%
741 Atmos Energy Corp............................................................................ 75,834
761 New Jersey Resources Corp.................................................................... 38,111
---------------
113,945
---------------
HOUSEHOLD PRODUCTS -- 0.8%
6,301 Procter & Gamble (The) Co.................................................................... 670,930
---------------
IT SERVICES -- 0.8%
8,151 Paychex, Inc................................................................................. 687,211
---------------
MULTI-UTILITIES -- 1.5%
9,243 NorthWestern Corp............................................................................ 645,624
7,763 Public Service Enterprise Group, Inc......................................................... 463,063
610 Sempra Energy................................................................................ 78,049
971 WEC Energy Group, Inc........................................................................ 76,156
---------------
1,262,892
---------------
OIL, GAS & CONSUMABLE FUELS -- 4.1%
10,429 Enbridge, Inc................................................................................ 385,247
10,679 Equitrans Midstream Corp..................................................................... 222,444
38,163 Kinder Morgan, Inc........................................................................... 758,299
4,376 ONEOK, Inc................................................................................... 297,262
22,174 TransCanada Corp............................................................................. 1,059,030
26,583 Williams (The) Cos., Inc..................................................................... 753,096
---------------
3,475,378
---------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.8%
6,134 Texas Instruments, Inc....................................................................... 722,769
---------------
SPECIALTY RETAIL -- 0.8%
34,798 Buckle (The), Inc............................................................................ 643,067
---------------
THRIFTS & MORTGAGE FINANCE -- 1.5%
24,110 Provident Financial Services, Inc............................................................ 639,397
80,818 TrustCo Bank Corp. NY........................................................................ 646,544
---------------
1,285,941
---------------
TOBACCO -- 0.8%
7,387 Philip Morris International, Inc............................................................. 639,419
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.9%
4,575 Watsco, Inc.................................................................................. 725,000
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.7%
12,777 China Mobile Ltd., ADR....................................................................... 609,080
---------------
TOTAL COMMON STOCKS.......................................................................... 21,092,198
(Cost $19,767,664) ---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
UNITS DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
MASTER LIMITED PARTNERSHIPS -- 10.3%
CHEMICALS -- 0.4%
13,435 Westlake Chemical Partners, L.P.............................................................. $ 300,944
---------------
GAS UTILITIES -- 0.4%
9,953 AmeriGas Partners, L.P....................................................................... 360,896
---------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.7%
13,097 NextEra Energy Partners, L.P. (b)............................................................ 602,855
---------------
OIL, GAS & CONSUMABLE FUELS -- 8.8%
7,489 Alliance Resource Partners, L.P.............................................................. 144,313
10,584 BP Midstream Partners, L.P................................................................... 153,045
55,138 Energy Transfer, L.P......................................................................... 833,687
63,248 Enterprise Products Partners, L.P............................................................ 1,810,790
19,640 Holly Energy Partners, L.P................................................................... 534,012
18,738 Magellan Midstream Partners, L.P............................................................. 1,161,943
6,879 MPLX, L.P.................................................................................... 221,917
13,025 Phillips 66 Partners, L.P.................................................................... 645,128
29,516 Plains All American Pipeline, L.P............................................................ 683,295
15,048 Shell Midstream Partners, L.P................................................................ 302,615
6,082 Tallgrass Energy, L.P. (b)................................................................... 146,819
22,319 TC PipeLines, L.P............................................................................ 796,788
---------------
7,434,352
---------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................................ 8,699,047
(Cost $8,316,787) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 7.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.8%
Federal Home Loan Mortgage Corporation
$ 11,619 Series 1998-192, Class IO, IO, STRIPS........................ 6.50% 02/01/28 2,255
102,478 Series 2003-2564, Class PK................................... 4.00% 06/15/32 107,171
103,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 113,930
2,664 Series 2004-2776, Class QP................................... 4.00% 01/15/34 2,663
102,764 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 +
6.60% (c)................................................. 4.13% 02/15/36 15,383
7,891 Series 2006-3200, Class PO, PO............................... (d) 08/15/36 6,971
10,767 Series 2007-3373, Class TO, PO............................... (d) 04/15/37 9,303
123,080 Series 2007-3382, Class CE................................... 6.00% 11/15/37 135,197
79,674 Series 2009-3589, Class ZW................................... 4.50% 10/15/39 85,303
186,000 Series 2010-3626, Class ME................................... 5.00% 01/15/40 209,671
94,145 Series 2011-3817, Class MA................................... 4.50% 10/15/37 96,031
13,810 Series 2011-3917, Class AI, IO............................... 4.50% 07/15/26 1,021
93,355 Series 2012-4101, Class QN................................... 3.50% 09/15/42 95,599
1,523,089 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 181,335
Federal National Mortgage Association
4,049 Series 1992-205, Class Z..................................... 7.00% 11/25/22 4,248
22,094 Series 1993-176, Class E, PO................................. (d) 08/25/23 21,081
19,075 Series 1993-247, Class 2, IO, STRIPS......................... 7.50% 10/25/23 2,070
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 61,798 Series 1997-22, Class PC..................................... 4.50% 03/18/27 $ 64,172
15,950 Series 2002-1, Class HC...................................... 6.50% 02/25/22 16,350
84,763 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 18,966
15,258 Series 2003-W2, Class 1A1.................................... 6.50% 07/25/42 17,014
53,790 Series 2004-T2, Class 1PO, PO................................ (d) 11/25/43 49,285
10,152 Series 2006-125, Class FA, 1 Mo. LIBOR + 0.28% (e)........... 2.76% 01/25/37 10,117
54,645 Series 2007-32, Class KT..................................... 5.50% 04/25/37 60,680
8,548 Series 2007-42, Class AO, PO................................. (d) 05/25/37 7,777
103,842 Series 2008-24, Class WH..................................... 6.00% 02/25/38 126,924
14,393 Series 2008-44, Class PO, PO................................. (d) 05/25/38 12,044
151,904 Series 2011-30, Class MD..................................... 4.00% 02/25/39 153,359
470,945 Series 2011-99, Class CZ..................................... 4.50% 10/25/41 521,918
96,950 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 19,446
112,463 Series 2015-14, Class IK, IO................................. 0.75% 03/25/45 12,746
94,864 Series 2015-72, Class PC..................................... 3.00% 10/25/43 94,920
Government National Mortgage Association
45,871 Series 1999-30, Class S, IO, 1 Mo. LIBOR (x) -1 + 8.60% (c).. 6.12% 08/16/29 552
32,715 Series 2003-7, Class TA...................................... 4.50% 11/16/32 33,664
26,523 Series 2003-52, Class AP, PO................................. (d) 06/16/33 23,055
54,000 Series 2004-47, Class PD..................................... 6.00% 06/16/34 60,673
52,268 Series 2004-109, Class BC.................................... 5.00% 11/20/33 52,976
11,990 Series 2005-17, Class AD..................................... 5.00% 02/20/35 12,561
350,340 Series 2006-17, Class TW..................................... 6.00% 04/20/36 386,334
245,000 Series 2008-2, Class GC...................................... 4.75% 01/16/38 264,500
82,330 Series 2009-96, Class ZG..................................... 5.50% 10/16/39 93,439
10,000 Series 2010-84, Class YB..................................... 4.00% 07/20/40 10,460
238,299 Series 2010-111, Class JA.................................... 2.50% 09/16/40 237,593
456,000 Series 2010-167, Class WL.................................... 4.50% 09/20/40 504,609
17,508 Series 2011-29, Class JA..................................... 4.50% 04/20/40 17,541
34,828 Series 2012-34, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.05% (c)............................ 3.57% 03/16/42 5,708
37,045 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 7,368
1,736 Series 2013-31, Class TH, 1 Mo. LIBOR + 4.35% (e)............ 6.83% 08/20/39 1,773
46,272 Series 2013-67, Class PI, IO................................. 4.00% 12/16/42 6,410
NCUA Guaranteed Notes Trust
31,772 Series 2010-R3, Class 1A, 1 Mo. LIBOR + 0.56% (e)............ 3.03% 12/08/20 31,857
Vendee Mortgage Trust
107,699 Series 2011-2, Class DA...................................... 3.75% 12/15/33 108,366
---------------
4,134,389
---------------
PASS-THROUGH SECURITIES -- 2.9%
Federal Home Loan Mortgage Corporation..........................
69,442 Pool A47829.................................................. 4.00% 08/01/35 71,711
78,201 Pool A80290.................................................. 5.00% 11/01/35 84,722
58,866 Pool A94951.................................................. 4.00% 11/01/40 61,199
34,220 Pool A95134.................................................. 4.50% 11/01/40 36,410
31,637 Pool A97601.................................................. 4.50% 03/01/41 33,702
14,240 Pool G03523.................................................. 6.00% 11/01/37 15,842
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 39,393 Pool G06501.................................................. 4.00% 04/01/41 $ 40,868
51,713 Pool G07286.................................................. 6.50% 09/01/39 59,214
874 Pool G11805.................................................. 5.50% 12/01/19 874
5,586 Pool G11973.................................................. 5.50% 02/01/21 5,650
38,885 Pool G13124.................................................. 6.00% 12/01/22 39,959
32,227 Pool G13465.................................................. 6.00% 01/01/24 33,212
31,513 Pool G13790.................................................. 4.50% 04/01/25 32,598
35,146 Pool G13844.................................................. 4.50% 07/01/25 36,355
26,854 Pool G14184.................................................. 5.00% 07/01/25 27,836
40,796 Pool G15725.................................................. 4.50% 09/01/26 42,194
12,821 Pool G18072.................................................. 4.50% 09/01/20 13,096
9,898 Pool O20138.................................................. 5.00% 11/01/30 10,507
35,808 Pool Q05201.................................................. 4.00% 12/01/41 37,238
Federal National Mortgage Association
99,310 Pool 724888.................................................. 5.50% 06/01/33 106,860
23,759 Pool 879398.................................................. 5.50% 02/01/21 24,034
32,049 Pool 888112.................................................. 6.50% 12/01/36 36,352
16,154 Pool 889780.................................................. 5.50% 03/01/23 16,698
4,480 Pool 890206.................................................. 5.50% 10/01/21 4,508
38,917 Pool 897936.................................................. 5.50% 08/01/21 39,663
22,209 Pool 923171.................................................. 7.50% 03/01/37 24,669
39,031 Pool 977130.................................................. 5.50% 08/01/23 40,120
25,311 Pool 983629.................................................. 4.50% 05/01/23 25,832
30,535 Pool 995400.................................................. 7.00% 06/01/23 31,664
65,830 Pool 995700.................................................. 6.50% 03/01/27 72,521
31,683 Pool AB2265.................................................. 4.00% 02/01/41 33,072
9,916 Pool AI1191.................................................. 4.50% 04/01/41 10,510
31,856 Pool AI7800.................................................. 4.50% 07/01/41 33,758
26,185 Pool AJ5299.................................................. 4.00% 11/01/41 27,365
48,788 Pool AJ5300.................................................. 4.00% 11/01/41 50,821
40,506 Pool AK3103.................................................. 4.00% 02/01/42 42,093
81,454 Pool AL1024.................................................. 4.50% 07/01/26 84,702
27,587 Pool AL6304.................................................. 5.50% 09/01/25 28,401
55,830 Pool AU4726.................................................. 4.00% 09/01/43 58,154
428,190 Pool BN0965.................................................. 4.50% 12/01/48 447,171
Government National Mortgage Association
19,023 Pool 3500.................................................... 5.50% 01/20/34 20,847
11,059 Pool 3513.................................................... 5.00% 02/20/34 11,825
21,852 Pool 3555.................................................... 5.00% 05/20/34 23,370
60,962 Pool 3975.................................................... 5.50% 04/20/37 66,802
24,419 Pool 4230.................................................... 6.00% 09/20/23 25,627
38,568 Pool 609116.................................................. 4.50% 02/15/44 40,875
285,180 Pool 770005.................................................. 4.00% 11/15/33 301,149
25,247 Pool MA2293.................................................. 3.50% 10/20/44 25,522
---------------
2,438,172
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 6,572,561
(Cost $6,619,754) ---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 2.2%
EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.2%
11,695 National Retail Properties, Inc.............................................................. $ 615,391
2,974 Public Storage............................................................................... 657,789
8,865 Realty Income Corp........................................................................... 620,639
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................................... 1,893,819
(Cost $1,706,311) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES -- 0.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
BCAP LLC Trust
$ 10,799 Series 2011-R11, Class 30A5 (f) (g).......................... 4.37% 01/26/34 10,664
MASTR Asset Securitization Trust
558 Series 2003-11, Class 3A1.................................... 4.50% 12/25/18 558
Residential Accredit Loans, Inc.
1,653 Series 2003-QS5, Class A2, 1 Mo. LIBOR (x) -1.83 +
14.76% (c)................................................ 10.22% 03/25/18 1,569
1,748 Series 2003-QS14, Class A1................................... 5.00% 07/25/18 1,716
1,218 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 1,217
Residential Asset Securitization Trust
4,341 Series 2003-A14, Class A1.................................... 4.75% 02/25/19 3,799
Structured Asset Securities Corp.
12,762 Series 2003-37A, Class 3A7 (g)............................... 4.44% 12/25/33 12,953
---------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 32,476
(Cost $32,568) ---------------
ASSET-BACKED SECURITIES -- 0.0%
First Alliance Mortgage Loan Trust
26,321 Series 1999-1, Class A1...................................... 7.18% 06/20/30 26,510
Lehman XS Trust
491 Series 2005-2, Class 1A2, 1 Mo. LIBOR + 0.70% (e)............ 3.18% 08/25/35 492
---------------
TOTAL ASSET-BACKED SECURITIES................................................................ 27,002
(Cost $26,788) ---------------
TOTAL INVESTMENTS -- 99.2%................................................................... 84,253,236
(Cost $82,513,736) (h)
NET OTHER ASSETS AND LIABILITIES -- 0.8%..................................................... 687,197
---------------
NET ASSETS -- 100.0%......................................................................... $ 84,940,433
===============
</TABLE>
-----------------------------
(a) Investment in an affiliated fund.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
(c) Inverse floating rate security.
(d) Zero coupon security.
(e) Floating or variable rate security.
(f) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P., the Fund's
advisor. Although market instability can result in periods of increased
overall market illiquidity, liquidity for each security is determined
based on security specific factors and assumptions, which require
subjective judgment. At April 30, 2019, securities noted as such amounted
to $10,664 or 0.0% of net assets.
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
(g) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(h) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $2,788,421 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $1,048,921. The net unrealized appreciation was
$1,739,500.
ADR American Depositary Receipt
IO Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
LIBOR London Interbank Offered Rate
PO Principal-Only Security
STRIPS Separate Trading of Registered Interest and Principal of Securities
Currency Abbreviations:
CAD Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Exchange-Traded Funds*............................ $ 45,936,133 $ 45,936,133 $ -- $ --
Common Stocks*.................................... 21,092,198 21,092,198 -- --
Master Limited Partnerships*...................... 8,699,047 8,699,047 -- --
U.S. Government Agency Mortgage-Backed
Securities..................................... 6,572,561 -- 6,572,561 --
Real Estate Investment Trusts*.................... 1,893,819 1,893,819 -- --
Mortgage-Backed Securities........................ 32,476 -- 32,476 --
Asset-Backed Securities........................... 27,002 -- 27,002 --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 84,253,236 $ 77,621,197 $ 6,632,039 $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated..................................... $ 48,361,915
Investments, at value - Affiliated....................................... 35,891,321
----------------
Total investments, at value.............................................. 84,253,236
Cash..................................................................... 550,215
Due from broker.......................................................... 49,860
Foreign currency, at value............................................... 10,122
Receivables:
Interest.............................................................. 95,381
Dividends............................................................. 42,735
Reclaims.............................................................. 10,337
Investment securities sold............................................ 98
----------------
Total Assets....................................................... 85,011,984
----------------
LIABILITIES:
Payables:
Investment securities purchased....................................... 38,715
Investment advisory fees.............................................. 32,836
----------------
Total Liabilities.................................................. 71,551
----------------
NET ASSETS............................................................... $ 84,940,433
================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 84,607,517
Par value................................................................ 17,000
Accumulated distributable earnings (loss)................................ 315,916
----------------
NET ASSETS............................................................... $ 84,940,433
================
NET ASSET VALUE, per share............................................... $ 49.96
================
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................ 1,700,002
================
Investments, at cost - Unaffiliated...................................... $ 46,343,451
================
Investments, at cost - Affiliated........................................ $ 36,170,285
================
Total investments, at cost............................................... $ 82,513,736
================
Foreign currency, at cost (proceeds)..................................... $ 10,666
================
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends - Unaffiliated................................................. $ 619,756
Dividends - Affiliated................................................... 806,041
Interest................................................................. 101,070
Foreign withholding tax.................................................. (9,293)
----------------
Total investment income............................................... 1,517,574
----------------
EXPENSES:
Investment advisory fees................................................. 337,787
----------------
Total expenses........................................................ 337,787
Less fees waived by the investment advisor............................ (128,820)
----------------
Net expenses.......................................................... 208,967
----------------
NET INVESTMENT INCOME (LOSS)............................................. 1,308,607
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................ (88,079)
Investments - Affiliated.............................................. (306,801)
In-kind redemptions................................................... 253,306
Futures contracts..................................................... 342
Foreign currency transactions......................................... (1,645)
----------------
Net realized gain (loss)................................................. (142,877)
----------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................ 3,661,095
Investments - Affiliated.............................................. 548,460
Futures contracts..................................................... 1,290
Foreign currency translation.......................................... 164
----------------
Net change in unrealized appreciation (depreciation)..................... 4,211,009
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 4,068,132
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 5,376,739
================
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2019 ENDED
(UNAUDITED) 10/31/2018
-------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)............................................. $ 1,308,607 $ 3,109,606
Net realized gain (loss)................................................. (142,877) (138,062)
Net change in unrealized appreciation (depreciation)..................... 4,211,009 (4,128,061)
-------------- ---------------
Net increase (decrease) in net assets resulting from operations.......... 5,376,739 (1,156,517)
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................... (1,784,002) (3,832,900)
Return of capital........................................................ -- (526,104)
-------------- ---------------
Total distributions to shareholders...................................... (1,784,002) (4,359,004)
-------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 7,455,282 9,972,148
Cost of shares redeemed.................................................. (9,611,633) (17,238,788)
-------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions......................................... (2,156,351) (7,266,640)
-------------- ---------------
Total increase (decrease) in net assets.................................. 1,436,386 (12,782,161)
NET ASSETS:
Beginning of period...................................................... 83,504,047 96,286,208
-------------- ---------------
End of period............................................................ $ 84,940,433 $ 83,504,047
============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. 1,750,002 1,900,002
Shares sold.............................................................. 150,000 200,000
Shares redeemed.......................................................... (200,000) (350,000)
-------------- ---------------
Shares outstanding, end of period........................................ 1,700,002 1,750,002
============== ===============
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2019 ----------------------------------------------------- ENDED
(UNAUDITED) 2018 2017 2016 2015 10/31/2014 (a)
------------ ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 47.72 $ 50.68 $ 49.89 $ 47.76 $ 50.59 $ 50.00
---------- --------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.81 1.69 1.56 1.60 1.67 0.29
Net realized and unrealized gain (loss) 2.52 (2.26) 1.10 (c) 2.45 (2.58) (b) 0.59
---------- --------- --------- --------- --------- ----------
Total from investment operations 3.33 (0.57) 2.66 4.05 (0.91) 0.88
---------- --------- --------- --------- --------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.09) (2.10) (1.65) (1.92) (1.40) (0.27)
Net realized gain -- -- (0.22) -- -- --
Return of capital -- (0.29) -- -- (0.52) (0.02)
---------- --------- --------- --------- --------- ----------
Total distributions (1.09) (2.39) (1.87) (1.92) (1.92) (0.29)
---------- --------- --------- --------- --------- ----------
Net asset value, end of period $ 49.96 $ 47.72 $ 50.68 $ 49.89 $ 47.76 $ 50.59
========== ========= ========= ========= ========= ==========
TOTAL RETURN (d) 7.05% (1.21)% 5.40% (c) 8.67% (1.85)% (b) 1.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 84,940 $ 83,504 $ 96,286 $ 17,460 $ 19,102 $ 20,236
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (e) 0.85% (f) 0.86% (g) 0.85% 0.85% 0.85% 0.85% (f)
Ratio of net expenses to average net
assets (e) 0.53% (f) 0.50% (g) 0.52% 0.55% 0.61% 0.69% (f)
Ratio of net investment income (loss) to
average net assets 3.29% (f) 3.40% 3.10% 3.30% 3.37% 2.71% (f)
Portfolio turnover rate (h) 49% 113% 119% 88% 125% 33%
</TABLE>
(a) Inception date is August 13, 2014, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) The Fund received a payment from the Advisor in the amount of $23,478 in
connection with a trade error. The payment from the Advisor represents
$0.06 per share and had no effect on the Fund's total return.
(c) The Fund received a reimbursement from the Advisor in the amount of $3,457
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.
(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. The total returns would have been lower if certain
fees had not been waived by the Advisor.
(e) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(f) Annualized.
(g) Includes excise tax. If this excise tax expense was not included, the
total and net expense ratios would have been 0.85% and 0.49%,
respectively.
(h) 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.
Page 16 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Strategic Income ETF (the "Fund"), which trades under the
ticker "FDIV" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional
mutual funds, the Fund issues and redeems shares on a continuous basis, at net
asset value ("NAV"), only in large specified blocks consisting of 50,000 shares
called a "Creation Unit." Creation Units are issued and redeemed in-kind for
securities in which the Fund invests and/or cash, and only to and from
broker-dealers and large institutional investors that have entered into
participation agreements. Except when aggregated in Creation Units, the Fund's
shares are not redeemable securities.
The Fund is a multi-manager, multi-strategy actively managed exchange-traded
fund. The Fund's primary investment objective is to seek risk-adjusted income.
The Fund's secondary investment objective is capital appreciation.
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the Fund. The following serve as investment sub-advisors to the Fund:
First Trust Global Portfolios Ltd. ("FTGP"); Energy Income Partners, LLC
("EIP"); Stonebridge Advisors LLC ("Stonebridge"); and Richard Bernstein
Advisors LLC ("RBA") (each, a "Sub-Advisor" and together, the "Sub-Advisors").
The Advisor's Investment Committee determines the Fund's strategic allocation
among various general investment categories and allocates the Fund's assets to
portfolio management teams comprised of personnel of the Advisor and/or a
Sub-Advisor (each, a "Management Team"), which employ their respective
investment strategies. The Fund seeks to achieve its objectives by having each
Management Team focus on those investments within its respective investment
category. The Fund may add or remove investment categories or Management Teams
at the discretion of the Advisor.
Under normal market conditions, the Fund will invest in various asset classes,
which include high-yield corporate bonds, commonly referred to as "junk" bonds,
and first lien senior secured floating rate bank loans, mortgage-related
investments, preferred securities, international sovereign bonds, including
securities issued by emerging market countries, equity securities of Energy
Infrastructure Companies(1), certain of which are master limited partnerships
("MLPs"), and dividend paying U.S. exchange-traded equity securities (including
common stock) of companies (that may be domiciled in or outside of the United
States) and depositary receipts. The Management Team may utilize a related
option overlay strategy and/or derivative instruments in implementing their
respective investment strategies for the Fund. Additionally, the Management Team
may seek exposure to these asset classes through investments in exchange-traded
funds ("ETFs"). The Advisor expects that the Fund may at times invest
significantly in other exchange-traded funds, including but not limited to,
other exchange-traded funds that are advised by the Advisor; accordingly, the
Fund may operate principally as a "fund of funds" but will not necessarily
operate as such at all times.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
-----------------------------
(1) Energy Infrastructure Companies are publicly-traded MLPs or limited
liability companies that are taxed as partnerships; entities that control
MLPs, entities that own general partner interests in an MLP, or MLP
affiliates (such as I-shares or I-units); U.S. and Canadian energy yield
corporations ("yieldcos"); pipeline companies; utilities; and other
companies that are involved in operating or providing services in support
of infrastructure assets such as pipeline, power transmission,
terminalling and petroleum and natural gas storage in the petroleum,
natural gas and power generation industries.
Page 17
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
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 last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee in
accordance with valuation procedures adopted by the Trust's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. All securities and other assets of the Fund
initially expressed in foreign currencies will be converted to U.S. dollars
using exchange rates in effect at the time of valuation. The Fund's investments
are valued as follows:
Corporate bonds, corporate notes, U.S. government securities,
mortgage-backed securities, asset-backed securities and other debt
securities are fair valued on the basis of valuations provided by dealers
who make markets in such securities or by a third-party pricing service
approved by the Trust's Board of Trustees, 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.
Common stocks, preferred stocks, MLPs and other equity securities listed
on any national or foreign exchange (excluding Nasdaq and the London Stock
Exchange Alternative Investment Market ("AIM")) are valued at the last
sale price on the exchange on which they are principally traded or, for
Nasdaq and AIM securities, the official closing price. Securities traded
on more than one securities exchange are valued at the last sale price or
official closing price, as applicable, at the close of the securities
exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Forward foreign currency contracts are fair valued at the current day's
interpolated foreign exchange rate, as calculated using the current day's
spot rate, and the thirty, sixty, ninety, and one-hundred eighty day
forward rates provided by a third-party pricing service.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities.
Fair valuation of a debt security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities of the
issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the economic, political and social prospects/developments of the
country of issue and the assessment of the country's government
leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
13) other relevant factors.
Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might
affect the value of the security.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of the Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of the securities denominated in foreign
currencies is converted into U.S. dollars using exchange rates determined daily
as of the close of regular trading on the NYSE.
The 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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
Distributions received from the Fund's investments in MLPs generally are
comprised of return of capital and investment income. The Fund records estimated
return of capital and investment income based on historical information
available from each MLP. These estimates may subsequently be revised based on
information received from the MLPs after their tax reporting periods are
concluded.
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 is 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.
C. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund is subject to foreign currency risk in the normal course of pursuing
its investment objectives. Forward foreign currency contracts are agreements
between two parties ("Counterparties") to exchange one currency for another at a
future date and at a specified price. The Fund uses forward foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Fund's foreign currency exposure. These contracts are valued daily, and the
Fund's net equity therein, representing unrealized gain or loss on the contracts
as measured by the difference between the forward foreign exchange rates at the
dates of entry into the contracts and the forward rates at the reporting date,
is included in "Unrealized appreciation (depreciation) on forward foreign
currency contracts" on the Statement of Assets and Liabilities. When the forward
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or the cost of) the closing transaction
and the Fund's basis in the contract. This realized gain or loss is included in
"Net realized gain (loss) on forward foreign currency contracts" on the
Statement of Operations. Risks arise from the possible inability of
Counterparties to meet the terms of their contracts and from movement in
currency and securities values and interest rates. Due to the risks, the Fund
could incur losses in excess of the net unrealized value shown on the forward
foreign currency contracts table in the Portfolio of Investments. In the event
of default by the Counterparty, the Fund will provide notice to the Counterparty
of the Fund's intent to convert the currency held by the Fund into the currency
that the Counterparty agreed to exchange with the Fund. If a Counterparty
becomes bankrupt or otherwise fails to perform its obligations due to financial
difficulties, the Fund may experience significant delays in obtaining any
recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain
only limited recovery or may obtain no recovery in such circumstances.
The Fund did not have any forward foreign currency contracts during the six
months ended April 30, 2019.
D. FUTURES CONTRACTS
The Fund purchases or sells (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
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
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 contacts
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. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are included in "Variation margin" receivable or payable 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.
E. OPTIONS CONTRACTS
In the normal course of pursuing its investment objective, the Fund may invest
up to 20% of its net assets in derivative instruments in connection with hedging
strategies. The Fund may invest in exchange-listed futures contracts,
exchange-listed options, exchange-listed options on futures contracts, and
exchange-listed stock index options.
The Fund may purchase or write (sell) put and call options on futures contracts
and enter into closing transactions with respect to such options to terminate an
existing position. A futures option gives the holder the right, in return for
the premium paid, to assume a long position (call) or short position (put) in a
futures contract at a specified exercise price prior to the expiration of the
option. Upon exercise of a call option, the holder acquires a long position in
the futures contract and the writer is assigned the opposite short position. In
the case of a put option, the opposite is true. Prior to exercise or expiration,
a futures contract may be closed out by an offsetting purchase or sale of a
futures option of the same series. Options are marked-to-market daily and their
value is affected by changes in the value of the underlying security, changes in
interest rates, changes in the actual or perceived volatility of the securities
markets and the underlying securities, and the remaining time to the option's
expiration. The value of options may also be adversely affected if the market
for the options becomes less liquid or the trading volume diminishes.
The Fund uses options on futures contracts in connection with hedging
strategies. Generally, these strategies are applied under the same market and
market sector conditions in which the Fund uses put and call options on
securities or indices. The purchase of put options on futures contracts is
analogous to the purchase of puts on securities or indices so as to hedge the
Fund's securities holdings against the risk of declining market prices. The
writing of a call option or the purchasing of a put option on a futures contract
constitutes a partial hedge against declining prices of securities which are
deliverable upon exercise of the futures contract. If the price at expiration of
a written call option is below the exercise price, the Fund will retain the full
amount of the option premium which provides a partial hedge against any decline
that may have occurred in the Fund's holdings of securities. If the price when
the option is exercised is above the exercise price, however, the Fund will
incur a loss, which may be offset, in whole or in part, by the increase in the
value of the securities held by the Fund that were being hedged. Writing a put
option or purchasing a call option on a futures contract serves as a partial
hedge against an increase in the value of the securities the Fund intends to
acquire. Realized gains and losses on purchased options are included in "Net
realized gain (loss) on purchased options contracts" on the Statement of
Operations.
The Fund is required to deposit and maintain margin with respect to put and call
options on futures contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund. The Fund will pledge in a segregated account
at the Fund's custodian, liquid assets, such as cash, U.S. government securities
or other high-grade liquid debt obligations equal in value to the amount due on
the underlying obligation. Such segregated assets will be marked-to-market
daily, and additional assets will be pledged in the segregated account whenever
the total value of the pledged assets falls below the amount due on the
underlying obligation.
The risks associated with the use of options on future contracts include the
risk that the Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on futures contracts depends on the Advisor's
ability to correctly predict the movement in prices on futures contracts and the
underlying instruments, which may prove to be incorrect. In addition, there may
be imperfect correlation between the instruments being hedged and the futures
contract subject to option.
The Fund did not have any options contracts during the six months ended April
30, 2019.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
F. FOREIGN CURRENCY
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
included in "Net change in unrealized appreciation (depreciation) on investments
- Unaffiliated" on the Statement of Operations. Net realized foreign currency
gains and losses include the effect of changes in exchange rates between trade
date and settlement date on investment security transactions, foreign currency
transactions and interest and dividends received is included in "Net realized
gain (loss) on foreign currency transactions" on the Statement of Operations.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial purchase settlement date and subsequent sale
trade date is included in "Net realized gain (loss) on investments -
Unaffiliated" on the Statement of Operations.
G. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.
H. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
I. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage-backed securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security known as an IO Security and all
of the principal is distributed to holders of another type of security known as
a PO Security. These securities, if any, are identified on the Portfolio of
Investments.
J. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. Dividend income and realized
gains and losses, and change in appreciation (depreciation) from affiliated
funds are presented on the Statement of Operations. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
Amounts related to these investments at April 30, 2019, and for the six month
period then ended are as follows:
<TABLE>
<CAPTION>
CHANGE TO
SHARES VALUE UNREALIZED REALIZED VALUE
AT AT APPRECIATION GAIN AT DIVIDEND
SECURITY NAME 4/30/2019 10/31/2018 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2019 INCOME
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust
Emerging Markets
Local Currency
Bond ETF 244,182 $ 3,372,038 $ 6,169,123 $ (499,654) $ 103,651 $ 4,342 $ 9,149,500 $ 163,238
First Trust
Institutional
Preferred
Securities and
Income ETF 173,136 2,976,888 622,814 (338,984) 68,597 (5,104) 3,324,211 81,299
First Trust
Long Duration
Opportunities
ETF 5,106 -- 131,625 -- 595 -- 132,220 266
First Trust
Low Duration
Opportunities
ETF -- -- 102,350 (102,519) -- 169 -- 470
First Trust
Preferred
Securities and
Income ETF 518,455 8,899,776 1,857,717 (1,012,083) 256,471 (16,438) 9,985,443 257,006
First Trust
Senior Loan
Fund 139,197 16,316,822 741,960 (10,166,305) 66,221 (289,770) 6,668,928 274,386
First Trust
Tactical High
Yield ETF 137,573 -- 6,578,094 -- 52,925 -- 6,631,019 29,376
-----------------------------------------------------------------------------------------------
$31,565,524 $16,203,683 $(12,119,545) $ 548,460 $(306,801) $35,891,321 $ 806,041
===============================================================================================
</TABLE>
K. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
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 significantly modified portfolio securities
held by the Fund and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 3,832,900
Capital gains................................... --
Return of capital............................... 526,104
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (479,011)
Net unrealized appreciation (depreciation)...... (2,797,810)
L. 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 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
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 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, management has evaluated the application of these standards to the Fund
and has determined that no provision for income tax is required in the Fund's
financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2018, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $479,011.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
net ordinary losses.
M. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
N. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Fund has early adopted ASU 2018-13 for these financial statements, which did
not result in a material impact.
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.
The Fund and First Trust have retained the Sub-Advisors to provide
recommendations to the Advisor regarding the selection and ongoing monitoring of
the securities in the Fund's investment portfolio. First Trust executes all
transactions on behalf of the Fund, with the exception of the securities that
are selected by FTGP. EIP, an affiliate of First Trust, provides recommendations
regarding the selection of MLP securities for the Fund's investment portfolio
and provides ongoing monitoring of the MLP securities, MLP affiliate and energy
infrastructure securities in the Fund's investment portfolio selected by EIP.
EIP exercises discretion only with respect to assets of the Fund allocated to
EIP by the Advisor. FTGP, an affiliate of First Trust, selects international
sovereign debt securities for the Fund's investment portfolio and provides
ongoing monitoring of the international sovereign debt securities in the Fund's
investment portfolio selected by FTGP. RBA provides recommendations regarding
longer term investment strategies that combine top-down, macroeconomic analysis
and quantitatively-driven portfolio construction. Stonebridge, an affiliate of
First Trust, provides recommendations regarding the selection and ongoing
monitoring of the preferred and hybrid securities in the Fund's investment
portfolio.
Pursuant to the Investment Management Agreement between the Trust and Advisor,
First Trust will supervise the Sub-Advisors and their management of the
investment of the Fund's assets and will pay EIP, FTGP, RBA and Stonebridge for
their services as the Fund's sub-advisors. First Trust will also be 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, pro rata share of
fees and expenses attributable to investments in other investment companies
("acquired fund fees and expenses") with the exception of those attributable to
affiliated Funds, 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. The Fund has agreed to pay
First Trust an annual unitary management fee equal to 0.85% of its average daily
net assets. The total of the unitary management fee, acquired fund fees and
expenses, and other excluded expenses, represents the Fund's total annual
operating expenses. Pursuant to a contractual agreement between the Trust, on
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
behalf of the Fund, and First Trust, the management fees paid to First Trust
will be reduced by the proportional amount of the acquired fund fees and
expenses of the shares of investment companies held by the Fund so that the Fund
would not bear the indirect costs of holding them, provided that the investment
companies are advised by First Trust. This contractual agreement shall continue
until the earlier of (i) its termination at the direction of the Trust's Board
of Trustees or (ii) the termination of the Fund's management agreement with
First Trust. First Trust does not have the right to recover the fees waived that
are attributable to acquired fund fees and expenses on the shares of investment
companies advised by First Trust. During the six months ended April 30, 2019,
the Advisor waived fees of $128,820.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases of U.S. Government securities and non-U.S. Government
securities, excluding short-term investments and in-kind transactions for the
six months ended April 30, 2019, were $2,200,883 and $36,763,470, respectively.
The proceeds from sales and paydowns of U.S. Government securities and non-U.S.
Government securities, excluding short-term investments and in-kind transactions
for the six months ended April 30, 2019, were $542,086 and $38,851,146,
respectively.
For the six months ended April 30, 2019, the cost of in-kind purchases and
proceeds from in-kind sales were $6,251,642 and $8,104,953, respectively.
5. DERIVATIVE TRANSACTIONS
As of April 30, 2019, the Fund had no derivative instruments.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2019, 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 $ 342
Net change in unrealized appreciation (depreciation) on
futures contracts 1,290
During the six months ended April 30, 2019, there were no forward foreign
currency contracts opened or closed.
During the six months ended April 30, 2019, the notional value of futures
contracts opened and closed were $114,144 and $87,112, respectively.
During the six months ended April 30, 2019, there were no options contracts
opened or closed.
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.
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker-dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). In order to purchase Creation Units of the Fund, an
Authorized Participant must deposit (i) a designated portfolio of securities
determined by First Trust (the "Deposit Securities") and generally make or
receive a cash payment referred to as the "Cash Component," which is an amount
equal to the difference between the NAV of the Fund Shares (per Creation Unit
Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in
lieu of all or a portion of the Deposit Securities. The Fund's Creation Units
are generally issued and redeemed for cash. If the Cash Component is a positive
number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount),
the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (i.e., the NAV per Creation Unit Aggregation is
less than the Deposit Amount), the Authorized Participant will receive the Cash
Component. Authorized Participants purchasing Creation Units must pay to BNYM,
as transfer agent, a creation transaction fee (the "Creation Transaction Fee")
regardless of the number of Creation Units purchased in the transaction. The
Creation Transaction Fee is based on the composition of the securities included
in the Fund's portfolio and the countries in which the transactions are settled.
The Creation Transaction Fee is currently $500. The price for each Creation Unit
will equal the daily NAV per share 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 or stamp taxes. When the Fund permits an
Authorized Participant to substitute cash or a different security in lieu of
depositing one or more of the requisite Deposit Securities, the Authorized
Participant may also be assessed an amount to cover the cost of purchasing the
Deposit Securities and/or disposing of the substituted securities, including
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 such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer
agent, a redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $500. The
Fund reserves the right to effect redemptions in cash. An Authorized Participant
may request cash redemption in lieu of securities; however, the Fund may, in its
discretion, reject any such request.
7. 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 March 31, 2020.
8. 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.
9. 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 26
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
Page 27
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2019 (UNAUDITED)
lack of liquidity; currency exchange rates; excessive taxation; government
seizure of assets; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
Energy Income Partners, LLC
10 Wright Street
Westport, CT 06880
First Trust Global Portfolios Ltd.
8 Angel Court
London EC2R 7HJ
Richard Bernstein Advisors, LLC
120 West 45th Street, 36th Floor
New York, NY 10036
Stonebridge Advisors LLC
10 Westport Road, Suite C101
Wilton, CT 06897
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Low Duration Opportunities ETF (LMBS)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management ........................................................ 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 47
Statement of Operations...................................................... 48
Statements of Changes in Net Assets.......................................... 49
Financial Highlights......................................................... 50
Notes to Financial Statements................................................ 51
Additional Information....................................................... 60
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Low Duration Opportunities ETF; hereinafter referred to
as the "Fund") to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Low Duration Opportunities ETF (the "Fund"), which contains detailed
information about the Fund for the six months ended April 30, 2019. We encourage
you to read this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
The primary investment objective of the First Trust Low Duration Opportunities
ETF (the "Fund") is to generate current income. The Fund's secondary investment
objective is to provide capital appreciation. The Fund is an actively managed
exchange-traded fund. First Trust Advisors L.P. ("First Trust" or the "Advisor")
serves as the advisor. Jim Snyder and Jeremiah Charles are the Fund's portfolio
managers and are jointly and primarily responsible for the day-to-day management
of the Fund's investment portfolio.
Under normal market conditions, the Fund will seek to achieve its investment
objectives by investing at least 80% of its net assets (including investment
borrowings) in mortgage-related debt securities and other mortgage-related
instruments. The Fund's investment categories are: (i) mortgage-related
investments, including mortgage-backed securities that may be, but are not
required to be, issued or guaranteed by the U.S. government or its agencies or
instrumentalities; (ii) U.S. government securities, including callable agency
securities, which give the issuer (the U.S. government agency) the right to
redeem the security prior to maturity, and U.S. government inflation-indexed
securities; and (iii) high yield debt, commonly referred to as "junk" debt.
Although the Fund intends to invest primarily in investment grade securities,
the Fund may invest up to 20% of its net assets (including investment
borrowings) in securities of any credit quality, including securities that are
below investment grade (as described in (iii) above), illiquid securities, and
derivative instruments. The Fund is non-diversified.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (11/4/14) Inception (11/4/14)
4/30/19 4/30/19 to 4/30/19 to 4/30/19
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 2.35% 3.02% 3.43% 16.35%
Market Price 2.32% 3.06% 3.46% 16.47%
INDEX PERFORMANCE
ICE BofAML 1-5 Year US Treasury & Agency Index 2.98% 3.66% 1.26% 5.78%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after its inception, for the period from inception to the
first day of secondary market trading in shares of the Fund, the NAV of the Fund
is used as a proxy for the secondary market trading price to calculate market
returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
-----------------------------------------------------------
% OF LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
U.S. Government Agency Mortgage-
Backed Securities 75.98%
Mortgage-Backed Securities 9.98
U.S. Government Bonds and Notes 8.17
Asset-Backed Securities 5.50
Exchange-Traded Funds 0.37
Foreign Corporate Bonds 0.00*
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
-----------------------------------------------------------
Government and Agency 84.10%
AAA 11.52
AA+ 0.11
AA 0.33
A+ 0.68
A 0.16
A- 0.11
BBB+ 0.02
BBB 0.04
BBB- 0.01
BB+ 0.61
BB 0.14
B 0.03
CCC+ 0.01
Not Rated 1.69
Cash 0.44
-------
Total 100.00%
=======
Amount is less than 0.01%.
-----------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(1)
-----------------------------------------------------------
Federal National Mortgage Association,
Pool TBA, 5.00%, 5/15/41 3.49%
Federal National Mortgage Association,
Pool TBA, 3.00%, 5/15/43 3.28
U.S. Treasury Note 3.38%, 11/15/19 1.57
U.S. Treasury Note 2.25%, 2/29/20 1.56
Federal Home Loan Mortgage Corporation,
Series 2015-343, Class F4, STRIPS,
1 Mo. LIBOR + 0.35%, 2.85%, 10/15/37 1.54
U.S. Treasury Note 2.25%, 3/31/20 1.36
U.S. Treasury Note 1.50%, 10/31/19 1.36
Federal Home Loan Mortgage Corporation,
Pool U69055, 4.50%, 10/01/47 1.33
Federal National Mortgage Association,
Pool BM5039, 4.50%, 12/01/48 1.31
Federal National Mortgage Association,
Series 2019-8, Class DY, 3.50%, 3/25/49 1.16
-------
Total 17.96%
=======
-----------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
-----------------------------------------------------------
April 30, 2019 2.01 Years
High - February 28, 2019 2.09 Years
Low - March 31, 2019 1.73 Years
-----------------------------
(1) Percentages are based on the long positions only. Money market funds and
short positions are excluded.
(2) The ratings are by Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO), of the
creditworthiness of an issuer with respect to debt obligations. Ratings
are measured highest to lowest on a scale that generally ranges from AAA
to D for long-term ratings and A-1+ to C for short-term ratings.
Investment grade is defined as those issuers that have a long-term credit
rating of BBB- or higher or a short-term credit rating of A-3 or higher.
The credit ratings shown relate to the credit worthiness of the issuers of
the underlying securities in the Fund, and not to the Fund or its shares.
U.S. Treasury and U.S. Agency mortgage-backed securities appear under
"Government and Agency". Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
NOVEMBER 4, 2014 - APRIL 30, 2019
First Trust Low Duration ICE BofAML 1-5 Year US
Opportunities ETF Treasury & Agency Index
<S> <C> <C>
11/4/14 $10,000 $10,000
4/30/15 10,236 10,097
10/31/15 10,362 10,144
4/30/16 10,725 10,256
10/31/16 11,138 10,301
4/30/17 11,186 10,279
10/31/17 11,274 10,307
4/30/18 11,294 10,205
10/31/18 11,368 10,273
4/30/19 11,635 10,578
</TABLE>
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period November 5, 2014
(commencement of trading) through April 30, 2019. Shareholders may pay more than
NAV when they buy Fund shares and receive less than NAV when they sell those
shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
<TABLE>
<CAPTION>
NUMBER OF DAYS BID/ASK MIDPOINT NUMBER OF DAYS BID/ASK MIDPOINT
AT/ABOVE NAV BELOW NAV
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00%- 0.50%- 1.00%- 0.00%- 0.50%- 1.00%-
FOR THE PERIOD 0.49% 0.99% 1.99% >=2.00% 0.49% 0.99% 1.99% >=2.00%
11/5/14 - 10/31/15 144 40 0 1 62 3 0 0
11/1/15 - 10/31/16 178 7 0 0 66 1 0 0
11/1/16 - 10/31/17 236 0 0 0 16 0 0 0
11/1/17 - 10/31/18 222 1 0 0 29 0 0 0
11/1/18 - 4/30/19 120 0 0 0 2 0 0 0
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Low Duration Opportunities ETF ("the Fund" or
"LMBS"). In this capacity, First Trust is responsible for the selection and
ongoing monitoring of the investments in the Fund's portfolio and certain other
services necessary for the management of the portfolio.
PORTFOLIO MANAGEMENT TEAM
JEREMIAH CHARLES - PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP
JIM SNYDER - PORTFOLIO MANAGER, FIRST TRUST SECURITIZED PRODUCTS GROUP
Page 5
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Low Duration Opportunities ETF (the "Fund"), you
incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service fees, if any, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Fund and to compare these costs with the ongoing costs
of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH
NOVEMBER 1, 2018 APRIL 30, 2019 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
Actual $1,000.00 $1,023.50 0.65% $3.26
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
</TABLE>
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2018 through April 30, 2019), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 72.9%
ASSET-BACKED SECURITIES -- 0.0%
Fannie Mae Grantor Trust
$ 437,710 Series 2002-T7, Class A1, 1 Mo. LIBOR + 0.11% (a)............ 2.71% 07/25/32 $ 426,195
---------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 23.0%
Federal Home Loan Mortgage Corporation
79 Series 1989-74, Class F...................................... 6.00% 10/15/20 79
10 Series 1990-186, Class E..................................... 6.00% 08/15/21 10
49 Series 1990-188, Class H..................................... 7.00% 09/15/21 49
59,628 Series 1992-133, Class B, IO, STRIPS......................... 8.50% 06/01/22 5,501
777 Series 1992-205, Class A, 1 Mo. LIBOR + 0.45% (a)............ 2.92% 05/15/23 778
72,003 Series 1992-1206, Class IB, 1 Mo. LIBOR + 0.83% (a).......... 3.30% 03/15/22 72,526
20,638 Series 1993-1498, Class I, 1 Mo. LIBOR + 1.15% (a)........... 3.62% 04/15/23 20,949
16,609 Series 1993-1552, Class I, 10 Yr. U.S. Treasury Yield
Curve - 0.65% (a)......................................... 1.93% 08/15/23 16,362
149,103 Series 1993-1579, Class PM................................... 6.70% 09/15/23 158,483
121,351 Series 1993-1630, Class PK................................... 6.00% 11/15/23 127,120
10,457 Series 1993-1643, Class PK................................... 6.50% 12/15/23 10,980
374,574 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 3.97% 04/15/24 382,332
18,013 Series 1998-2042, Class H, PO................................ (b) 03/15/28 16,566
2,283 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 254
11,194 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 12,164
1,064,602 Series 1999-21, Class A, 1 Mo. LIBOR + 0.18% (a)............. 2.66% 10/25/29 1,058,447
564,951 Series 1999-201, Class PO, PO, STRIPS........................ (b) 01/01/29 507,885
69,418 Series 2000-2245, Class EA, PO............................... (b) 08/15/30 65,860
2,811 Series 2001-2365, Class LO, PO............................... (b) 09/15/31 2,780
209,031 Series 2002-48, Class 1A (c)................................. 4.95% 07/25/33 220,977
91,546 Series 2002-2405, Class BF................................... 7.00% 03/25/24 97,584
150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 180,049
308,125 Series 2002-2425, Class PO, PO............................... (b) 03/15/32 275,404
179,916 Series 2002-2427, Class GE................................... 6.00% 03/15/32 197,892
315,775 Series 2002-2437, Class SA, IO,
1 Mo. LIBOR (x) -1 + 7.90% (d)............................ 5.43% 01/15/29 46,358
83,919 Series 2002-2449, Class LO, PO............................... (b) 05/15/32 73,221
52,189 Series 2002-2499, Class PO, PO............................... (b) 01/15/32 47,040
18,904 Series 2003-58, Class 2A..................................... 6.50% 09/25/43 21,702
166,512 Series 2003-225, Class PO, PO, STRIPS........................ (b) 11/15/33 143,315
53,040 Series 2003-2557, Class HL................................... 5.30% 01/15/33 58,006
174,539 Series 2003-2564, Class AC................................... 5.50% 02/15/33 192,407
556,075 Series 2003-2574, Class PE................................... 5.50% 02/15/33 613,478
261,209 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 50,196
1,628,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 1,772,362
538,135 Series 2003-2586, Class TG................................... 5.50% 03/15/23 551,382
132,015 Series 2003-2597, Class AE................................... 5.50% 04/15/33 140,002
2,005,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 2,168,408
220,344 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 242,965
480,351 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 560,459
123,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 136,053
8,000 Series 2003-2676, Class LL................................... 5.50% 09/15/33 8,881
615,049 Series 2004-2771, Class NL................................... 6.00% 03/15/34 696,318
522,275 Series 2004-2793, Class PE................................... 5.00% 05/15/34 570,597
1,395,026 Series 2004-2801, Class SE, IO,
1 Mo. LIBOR (x) -1 + 7.05% (d)............................ 4.58% 07/15/32 238,343
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 276,434 Series 2004-2835, Class QY, IO,
1 Mo. LIBOR (x) -1 + 7.90% (d)............................ 5.43% 12/15/32 $ 47,158
24,874 Series 2004-2863, Class PO, PO............................... (b) 10/15/31 23,923
219,714 Series 2004-2890, Class ZA................................... 5.00% 11/15/34 238,819
509,216 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 690,930
538,381 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 546,692
2,312,700 Series 2005-233, Class 12, IO, STRIPS........................ 5.00% 09/15/35 483,348
632,261 Series 2005-234, Class IO, IO, STRIPS........................ 4.50% 10/01/35 118,653
1,084,228 Series 2005-2923, Class PO, PO............................... (b) 01/15/35 966,931
40,815 Series 2005-2934, Class EC, PO............................... (b) 02/15/20 40,431
595,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 694,675
639,576 Series 2005-2980, Class AO, PO............................... (b) 11/15/34 526,655
240,493 Series 2005-2990, Class GO, PO............................... (b) 02/15/35 217,734
129,447 Series 2005-3001, Class OK, PO............................... (b) 02/15/35 112,584
78,500 Series 2005-3027, Class AP, PO............................... (b) 05/15/29 70,375
185,027 Series 2005-3031, Class BI, IO,
1 Mo. LIBOR (x) -1 + 6.69% (d)............................ 4.22% 08/15/35 32,994
18,792 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 23,691
249,637 Series 2005-3077, Class TO, PO............................... (b) 04/15/35 230,665
92,873 Series 2006-237, Class PO, PO, STRIPS........................ (b) 05/15/36 79,781
555,673 Series 2006-238, Class 8, IO, STRIPS......................... 5.00% 04/15/36 115,104
458,479 Series 2006-243, Class 11, IO, STRIPS (e).................... 7.00% 08/15/36 112,866
186,709 Series 2006-3100, Class PO, PO............................... (b) 01/15/36 164,543
509,422 Series 2006-3114, Class GI, IO,
1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 4.13% 02/15/36 76,258
259,611 Series 2006-3117, Class EO, PO............................... (b) 02/15/36 225,461
34,978 Series 2006-3117, Class OK, PO............................... (b) 02/15/36 30,332
898,012 Series 2006-3117, Class SO, PO............................... (b) 02/15/36 740,365
31,095 Series 2006-3117, Class ZU................................... 6.00% 02/15/36 41,747
24,296 Series 2006-3122, Class OH, PO............................... (b) 03/15/36 21,708
24,094 Series 2006-3122, Class OP, PO............................... (b) 03/15/36 22,036
8,752 Series 2006-3122, Class ZW................................... 6.00% 03/15/36 11,217
90,361 Series 2006-3134, Class PO, PO............................... (b) 03/15/36 80,446
156,932 Series 2006-3138, Class PO, PO............................... (b) 04/15/36 139,596
224,424 Series 2006-3140, Class XO, PO............................... (b) 03/15/36 203,402
44,301 Series 2006-3150, Class DZ................................... 5.50% 05/15/36 49,413
26,514 Series 2006-3150, Class PO, PO............................... (b) 05/15/36 23,938
341,651 Series 2006-3152, Class MO, PO............................... (b) 03/15/36 298,760
859,875 Series 2006-3153, Class EO, PO............................... (b) 05/15/36 735,470
105,148 Series 2006-3171, Class MO, PO............................... (b) 06/15/36 95,309
3,050,770 Series 2006-3174, Class LF, 1 Mo. LIBOR + 0.35% (a).......... 2.83% 05/15/36 3,054,130
34,964 Series 2006-3178, Class BO, PO............................... (b) 06/15/36 30,328
101,263 Series 2006-3179, Class OA, PO............................... (b) 07/15/36 89,228
60,333 Series 2006-3181, Class LO, PO............................... (b) 07/15/36 55,076
380,280 Series 2006-3200, Class PO, PO............................... (b) 08/15/36 335,939
83,351 Series 2006-3206, Class EO, PO............................... (b) 08/15/36 71,444
2,526,187 Series 2006-3210, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 4.13% 09/15/36 352,654
122,585 Series 2006-3211, Class SO, PO............................... (b) 09/15/36 108,420
60,246 Series 2006-3217, Class CO, PO............................... (b) 09/15/36 54,964
687,478 Series 2006-3218, Class AO, PO............................... (b) 09/15/36 549,603
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 220,165 Series 2006-3219, Class AO, PO............................... (b) 09/15/36 $ 190,603
664,935 Series 2006-3223, Class FC, 1 Mo. LIBOR + 0.55% (a).......... 3.02% 04/15/32 671,699
115,094 Series 2006-3225, Class EO, PO............................... (b) 10/15/36 100,578
1,382,438 Series 2006-3240, Class GO, PO............................... (b) 11/15/36 1,254,298
262,406 Series 2006-3242, Class CO, PO............................... (b) 11/15/36 233,496
189,458 Series 2006-3244, Class GO, PO............................... (b) 11/15/36 160,434
369,989 Series 2006-3244, Class QO, PO............................... (b) 11/15/36 347,824
261,162 Series 2006-3245, Class PO, PO............................... (b) 11/15/36 233,334
610,149 Series 2006-3252, Class LO, PO............................... (b) 12/15/36 511,299
386,478 Series 2006-3256, Class PO, PO............................... (b) 12/15/36 335,201
202,110 Series 2007-3260, Class BO, PO............................... (b) 01/15/37 172,923
401,694 Series 2007-3261, Class OA, PO............................... (b) 01/15/37 346,703
1,576,290 Series 2007-3262, Class KS, IO,
1 Mo. LIBOR (x) -1 + 6.41% (d)............................ 3.94% 01/15/37 171,602
73,517 Series 2007-3274, Class B.................................... 6.00% 02/15/37 81,353
48,032 Series 2007-3292, Class DO, PO............................... (b) 03/15/37 45,524
134,958 Series 2007-3296, Class OK, PO............................... (b) 03/15/37 124,458
355,039 Series 2007-3300, Class OC, PO............................... (b) 04/15/37 312,099
1,717,261 Series 2007-3300, Class XO, PO............................... (b) 03/15/37 1,470,555
21,160 Series 2007-3301, Class OY, PO............................... (b) 04/15/37 19,393
51,679 Series 2007-3305, Class PO, PO............................... (b) 04/15/37 47,484
78,472 Series 2007-3314, Class OW, PO............................... (b) 05/15/37 64,770
147,086 Series 2007-3317, Class CO, PO............................... (b) 05/15/37 133,225
417,971 Series 2007-3322, Class NF,
1 Mo. LIBOR (x) 2,566.67 - 16,683.33%, 0.00% Floor (a).... 0.00% 05/15/37 387,919
173,338 Series 2007-3325, Class OB, PO............................... (b) 06/15/37 157,402
49,838 Series 2007-3326, Class KO, PO............................... (b) 06/15/37 42,568
327,037 Series 2007-3331, Class PO, PO............................... (b) 06/15/37 294,611
23,330 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a).......... 2.77% 07/15/37 23,271
73,937 Series 2007-3349, Class MY................................... 5.50% 07/15/37 81,889
262,630 Series 2007-3360, Class CB................................... 5.50% 08/15/37 279,348
90,294 Series 2007-3369, Class BO, PO............................... (b) 09/15/37 82,964
40,078 Series 2007-3373, Class TO, PO............................... (b) 04/15/37 34,626
476,552 Series 2007-3376, Class OX, PO............................... (b) 10/15/37 433,835
157,011 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a).......... 2.82% 11/15/36 155,745
42,469 Series 2007-3383, Class OP, PO............................... (b) 11/15/37 36,848
749,002 Series 2007-3384, Class TO, PO............................... (b) 11/15/37 641,555
429,955 Series 2007-3387, Class PO, PO............................... (b) 11/15/37 370,954
930,940 Series 2007-3391, Class PO, PO............................... (b) 04/15/37 855,152
865,845 Series 2007-3393, Class JO, PO............................... (b) 09/15/32 783,449
143,079 Series 2007-3403, Class OB, PO............................... (b) 12/15/37 122,823
282,703 Series 2007-3403, Class PO, PO............................... (b) 12/15/37 260,610
547,918 Series 2008-3406, Class B.................................... 6.00% 01/15/38 570,556
74,357 Series 2008-3413, Class B.................................... 5.50% 04/15/37 79,294
540,911 Series 2008-3419, Class LO, PO............................... (b) 07/15/37 480,826
403,143 Series 2008-3420, Class AZ................................... 5.50% 02/15/38 443,713
33,964 Series 2008-3444, Class DO, PO............................... (b) 01/15/37 29,637
253,655 Series 2008-3448, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 3.58% 05/15/38 13,102
206,380 Series 2008-3469, Class DO, PO............................... (b) 07/15/38 184,150
457,137 Series 2008-3469, Class EO, PO............................... (b) 07/15/38 407,871
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 4,847,772 Series 2009-3522, Class SE, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.63% 04/15/39 $ 689,922
46,367 Series 2009-3523, Class SD,
1 Mo. LIBOR (x) -2.75 + 19.66% (d)........................ 12.86% 06/15/36 59,080
1,064,021 Series 2009-3542, Class ZP................................... 5.00% 06/15/39 1,213,216
177,000 Series 2009-3550, Class LL................................... 4.50% 07/15/39 194,001
485,953 Series 2009-3563, Class ZP................................... 5.00% 08/15/39 573,744
20,404 Series 2009-3571, Class OC, PO............................... (b) 05/15/37 17,865
4,039,585 Series 2009-3572, Class JS, IO,
1 Mo. LIBOR (x) -1 + 6.80% (d)............................ 4.33% 09/15/39 478,699
28,912 Series 2009-3585, Class QZ................................... 5.00% 08/15/39 34,705
207,695 Series 2009-3587, Class FX, 1 Mo. LIBOR (a).................. 2.47% 12/15/37 203,519
1,051,670 Series 2009-3591, Class PO, PO............................... (b) 10/15/39 960,613
1,463,273 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)........... 3.00% 03/15/36 1,464,838
2,593,876 Series 2009-3605, Class NC................................... 5.50% 06/15/37 2,855,995
349,467 Series 2009-3606, Class BO, PO............................... (b) 12/15/39 304,113
383,957 Series 2009-3607, Class BO, PO............................... (b) 04/15/36 335,283
1,237,993 Series 2009-3607, Class OP, PO............................... (b) 07/15/37 1,087,970
175,387 Series 2009-3611, Class PO, PO............................... (b) 07/15/34 153,023
136,777 Series 2010-3621, Class BO, PO............................... (b) 01/15/40 120,071
160,996 Series 2010-3621, Class PO, PO............................... (b) 01/15/40 140,405
400,000 Series 2010-3622, Class PB................................... 5.00% 01/15/40 444,099
353,581 Series 2010-3623, Class LO, PO............................... (b) 01/15/40 313,877
73,000 Series 2010-3626, Class ME................................... 5.00% 01/15/40 82,290
758,680 Series 2010-3632, Class BS,
1 Mo. LIBOR (x) -3.33 + 17.50% (d)........................ 9.26% 02/15/40 921,966
16,014 Series 2010-3637, Class LJ................................... 3.50% 02/15/25 15,943
107,000 Series 2010-3645, Class WD................................... 4.50% 02/15/40 115,304
24,607 Series 2010-3664, Class BA................................... 4.00% 03/15/38 24,594
661,000 Series 2010-3667, Class PL................................... 5.00% 05/15/40 707,808
163,108 Series 2010-3687, Class HB................................... 2.50% 07/15/38 162,443
393,071 Series 2010-3688, Class HI, IO............................... 5.00% 11/15/21 9,956
130,715 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a).......... 3.07% 07/15/40 131,833
2,379,222 Series 2010-3704, Class ED................................... 4.00% 12/15/36 2,436,125
400,000 Series 2010-3714, Class PB................................... 4.75% 08/15/40 455,177
20,907 Series 2010-3716, Class PC................................... 2.50% 04/15/38 20,856
842,866 Series 2010-3722, Class AI, IO............................... 3.50% 09/15/20 15,841
3,972,721 Series 2010-3726, Class BI, IO............................... 6.00% 07/15/30 161,015
660,569 Series 2010-3726, Class ND................................... 3.50% 06/15/39 660,756
1,347,513 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 104,184
189,418 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 27,406
120,261 Series 2010-3739, Class MB................................... 4.00% 06/15/37 121,567
701,184 Series 2010-3740, Class SC, IO,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.53% 10/15/40 87,595
4,186 Series 2010-3752, Class KF, 1 Mo. LIBOR + 0.50% (a).......... 2.97% 12/15/37 4,189
1,028,106 Series 2010-3755, Class AI, IO............................... 3.50% 11/15/20 20,124
1,228,572 Series 2010-3764, Class QA................................... 4.00% 10/15/29 1,242,581
72,698 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 82,876
97,403 Series 2010-3773, Class PH................................... 2.50% 06/15/25 96,839
131,160 Series 2010-3775, Class LD................................... 3.00% 12/15/20 131,255
381,153 Series 2010-3775, Class LI, IO............................... 3.50% 12/15/20 7,757
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 312,000 Series 2010-3780, Class AV................................... 4.00% 04/15/31 $ 331,172
189,783 Series 2011-3795, Class ED................................... 3.00% 10/15/39 191,621
600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 681,866
418,084 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 470,410
2,670 Series 2011-3820, Class DA................................... 4.00% 11/15/35 2,682
1,818,751 Series 2011-3820, Class GZ................................... 5.00% 03/15/41 2,063,423
300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 328,547
574,540 Series 2011-3827, Class BM................................... 5.50% 08/15/39 589,857
153,801 Series 2011-3828, Class SY,
1 Mo. LIBOR (x) -3 + 13.20% (d)........................... 5.78% 02/15/41 193,257
1,639,644 Series 2011-3841, Class JZ................................... 5.00% 04/15/41 1,827,774
103,547 Series 2011-3842, Class BS,
1 Mo. LIBOR (x) -5 + 22.75% (d)........................... 10.32% 04/15/41 164,485
300,000 Series 2011-3844, Class PC................................... 5.00% 04/15/41 348,875
1,235,397 Series 2011-3852, Class SW, IO,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.52% 05/15/41 158,710
1,514,088 Series 2011-3860, Class PZ................................... 5.00% 05/15/41 1,724,692
198,936 Series 2011-3862, Class TO, PO............................... (b) 05/15/41 171,777
62,276 Series 2011-3864, Class FW, 1 Mo. LIBOR + 0.40% (a).......... 2.87% 02/15/41 62,326
314,438 Series 2011-3868, Class PO, PO............................... (b) 05/15/41 272,474
506,143 Series 2011-3884, Class DL................................... 3.00% 02/15/25 506,693
525,000 Series 2011-3890, Class ME................................... 5.00% 07/15/41 604,464
937,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,063,390
34,009 Series 2011-3902, Class MA................................... 4.50% 07/15/39 34,122
1,605,139 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 1,790,353
1,879,491 Series 2011-3926, Class SH, IO,
1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 4.08% 05/15/40 127,551
851,389 Series 2011-3935, Class LI, IO............................... 3.00% 10/15/21 19,704
2,719,956 Series 2011-3951, Class AO, PO............................... (b) 03/15/32 2,417,007
75,973 Series 2011-3954, Class JE................................... 5.00% 08/15/29 76,959
2,607,953 Series 2011-3956, Class KI, IO............................... 3.00% 11/15/21 70,348
820,793 Series 2011-3960, Class BU................................... 3.50% 02/15/30 832,911
946,073 Series 2011-3968, Class AI, IO............................... 3.00% 12/15/21 25,261
1,056,264 Series 2012-267, Class S5, IO, STRIPS,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.53% 08/15/42 166,022
130,067 Series 2012-278, Class F1, STRIPS,
1 Mo. LIBOR + 0.45% (a)................................... 2.92% 09/15/42 130,267
2,080,311 Series 2012-3994, Class AI, IO............................... 3.00% 02/15/22 57,143
996,424 Series 2012-3999, Class WA (e)............................... 5.40% 08/15/40 1,085,837
1,678,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 1,912,860
1,720,415 Series 2012-4002, Class DE................................... 2.50% 03/15/30 1,715,874
59,000 Series 2012-4012, Class GC................................... 3.50% 06/15/40 60,336
39,703 Series 2012-4015, Class KB................................... 1.75% 05/15/41 36,597
1,170,454 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 79,502
983,434 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,112,884
2,184,157 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 170,586
241,132 Series 2012-4038, Class CS,
1 Mo. LIBOR (x) -3 + 12.00% (d)........................... 4.54% 04/15/42 255,621
1,646,864 Series 2012-4048, Class FJ, 1 Mo. LIBOR + 0.40% (a).......... 2.91% 07/15/37 1,642,389
3,918,718 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 280,312
514,123 Series 2012-4076, Class QB................................... 1.75% 11/15/41 466,782
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 3,737,273 Series 2012-4077, Class TS, IO,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.53% 05/15/41 $ 512,063
573,924 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 644,148
72,029 Series 2012-4097, Class ES, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.63% 08/15/42 12,648
665,645 Series 2012-4097, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.05% (d)............................ 3.58% 08/15/42 115,646
747,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 800,650
726,923 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 57,198
82,682 Series 2012-4116, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.15% (d)............................ 3.68% 10/15/42 14,819
3,974,151 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 351,202
3,588,094 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 764,701
902,909 Series 2012-4136, Class TU, IO,
1 Mo. LIBOR (x) -22.50 + 139.50%, 4.50% Cap (d)........... 4.50% 08/15/42 178,037
913,019 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 73,028
827,266 Series 2013-299, Class S1, IO, STRIPS,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.53% 01/15/43 126,434
1,012,995 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 89,264
13,355,261 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 1,968,033
875,332 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 57,438
4,325,931 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 342,922
4,559,044 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 385,290
9,124,975 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 844,860
655,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 703,247
702,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 691,898
826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 876,502
23,403,072 Series 2013-4194, Class GI, IO............................... 4.00% 04/15/43 4,107,630
6,429,021 Series 2013-4203, Class US,
1 Mo. LIBOR (x) -1.50 + 6.00% (d)......................... 2.29% 05/15/33 5,955,446
500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 477,178
1,641,006 Series 2013-4213, Class MZ................................... 4.00% 06/15/43 1,729,722
415,289 Series 2013-4226, Class NS,
1 Mo. LIBOR (x) -3 + 10.50% (d)........................... 3.04% 01/15/43 415,309
59,456 Series 2013-4235, Class AB................................... 2.00% 01/15/34 59,285
680,703 Series 2013-4239, Class IO, IO............................... 3.50% 06/15/27 56,285
1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,607,714
560,606 Series 2013-4249, Class KO, PO............................... (b) 11/15/42 463,116
877,343 Series 2013-4261, Class GS,
1 Mo. LIBOR (x) -2.75 + 10.98% (d)........................ 4.19% 01/15/41 917,561
1,818,048 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 139,086
165,387 Series 2013-4270, Class AP................................... 2.50% 04/15/40 164,495
348,300 Series 2014-4300, Class IM, IO............................... 3.00% 03/15/37 29,705
703,100 Series 2014-4314, Class CI, IO............................... 6.00% 03/15/44 176,975
521,443 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 578,357
1,558,942 Series 2014-4318, Class CI, IO............................... 4.00% 03/15/22 39,494
765,045 Series 2014-4337, Class TV................................... 4.00% 10/15/45 793,528
8,478,257 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 572,136
39,456,554 Series 2015-343, Class F4, STRIPS,
1 Mo. LIBOR + 0.35% (a)................................... 2.85% 10/15/37 39,454,834
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 2,649,025 Series 2015-4487, Class CB................................... 3.50% 06/15/45 $ 2,676,529
1,416,706 Series 2015-4503, Class MI, IO............................... 5.00% 08/15/45 312,767
1,023,141 Series 2015-4512, Class W (c) (e)............................ 5.38% 05/15/38 1,109,053
224,416 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 33,117
530,375 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 512,623
242,984 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 254,956
411,311 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 423,701
126,254 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 129,117
8,748,278 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 1,399,978
3,446,565 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 647,419
2,097,975 Series 2016-4596, Class FL, 1 Mo. LIBOR + 0.50% (a).......... 3.01% 11/15/41 2,098,243
771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 783,764
424,625 Series 2016-4605, Class KS,
1 Mo. LIBOR (x) -1.57 + 4.71% (d)......................... 0.81% 08/15/43 389,577
1,622,006 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 174,142
588,814 Series 2016-4613, Class AF, 1 Mo. LIBOR + 1.10% (a).......... 3.57% 11/15/37 607,411
1,376,248 Series 2016-4615, Class GT,
1 Mo. LIBOR (x) -4 + 16.00%, 4.00% Cap (d)................ 4.00% 10/15/42 1,232,161
36,311,508 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 4,323,165
4,663,975 Series 2016-4641, Class DI, IO............................... 5.00% 05/15/41 884,910
1,173,000 Series 2017-4650, Class JH................................... 3.00% 01/15/47 1,065,139
600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 539,593
2,920,292 Series 2018-4780, Class VA................................... 4.00% 05/15/29 3,094,389
9,924,000 Series 2018-4826, Class ME................................... 3.50% 09/15/48 9,863,531
Federal National Mortgage Association
319 Series 1989-81, Class G...................................... 9.00% 11/25/19 318
1,939 Series 1990-13, Class E...................................... 9.00% 02/25/20 1,970
773 Series 1990-79, Class J...................................... 9.00% 07/25/20 772
1,475 Series 1990-98, Class J...................................... 9.00% 08/25/20 1,475
338 Series 1990-108, Class G..................................... 7.00% 09/25/20 343
462 Series 1990-109, Class J..................................... 7.00% 09/25/20 468
11,624 Series 1991-30, Class PN..................................... 9.00% 10/25/21 11,850
31 Series 1991-130, Class D, PO................................. (b) 09/25/21 31
223,794 Series 1992-38, Class GZ..................................... 7.50% 07/25/22 236,563
46 Series 1992-44, Class ZQ..................................... 8.00% 07/25/22 48
7,395 Series 1992-185, Class ZB.................................... 7.00% 10/25/22 7,796
1,294 Series 1993-3, Class K....................................... 7.00% 02/25/23 1,346
14,399 Series 1993-39, Class Z...................................... 7.50% 04/25/23 15,227
1,965 Series 1993-46, Class FH, 7 Yr. U.S. Treasury Yield
Curve - 0.20% (a)......................................... 2.23% 04/25/23 1,950
183,823 Series 1993-169, Class L..................................... 6.50% 09/25/23 193,989
60,064 Series 1993-171, Class SB, 10 Yr. U.S. Treasury Yield
Curve (x) -2.17 + 21.99% (d).............................. 16.47% 09/25/23 72,042
51,619 Series 1993-214, Class 2, IO, STRIPS......................... 7.50% 03/25/23 5,067
433,188 Series 1993-222, Class 2, IO, STRIPS......................... 7.00% 06/25/23 44,772
27,078 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 3.08% 12/25/23 27,273
289 Series 1994-24, Class H, PO.................................. (b) 11/25/23 275
282,278 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 3.98% 04/25/24 288,771
66,774 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 11,184
57,435 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 60,226
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 843,474 Series 2000-45, Class SD, IO,
1 Mo. LIBOR (x) -1 + 7.95% (d)............................ 5.47% 12/18/30 $ 90,892
2,948 Series 2001-8, Class SE, IO,
1 Mo. LIBOR (x) -1 + 8.60% (d)............................ 6.13% 02/17/31 82
164,115 Series 2001-34, Class SR, IO,
1 Mo. LIBOR (x) -1 + 8.10% (d)............................ 5.62% 08/18/31 13,251
52,525 Series 2001-37, Class PO, PO................................. (b) 08/25/31 47,410
3,733 Series 2001-42, Class SB,
1 Mo. LIBOR (x) -16 + 128.00%, 8.50% Cap (d).............. 8.50% 09/25/31 4,348
234,792 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 2.88% 09/18/31 230,986
162,524 Series 2001-314, Class 1, PO, STRIPS......................... (b) 07/25/31 143,830
3,673 Series 2002-22, Class G...................................... 6.50% 04/25/32 4,148
131,210 Series 2002-30, Class Z...................................... 6.00% 05/25/32 143,093
228,951 Series 2002-41, Class PO, PO................................. (b) 07/25/32 205,664
62,948 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 69,023
146,592 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 33,782
151,652 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 32,255
382,363 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 86,946
161,534 Series 2002-329, Class 1, PO, STRIPS......................... (b) 01/25/33 144,579
45,928 Series 2003-14, Class AT..................................... 4.00% 03/25/33 46,551
126,503 Series 2003-21, Class OA..................................... 4.00% 03/25/33 131,787
131,637 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 30,433
497,078 Series 2003-45, Class JB..................................... 5.50% 06/25/33 549,163
113,225 Series 2003-52, Class NA..................................... 4.00% 06/25/23 114,143
49,672 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 2.78% 11/25/27 49,656
2,363,864 Series 2003-63, Class IP, IO................................. 6.00% 07/25/33 541,935
355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 380,862
1,476,609 Series 2003-75, Class GI, IO................................. 5.00% 08/25/23 83,673
172,506 Series 2003-109, Class YB.................................... 6.00% 11/25/33 200,176
495,024 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 80,144
396,715 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 80,352
72,912 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 16,102
105,378 Series 2003-348, Class 18, IO, STRIPS (e).................... 7.50% 12/25/33 24,115
106,121 Series 2003-W3, Class 2A5.................................... 5.36% 06/25/42 115,473
141,976 Series 2003-W6, Class 1A41................................... 5.40% 10/25/42 154,102
26,423 Series 2003-W10, Class 1A4................................... 4.51% 06/25/43 27,774
81,863 Series 2003-W12, Class 1A8................................... 4.55% 06/25/43 86,056
228,364 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 250,696
1,087,490 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 1,215,454
335,431 Series 2004-25, Class LC..................................... 5.50% 04/25/34 372,246
316,906 Series 2004-25, Class UC..................................... 5.50% 04/25/34 355,666
36,441 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 45,781
17,235 Series 2004-36, Class TA..................................... 5.50% 08/25/33 17,322
41,742 Series 2004-59, Class BG, PO................................. (b) 12/25/32 36,520
411,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 458,894
208,007 Series 2004-61, Class DO, PO................................. (b) 05/25/33 182,143
177,053 Series 2004-69, Class PO, PO................................. (b) 05/25/33 162,303
15,937 Series 2004-W9, Class 1A3.................................... 6.05% 02/25/44 17,423
1,758,519 Series 2004-W10, Class A6.................................... 5.75% 08/25/34 1,919,524
3,307,242 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)... 4.12% 02/25/35 520,448
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 671,930 Series 2005-2, Class TB, IO,
1 Mo. LIBOR (x) -1 + 5.90%, 0.40% Cap (d)................. 0.40% 07/25/33 $ 9,542
50,480 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 59,066
144,660 Series 2005-40, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.70% (d)............................ 4.22% 05/25/35 22,887
15,048 Series 2005-43, Class PB..................................... 5.00% 02/25/34 15,064
7,772 Series 2005-48, Class AR..................................... 5.50% 02/25/35 7,798
662,204 Series 2005-52, Class PO, PO................................. (b) 06/25/35 595,151
246,488 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 335,512
46,450 Series 2005-52, Class WZ..................................... 6.50% 06/25/35 47,116
317,191 Series 2005-56, Class PO, PO................................. (b) 07/25/35 274,169
905,820 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,117,030
15,652 Series 2005-67, Class SC,
1 Mo. LIBOR (x) -2.15 + 14.41% (d)........................ 9.08% 08/25/35 18,695
10,375 Series 2005-68, Class BC..................................... 5.25% 06/25/35 10,426
76,082 Series 2005-79, Class NS, IO,
1 Mo. LIBOR (x) -1 + 6.09% (d)............................ 3.61% 09/25/35 9,023
7,814,592 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 8,520,314
22,254 Series 2005-87, Class SC,
1 Mo. LIBOR (x) -1.67 + 13.83% (d)........................ 9.71% 10/25/35 28,224
46,877 Series 2005-90, Class ES,
1 Mo. LIBOR (x) -2.50 + 16.88% (d)........................ 10.68% 10/25/35 57,888
47,111 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 63,885
71,269 Series 2005-102, Class DS,
1 Mo. LIBOR (x) -2.75 + 19.80% (d)........................ 12.99% 11/25/35 93,687
527,000 Series 2005-104, Class UE.................................... 5.50% 12/25/35 592,547
13,202 Series 2005-113, Class DO, PO................................ (b) 01/25/36 11,402
238,118 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 42,756
689,475 Series 2005-359, Class 12, IO, STRIPS........................ 5.50% 10/25/35 160,720
191,161 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 42,573
29,293 Series 2005-W1, Class 1A2.................................... 6.50% 10/25/44 33,358
60,440 Series 2006-5, Class 2A2 (c)................................. 4.38% 02/25/35 63,844
48,581,182 Series 2006-5, Class N2, IO (c).............................. 0.00% 02/25/35 49
267,021 Series 2006-8, Class HK, PO.................................. (b) 03/25/36 224,117
111,601 Series 2006-8, Class WQ, PO.................................. (b) 03/25/36 93,027
98,388 Series 2006-15, Class IS, IO,
1 Mo. LIBOR (x) -1 + 6.58% (d)............................ 4.10% 03/25/36 17,449
2,424,924 Series 2006-20, Class PI, IO,
1 Mo. LIBOR (x) -1 + 6.68% (d)............................ 4.20% 11/25/30 263,712
140,835 Series 2006-22, Class AO, PO................................. (b) 04/25/36 123,413
104,178 Series 2006-27, Class OH, PO................................. (b) 04/25/36 93,807
21,772 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 29,638
38,203 Series 2006-36, Class CO, PO................................. (b) 05/25/36 32,107
282,423 Series 2006-36, Class NO, PO................................. (b) 05/25/36 242,420
66,314 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 2.93% 06/25/36 66,576
2,688,722 Series 2006-42, Class EI, IO,
1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 4.07% 06/25/36 429,495
228,255 Series 2006-44, Class GO, PO................................. (b) 06/25/36 198,240
132,923 Series 2006-44, Class P, PO.................................. (b) 12/25/33 115,342
87,834 Series 2006-50, Class PS, PO................................. (b) 06/25/36 79,006
1,085,346 Series 2006-56, Class OM, PO................................. (b) 07/25/36 951,462
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 121,383 Series 2006-56, Class PO, PO................................. (b) 07/25/36 $ 105,656
176,439 Series 2006-58, Class AP, PO................................. (b) 07/25/36 152,144
320,957 Series 2006-58, Class PO, PO................................. (b) 07/25/36 279,855
543,842 Series 2006-59, Class KO, PO................................. (b) 07/25/36 483,852
716,802 Series 2006-59, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.57% (d)............................ 4.09% 07/25/36 115,487
44,492 Series 2006-60, Class DO, PO................................. (b) 04/25/35 43,629
419,437 Series 2006-60, Class OG, PO................................. (b) 07/25/36 363,305
222,637 Series 2006-65, Class QO, PO................................. (b) 07/25/36 194,838
610,977 Series 2006-69, Class GO, PO................................. (b) 08/25/36 526,905
110,425 Series 2006-72, Class TO, PO................................. (b) 08/25/36 94,692
42,300 Series 2006-75, Class AO, PO................................. (b) 08/25/36 36,392
169,778 Series 2006-79, Class DO, PO................................. (b) 08/25/36 153,515
835,194 Series 2006-80, Class PH..................................... 6.00% 08/25/36 917,604
54,795 Series 2006-81, Class EO, PO................................. (b) 09/25/36 49,198
42,730 Series 2006-84, Class OT, PO................................. (b) 09/25/36 37,875
181,303 Series 2006-84, Class PK..................................... 5.50% 02/25/36 182,504
131,184 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 144,446
101,787 Series 2006-91, Class PO, PO................................. (b) 09/25/36 87,213
108,030 Series 2006-109, Class PO, PO................................ (b) 11/25/36 93,021
3,326,396 Series 2006-110, Class PI, IO................................ 5.50% 11/25/36 674,008
67,063 Series 2006-110, Class PO, PO................................ (b) 11/25/36 57,872
344,586 Series 2006-114, Class AO, PO................................ (b) 12/25/36 320,351
3,212,222 Series 2006-116, Class ES, IO,
1 Mo. LIBOR (x) -1 + 6.65% (d)........................... 4.17% 12/25/36 552,537
147,914 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 2.83% 12/25/36 147,347
3,558,004 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 2.55% 12/25/36 3,537,298
125,232 Series 2006-124, Class LO, PO................................ (b) 01/25/37 107,924
49,779 Series 2006-124, Class UO, PO................................ (b) 01/25/37 42,789
1,439 Series 2006-126, Class DZ.................................... 5.50% 01/25/37 1,490
152,256 Series 2006-126, Class PO, PO................................ (b) 01/25/37 130,838
346,073 Series 2006-128, Class PO, PO................................ (b) 01/25/37 295,637
26,101 Series 2006-377, Class 1, PO, STRIPS......................... (b) 10/25/36 22,693
136,933 Series 2006-378, Class 31, IO, STRIPS........................ 4.50% 06/25/21 2,591
313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 362,843
170,940 Series 2007-14, Class OP, PO................................. (b) 03/25/37 151,542
38,300 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 2.81% 04/25/37 38,203
1,320,361 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 1,431,866
883,113 Series 2007-30, Class WO, PO................................. (b) 04/25/37 767,811
64,590 Series 2007-32, Class KT..................................... 5.50% 04/25/37 71,724
259,888 Series 2007-36, Class GO, PO................................. (b) 04/25/37 228,937
959,332 Series 2007-36, Class PO, PO................................. (b) 04/25/37 837,313
900,395 Series 2007-39, Class LO, PO................................. (b) 05/25/37 772,985
161,308 Series 2007-42, Class CO, PO................................. (b) 05/25/37 132,441
326,406 Series 2007-44, Class AO, PO................................. (b) 05/25/37 294,182
45,413 Series 2007-44, Class KO, PO................................. (b) 05/25/37 39,243
363,413 Series 2007-44, Class LO, PO................................. (b) 05/25/37 318,652
458,182 Series 2007-44, Class OB, PO................................. (b) 05/25/37 412,432
77,604 Series 2007-48, Class PO, PO................................. (b) 05/25/37 70,194
733,048 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 812,468
476,612 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 539,691
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 9,954 Series 2007-67, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.75% (d)............................ 4.27% 04/25/37 $ 63
505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 615,416
99,179 Series 2007-102, Class OT, PO................................ (b) 11/25/37 86,146
481,841 Series 2007-116, Class PB.................................... 5.50% 08/25/35 530,826
266,127 Series 2007-117, Class MD.................................... 5.50% 07/25/37 275,711
116,543 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 3.03% 02/25/38 120,893
17,530 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 19,241
31,328 Series 2008-16, Class AB..................................... 5.50% 12/25/37 31,901
24,585 Series 2008-17, Class IP, IO................................. 6.50% 02/25/38 4,062
9,212 Series 2008-64, Class EO, PO................................. (b) 08/25/38 7,771
383,308 Series 2008-65, Class PE..................................... 5.75% 08/25/38 423,626
1,354,264 Series 2008-389, Class 4, IO, STRIPS......................... 6.00% 03/25/38 267,543
37,416 Series 2009-10, Class AB..................................... 5.00% 03/25/24 38,409
1,548,725 Series 2009-11, Class PI, IO................................. 5.50% 03/25/36 347,896
63,197 Series 2009-14, Class BS, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 03/25/24 2,446
132,248 Series 2009-47, Class PE..................................... 4.00% 07/25/39 133,564
3,743,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 4,307,931
769,233 Series 2009-64, Class ZD..................................... 8.00% 08/25/39 961,437
171,494 Series 2009-69, Class PO, PO................................. (b) 09/25/39 148,142
92,171 Series 2009-70, Class CO, PO................................. (b) 01/25/37 78,079
1,787 Series 2009-76, Class MA..................................... 4.00% 09/25/24 1,787
309 Series 2009-81, Class GC..................................... 3.50% 12/25/19 308
4,784,138 Series 2009-85, Class J...................................... 4.50% 10/25/39 5,071,803
953,203 Series 2009-86, Class OT, PO................................. (b) 10/25/37 859,562
388,836 Series 2009-91, Class HL..................................... 5.00% 11/25/39 399,062
47,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 52,974
669,407 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 888,843
1,169,550 Series 2009-106, Class PO, PO................................ (b) 01/25/40 1,012,146
370,784 Series 2009-106, Class SN, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 01/25/40 54,207
237,903 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 263,253
134,466 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 137,992
2,330,260 Series 2009-397, Class 2, IO, STRIPS......................... 5.00% 09/25/39 452,739
763,421 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 46,348
550,000 Series 2010-2, Class LC...................................... 5.00% 02/25/40 612,122
171,204 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 191,085
340,137 Series 2010-21, Class KO, PO................................. (b) 03/25/40 287,305
500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 595,226
149,823 Series 2010-35, Class SJ,
1 Mo. LIBOR (x) -3.33 + 17.67% (d)........................ 9.41% 04/25/40 184,244
400,000 Series 2010-38, Class KC..................................... 4.50% 04/25/40 434,927
60,159 Series 2010-45, Class GD..................................... 5.00% 04/25/33 60,228
387,000 Series 2010-45, Class WB..................................... 5.00% 05/25/40 437,588
39,114 Series 2010-49, Class SC, 1 Mo. LIBOR (x) -2 + 12.66% (d).... 7.71% 03/25/40 44,412
2,820,729 Series 2010-55, Class YP..................................... 4.50% 10/25/38 2,874,568
636,994 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 123,601
421,415 Series 2010-68, Class CO, PO................................. (b) 07/25/40 380,315
85,327 Series 2010-75, Class MT (c)................................. 2.75% 12/25/39 85,293
98,446 Series 2010-106, Class BI, IO................................ 3.50% 09/25/20 1,866
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 1,107,743 Series 2010-110, Class KI, IO................................ 5.50% 10/25/25 $ 87,307
481,406 Series 2010-115, Class PO, PO................................ (b) 04/25/40 416,778
252,353 Series 2010-117, Class EO, PO................................ (b) 10/25/40 216,276
586,912 Series 2010-120, Class PD.................................... 4.00% 02/25/39 592,680
483,466 Series 2010-129, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.52% 11/25/40 60,549
141,778 Series 2010-137, Class IM, IO................................ 5.00% 10/25/38 2,815
1,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 1,946,852
988 Series 2010-145, Class PE.................................... 3.25% 10/25/24 988
3,453,215 Series 2010-147, Class KS, IO,
1 Mo. LIBOR (x) -1 + 5.95% (d)............................ 3.47% 01/25/41 349,814
498,982 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 547,275
507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 620,553
42,097 Series 2011-17, Class CD..................................... 2.00% 03/25/21 41,794
336,775 Series 2011-17, Class CJ..................................... 2.75% 03/25/21 336,328
216 Series 2011-23, Class AB..................................... 2.75% 06/25/20 216
314,547 Series 2011-30, Class LS, IO (e)............................. 1.63% 04/25/41 17,310
4,344,269 Series 2011-30, Class MD..................................... 4.00% 02/25/39 4,385,867
112,260 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 125,432
1,500,383 Series 2011-47, Class AI, IO................................. 5.50% 01/25/40 81,463
427,310 Series 2011-52, Class GB..................................... 5.00% 06/25/41 464,018
132,636 Series 2011-60, Class OA, PO................................. (b) 08/25/39 122,545
429,207 Series 2011-67, Class EI, IO................................. 4.00% 07/25/21 4,271
13,351 Series 2011-70, Class NK..................................... 3.00% 04/25/37 13,317
133,454 Series 2011-72, Class TI, IO................................. 4.00% 09/25/40 7,711
4,160,517 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 411,200
490,254 Series 2011-74, Class TQ, IO,
1 Mo. LIBOR (x) -6.43 + 55.93%, 4.50% Cap (d)............. 4.50% 12/25/33 83,687
236,410 Series 2011-75, Class BL..................................... 3.50% 08/25/21 237,827
412,374 Series 2011-86, Class DI, IO................................. 3.50% 09/25/21 12,872
3,387,902 Series 2011-87, Class YI, IO................................. 5.00% 09/25/41 723,636
17,203 Series 2011-90, Class QI, IO................................. 5.00% 05/25/34 597
6,767,320 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 546,397
411,974 Series 2011-103, Class JL.................................... 6.50% 11/25/29 420,478
750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 793,259
45,362 Series 2011-107, Class CA.................................... 3.50% 11/25/29 45,409
117,748 Series 2011-111, Class DG.................................... 2.25% 12/25/38 117,188
101,970 Series 2011-111, Class DH.................................... 2.50% 12/25/38 101,586
1,535,008 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 1,715,768
46,600 Series 2011-113, Class GA.................................... 2.00% 11/25/21 46,246
4,184,114 Series 2011-118, Class IC, IO................................ 3.50% 11/25/21 120,613
10,945,153 Series 2011-123, Class JS, IO,
1 Mo. LIBOR (x) -1 + 6.65% (d)............................ 4.17% 03/25/41 1,375,760
327,901 Series 2011-123, Class ZP.................................... 4.50% 12/25/41 364,122
174,966 Series 2011-124, Class CG.................................... 3.00% 09/25/29 175,173
109 Series 2011-134, Class PA.................................... 4.00% 09/25/40 110
2,301,044 Series 2011-137, Class AI, IO................................ 3.00% 01/25/22 68,072
583,415 Series 2011-141, Class EI, IO................................ 3.00% 07/25/21 2,939
3,317,660 Series 2011-145, Class IO, IO................................ 3.00% 01/25/22 97,208
1,145,536 Series 2012-8, Class TI, IO.................................. 3.00% 10/25/21 29,723
2,340,964 Series 2012-28, Class PT..................................... 4.00% 03/25/42 2,457,398
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 $ 844,502
137,541 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 154,764
4,153,625 Series 2012-53, Class CI, IO................................. 3.00% 05/25/22 132,020
1,529,304 Series 2012-65, Class IO, IO................................. 5.50% 07/25/40 327,617
431,910 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 40,264
279,368 Series 2012-79, Class QA..................................... 2.00% 03/25/42 276,025
1,534,224 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 102,808
395,700 Series 2012-111, Class B..................................... 7.00% 10/25/42 461,653
1,197,542 Series 2012-114, Class HS, IO,
1 Mo. LIBOR (x) -1 + 6.15% (d)............................ 3.67% 03/25/40 97,168
7,668,921 Series 2012-118, Class DI, IO................................ 3.50% 01/25/40 734,640
206,226 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 40,946
997,977 Series 2012-122, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.62% 11/25/42 168,935
2,277,477 Series 2012-128, Class HS,
1 Mo. LIBOR (x) -1.50 + 6.00% (d)......................... 2.29% 11/25/42 1,873,429
435,138 Series 2012-133, Class KO, PO................................ (b) 12/25/42 231,835
1,789,666 Series 2012-134, Class GI, IO................................ 4.50% 03/25/29 240,975
823,172 Series 2012-138, Class MA.................................... 1.00% 12/25/42 772,601
4,406,148 Series 2012-146, Class QA.................................... 1.00% 01/25/43 4,070,816
716,863 Series 2012-409, Class 49, IO, STRIPS (e).................... 3.50% 11/25/41 136,976
969,915 Series 2012-409, Class 53, IO, STRIPS (e).................... 3.50% 04/25/42 184,301
176,791 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 35,460
690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 610,534
1,077,802 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 77,340
165,558 Series 2013-22, Class TS,
1 Mo. LIBOR (x) -1.50 + 6.08% (d)......................... 2.35% 03/25/43 151,810
45,712 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 46,722
750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 714,062
2,165,270 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 453,506
786,587 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 76,421
214,281 Series 2013-52, Class MD..................................... 1.25% 06/25/43 191,904
1,346,076 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 172,538
119,098 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 110,997
312,668 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 2.73% 07/25/42 313,129
669,921 Series 2013-94, Class CA..................................... 3.50% 08/25/38 676,666
228,834 Series 2013-103, Class IO, IO................................ 3.50% 03/25/38 23,067
379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 395,365
429,739 Series 2013-105, Class KO, PO................................ (b) 10/25/43 388,797
195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 162,256
719,905 Series 2013-117, Class AC.................................... 2.50% 04/25/36 716,097
558,279 Series 2013-128, Class PO, PO................................ (b) 12/25/43 464,438
1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 1,099,275
5,578,913 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 1,077,959
269,098 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 23,196
11,252,771 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 957,980
1,933,567 Series 2014-46, Class KA (e)................................. 4.76% 08/25/44 2,108,531
403,985 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 64,097
523,483 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 551,708
2,409,116 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 194,396
897,424 Series 2014-91, Class PB..................................... 3.00% 02/25/38 898,049
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 $ 868,583
589,553 Series 2015-38, Class GI, IO................................. 3.00% 09/25/43 48,471
24,267,821 Series 2015-66, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 09/25/45 3,501,580
3,301,042 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 377,142
598,451 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 93,582
8,871,359 Series 2015-97, Class AI, IO................................. 4.00% 09/25/41 1,254,771
15,890,776 Series 2016-62, Class SB, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.61% 09/25/46 2,322,715
1,655,679 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 238,793
13,476,310 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 1,668,034
664,615 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 107,193
813,544 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 2.91% 11/25/46 812,108
2,007,176 Series 2016-87, Class AF, 1 Mo. LIBOR + 0.40% (a)............ 2.89% 11/25/46 1,998,651
597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 534,824
1,994,801 Series 2018-19, Class MA..................................... 3.00% 03/25/29 1,994,435
12,557,063 Series 2018-86, Class DL..................................... 3.50% 12/25/48 12,699,736
17,299,616 Series 2018-92, Class DA..................................... 3.50% 11/25/46 17,551,294
3,957,386 Series 2018-92, Class DB..................................... 3.50% 01/25/49 3,966,682
5,358,716 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 5,625,343
29,541,349 Series 2019-8, Class DY...................................... 3.50% 03/25/49 29,868,833
7,216,731 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 7,663,433
Government National Mortgage Association
97,613 Series 1999-30, Class S, IO,
1 Mo. LIBOR (x) -1 + 8.60% (d)............................ 6.12% 08/16/29 1,174
583,340 Series 2001-22, Class SE, IO,
1 Mo. LIBOR (x) -1 + 8.15%, 0.65% Cap (d)................. 0.65% 05/16/31 778
118,922 Series 2001-51, Class FA, 1 Mo. LIBOR + 0.50% (a)............ 2.98% 10/16/31 118,938
40,523 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 40,504
141,540 Series 2001-65, Class SH, IO,
1 Mo. LIBOR (x) -1 + 7.60% (d)............................ 5.12% 12/16/31 1,002
312,362 Series 2002-7, Class ST, IO,
1 Mo. LIBOR (x) -1 + 7.50% (d)............................ 5.03% 08/17/27 3,193
91,682 Series 2002-24, Class AG, IO,
1 Mo. LIBOR (x) -1 + 7.95% (d)............................ 5.47% 04/16/32 688
271,421 Series 2002-45, Class SV, IO,
1 Mo. LIBOR (x) -1 + 8.10% (d)............................ 5.62% 06/16/32 3,039
159,465 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 167,238
407,893 Series 2002-75, Class PJ..................................... 5.50% 11/20/32 425,679
352,150 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 380,405
577,452 Series 2003-11, Class SM, IO,
1 Mo. LIBOR (x) -1 + 7.70% (d)............................ 5.22% 02/16/33 29,446
608,390 Series 2003-18, Class PG..................................... 5.50% 03/20/33 661,452
1,251,890 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,372,370
311,948 Series 2003-42, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 4.12% 07/16/31 32,495
1,282,685 Series 2003-42, Class SH, IO,
1 Mo. LIBOR (x) -1 + 6.55% (d)............................ 4.07% 05/20/33 140,129
106,797 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 124,996
378,987 Series 2003-84, Class Z...................................... 5.50% 10/20/33 411,810
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 191,182 Series 2004-37, Class B...................................... 6.00% 04/17/34 $ 213,070
447,477 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 521,162
82,473 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 90,743
105,620 Series 2004-71, Class ST,
1 Mo. LIBOR (x) -6.25 + 44.50%, 7.00% Cap (d)............. 7.00% 09/20/34 113,319
171,182 Series 2004-83, Class AK,
1 Mo. LIBOR (x) -3.00 + 16.49% (d)........................ 9.06% 10/16/34 211,666
830,690 Series 2004-88, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.62% 10/16/34 90,672
72,035 Series 2004-92, Class AK, 1 Mo. LIBOR (x) -3 + 16.50% (d).... 9.07% 11/16/34 90,617
1,423,415 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,591,704
204,455 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 229,359
63,749 Series 2004-105, Class KA.................................... 5.00% 12/16/34 69,861
98,190 Series 2004-109, Class BC.................................... 5.00% 11/20/33 99,520
203,607 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 206,859
203,607 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 221,997
31,584 Series 2005-7, Class AJ, 1 Mo. LIBOR (x) -4 + 22.00% (d)..... 12.09% 02/16/35 43,851
252,115 Series 2005-7, Class KA,
1 Mo. LIBOR (x) -2.81 + 18.95% (d)........................ 11.99% 12/17/34 272,113
584,691 Series 2005-7, Class MA,
1 Mo. LIBOR (x) -2.81 + 18.95% (d)........................ 11.99% 12/17/34 656,659
182,307 Series 2005-33, Class AY..................................... 5.50% 04/16/35 198,617
133,038 Series 2005-41, Class PA..................................... 4.00% 05/20/35 140,158
548,075 Series 2005-44, Class IO, IO................................. 5.50% 07/20/35 110,698
434,420 Series 2005-93, Class PO, PO................................. (b) 06/20/35 391,561
398,478 Series 2006-17, Class TW..................................... 6.00% 04/20/36 439,418
500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 584,512
163,511 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 178,426
373,565 Series 2007-16, Class OZ..................................... 6.00% 04/20/37 437,003
254,124 Series 2007-27, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.20% (d)............................ 3.72% 05/20/37 25,437
203,431 Series 2007-41, Class OL, PO................................. (b) 07/20/37 181,360
364,457 Series 2007-42, Class SB, IO,
1 Mo. LIBOR (x) -1 + 6.75% (d)............................ 4.27% 07/20/37 60,207
145,955 Series 2007-68, Class NA..................................... 5.00% 11/20/37 156,375
945,539 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 1,034,789
145,481 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 2.83% 12/20/37 144,990
128,980 Series 2008-6, Class CK...................................... 4.25% 10/20/37 129,347
173,477 Series 2008-16, Class PO, PO................................. (b) 02/20/38 154,036
18,086 Series 2008-20, Class PO, PO................................. (b) 09/20/37 17,356
87,120 Series 2008-29, Class PO, PO................................. (b) 02/17/33 85,564
154,621 Series 2008-33, Class XS, IO,
1 Mo. LIBOR (x) -1 + 7.70% (d)............................ 5.22% 04/16/38 27,013
92,504 Series 2008-47, Class MI, IO................................. 6.00% 10/16/37 1,640
703,000 Series 2008-47, Class ML..................................... 5.25% 06/16/38 786,064
32,791 Series 2008-50, Class NA..................................... 5.50% 03/16/37 32,845
180,000 Series 2008-54, Class PE..................................... 5.00% 06/20/38 203,674
807,220 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 168,524
196,715 Series 2009-10, Class PA..................................... 4.50% 12/20/38 202,657
627,501 Series 2009-14, Class KF, 1 Mo. LIBOR + 0.70% (a)............ 3.18% 03/20/39 638,674
217,693 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 47,050
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 71,431 Series 2009-14, Class KS, IO,
1 Mo. LIBOR (x) -1 + 6.30% (d)............................ 3.82% 03/20/39 $ 7,735
175,581 Series 2009-25, Class SE, IO,
1 Mo. LIBOR (x) -1 + 7.60% (d)............................ 5.12% 09/20/38 24,879
2,228,680 Series 2009-29, Class PC..................................... 7.00% 05/20/39 2,853,139
344,932 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 409,955
685,932 Series 2009-42, Class BI, IO................................. 6.00% 06/20/39 136,204
122,839 Series 2009-53, Class AB..................................... 4.50% 10/16/38 123,773
138,498 Series 2009-57, Class KA..................................... 4.50% 05/20/39 139,032
3,732,600 Series 2009-57, Class VB..................................... 5.00% 06/16/39 4,197,213
954,987 Series 2009-61, Class OW, PO................................. (b) 11/16/35 831,831
218,127 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 305,818
891,730 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 1,044,709
1,238,344 Series 2009-72, Class SM, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 08/16/39 161,936
455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 529,860
139,602 Series 2009-76, Class PC..................................... 4.00% 03/16/39 140,864
517,735 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 667,192
231,357 Series 2009-79, Class OK, PO................................. (b) 11/16/37 204,430
121,820 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 147,595
1,707,567 Series 2009-87, Class EI, IO................................. 5.50% 08/20/39 289,020
291,131 Series 2009-93, Class WG..................................... 4.00% 09/20/38 292,502
39,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 44,061
246,451 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 296,853
41,913 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 52,043
548,871 Series 2009-116, Class MS, IO,
1 Mo. LIBOR (x) -1 + 6.50% (d)............................ 4.02% 11/16/38 16,154
11,747 Series 2009-118, Class KP.................................... 4.50% 05/20/38 11,895
732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 827,929
192,171 Series 2010-3, Class MF, 1 Mo. LIBOR + 0.45% (a)............. 2.93% 11/20/38 192,542
52,000 Series 2010-4, Class WA...................................... 3.00% 01/16/40 52,040
2,589,402 Series 2010-6, Class PD...................................... 5.00% 03/16/38 2,591,962
255,721 Series 2010-7, Class BC...................................... 4.00% 09/16/24 258,366
189,804 Series 2010-11, Class HE..................................... 4.00% 04/20/39 192,349
32,814 Series 2010-14, Class AO, PO................................. (b) 12/20/32 32,101
2,097,617 Series 2010-14, Class BV, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 02/16/40 294,125
54,470 Series 2010-29, Class CB..................................... 5.00% 12/20/38 54,843
1,071,810 Series 2010-42, Class CO, PO................................. (b) 06/16/39 1,013,595
5,531 Series 2010-44, Class BE..................................... 3.00% 04/20/38 5,524
2,510,780 Series 2010-46, Class FC, 1 Mo. LIBOR + 0.80% (a)............ 3.28% 03/20/35 2,561,259
748,652 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,020,692
2,338,611 Series 2010-85, Class SL, IO,
1 Mo. LIBOR (x) -1 + 6.60% (d)............................ 4.12% 07/20/37 313,302
87,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 98,267
2,561,499 Series 2010-116, Class JB.................................... 5.00% 06/16/40 2,838,671
611,266 Series 2010-129, Class PQ.................................... 3.00% 04/20/39 613,613
125,111 Series 2010-138, Class PD.................................... 3.50% 08/20/38 125,360
1,287,146 Series 2010-157, Class OP, PO................................ (b) 12/20/40 1,059,429
206,620 Series 2010-162, Class PQ.................................... 4.50% 06/16/39 209,164
536,319 Series 2010-166, Class DI, IO................................ 4.50% 02/20/39 56,708
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 116,216 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 $ 133,759
2,394,182 Series 2011-19, Class MI, IO................................. 5.00% 06/16/40 209,776
771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 860,432
583,856 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 108,277
447,176 Series 2011-50, Class PZ..................................... 5.00% 04/20/41 522,712
159,265 Series 2011-63, Class BI, IO................................. 6.00% 02/20/38 24,276
257,942 Series 2011-69, Class HC..................................... 2.25% 05/20/38 257,451
1,208,512 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 1,334,538
3,298,408 Series 2011-81, Class IC, IO,
1 Mo. LIBOR (x) -1 + 6.72%, 0.62% Cap (d)................. 0.62% 07/20/35 63,323
1,532,325 Series 2011-112, Class IP, IO................................ 0.50% 08/16/26 9,193
239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 259,587
6,200 Series 2011-136, Class GB.................................... 2.50% 05/20/40 6,144
304,644 Series 2011-137, Class WA (e)................................ 5.56% 07/20/40 338,330
393,744 Series 2011-146, Class EI, IO................................ 5.00% 11/16/41 77,401
97,391 Series 2011-151, Class TB, IO,
1 Mo. LIBOR (x) -70 + 465.50%, 3.50% Cap (d).............. 3.50% 04/20/41 13,237
3,226,062 Series 2012-10, Class LI, IO................................. 3.50% 07/20/40 250,418
192,641 Series 2012-16, Class AG..................................... 2.50% 10/20/38 191,397
4,699,921 Series 2012-18, Class IA, IO,
1 Mo. LIBOR (x) -1 + 6.68%, 0.58% Cap (d)................. 0.58% 07/20/39 81,776
2,010,056 Series 2012-48, Class MI, IO................................. 5.00% 04/16/42 403,834
17,297,911 Series 2012-84, Class QS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.62% 07/16/42 2,557,176
251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 229,434
6,660,693 Series 2012-143, Class IB, IO................................ 3.50% 12/20/39 325,904
11,448,235 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 901,813
3,399,628 Series 2012-149, Class PC (e)................................ 6.29% 12/20/42 3,902,308
27,259,803 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 5,602,582
165,336 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 21,681
1,768,649 Series 2013-10, Class DI, IO................................. 3.50% 09/20/42 215,187
432,195 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 85,956
2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 2,024,051
8,727,150 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 1,344,076
3,398,384 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 473,783
3,810,495 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 622,120
470,765 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 73,857
953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 843,858
4,629,000 Series 2013-91, Class PB..................................... 3.50% 09/20/42 4,701,714
2,103,773 Series 2013-130, Class WS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.62% 09/20/43 334,586
9,474,385 Series 2013-170, Class IG, IO................................ 5.50% 11/16/43 1,637,857
688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 729,680
196,189 Series 2013-188, Class CF, 1 Mo. LIBOR + 0.45% (a)........... 2.93% 03/20/43 196,296
8,097,659 Series 2014-6, Class IJ, IO.................................. 4.50% 06/16/43 1,433,069
6,783,014 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 530,427
15,675,842 Series 2014-44, Class ID, IO (c) (e)......................... 0.35% 03/16/44 204,946
74,262 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 12,080
882,146 Series 2014-94, Class Z...................................... 4.50% 01/20/44 989,418
6,544,567 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 1,117,843
11,458,652 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 804,213
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 5,658,248 Series 2014-116, Class SB, IO,
1 Mo. LIBOR (x) -1 + 5.60% (d)............................ 3.11% 08/20/44 $ 877,561
3,889,692 Series 2014-118, Class TV, IO,
1 Mo. LIBOR (x) -1 + 6.25% (d)............................ 3.77% 05/20/44 575,249
7,789,877 Series 2014-178, Class LT.................................... 2.00% 11/20/43 7,715,861
6,375,137 Series 2015-3, Class ZD...................................... 4.00% 01/20/45 6,954,344
22,657,478 Series 2015-40, Class IO, IO................................. 4.00% 03/20/45 4,384,752
10,925,846 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 2,157,456
77,286 Series 2015-95, Class IK, IO (e)............................. 1.23% 05/16/37 3,065
22,103,149 Series 2015-99, Class EI, IO................................. 5.50% 07/16/45 5,337,486
602,428 Series 2015-100, Class AI, IO................................ 3.50% 03/20/39 32,413
34,141,837 Series 2015-119, Class TI, IO................................ 3.50% 05/20/41 3,095,330
25,048,887 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 2,245,625
532,451 Series 2015-137, Class WA (c) (e)............................ 5.48% 01/20/38 591,907
1,238,977 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 176,606
330,280 Series 2015-151, Class KW (e)................................ 5.88% 04/20/34 350,472
8,344,806 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 1,980,695
175,925 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 159,480
640,118 Series 2016-55, Class PB (e)................................. 6.14% 03/20/31 682,974
2,563,430 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 552,994
1,317,227 Series 2016-75, Class SA, IO,
1 Mo. LIBOR (x) -1 + 6.00% (d)............................ 3.52% 05/20/40 163,982
1,709,626 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 283,464
5,809,708 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 938,448
719,829 Series 2016-99, Class JA (e)................................. 5.52% 11/20/45 799,781
912,171 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 915,438
13,192,488 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 1,732,595
1,581,917 Series 2016-118, Class GI, IO................................ 4.50% 02/16/40 316,239
16,676,694 Series 2016-120, Class AS, IO,
1 Mo. LIBOR (x) -1 + 6.10% (d)............................ 3.62% 09/20/46 3,328,938
464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 545,393
296,389 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 264,038
2,296,548 Series 2016-154, Class WF, 1 Mo. LIBOR + 0.40% (a)........... 2.89% 11/20/45 2,289,457
303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 251,574
467,094 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 103,486
820,489 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 919,628
5,648,710 Series 2017-32, Class IB, IO................................. 5.00% 02/16/47 1,197,809
9,958,122 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 2,481,444
21,721,176 Series 2017-57, Class IO, IO................................. 5.00% 04/20/47 3,602,759
6,830,765 Series 2017-113, Class IE, IO................................ 5.50% 07/20/47 1,586,117
10,285,583 Series 2017-130, Class LS, IO,
1 Mo. LIBOR (x) -1 + 6.20% (d)............................ 3.72% 08/16/47 1,919,396
11,208,590 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 2,594,487
9,368,614 Series 2017-186, Class TI, IO,
1 Mo. LIBOR (x) -1 + 6.50%, 0.50% Cap (d)................. 0.50% 05/20/40 168,837
838,537 Series 2018-44, Class Z...................................... 2.50% 09/20/47 679,984
3,869,734 Series 2018-53, Class VA..................................... 3.50% 07/20/29 4,013,308
19,731,129 Series 2018-89, Class A...................................... 3.50% 06/20/39 19,836,877
4,331,983 Series 2018-120, Class G..................................... 3.50% 09/20/48 4,308,946
13,592,996 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 2,786,057
10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 9,966,255
</TABLE>
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 10,556,000 Series 2018-155, Class KD.................................... 4.00% 11/20/48 $ 10,933,812
10,908,217 Series 2018-160, Class GY.................................... 4.50% 11/20/48 11,786,881
8,248,572 Series 2019-6, Class EI, IO.................................. 5.00% 09/20/39 1,689,438
12,488,006 Series 2019-18, Class TP..................................... 3.50% 02/20/49 12,582,965
2,389,612 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 525,061
Vendee Mortgage Trust
3,817,392 Series 2003-2, Class Z....................................... 5.00% 05/15/33 4,135,898
50,442 Series 2010-1, Class DA...................................... 4.25% 02/15/35 51,224
---------------
616,117,846
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 7.5%
Fannie Mae - Aces
50,000 Series 2013-M6, Class 1AC (c)................................ 3.70% 02/25/43 50,864
Freddie Mac Multifamily Structured Pass Through Certificates
2,000,000 Series 2009-K004, Class A3................................... 4.24% 08/25/19 2,002,150
2,362,925 Series 2010-K005, Class A2................................... 4.32% 11/25/19 2,370,849
93,299,533 Series 2011-K016, Class X1, IO (c)........................... 1.48% 10/25/21 2,937,079
46,524,430 Series 2012-K019, Class X1, IO (c)........................... 1.62% 03/25/22 1,844,838
68,517,277 Series 2012-K020, Class X1, IO (c)........................... 1.40% 05/25/22 2,456,427
127,788,948 Series 2013-K030, Class X1, IO (c)........................... 0.19% 04/25/23 899,481
80,755,694 Series 2014-K036, Class X1, IO (c)........................... 0.75% 10/25/23 2,349,127
21,598,714 Series 2014-K714, Class X3, IO (c)........................... 1.79% 01/25/42 573,336
97,017,585 Series 2015-K721, Class X1, IO (c)........................... 0.33% 08/25/22 975,716
190,133,023 Series 2016-KIR1, Class X, IO (c)............................ 1.07% 03/25/26 11,659,716
283,161,144 Series 2018-K086, Class X1, IO (c)........................... 0.24% 11/25/28 6,399,130
113,715,483 Series 2018-K159, Class X1, IO (c)........................... 0.11% 11/25/33 1,793,589
28,683,944 Series 2019-K1510, Class X1, IO (c).......................... 0.48% 01/25/34 1,513,612
104,459,000 Series 2019-K734, Class X1, IO (c)........................... 0.65% 02/25/26 3,987,388
68,018,000 Series 2019-K734, Class XAM, IO (c).......................... 0.42% 02/25/26 1,910,680
FREMF Mortgage Trust
2,780,000 Series 2010-K9, Class B (c) (f).............................. 5.21% 09/25/45 2,851,137
4,942,000 Series 2011-K10, Class B (c) (f)............................. 4.78% 11/25/49 5,048,807
23,000,906 Series 2011-K11, Class B (c) (f)............................. 4.57% 12/25/48 23,507,783
7,590,000 Series 2011-K14, Class B (c) (f)............................. 5.18% 02/25/47 7,902,190
3,000,000 Series 2011-K15, Class B (c) (f)............................. 4.95% 08/25/44 3,127,908
6,031,192 Series 2012-K710, Class B (c) (f)............................ 3.98% 06/25/47 6,020,122
12,750,000 Series 2013-K712, Class B (c) (f)............................ 3.47% 05/25/45 12,754,227
1,100,000 Series 2013-K713, Class B (c) (f)............................ 3.26% 04/25/46 1,101,624
11,771,000 Series 2014-K715, Class B (c) (f)............................ 3.97% 02/25/46 11,970,241
2,260,829 Series 2015-K721, Class B (c) (f)............................ 3.56% 11/25/47 2,290,065
Government National Mortgage Association
724,873 Series 2013-32, Class A...................................... 1.90% 06/16/36 715,470
532,000 Series 2013-57, Class D (e).................................. 2.35% 06/16/46 468,260
100,000 Series 2013-74, Class AG (c)................................. 2.81% 12/16/53 87,497
24,531 Series 2013-194, Class AE (e)................................ 2.75% 11/16/44 23,959
68,710,433 Series 2015-30, Class IO, IO (e)............................. 1.02% 07/16/56 4,402,497
24,491,028 Series 2015-70, Class IO, IO (e)............................. 1.03% 12/16/49 1,515,130
66,286,579 Series 2015-107, Class IO, IO (e)............................ 0.88% 03/16/57 3,507,733
6,039,749 Series 2015-125, Class VA (e)................................ 2.70% 05/16/35 5,943,558
54,319,952 Series 2016-2, Class IO, IO (e).............................. 0.91% 04/16/57 3,733,459
25,575,535 Series 2016-26, Class IO, IO (e)............................. 0.96% 02/16/58 1,815,796
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 66,880,784 Series 2016-34, Class IO, IO (e)............................. 1.00% 01/16/58 $ 5,012,855
68,729,252 Series 2016-35, Class IO, IO (e)............................. 0.89% 03/16/58 4,642,970
46,875,705 Series 2016-36, Class IO, IO (e)............................. 0.94% 08/16/57 3,358,199
38,173,115 Series 2016-52, Class IO, IO (e)............................. 0.93% 03/16/58 2,607,972
64,898,257 Series 2016-64, Class IO, IO (e)............................. 0.96% 12/16/57 4,339,312
4,774,715 Series 2016-110, Class VA.................................... 2.10% 01/16/38 4,409,181
24,824,650 Series 2016-127, Class IO, IO (e)............................ 0.95% 05/16/58 1,851,395
9,608,387 Series 2017-131, Class AG (e)................................ 2.50% 12/16/58 9,202,313
29,050,047 Series 2018-2, Class IO, IO (e).............................. 0.78% 12/16/59 2,007,620
8,613,939 Series 2018-150, Class Z..................................... 3.20% 02/16/60 7,602,422
16,781,910 Series 2019-7, Class Z....................................... 2.50% 01/16/61 12,182,797
---------------
199,728,481
---------------
PASS-THROUGH SECURITIES -- 42.4%
Federal Home Loan Mortgage Corporation
4,106,205 Pool 760043, 5 Yr. Constant Maturity Treasury Rate +
1.39% (a)................................................. 3.02% 12/01/48 4,148,222
16,155,472 Pool 840359, 12 Mo. LIBOR + 1.64% (a)........................ 4.35% 06/01/46 16,683,290
171,788 Pool A19763.................................................. 5.00% 04/01/34 185,721
80,014 Pool A47333.................................................. 5.00% 10/01/35 86,008
695,674 Pool A47828.................................................. 3.50% 08/01/35 704,914
387,487 Pool A47829.................................................. 4.00% 08/01/35 400,146
407,623 Pool A47937.................................................. 5.50% 08/01/35 445,819
143,205 Pool A48972.................................................. 5.50% 05/01/36 157,070
99,185 Pool A54675.................................................. 5.50% 01/01/36 109,183
257,429 Pool A65324.................................................. 5.50% 09/01/37 280,217
93,993 Pool A86143.................................................. 5.00% 05/01/39 101,130
32,622 Pool A90319.................................................. 5.00% 12/01/39 35,159
478,429 Pool A92197.................................................. 5.00% 05/01/40 515,649
13,457 Pool A93093.................................................. 4.50% 07/01/40 14,317
18,551 Pool A93891.................................................. 4.00% 09/01/40 19,332
26,695 Pool A94729.................................................. 4.00% 11/01/40 27,820
101,216 Pool A94843.................................................. 4.00% 11/01/40 105,479
420,301 Pool A95441.................................................. 4.00% 12/01/40 436,979
39,035 Pool A95653.................................................. 4.00% 12/01/40 40,679
63,252 Pool A95728.................................................. 4.00% 12/01/40 65,916
84,753 Pool A96380.................................................. 4.00% 01/01/41 87,927
242,458 Pool A97294.................................................. 4.00% 02/01/41 251,235
1,006,504 Pool B70791.................................................. 4.00% 06/01/39 1,052,314
6,543 Pool C01310.................................................. 6.50% 03/01/32 7,356
20,674 Pool C01574.................................................. 5.00% 06/01/33 22,227
23,913 Pool C03458.................................................. 5.00% 02/01/40 25,771
75,308 Pool C03949.................................................. 3.50% 05/01/42 76,671
189,465 Pool C04269.................................................. 3.00% 10/01/42 188,293
392,344 Pool C91167.................................................. 5.00% 04/01/28 414,100
271,960 Pool C91353.................................................. 3.50% 01/01/31 276,444
590,816 Pool C91366.................................................. 4.50% 04/01/31 621,051
44,322 Pool C91482.................................................. 3.50% 07/01/32 45,436
42,405 Pool E02883.................................................. 4.00% 04/01/26 43,788
31,333 Pool G01443.................................................. 6.50% 08/01/32 35,291
78,639 Pool G01737.................................................. 5.00% 12/01/34 84,567
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 43,198 Pool G01840.................................................. 5.00% 07/01/35 $ 46,449
469,935 Pool G02017.................................................. 5.00% 12/01/35 510,537
99,268 Pool G03072.................................................. 5.00% 11/01/36 106,739
449,292 Pool G04593.................................................. 5.50% 01/01/37 493,469
48,528 Pool G04632.................................................. 5.00% 11/01/36 52,183
223,445 Pool G04814.................................................. 5.50% 10/01/38 244,205
49,265 Pool G04913.................................................. 5.00% 03/01/38 52,977
48,184 Pool G05173.................................................. 4.50% 11/01/31 50,791
826,923 Pool G05275.................................................. 5.50% 02/01/39 902,075
149,942 Pool G05449.................................................. 4.50% 05/01/39 159,520
554,209 Pool G05792.................................................. 4.50% 02/01/40 589,668
426,855 Pool G05927.................................................. 4.50% 07/01/40 454,169
35,092 Pool G06252.................................................. 4.00% 02/01/41 36,406
673,808 Pool G06359.................................................. 4.00% 02/01/41 699,029
106,690 Pool G06501.................................................. 4.00% 04/01/41 110,684
108,819 Pool G06583.................................................. 5.00% 06/01/41 118,703
193,887 Pool G06687.................................................. 5.00% 07/01/41 210,580
107,767 Pool G06739.................................................. 4.50% 09/01/41 114,664
605,869 Pool G07025.................................................. 5.00% 02/01/42 652,102
817,528 Pool G07100.................................................. 5.50% 07/01/40 897,510
19,913 Pool G07219.................................................. 5.00% 10/01/41 21,450
109,218 Pool G07266.................................................. 4.00% 12/01/42 113,172
675,384 Pool G07329.................................................. 4.00% 01/01/43 699,834
739,771 Pool G07683.................................................. 4.00% 03/01/44 763,233
788,806 Pool G07806.................................................. 5.00% 06/01/41 849,384
4,079 Pool G08113.................................................. 6.50% 02/01/36 4,509
6,221,035 Pool G08854.................................................. 5.00% 12/01/48 6,572,610
13,668 Pool G11713.................................................. 5.50% 06/01/20 13,747
25,332 Pool G11769.................................................. 5.00% 10/01/20 25,991
40,877 Pool G11833.................................................. 5.00% 11/01/20 41,735
4,114 Pool G11880.................................................. 5.00% 12/01/20 4,199
89,223 Pool G12312.................................................. 6.00% 09/01/21 91,364
72,725 Pool G12797.................................................. 6.50% 02/01/22 74,158
135,917 Pool G12959.................................................. 6.50% 10/01/22 141,505
5,694 Pool G12978.................................................. 5.50% 12/01/22 5,879
8,482 Pool G13044.................................................. 4.50% 06/01/21 8,663
5,111 Pool G13581.................................................. 5.50% 11/01/21 5,136
63,661 Pool G13623.................................................. 4.50% 08/01/24 65,842
86,403 Pool G13625.................................................. 5.50% 01/01/24 89,596
131,493 Pool G13733.................................................. 5.00% 11/01/24 136,347
109,467 Pool G14088.................................................. 4.00% 02/01/26 113,021
230,438 Pool G14106.................................................. 6.00% 10/01/24 236,904
53,327 Pool G14167.................................................. 5.50% 07/01/23 55,097
173,428 Pool G14233.................................................. 6.00% 01/01/24 176,119
1,112,649 Pool G14348.................................................. 4.00% 10/01/26 1,153,938
52,033 Pool G14376.................................................. 4.00% 09/01/25 53,720
68,820 Pool G14676.................................................. 4.50% 09/01/26 71,156
5,148 Pool G14791.................................................. 6.00% 05/01/21 5,152
478,109 Pool G14995.................................................. 5.50% 12/01/24 492,409
236,129 Pool G15019.................................................. 4.50% 07/01/26 241,178
56,404 Pool G15039.................................................. 4.50% 09/01/26 58,337
</TABLE>
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 62,849 Pool G15725.................................................. 4.50% 09/01/26 $ 65,002
27,334 Pool G15821.................................................. 5.00% 07/01/25 28,002
271,870 Pool G15949.................................................. 4.00% 01/01/29 280,685
329,347 Pool G15957.................................................. 5.50% 12/01/24 335,552
23,825 Pool G18100.................................................. 5.00% 02/01/21 24,257
467,234 Pool G18264.................................................. 5.00% 07/01/23 484,332
378,439 Pool G18287.................................................. 5.50% 12/01/23 392,663
132,826 Pool G18306.................................................. 4.50% 04/01/24 137,338
18,977 Pool G60020.................................................. 4.50% 12/01/43 20,110
944,686 Pool G60114.................................................. 5.50% 06/01/41 1,036,144
1,386,091 Pool G60168.................................................. 4.50% 07/01/45 1,458,865
463,673 Pool G60194.................................................. 3.50% 08/01/45 474,063
462,670 Pool G60737.................................................. 4.50% 08/01/42 492,205
1,353,825 Pool G60762.................................................. 5.00% 07/01/41 1,455,300
337,768 Pool G60806.................................................. 5.00% 12/01/44 363,841
506,574 Pool G60808.................................................. 3.00% 10/01/46 501,555
8,925,623 Pool G60921.................................................. 4.50% 02/01/47 9,398,014
22,042,369 Pool G60940.................................................. 4.00% 09/01/46 22,809,637
8,947,116 Pool G61160.................................................. 4.50% 11/01/45 9,455,070
19,619 Pool H09034.................................................. 5.50% 05/01/37 20,754
4,194 Pool J03523.................................................. 5.00% 09/01/21 4,258
61,101 Pool J05364.................................................. 6.00% 08/01/22 62,361
311,406 Pool J09465.................................................. 4.00% 04/01/24 321,503
134,546 Pool J09504.................................................. 4.00% 04/01/24 138,909
46,708 Pool J09798.................................................. 4.00% 05/01/24 48,223
94,716 Pool J10623.................................................. 4.00% 09/01/24 97,979
895,361 Pool J10827.................................................. 4.50% 10/01/24 925,199
306,009 Pool N70075.................................................. 5.00% 01/01/35 327,671
488,945 Pool N70081.................................................. 5.50% 07/01/38 542,310
76,346 Pool O20138.................................................. 5.00% 11/01/30 81,041
1,145,344 Pool Q00841.................................................. 4.50% 05/01/41 1,218,638
143,379 Pool Q03139.................................................. 4.00% 09/01/41 149,459
51,591 Pool Q04031.................................................. 4.00% 10/01/41 54,098
39,086 Pool Q04905.................................................. 4.00% 12/01/41 40,985
77,949 Pool Q05035.................................................. 4.00% 12/01/41 81,062
66,356 Pool Q05173.................................................. 4.00% 12/01/41 69,580
50,887 Pool Q05181.................................................. 4.00% 12/01/41 53,359
34,867 Pool Q05445.................................................. 4.00% 01/01/42 36,561
137,204 Pool Q07189.................................................. 4.00% 04/01/42 142,175
49,093 Pool Q07479.................................................. 3.50% 04/01/42 49,981
152,584 Pool Q11791.................................................. 3.50% 10/01/42 155,345
100,240 Pool Q11836.................................................. 3.50% 10/01/42 102,286
724,412 Pool Q14034.................................................. 3.50% 12/01/42 741,128
2,852,599 Pool Q43309.................................................. 4.00% 09/01/46 2,955,150
7,059,480 Pool Q45763.................................................. 4.00% 01/01/47 7,313,073
5,319,221 Pool Q50564.................................................. 4.50% 09/01/47 5,570,198
13,999,847 Pool Q53219.................................................. 4.50% 12/01/47 14,778,486
8,735,846 Pool Q53875.................................................. 4.00% 01/01/48 9,045,631
1,058,220 Pool Q54651.................................................. 4.50% 03/01/48 1,135,392
1,990,526 Pool Q55037.................................................. 4.50% 04/01/48 2,132,651
20,563,739 Pool Q55152.................................................. 4.50% 04/01/48 21,634,034
</TABLE>
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 5,517,325 Pool Q56260.................................................. 5.00% 05/01/48 $ 5,930,924
9,095,817 Pool Q58363.................................................. 5.00% 09/01/48 9,605,775
665,332 Pool U50165.................................................. 4.00% 05/01/32 698,786
3,278,770 Pool U59020.................................................. 4.00% 06/01/35 3,444,019
3,018,235 Pool U64762.................................................. 4.50% 10/01/45 3,180,611
14,581,962 Pool U69020.................................................. 5.00% 07/01/44 15,649,452
15,522,980 Pool U69040.................................................. 4.00% 05/01/45 16,066,017
8,427,630 Pool U69041.................................................. 5.00% 11/01/43 9,039,338
32,458,491 Pool U69055.................................................. 4.50% 10/01/47 34,203,598
5,018,997 Pool U79023.................................................. 3.50% 10/01/28 5,139,930
64,609 Pool U80068.................................................. 3.50% 10/01/32 66,208
135,845 Pool U80212.................................................. 3.50% 02/01/33 139,228
167,546 Pool U90245.................................................. 3.50% 10/01/42 170,016
90,909 Pool U90291.................................................. 4.00% 10/01/42 93,974
840,133 Pool U90316.................................................. 4.00% 10/01/42 868,555
817,935 Pool U90490.................................................. 4.00% 06/01/42 845,837
2,075,742 Pool U90690.................................................. 3.50% 06/01/42 2,106,184
25,232 Pool U90932.................................................. 3.00% 02/01/43 25,107
245,651 Pool U90975.................................................. 4.00% 06/01/42 253,936
567,621 Pool U91254.................................................. 4.00% 04/01/43 586,896
2,017,566 Pool U91619.................................................. 4.00% 06/01/43 2,085,705
63,470 Pool U92272.................................................. 4.50% 12/01/43 66,988
876,839 Pool U92432.................................................. 4.00% 02/01/44 906,841
55,606 Pool U95137.................................................. 4.00% 08/01/43 57,481
220,885 Pool U99045.................................................. 3.50% 03/01/43 224,125
252,942 Pool U99084.................................................. 4.50% 02/01/44 266,986
123,053 Pool U99091.................................................. 4.50% 03/01/44 129,803
368,251 Pool U99096.................................................. 4.50% 05/01/44 388,624
3,647,195 Pool U99134.................................................. 4.00% 01/01/46 3,771,332
909,786 Pool V80910.................................................. 4.00% 12/01/43 946,098
Federal National Mortgage Association
87,445 Pool 190371.................................................. 6.50% 07/01/36 101,067
35,268 Pool 254636.................................................. 5.00% 02/01/33 37,857
49,868 Pool 255190.................................................. 5.50% 05/01/34 54,927
38,704 Pool 255984.................................................. 4.50% 11/01/25 40,277
216,317 Pool 256181.................................................. 5.50% 03/01/36 230,509
164,799 Pool 256576.................................................. 5.50% 01/01/37 174,625
43,700 Pool 256808.................................................. 5.50% 07/01/37 45,610
129,077 Pool 256936.................................................. 6.00% 10/01/37 135,024
41,559 Pool 257281.................................................. 5.00% 07/01/28 43,820
98,226 Pool 545759.................................................. 6.50% 07/01/32 110,904
22,657 Pool 555851.................................................. 6.50% 01/01/33 25,654
387,902 Pool 683246.................................................. 5.50% 02/01/33 430,330
312,235 Pool 725014.................................................. 5.50% 12/01/33 344,281
505,589 Pool 734922.................................................. 4.50% 09/01/33 536,444
665,561 Pool 735415.................................................. 6.50% 12/01/32 755,131
6,197 Pool 745875.................................................. 6.50% 09/01/36 7,166
53,190 Pool 747097.................................................. 6.00% 10/01/29 56,630
1,399 Pool 780962.................................................. 4.50% 05/01/19 1,424
601,550 Pool 788149.................................................. 5.50% 05/01/33 662,080
302,934 Pool 812741.................................................. 5.50% 02/01/35 326,408
</TABLE>
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 467,363 Pool 827948.................................................. 5.50% 05/01/35 $ 506,118
455,659 Pool 850000.................................................. 5.50% 01/01/36 502,030
88,168 Pool 871039.................................................. 5.50% 02/01/37 93,339
228,932 Pool 888001.................................................. 5.50% 10/01/36 255,773
183,081 Pool 888163.................................................. 7.00% 12/01/33 212,327
48,476 Pool 888435.................................................. 5.50% 06/01/22 49,809
641,399 Pool 889610.................................................. 5.50% 06/01/38 698,415
446,481 Pool 889834.................................................. 5.00% 12/01/35 482,276
21,150 Pool 890149.................................................. 6.50% 10/01/38 23,948
61,217 Pool 890231.................................................. 5.00% 07/01/25 62,781
157,276 Pool 890314.................................................. 5.50% 12/01/22 160,393
29,551 Pool 890378.................................................. 6.00% 05/01/24 30,868
1,431,294 Pool 890556.................................................. 4.50% 10/01/43 1,527,300
620,200 Pool 890561.................................................. 4.50% 01/01/27 635,090
79,114 Pool 890588.................................................. 4.50% 09/01/41 83,854
1,272,242 Pool 890736.................................................. 5.00% 07/01/30 1,341,674
267,212 Pool 905917.................................................. 5.50% 01/01/37 298,131
130,856 Pool 922386.................................................. 5.50% 01/01/37 137,769
19,542 Pool 930562.................................................. 5.00% 02/01/39 21,283
1,036 Pool 931150.................................................. 5.00% 05/01/39 1,113
196,943 Pool 931565.................................................. 5.00% 07/01/39 211,811
201,212 Pool 931808.................................................. 5.50% 08/01/39 218,963
202,676 Pool 953115.................................................. 5.50% 11/01/38 216,593
194,224 Pool 962556.................................................. 5.00% 04/01/23 199,095
70,619 Pool 973561.................................................. 5.00% 03/01/23 72,286
83,858 Pool 976871.................................................. 6.50% 08/01/36 94,584
78,918 Pool 995002.................................................. 5.00% 07/01/37 84,722
24,637 Pool 995097.................................................. 6.50% 10/01/37 28,439
157,443 Pool 995149.................................................. 6.50% 10/01/38 179,750
62,929 Pool 995228.................................................. 6.50% 11/01/38 72,502
277,581 Pool 995252.................................................. 5.00% 12/01/23 284,503
94,563 Pool 995259.................................................. 6.50% 11/01/23 99,209
34,314 Pool AA0916.................................................. 5.00% 08/01/37 36,822
7,895 Pool AA1740.................................................. 5.00% 01/01/39 8,464
1,630 Pool AA3267.................................................. 5.00% 02/01/39 1,751
148,562 Pool AA3303.................................................. 5.50% 06/01/38 162,472
857,670 Pool AB0460.................................................. 5.50% 02/01/37 949,051
343,025 Pool AB0731.................................................. 4.00% 06/01/39 354,966
15,789 Pool AB1576.................................................. 4.00% 10/01/20 16,260
743,669 Pool AB1801.................................................. 4.00% 11/01/40 771,682
92,271 Pool AB1953.................................................. 4.00% 12/01/40 96,003
72,743 Pool AB2092.................................................. 4.00% 01/01/41 75,929
68,094 Pool AB2133.................................................. 4.00% 01/01/26 70,403
227,373 Pool AB2265.................................................. 4.00% 02/01/41 237,340
157,796 Pool AB2275.................................................. 4.50% 02/01/41 167,227
35,631 Pool AB2467.................................................. 4.50% 03/01/41 37,788
1,196,774 Pool AB2506.................................................. 5.00% 03/01/41 1,298,259
2,250,706 Pool AB2959.................................................. 4.50% 07/01/40 2,402,132
81,334 Pool AB3284.................................................. 5.00% 07/01/41 87,480
140,846 Pool AB4937.................................................. 3.50% 04/01/42 143,271
155,820 Pool AB5174.................................................. 3.50% 05/01/42 158,728
</TABLE>
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 973,271 Pool AB5500.................................................. 3.50% 07/01/42 $ 990,083
165,768 Pool AB5919.................................................. 3.00% 08/01/42 164,725
111,198 Pool AB6632.................................................. 3.50% 10/01/42 113,119
335,212 Pool AB6671.................................................. 3.00% 10/01/42 333,102
401,744 Pool AB7765.................................................. 3.00% 02/01/43 399,215
288,092 Pool AB7859.................................................. 3.50% 02/01/43 293,512
197,179 Pool AB8143.................................................. 5.00% 01/01/38 211,543
1,753,922 Pool AB8289.................................................. 4.50% 04/01/42 1,843,197
579,942 Pool AB8676.................................................. 3.50% 05/01/42 594,946
43,525 Pool AB9382.................................................. 4.00% 05/01/43 45,303
1,117,144 Pool AB9551.................................................. 3.00% 06/01/43 1,110,112
471,097 Pool AB9615.................................................. 4.00% 06/01/33 488,175
61,836 Pool AB9683.................................................. 4.00% 06/01/43 64,258
83,509 Pool AB9959.................................................. 4.00% 07/01/43 86,978
103,454 Pool AC1232.................................................. 5.00% 07/01/24 107,502
1,055,238 Pool AC2946.................................................. 5.00% 09/01/39 1,134,930
123,089 Pool AC3236.................................................. 5.00% 09/01/39 132,576
378,431 Pool AC3267.................................................. 5.50% 09/01/39 416,302
148,691 Pool AC5446.................................................. 5.00% 11/01/39 159,908
558,029 Pool AD0889.................................................. 6.00% 09/01/24 579,442
720,999 Pool AD4317.................................................. 4.00% 04/01/40 746,580
29,658 Pool AD5222.................................................. 4.50% 05/01/30 30,963
129,052 Pool AD5583.................................................. 5.00% 04/01/40 136,722
205,392 Pool AD6369.................................................. 4.50% 05/01/40 217,769
101,447 Pool AD6938.................................................. 4.50% 06/01/40 107,580
136,227 Pool AD7110.................................................. 5.00% 07/01/40 143,662
108,654 Pool AD7137.................................................. 5.50% 07/01/40 121,858
41,021 Pool AD8526.................................................. 4.50% 08/01/40 43,493
399,719 Pool AE0137.................................................. 4.50% 03/01/36 424,414
42,153 Pool AE0383.................................................. 4.50% 09/01/25 43,419
263,778 Pool AE0504.................................................. 4.50% 11/01/40 279,608
128,949 Pool AE1798.................................................. 5.00% 09/01/40 138,768
150,797 Pool AE4476.................................................. 4.00% 03/01/41 156,138
215,472 Pool AE7005.................................................. 4.00% 10/01/40 223,115
122,121 Pool AE8075.................................................. 4.00% 12/01/40 126,781
46,121 Pool AE9284.................................................. 4.00% 11/01/40 47,757
714,396 Pool AE9959.................................................. 5.00% 03/01/41 773,661
36,505 Pool AH0057.................................................. 4.50% 02/01/41 38,693
526,971 Pool AH0943.................................................. 4.00% 12/01/40 547,605
814,763 Pool AH0979.................................................. 3.50% 01/01/41 822,459
413,905 Pool AH1089.................................................. 4.00% 11/01/40 431,025
165,510 Pool AH1141.................................................. 4.50% 12/01/40 175,450
195,356 Pool AH4404.................................................. 4.00% 01/01/41 202,288
408,332 Pool AH7192.................................................. 5.00% 02/01/41 430,616
126,397 Pool AH7204.................................................. 4.00% 03/01/41 130,882
56,333 Pool AH8090.................................................. 4.50% 06/01/41 59,676
255,490 Pool AH8871.................................................. 5.00% 04/01/41 269,436
36,620 Pool AH9677.................................................. 5.00% 04/01/41 38,619
60,279 Pool AI1190.................................................. 4.50% 04/01/41 63,900
144,241 Pool AI1191.................................................. 4.50% 04/01/41 152,878
84,427 Pool AI1969.................................................. 4.50% 05/01/41 89,515
</TABLE>
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 540,206 Pool AI4268.................................................. 5.00% 06/01/41 $ 581,347
15,119,592 Pool AI5614.................................................. 5.00% 07/01/41 16,271,125
319,523 Pool AI6093.................................................. 4.50% 06/01/31 335,375
97,466 Pool AI6503.................................................. 5.00% 11/01/39 103,231
44,180 Pool AI6581.................................................. 4.50% 07/01/41 46,822
32,415 Pool AI7800.................................................. 4.50% 07/01/41 34,351
570,538 Pool AI8448.................................................. 4.50% 08/01/41 604,719
219,412 Pool AI8779.................................................. 4.00% 11/01/41 227,199
399,169 Pool AI9114.................................................. 4.00% 06/01/42 416,142
2,091,196 Pool AI9124.................................................. 4.00% 08/01/42 2,180,116
1,372,924 Pool AI9158.................................................. 6.50% 01/01/41 1,595,927
2,724,595 Pool AJ2311.................................................. 5.00% 10/01/41 2,915,650
31,183 Pool AJ4756.................................................. 4.00% 10/01/41 32,664
40,407 Pool AJ5301.................................................. 4.00% 11/01/41 41,990
43,359 Pool AJ5424.................................................. 4.00% 11/01/41 45,433
26,634 Pool AJ5736.................................................. 4.00% 12/01/41 27,889
32,202 Pool AJ6061.................................................. 4.00% 12/01/41 33,742
34,639 Pool AJ7538.................................................. 4.00% 01/01/42 36,296
48,038 Pool AJ8104.................................................. 4.00% 12/01/41 50,336
20,233 Pool AJ8203.................................................. 4.50% 01/01/42 21,443
34,113 Pool AJ8341.................................................. 4.00% 12/01/41 35,745
30,563 Pool AJ8369.................................................. 4.00% 01/01/42 32,014
47,457 Pool AJ8436.................................................. 4.00% 12/01/41 49,727
28,424 Pool AJ9162.................................................. 4.00% 01/01/42 29,784
1,124,016 Pool AJ9332.................................................. 4.00% 01/01/42 1,170,839
98,979 Pool AJ9333.................................................. 4.00% 01/01/42 102,858
52,386 Pool AK0543.................................................. 4.00% 01/01/42 54,893
1,743,396 Pool AK0765.................................................. 4.00% 03/01/42 1,799,920
39,498 Pool AK1827.................................................. 4.00% 01/01/42 41,387
815,892 Pool AK3103.................................................. 4.00% 02/01/42 847,868
273,771 Pool AK4520.................................................. 4.00% 03/01/42 283,486
217,896 Pool AK5555.................................................. 4.00% 04/01/42 225,623
22,058 Pool AL0147.................................................. 4.00% 04/01/41 22,875
157,474 Pool AL0212.................................................. 5.50% 02/01/38 173,456
356,766 Pool AL0241.................................................. 4.00% 04/01/41 369,426
79,665 Pool AL0399.................................................. 6.00% 08/01/24 82,235
36,369 Pool AL0446.................................................. 6.00% 05/01/24 37,655
460,189 Pool AL0677.................................................. 5.00% 07/01/41 495,236
52,909 Pool AL0815.................................................. 4.00% 09/01/41 55,435
34,790 Pool AL1195.................................................. 6.00% 09/01/23 36,026
716,329 Pool AL1850.................................................. 5.50% 07/01/40 789,262
50,047 Pool AL1948.................................................. 4.00% 01/01/42 52,132
61,021 Pool AL1953.................................................. 4.50% 01/01/27 62,858
133,945 Pool AL2142.................................................. 6.50% 09/01/38 153,553
1,352,266 Pool AL2392.................................................. 3.50% 08/01/42 1,375,624
685,162 Pool AL2551.................................................. 3.50% 10/01/42 698,037
277,571 Pool AL2589.................................................. 5.50% 05/01/25 285,202
110,188 Pool AL2892.................................................. 3.50% 12/01/42 112,091
861,204 Pool AL3093.................................................. 3.50% 02/01/43 878,075
31,320 Pool AL3154.................................................. 3.00% 02/01/43 31,123
120,199 Pool AL3484.................................................. 4.50% 10/01/42 127,383
</TABLE>
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 3,151,524 Pool AL4703.................................................. 3.50% 12/01/28 $ 3,203,391
10,848,569 Pool AL4741.................................................. 4.50% 01/01/44 11,399,416
50,954 Pool AL4962.................................................. 6.00% 05/01/24 53,196
1,395,253 Pool AL5315.................................................. 4.00% 06/01/42 1,449,871
202,126 Pool AL5616.................................................. 5.50% 09/01/41 221,417
1,054,043 Pool AL5760.................................................. 4.00% 09/01/43 1,097,813
733,376 Pool AL5890.................................................. 4.50% 03/01/43 781,619
642,909 Pool AL6031.................................................. 4.00% 10/01/44 669,777
69,654 Pool AL6057.................................................. 6.00% 08/01/24 70,779
121,448 Pool AL6449.................................................. 4.50% 01/01/27 124,999
4,267,242 Pool AL6513.................................................. 5.00% 07/01/44 4,555,736
5,975,971 Pool AL6536.................................................. 4.50% 03/01/45 6,296,895
705,072 Pool AL6948.................................................. 5.00% 09/01/25 722,888
160,408 Pool AL7046.................................................. 3.50% 06/01/45 163,427
11,690,186 Pool AL7162, 12 Mo. LIBOR + 1.72% (a)........................ 3.57% 09/01/42 12,058,003
455,206 Pool AL7231.................................................. 3.50% 08/01/45 463,771
448,574 Pool AL7306.................................................. 4.50% 09/01/42 475,496
726,395 Pool AL7449.................................................. 8.50% 12/01/37 864,244
1,055,858 Pool AL7637.................................................. 5.00% 01/01/42 1,117,745
2,837,422 Pool AL7905.................................................. 4.50% 03/01/34 2,960,592
194,256 Pool AL8139.................................................. 4.00% 02/01/32 199,520
1,393,133 Pool AL8174.................................................. 3.50% 02/01/46 1,416,112
13,758,145 Pool AL8263.................................................. 4.50% 02/01/44 14,455,596
113,385 Pool AL8353.................................................. 3.50% 08/01/44 115,515
14,077,322 Pool AL8640, 12 Mo. LIBOR + 1.80% (a)........................ 4.74% 12/01/41 14,687,557
1,390,361 Pool AL8743.................................................. 4.50% 06/01/46 1,468,232
681,796 Pool AL9143.................................................. 3.50% 09/01/36 695,646
225,383 Pool AL9226.................................................. 5.50% 12/01/41 251,789
2,189,041 Pool AL9777.................................................. 4.50% 01/01/47 2,304,436
71,020 Pool AO2976.................................................. 3.50% 05/01/42 72,247
7,164,775 Pool AO3529.................................................. 4.00% 06/01/42 7,400,979
2,617,508 Pool AO5527.................................................. 4.00% 07/01/42 2,704,221
2,012,914 Pool AO8106.................................................. 4.00% 08/01/42 2,079,659
747,113 Pool AO8167.................................................. 4.00% 09/01/42 771,756
275,011 Pool AP0495.................................................. 3.50% 08/01/42 279,762
210,335 Pool AP1197.................................................. 3.50% 09/01/42 213,968
1,660,474 Pool AP2109.................................................. 4.00% 08/01/32 1,721,538
137,662 Pool AP5113.................................................. 4.00% 09/01/42 143,398
452,238 Pool AP7963.................................................. 4.00% 09/01/42 472,619
2,983,617 Pool AQ0411.................................................. 3.50% 10/01/42 3,035,153
1,252,384 Pool AQ0535.................................................. 3.00% 11/01/42 1,244,501
970,211 Pool AQ1534.................................................. 3.50% 10/01/32 987,187
1,464,104 Pool AQ1584.................................................. 4.00% 11/01/42 1,534,158
846,864 Pool AQ1607.................................................. 3.50% 11/01/32 861,659
638,263 Pool AQ3310.................................................. 4.00% 11/01/42 659,427
2,053,351 Pool AQ4086.................................................. 4.00% 06/01/43 2,121,349
84,547 Pool AQ9715.................................................. 3.00% 01/01/43 84,015
564,727 Pool AQ9999.................................................. 3.00% 02/01/43 561,169
2,798,565 Pool AR7582.................................................. 3.50% 03/01/33 2,847,766
420,533 Pool AR7961.................................................. 3.50% 03/01/33 427,881
19,519 Pool AS0225.................................................. 4.00% 08/01/43 20,272
</TABLE>
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 5,201,978 Pool AS1719.................................................. 5.00% 02/01/44 $ 5,635,012
635,306 Pool AS5236.................................................. 4.00% 05/01/45 658,269
1,575,566 Pool AS5515.................................................. 3.50% 06/01/30 1,612,424
370,255 Pool AS5635.................................................. 3.00% 08/01/45 368,309
1,158,549 Pool AS7211.................................................. 3.00% 04/01/46 1,146,208
2,035,139 Pool AS7537.................................................. 3.00% 07/01/46 2,022,325
5,618,100 Pool AS8310.................................................. 3.00% 11/01/46 5,582,726
1,308,007 Pool AS9244.................................................. 4.50% 08/01/39 1,374,329
910,328 Pool AS9990.................................................. 4.50% 07/01/47 952,088
318,219 Pool AS9994.................................................. 4.50% 04/01/47 332,819
169,098 Pool AT0332.................................................. 3.00% 04/01/43 168,029
831,562 Pool AT1747.................................................. 3.00% 04/01/43 826,335
807,498 Pool AT3892.................................................. 3.00% 06/01/43 802,296
481,278 Pool AT4180.................................................. 3.50% 05/01/33 489,744
155,715 Pool AT5915.................................................. 4.00% 06/01/43 160,814
875,526 Pool AT6303.................................................. 4.00% 06/01/43 917,379
57,114 Pool AT6306.................................................. 4.00% 06/01/43 59,678
61,113 Pool AT9657.................................................. 4.00% 07/01/43 63,488
263,513 Pool AU3751.................................................. 4.00% 08/01/43 273,834
59,563 Pool AU4386.................................................. 4.00% 10/01/43 61,896
182,827 Pool AU5787.................................................. 4.50% 09/01/43 193,828
793,983 Pool AU6278.................................................. 5.00% 11/01/43 852,548
142,232 Pool AU6743.................................................. 4.00% 10/01/43 147,803
31,534 Pool AW7401.................................................. 5.00% 09/01/40 33,514
243,276 Pool AX5312.................................................. 4.00% 01/01/42 252,800
363,023 Pool AX5443.................................................. 5.00% 11/01/44 382,768
289,477 Pool AY0013.................................................. 4.50% 01/01/45 304,760
925,251 Pool BA4113.................................................. 3.00% 04/01/46 916,703
440,831 Pool BC4490.................................................. 5.00% 05/01/39 472,965
3,411,627 Pool BD4509, 12 Mo. LIBOR + 1.69% (a)........................ 2.66% 01/01/44 3,498,760
8,354,308 Pool BD4533, 12 Mo. LIBOR + 1.66% (a)........................ 2.19% 09/01/44 8,636,681
594,114 Pool BD8660, 1 Yr. Constant Maturity Treasury Rate +
1.67% (a)................................................. 2.43% 12/01/45 596,929
19,619,630 Pool BE2973.................................................. 4.00% 01/01/47 20,309,836
996,684 Pool BE3631.................................................. 4.50% 05/01/47 1,042,360
4,102,322 Pool BH2633.................................................. 5.00% 08/01/47 4,410,806
51,550 Pool BH9428.................................................. 4.50% 09/01/47 53,907
148,557 Pool BJ5732.................................................. 5.00% 04/01/48 156,690
249,681 Pool BJ6232.................................................. 5.00% 04/01/48 263,451
22,943 Pool BJ6234.................................................. 5.00% 05/01/48 24,191
710,073 Pool BJ7573.................................................. 5.00% 12/01/48 749,176
1,405,211 Pool BJ9100.................................................. 4.50% 02/01/48 1,505,117
1,184,558 Pool BJ9111.................................................. 4.50% 03/01/48 1,269,091
2,008,273 Pool BJ9124.................................................. 4.50% 04/01/48 2,151,572
1,266,624 Pool BJ9258.................................................. 5.00% 06/01/48 1,335,518
38,829 Pool BK0916.................................................. 5.00% 07/01/48 40,941
838,004 Pool BK1163.................................................. 5.00% 06/01/48 884,484
319,508 Pool BK2023.................................................. 5.00% 04/01/48 336,983
11,502,357 Pool BK4769.................................................. 5.00% 08/01/48 12,127,985
880,689 Pool BK4851.................................................. 5.00% 05/01/48 928,591
1,231,866 Pool BK4933.................................................. 5.00% 06/01/48 1,298,869
</TABLE>
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 919,249 Pool BK5211.................................................. 5.00% 08/01/48 $ 970,235
108,744 Pool BK5722.................................................. 5.00% 05/01/48 114,676
368,113 Pool BK7094.................................................. 5.00% 06/01/48 388,177
35,914 Pool BK7173.................................................. 5.00% 06/01/48 37,868
16,802,095 Pool BK7797.................................................. 5.00% 07/01/48 17,716,793
5,397,049 Pool BK8723.................................................. 5.00% 09/01/48 5,762,668
9,419,791 Pool BK8883.................................................. 5.00% 09/01/48 10,077,773
19,976 Pool BK8919.................................................. 5.00% 07/01/48 21,068
7,548,597 Pool BK9563.................................................. 4.50% 12/01/48 7,924,991
11,827,117 Pool BK9599.................................................. 5.00% 08/01/48 12,479,428
2,060,283 Pool BM3013, 12 Mo. LIBOR + 1.54% (a)........................ 4.24% 07/01/44 2,113,666
21,883,403 Pool BM3076.................................................. 4.50% 07/01/47 22,919,769
9,919,727 Pool BM3625.................................................. 3.00% 03/01/48 9,825,837
28,609,040 Pool BM3980, 12 Mo. LIBOR + 1.78% (a)........................ 4.60% 02/01/43 29,764,367
2,147,312 Pool BM4644.................................................. 5.00% 09/01/48 2,265,228
31,802,462 Pool BM5039.................................................. 4.50% 12/01/48 33,498,076
7,039,718 Pool BN0948.................................................. 4.50% 11/01/48 7,351,772
1,078,890 Pool BN1027.................................................. 5.50% 03/01/49 1,188,974
2,133,510 Pool BN1361.................................................. 5.00% 09/01/48 2,277,342
7,089,923 Pool CA0843.................................................. 3.00% 12/01/47 7,033,192
20,058,682 Pool CA1576.................................................. 5.00% 01/01/48 21,149,699
10,895,149 Pool CA1917.................................................. 5.00% 06/01/48 11,759,705
340,950 Pool CA2317.................................................. 5.00% 06/01/48 359,494
700,163 Pool CA2505.................................................. 5.00% 07/01/48 738,246
3,167,135 Pool CA2520.................................................. 4.00% 10/01/33 3,263,805
28,040 Pool CA2652.................................................. 5.00% 11/01/48 29,587
2,975,608 Pool CA2653.................................................. 5.00% 08/01/48 3,137,455
124,292 Pool MA0096.................................................. 4.50% 06/01/29 129,719
4,626 Pool MA0293.................................................. 4.50% 01/01/30 4,830
73,443 Pool MA0295.................................................. 5.00% 01/01/30 77,478
68,792 Pool MA0353.................................................. 4.50% 03/01/30 71,821
1,830,331 Pool MA0443.................................................. 5.00% 05/01/30 1,930,963
76,055 Pool MA0444.................................................. 5.00% 06/01/40 81,353
336,700 Pool MA0575.................................................. 4.50% 11/01/30 353,336
334,499 Pool MA0633.................................................. 5.00% 01/01/41 357,931
8,370 Pool MA0777.................................................. 5.00% 06/01/31 8,831
668,397 Pool MA1125.................................................. 4.00% 07/01/42 690,436
2,157,205 Pool MA1217.................................................. 4.00% 10/01/42 2,228,388
62,659 Pool MA1222.................................................. 4.00% 10/01/32 65,263
112,083 Pool MA1228.................................................. 3.00% 09/01/42 111,378
731,728 Pool MA1510.................................................. 4.00% 07/01/43 755,902
112,556 Pool MA1591.................................................. 4.50% 09/01/43 118,271
23,441,034 Pool MA1629.................................................. 4.50% 10/01/43 24,634,262
667,052 Pool MA1664.................................................. 4.50% 11/01/43 700,935
478,689 Pool MA1711.................................................. 4.50% 12/01/43 502,995
969,005 Pool MA1866.................................................. 4.50% 04/01/44 1,018,338
814,745 Pool MA1900.................................................. 4.50% 04/01/44 856,204
949,306 Pool MA2024.................................................. 4.00% 07/01/29 978,093
1,361,264 Pool MA2099.................................................. 3.50% 11/01/29 1,393,246
565,465 Pool MA2454.................................................. 3.50% 09/01/30 578,807
12,769 Pool MA2509.................................................. 3.00% 01/01/46 12,538
</TABLE>
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal National Mortgage Association (Continued)
$ 2,258,396 Pool MA2695.................................................. 4.00% 07/01/46 $ 2,333,210
2,707,011 Pool MA2916.................................................. 4.00% 02/01/47 2,794,657
748,736 Pool MA3101.................................................. 4.50% 08/01/47 783,724
327,009 Pool MA3123.................................................. 5.00% 08/01/47 345,219
1,091,516 Pool MA3205.................................................. 5.00% 10/01/47 1,151,492
499,359 Pool MA3301.................................................. 5.00% 02/01/48 526,520
1,801,597 Pool MA3348.................................................. 5.00% 04/01/48 1,900,966
2,189,638 Pool MA3422.................................................. 5.00% 07/01/48 2,308,735
25,000,000 Pool TBA (g)................................................. 5.00% 06/15/34 26,336,426
85,000,000 Pool TBA (g)................................................. 5.00% 05/15/41 89,600,294
85,000,000 Pool TBA..................................................... 3.00% 05/15/43 84,005,567
Government National Mortgage Association
113,618 Pool 3149.................................................... 6.00% 10/20/31 125,454
72,211 Pool 3172.................................................... 6.00% 12/20/31 80,263
77,463 Pool 3227.................................................... 6.00% 04/20/32 86,396
594,638 Pool 3345.................................................... 5.00% 02/20/33 641,055
185,974 Pool 3389.................................................... 5.00% 05/20/33 198,789
31,236 Pool 3390.................................................... 5.50% 05/20/33 34,231
892,433 Pool 3428.................................................... 5.00% 08/20/33 956,958
77,325 Pool 3442.................................................... 5.00% 09/20/33 82,680
32,099 Pool 3459.................................................... 5.50% 10/20/33 35,165
15,988 Pool 3474.................................................... 6.00% 11/20/33 18,123
115,009 Pool 3487.................................................... 5.00% 12/20/33 122,940
556,582 Pool 3529.................................................... 5.00% 03/20/34 595,228
82,601 Pool 3555.................................................... 5.00% 05/20/34 88,340
123,954 Pool 3596.................................................... 5.50% 08/20/34 135,870
108,452 Pool 3786.................................................... 5.50% 11/20/35 118,844
76,439 Pool 3807.................................................... 5.50% 01/20/36 83,782
542,614 Pool 4029.................................................... 6.50% 09/20/37 628,159
463,005 Pool 4251.................................................... 5.50% 10/20/23 480,106
226,597 Pool 455986.................................................. 5.25% 07/15/25 240,890
219,154 Pool 487108.................................................. 6.00% 04/15/29 243,068
76,649 Pool 553144.................................................. 5.50% 04/15/33 84,693
27,632 Pool 589331.................................................. 6.00% 10/15/22 28,380
228,332 Pool 604338.................................................. 5.00% 05/15/33 245,053
190,324 Pool 604897.................................................. 5.00% 12/15/33 204,242
211,528 Pool 605389.................................................. 5.00% 04/15/34 227,016
380,561 Pool 615403.................................................. 4.50% 08/15/33 403,551
20,137 Pool 627123.................................................. 5.50% 03/15/34 22,263
127,819 Pool 638704.................................................. 5.50% 11/15/36 140,648
259,099 Pool 653143.................................................. 4.90% 04/15/36 272,488
351,473 Pool 658324.................................................. 5.50% 03/15/37 378,946
299,415 Pool 677190.................................................. 5.00% 06/15/38 321,158
32,246 Pool 687833.................................................. 6.00% 08/15/38 35,667
56,344 Pool 706840.................................................. 4.50% 05/15/40 59,724
209,615 Pool 706855.................................................. 4.50% 09/15/40 222,184
406,002 Pool 711483.................................................. 4.00% 01/15/40 421,298
165,993 Pool 711543.................................................. 4.00% 11/15/40 172,241
1,114,611 Pool 711563.................................................. 4.50% 03/15/41 1,181,208
10,495,696 Pool 720225.................................................. 4.50% 07/15/39 11,135,790
556,564 Pool 723216.................................................. 4.50% 08/15/40 589,177
</TABLE>
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 124,374 Pool 723248.................................................. 5.00% 10/15/39 $ 133,315
465,430 Pool 724230.................................................. 5.00% 08/15/39 498,994
140,104 Pool 724267.................................................. 5.00% 09/15/39 150,214
384,172 Pool 724340.................................................. 4.50% 09/15/39 407,610
138,570 Pool 725272.................................................. 4.50% 11/15/39 145,145
97,879 Pool 726394.................................................. 4.50% 10/15/39 103,816
70,256 Pool 728921.................................................. 4.50% 12/15/24 72,437
371,042 Pool 733595.................................................. 4.50% 04/15/40 393,686
189,175 Pool 733733.................................................. 5.00% 06/15/40 202,807
1,133,788 Pool 736317.................................................. 4.25% 06/20/36 1,187,423
196,697 Pool 736617.................................................. 4.00% 12/15/35 204,059
1,685,021 Pool 737673.................................................. 4.50% 11/15/40 1,781,604
359,879 Pool 737996.................................................. 4.00% 02/15/41 374,289
119,057 Pool 739341.................................................. 3.50% 10/15/41 121,685
300,460 Pool 743673.................................................. 4.50% 07/15/40 319,471
553,192 Pool 745478.................................................. 5.00% 08/20/40 581,294
1,028,216 Pool 748939.................................................. 4.00% 09/20/40 1,066,017
158,241 Pool 754384.................................................. 4.50% 03/20/42 164,745
828,507 Pool 762905.................................................. 4.50% 04/15/41 876,638
2,237,155 Pool 769102.................................................. 4.50% 07/20/41 2,348,658
262,508 Pool 781623.................................................. 5.00% 06/15/33 281,715
92,319 Pool 781697.................................................. 6.00% 11/15/33 104,093
5,666 Pool 781783.................................................. 5.50% 08/15/19 5,666
454,819 Pool 781824.................................................. 5.50% 11/15/34 502,437
19,670 Pool 781862.................................................. 5.50% 01/15/35 21,746
94,705 Pool 782070.................................................. 7.00% 06/15/32 104,618
196,250 Pool 782133.................................................. 6.00% 01/15/22 201,192
199,835 Pool 782259.................................................. 5.00% 02/15/36 214,459
105,172 Pool 782810.................................................. 4.50% 11/15/39 110,818
1,710,494 Pool 783009.................................................. 6.10% 12/20/33 1,897,116
168,755 Pool 783091.................................................. 5.50% 06/15/40 183,661
95,890 Pool 783220.................................................. 5.50% 09/15/24 99,670
291,992 Pool 783375.................................................. 5.00% 08/15/41 313,106
20,059,452 Pool 783590.................................................. 4.50% 06/20/41 21,103,400
418,020 Pool 783760.................................................. 5.00% 02/15/42 448,310
8,200,711 Pool 784063.................................................. 5.00% 09/20/45 8,731,445
346,619 Pool 784343.................................................. 5.00% 02/15/41 371,723
5,118,788 Pool 784573.................................................. 5.00% 12/15/43 5,474,344
7,034,639 Pool AC0197.................................................. 4.00% 12/20/42 7,252,456
626,237 Pool AD0026.................................................. 3.50% 06/20/33 643,854
144,881 Pool AD0856.................................................. 3.75% 08/20/33 149,019
102,654 Pool AG8899.................................................. 4.00% 12/20/43 106,068
2,171,387 Pool AI6317.................................................. 4.50% 06/20/44 2,260,640
729,985 Pool AK2389.................................................. 4.50% 11/20/44 758,456
767,685 Pool AN4469.................................................. 5.00% 12/15/40 822,078
728,711 Pool AR8421.................................................. 5.00% 10/20/41 761,476
1,962,925 Pool BB1216.................................................. 4.50% 06/20/47 2,075,303
1,355,371 Pool BB4731.................................................. 4.00% 07/20/47 1,399,901
1,072,379 Pool BB4757.................................................. 4.00% 08/20/47 1,112,596
893,659 Pool BB4769.................................................. 4.00% 08/20/47 927,246
992,008 Pool BD0483.................................................. 4.50% 11/20/47 1,043,058
</TABLE>
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Government National Mortgage Association (Continued)
$ 920,662 Pool BF0415.................................................. 5.00% 06/20/35 $ 969,455
263,422 Pool MA1017.................................................. 6.00% 05/20/43 292,063
140,647 Pool MA1162.................................................. 6.00% 07/20/43 157,684
373,656 Pool MA2077.................................................. 5.50% 07/20/44 409,555
64,776 Pool MA2215.................................................. 3.50% 09/20/44 65,483
213,294 Pool MA2683.................................................. 6.00% 03/20/45 233,479
214,346 Pool MA2759.................................................. 6.00% 01/20/45 230,714
590,334 Pool MA2829.................................................. 5.00% 05/20/45 631,168
90,691 Pool MA2897.................................................. 6.00% 03/20/45 100,494
489,992 Pool MA2966.................................................. 6.00% 09/20/39 550,049
406,926 Pool MA3249.................................................. 6.00% 04/20/40 445,435
82,216 Pool MA3380.................................................. 5.50% 01/20/46 90,129
771,057 Pool MA3459.................................................. 6.00% 08/20/39 833,723
547,002 Pool MA3525.................................................. 5.50% 03/20/46 596,981
524,850 Pool MA3941.................................................. 5.50% 09/20/46 575,349
1,156,830 Pool MA4076.................................................. 7.00% 01/20/39 1,313,391
10,000,000 Pool TBA (g)................................................. 4.50% 05/19/39 10,370,117
---------------
1,132,383,406
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 1,948,655,928
(Cost $1,943,135,259) ---------------
MORTGAGE-BACKED SECURITIES -- 9.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.6%
Adjustable Rate Mortgage Trust
454,079 Series 2005-5, Class 6A21, 1 Mo. LIBOR + 0.23% (a)........... 2.71% 09/25/35 454,999
Alternative Loan Trust
86,232 Series 2003-J3, Class 2A1.................................... 6.25% 12/25/33 88,683
415 Series 2004-J8, Class 4A1.................................... 6.00% 02/25/17 429
American Home Mortgage Investment Trust
4,088 Series 2004-3, Class 6A1..................................... 5.32% 10/25/34 4,130
Banc of America Funding Corp.
34,222 Series 2008-R2, Class 1A2 (f)................................ 6.00% 09/25/37 34,820
Banc of America Funding Trust
1,924 Series 2005-2, Class 2A4..................................... 5.75% 04/25/35 2,090
Banc of America Mortgage Trust
34,848 Series 2005-11, Class 2A1.................................... 5.25% 12/25/20 34,808
532,952 Series 2005-A, Class 2A2 (c)................................. 4.51% 02/25/35 537,647
BCAP LLC Trust
54,606 Series 2009-RR5, Class 8A1 (f)............................... 5.50% 11/26/34 56,138
42,589 Series 2011-R11, Class 20A5 (c) (f).......................... 4.60% 03/26/35 42,924
CHL Mortgage Pass-Through Trust
66,000 Series 2004-8, Class 1A7..................................... 5.75% 07/25/34 69,805
30,896 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 31,241
37 Series 2004-J1, Class 2A1.................................... 4.75% 01/25/19 37
Citigroup Global Markets Mortgage Securities VII, Inc.
259 Series 2003-UP2, Class PO1, PO............................... (b) 12/25/18 226
Citigroup Mortgage Loan Trust
8,906 Series 2003-1, Class WA2..................................... 6.50% 06/25/31 9,090
COLT Mortgage Loan Trust
691,823 Series 2016-2, Class A1 (f).................................. 2.75% 09/25/46 691,006
</TABLE>
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
COLT Mortgage Loan Trust (Continued)
$ 1,859,284 Series 2017-1, Class A1 (f).................................. 2.61% 05/27/47 $ 1,854,174
1,600,511 Series 2017-1, Class A2 (f).................................. 2.82% 05/27/47 1,595,680
202,563 Series 2018-1, Class A3 (f).................................. 3.08% 02/25/48 202,407
3,653,563 Series 2018-2, Class A1 (f).................................. 3.47% 07/27/48 3,664,319
2,453,407 Series 2018-3, Class A1 (f).................................. 3.69% 10/26/48 2,472,829
Credit Suisse First Boston Mortgage Securities Corp.
4,809 Series 2003-11, Class 1A39................................... 5.25% 06/25/33 4,858
23,339 Series 2003-AR18, Class 2A3 (c).............................. 4.09% 07/25/33 23,643
7,469 Series 2004-AR8, Class 2A1 (c)............................... 4.30% 09/25/34 7,515
100,043 Series 2005-5, Class 3A2, 1 Mo. LIBOR + 0.30% (a)............ 2.78% 07/25/35 97,296
3,000 Series 2005-7, Class 1A5..................................... 5.15% 08/25/35 3,074
Credit Suisse Mortgage Capital Certificates
167,117 Series 2009-12R, Class 6A1 (f)............................... 6.00% 05/27/37 169,834
194,959 Series 2009-12R, Class 15A1 (f).............................. 6.00% 05/27/36 196,544
CSFB Mortgage-Backed Pass-Through Certificates
33,879 Series 2004-AR4, Class 5A2, 1 Mo. LIBOR + 0.74% (a).......... 3.22% 05/25/34 33,827
CSFB Mortgage-Backed Trust
2,279 Series 2004-7, Class 6A1..................................... 5.25% 10/25/19 2,305
CSMC
192,994 Series 2010-9R, Class 30A4, 1 Mo. LIBOR + 0.45% (a) (f)...... 2.94% 10/27/36 193,495
9,430,635 Series 2014-WIN1, Class 1A1 (f).............................. 3.00% 08/25/29 9,414,223
2,871,096 Series 2017-HL1, Class A3 (f)................................ 3.50% 06/25/47 2,876,577
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust
6,774 Series 2005-3, Class 1A1 (c)................................. 3.36% 06/25/20 6,675
Galton Funding Mortgage Trust
7,602,026 Series 2018-1, Class A43 (f)................................. 3.50% 11/25/57 7,637,038
12,146,569 Series 2018-2, Class A41 (f)................................. 4.50% 10/25/58 12,362,294
GMACM Mortgage Loan Trust
892 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 905
GSMSC Pass-Through Trust
4,757 Series 2009-3R, Class 2A1 (c) (f)............................ 4.42% 07/25/35 4,770
GSR Mortgage Loan Trust
31,815 Series 2004-8F, Class 2A3.................................... 6.00% 09/25/34 32,898
364,457 Series 2004-12, Class 3A6 (c)................................ 4.44% 12/25/34 369,860
Impac CMB Trust
38,746 Series 2003-4, Class 1A1, 1 Mo. LIBOR + 0.64% (a)............ 3.12% 10/25/33 38,617
582,330 Series 2004-6, Class M3, 1 Mo. LIBOR + 1.05% (a)............. 3.53% 10/25/34 558,179
JP Morgan Resecuritization Trust
92,678 Series 2009-7, Class 2A1 (f)................................. 6.00% 02/27/37 92,662
136,257 Series 2009-7, Class 11A1 (c) (f)............................ 4.06% 09/27/36 138,392
501,049 Series 2009-7, Class 17A1 (c) (f)............................ 5.43% 07/27/37 504,128
JPMorgan Mortgage Trust
3,364 Series 2004-S1, Class 1A2.................................... 4.50% 09/25/34 3,364
18,329 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 17,212
17,064,370 Series 2014-5, Class A1 (f).................................. 2.98% 10/25/29 17,007,039
3,938,944 Series 2014-5, Class A2 (f).................................. 2.50% 10/25/29 3,901,348
132,546 Series 2014-IVR3, Class 2A1 (c) (f).......................... 3.00% 09/25/44 132,883
3,073,519 Series 2015-3, Class A5 (f).................................. 3.50% 05/25/45 3,096,537
1,792,236 Series 2016-1, Class A5 (f).................................. 3.50% 05/25/46 1,805,658
1,739,900 Series 2016-3, Class 1A3 (f)................................. 3.50% 10/25/46 1,750,843
10,051,088 Series 2019-2, Class A11, 1 Mo. LIBOR + 0.95% (a) (f)........ 3.45% 08/25/49 10,090,809
</TABLE>
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
JPMorgan Mortgage Trust (Continued)
$ 20,000,000 Series 2019-3, Class A11, 1 Mo. LIBOR + 0.95% (a) (f)........ 3.43% 09/25/49 $ 20,037,500
MASTR Alternative Loan Trust
1 Series 2004-5, Class 4A1..................................... 5.50% 07/25/19 1
32 Series 2004-8, Class 7A1..................................... 5.00% 09/25/19 32
5,612 Series 2004-13, Class 8A1.................................... 5.50% 01/25/25 5,671
MASTR Asset Securitization Trust
196,721 Series 2003-11, Class 7A5.................................... 5.25% 12/25/33 200,388
299,217 Series 2003-12, Class 1A1.................................... 5.25% 12/25/24 302,850
44,329 Series 2003-12, Class 1A2.................................... 5.25% 12/25/24 43,836
10,460 Series 2004-1, Class 30PO, PO................................ (b) 02/25/34 9,059
20,591 Series 2004-3, Class 1A3..................................... 5.25% 03/25/24 20,688
MASTR Seasoned Securitization Trust
67,765 Series 2005-1, Class 3A1 (c)................................. 4.48% 10/25/32 68,542
2,423 Series 2005-2, Class 3A1..................................... 6.00% 11/25/17 2,423
Merrill Lynch Mortgage Investors Trust MLCC
27 Series 2003-H, Class A3A (c)................................. 4.14% 01/25/29 27
MetLife Securitization Trust
5,278,805 Series 2018-1A, Class A (f).................................. 3.75% 03/25/57 5,364,633
2,250,000 Series 2019-1A, Class A1A (f)................................ 3.75% 04/25/58 2,290,853
Morgan Stanley Mortgage Loan Trust
3,000,000 Series 2005-6AR, Class 1M1, 1 Mo. LIBOR + 0.46% (a).......... 2.94% 11/25/35 2,995,415
New Residential Mortgage Loan Trust
891,649 Series 2014-2A, Class A3 (f)................................. 3.75% 05/25/54 902,627
7,608,156 Series 2015-2A, Class B1 (f)................................. 4.50% 08/25/55 8,048,008
9,135,782 Series 2016-1A, Class A1 (f)................................. 3.75% 03/25/56 9,243,182
1,487,402 Series 2017-5A, Class A1, 1 Mo. LIBOR + 1.50% (a) (f)........ 3.98% 06/25/57 1,523,904
Nomura Asset Acceptance Corp. Alternative Loan Trust
12,100 Series 2004-AP3, Class A6.................................... 5.29% 10/25/34 12,389
7,623 Series 2005-WF1, Class 2A5, steps up to 5.66% after
Redemption Date (h)....................................... 5.16% 03/25/35 7,903
Oaks Mortgage Trust
17,566,478 Series 2015-2, Class A8 (f).................................. 3.50% 10/25/45 17,647,540
OBX Trust
1,705,414 Series 2018-EXP1, Class 1A3 (f).............................. 4.00% 04/25/48 1,726,231
3,088,847 Series 2018-EXP2, Class 1A1 (f).............................. 4.00% 11/25/48 3,128,082
Prime Mortgage Trust
39,865 Series 2004-2, Class A2...................................... 4.75% 11/25/19 39,810
93,109 Series 2004-2, Class A6...................................... 5.00% 11/25/19 94,373
RBSSP Resecuritization Trust
422,524 Series 2009-6, Class 9A4, 1 Mo. LIBOR + 0.45% (a) (f)........ 2.94% 11/26/36 418,426
23,783 Series 2009-6, Class 11A4, 1 Mo. LIBOR + 0.42% (a) (f)....... 2.91% 08/26/36 23,778
24,823 Series 2009-12, Class 15A1 (c) (f)........................... 4.24% 10/26/35 25,178
Residential Accredit Loans, Inc.
5,380 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 5,376
Residential Asset Securitization Trust
227 Series 2004-A3, Class A4..................................... 5.25% 06/25/34 228
RFMSI Trust
16,353 Series 2005-S3, Class A1..................................... 4.75% 03/25/20 16,398
Sequoia Mortgage Trust
539,782 Series 2000-4, Class A, 1 Mo. LIBOR + 0.72% (a).............. 3.21% 11/22/24 539,441
</TABLE>
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Sequoia Mortgage Trust (Continued)
$ 4,284,911 Series 2018-CH2, Class A12 (f)............................... 4.00% 06/25/48 $ 4,357,837
5,356,493 Series 2018-CH3, Class A10 (f)............................... 4.50% 08/25/48 5,483,493
757,765 Series 2018-CH3, Class A11 (f)............................... 4.00% 08/25/48 770,078
3,975,496 Series 2018-CH4, Class A10 (f)............................... 4.50% 10/25/48 4,084,313
5,760,584 Series 2019-1, Class A4 (f).................................. 4.00% 02/25/49 5,836,745
14,056,432 Series 2019-CH1, Class A10 (f)............................... 4.50% 03/25/49 14,381,990
Structured Asset Securities Corp.
2,666 Series 2004-4XS, Class A3A (i)............................... 5.22% 02/25/34 2,752
Structured Asset Securities Corp. Mortgage Loan Trust
26,419 Series 2002-9, Class A2, 1 Mo. LIBOR + 0.60% (a)............. 3.08% 10/25/27 26,292
Structured Asset Securities Corp. Mortgage Pass-Through
Certificates
36,594 Series 2004-11XS, Class 1A6 (i).............................. 5.29% 06/25/34 37,419
41,837 Series 2004-S3, Class M1, 1 Mo. LIBOR + 0.98% (a)............ 3.45% 11/25/34 41,942
WaMu Mortgage Pass-Through Certificates Trust
33,236 Series 2003-S3, Class 3A1.................................... 5.50% 05/25/33 34,568
239 Series 2004-CB2, Class 5A.................................... 5.00% 07/25/19 239
261 Series 2004-CB3, Class 3A.................................... 5.50% 10/25/19 261
12,899 Series 2004-RS1, Class A11................................... 5.50% 11/25/33 13,209
Wells Fargo Mortgage Backed Securities Trust
4,433 Series 2004-K, Class 2A12 (c)................................ 4.49% 07/25/34 4,614
70,439 Series 2004-L, Class A8 (c).................................. 4.63% 07/25/34 73,696
139,567 Series 2004-X, Class 1A1 (c)................................. 4.83% 11/25/34 143,663
53,085 Series 2005-2, Class 2A1..................................... 4.75% 04/25/20 53,404
448,888 Series 2005-AR4, Class 1A3 (c)............................... 5.16% 04/25/35 462,133
55,352 Series 2005-AR10, Class 2A2 (c).............................. 4.84% 06/25/35 57,661
18,277 Series 2005-AR16, Class 4A2 (c).............................. 4.69% 10/25/35 18,264
46,572 Series 2007-14, Class 2A2.................................... 5.50% 10/25/22 47,383
19,227,597 Series 2019-1, Class A7 (f).................................. 4.00% 11/25/48 19,585,957
WinWater Mortgage Loan Trust
1,731,691 Series 2014-1, Class A4 (f).................................. 3.50% 06/20/44 1,748,413
5,271,055 Series 2015-2, Class A5 (f).................................. 3.00% 02/20/45 5,295,402
522,127 Series 2015-A, Class A5 (f).................................. 3.50% 06/20/45 523,993
8,672,210 Series 2016-1, Class 2A3 (f)................................. 3.00% 12/20/30 8,628,212
---------------
230,881,509
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.9%
DBCG Mortgage Trust
10,000,000 Series 2017-BBG, Class A, 1 Mo. LIBOR + 0.70% (a) (f)........ 3.17% 06/15/34 9,997,406
Morgan Stanley Capital Trust
6,839,000 Series 2017-CLS, Class A, 1 Mo. LIBOR + 0.70% (a) (f)........ 3.17% 11/15/34 6,838,316
2,745,000 Series 2017-CLS, Class C, 1 Mo. LIBOR + 1.00% (a) (f)........ 3.47% 11/15/34 2,733,599
Wells Fargo Re-REMIC Trust
6,000,000 Series 2013-FRR1, Class AK16, PO (f)......................... (b) 12/27/43 5,446,687
---------------
25,016,008
---------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 255,897,517
(Cost $253,656,029) ---------------
</TABLE>
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT BONDS AND NOTES -- 7.8%
$ 10,000,000 U.S. Treasury Note........................................... 1.38% 07/31/19 $ 9,973,508
35,000,000 U.S. Treasury Note........................................... 1.50% 10/31/19 34,841,406
40,000,000 U.S. Treasury Note........................................... 3.38% 11/15/19 40,194,530
5,000,000 U.S. Treasury Note........................................... 1.38% 02/15/20 4,959,961
20,000,000 U.S. Treasury Note........................................... 1.38% 02/29/20 19,828,906
40,000,000 U.S. Treasury Note........................................... 2.25% 02/29/20 39,946,094
10,000,000 U.S. Treasury Note........................................... 1.38% 03/31/20 9,906,641
35,000,000 U.S. Treasury Note........................................... 2.25% 03/31/20 34,956,934
200,000 U.S. Treasury Note........................................... 1.63% 06/30/20 198,301
15,000,000 U.S. Treasury Note........................................... 1.38% 08/31/20 14,808,984
---------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES........................................................ 209,615,265
(Cost $209,135,638) ---------------
ASSET-BACKED SECURITIES -- 5.3%
Aegis Asset Backed Securities Trust
1,924,336 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.44% (a)............. 2.93% 06/25/35 1,909,864
AFC Trust
3,457 Series 1999-4, Class 3A, 1 Mo. LIBOR + 0.95% (a) (f)......... 3.43% 12/26/29 3,470
Bear Stearns Asset-Backed Securities Trust
5,914 Series 2002-1, Class 1A5..................................... 6.89% 12/25/34 5,972
42,357 Series 2002-1, Class M1, 1 Mo. LIBOR + 1.20% (a)............. 3.68% 12/25/34 42,509
Carrington Mortgage Loan Trust
1,985,848 Series 2006-RFC1, Class A4, 1 Mo. LIBOR + 0.24% (a).......... 2.73% 03/25/36 1,980,803
CIT Home Equity Loan Trust
10,787 Series 2003-1, Class A6 (i).................................. 4.56% 10/20/32 10,855
Citicorp Residential Mortgage Trust
56,451 Series 2007-2, Class A6 (i).................................. 5.11% 06/25/37 57,326
Citigroup Global Markets Mortgage Securities VII, Inc.
2,677 Series 1998-AQ1, Class A6.................................... 6.63% 06/25/28 2,713
Countrywide Asset-Backed Certificates
11,008,892 Series 2005-9, Class M1, 1 Mo. LIBOR + 0.52% (a)............. 3.00% 01/25/36 11,057,789
Credit-Based Asset Servicing & Securitization LLC
11,038,378 Series 2007-MX1, Class A3, steps up to 6.33% after
Redemption Date (f) (h)................................... 5.83% 12/25/36 11,321,887
FBR Securitization Trust
3,383,866 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.75% (a)............. 3.24% 09/25/35 3,392,380
Fieldstone Mortgage Investment Trust
1,793,015 Series 2005-3, Class 2A2, 1 Mo. LIBOR + 0.52% (a)............ 3.00% 02/25/36 1,766,012
First Alliance Mortgage Loan Trust
43,869 Series 1999-1, Class A1...................................... 7.18% 06/20/30 44,183
Fremont Home Loan Trust
2,333,598 Series 2005-1, Class M4, 1 Mo. LIBOR + 1.02% (a)............. 3.35% 06/25/35 2,344,744
111,172 Series 2005-A, Class M2, 1 Mo. LIBOR + 0.69% (a)............. 3.17% 01/25/35 111,472
GMACM Home Equity Loan Trust
93,837 Series 2000-HE2, Class A1, 1 Mo. LIBOR + 0.44% (a)........... 2.92% 06/25/30 78,732
192,071 Series 2004-HE1, Class A3, 1 Mo. LIBOR + 0.50% (a)........... 2.98% 06/25/34 188,124
Mill City Mortgage Loan Trust
501,412 Series 2016-1, Class A1 (f).................................. 2.50% 04/25/57 496,225
2,864,377 Series 2018-4, Class A1A (f)................................. 3.50% 04/25/66 2,869,516
Morgan Stanley Dean Witter Capital I, Inc. Trust
5,331 Series 2003-NC2, Class M2, 1 Mo. LIBOR + 3.00% (a)........... 5.48% 02/25/33 5,542
</TABLE>
Page 42 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
New Century Home Equity Loan Trust
$ 25,303 Series 2003-5, Class AI7..................................... 5.06% 11/25/33 $ 25,873
Park Place Securities, Inc. Asset-Backed Pass-Through
Certificates
4,243,326 Series 2004-WCW2, Class M2, 1 Mo. LIBOR + 0.98% (a).......... 3.45% 10/25/34 4,266,944
RASC Trust
1,803 Series 2004-KS1, Class AI6................................... 4.27% 02/25/34 1,808
RCO Mortgage LLC
4,184,084 Series 2018-1, Class A1, steps up 05/25/21 to 7.00% (f) (h).. 4.00% 05/25/23 4,202,716
Renaissance Home Equity Loan Trust
262,209 Series 2005-4, Class A3, steps up to 6.07% after
Redemption Date (h)....................................... 5.57% 02/25/36 262,113
Saxon Asset Securities Trust
13,233 Series 2003-1, Class AF6 (i)................................. 4.68% 06/25/33 13,381
12,648 Series 2004-2, Class MV3, 1 Mo. LIBOR + 1.91% (a)............ 4.14% 08/25/35 12,491
Structured Asset Securities Corp. Mortgage Pass-Through
Certificates
928 Series 2004-23XS, Class 1A4.................................. 5.43% 01/25/35 928
Towd Point Mortgage Trust
340,000 Series 2015-1, Class A2 (f).................................. 3.25% 10/25/53 341,144
1,255,635 Series 2015-2, Class 1A12 (f)................................ 2.75% 11/25/60 1,248,197
1,947,871 Series 2015-3, Class A1B (f)................................. 3.00% 03/25/54 1,941,268
607,679 Series 2015-3, Class A4B (f)................................. 3.50% 03/25/54 612,072
7,680,972 Series 2015-4, Class A1 (f).................................. 3.50% 04/25/55 7,710,884
2,372,589 Series 2015-4, Class A1B (f)................................. 2.75% 04/25/55 2,359,746
1,500,000 Series 2015-4, Class A2A (f)................................. 3.50% 04/25/55 1,516,662
1,849,815 Series 2015-5, Class A1 (f).................................. 3.50% 05/25/55 1,858,383
3,141,930 Series 2015-5, Class A1B (f)................................. 2.75% 05/25/55 3,122,819
425,000 Series 2015-5, Class A2 (f).................................. 3.50% 05/25/55 429,790
3,431,972 Series 2015-6, Class A1B (f)................................. 2.75% 04/25/55 3,406,565
1,998,677 Series 2016-1, Class A1B (f)................................. 2.75% 02/25/55 1,988,402
4,314,273 Series 2016-2, Class A1A (f)................................. 2.75% 08/25/55 4,271,803
854,852 Series 2016-3, Class A1 (f).................................. 2.25% 04/25/56 844,761
422,464 Series 2016-5, Class A1 (f).................................. 2.50% 10/25/56 416,438
13,931,249 Series 2017-1, Class A1 (f).................................. 2.75% 10/25/56 13,782,436
2,982,789 Series 2017-2, Class A1 (f).................................. 2.75% 04/25/57 2,950,702
2,976,973 Series 2017-3, Class A4 (c) (f).............................. 2.85% 07/25/57 2,936,764
9,827,940 Series 2017-5, Class A1, 1 Mo. LIBOR + 0.60% (a) (f)......... 3.08% 02/25/57 9,788,991
UCFC Home Equity Loan Trust
84,226 Series 1998-D, Class MF1..................................... 6.91% 04/15/30 85,000
VOLT LLC
9,336,965 Series 2017-NP11, Class A1, steps up 10/25/20 to
6.375% (f) (h)............................................ 3.38% 10/25/47 9,350,656
3,844,247 Series 2017-NPL9, Class A1, steps up 09/25/20 to
6.125% (f) (h)............................................ 3.13% 09/25/47 3,843,662
6,346,959 Series 2018-NPL5, Class A1A, steps up 08/25/21 to
7.21% (f) (h)............................................. 4.21% 08/25/48 6,400,632
13,163,640 Series 2018-NPL6, Class A1A, steps up 09/25/21 to
7.13% (f) (h)............................................. 4.11% 09/25/48 13,239,642
---------------
TOTAL ASSET-BACKED SECURITIES................................................................ 140,923,791
(Cost $140,257,296) ---------------
</TABLE>
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 0.4%
CAPITAL MARKETS -- 0.4%
7,500 First Trust Long Duration Opportunities ETF (j).............................................. $ 194,213
87,622 iShares 7-10 Year Treasury Bond ETF.......................................................... 9,279,169
---------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 9,473,382
(Cost $9,085,943) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR)
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS -- 0.0%
INSURANCE -- 0.0%
2 Ambac LSNI LLC, 3 Mo. LIBOR + 5.00% (USD) (a) (f)............... 7.59% 02/12/23 2
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 2
(Cost $0) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
MONEY MARKET FUNDS -- 11.1%
296,528,746 Morgan Stanley Institutional Liquidity Fund - Treasury
Portfolio - Institutional Class - 2.32% (k)............................................... 296,528,746
(Cost $296,528,746) ---------------
TOTAL INVESTMENTS -- 107.0%.................................................................. 2,861,094,631
(Cost $2,851,798,911) (l) ---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- --------------------------------------------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS PURCHASED -- 0.0%
75 U.S. Treasury Long Bond Futures Call............... $11,060,160 $ 148.00 Jun 2019 45,703
35 U.S. Treasury Long Bond Futures Call............... 5,161,408 147.00 Jun 2019 38,828
---------------
TOTAL CALL OPTIONS PURCHASED................................................................. 84,531
(Cost $116,492) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT -- (4.9%)
Federal National Mortgage Association
$ (5,000,000) Pool TBA..................................................... 2.50% 05/17/27 (4,947,847)
(10,000,000) Pool TBA (g)................................................. 2.50% 06/18/27 (9,883,975)
(10,000,000) Pool TBA..................................................... 3.50% 05/01/41 (10,091,211)
(45,000,000) Pool TBA..................................................... 3.00% 06/15/43 (44,426,075)
(50,000,000) Pool TBA (g)................................................. 3.50% 06/01/47 (50,418,945)
Federal Home Loan Mortgage Corporation
(10,000,000) Pool TBA (g)................................................. 4.50% 05/15/36 (10,422,592)
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT........................... (130,190,645)
(Proceeds $130,215,235) ---------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- --------------------------------------------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
PUT OPTIONS WRITTEN -- (0.0%)
275 U.S. 5-Year Treasury Futures Put................... $31,831,250 $ 115.25 Jul 2019 (60,156)
(Premiums received $71,856) ---------------
</TABLE>
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- --------------------------------------------------- ----------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS WRITTEN -- (0.0%)
125 U.S. 5-Year Treasury Futures Call.................. $14,468,750 $ 116.50 Jul 2019 $ (22,462)
75 U.S. Treasury Long Bond Futures Call............... 11,060,160 150.00 Jun 2019 (12,890)
100 U.S. 5-Year Treasury Futures Call.................. 11,575,000 116.25 Jul 2019 (24,219)
---------------
TOTAL CALL OPTIONS WRITTEN................................................................... (59,571)
(Premiums received $53,616) ---------------
TOTAL OPTIONS WRITTEN........................................................................ (119,727)
(Premiums received $125,472) ---------------
NET OTHER ASSETS AND LIABILITIES -- (2.1)%................................................... (57,792,270)
---------------
NET ASSETS -- 100.0%......................................................................... $ 2,673,076,520
===============
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2019 (see Note 2D - Futures Contracts in the
Notes to Financial Statements):
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
-------------------------------------------------------- ----------- ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
U.S. 2-Year Treasury Notes Short 149 Jun-2019 $ (31,738,164) $ (8,282)
U.S. 5-Year Treasury Notes Short 2,375 Jun-2019 (274,646,484) (775,478)
U.S. 10-Year Treasury Notes Short 890 Jun-2019 (110,067,969) (543,097)
U.S. 10-Year Ultra Treasury Notes Short 385 Jun-2019 (50,735,781) (493,351)
U.S. Treasury Long Bond Futures Short 377 Jun-2019 (55,595,719) 420,096
-------------- ---------------
(522,784,117) (1,400,112)
-------------- ---------------
U.S. Treasury Ultra Bond Futures Long 192 Jun-2019 31,542,000 28,250
-------------- ---------------
$ (491,242,117) $ (1,371,862)
============== ===============
</TABLE>
-----------------------------
(a) Floating or variable rate security.
(b) Zero coupon security.
(c) Collateral Strip Rate bond. Coupon is based on the weighted net interest
rate of the investment's underlying collateral. The interest rate resets
periodically.
(d) Inverse floating rate security.
(e) Weighted Average Coupon security. Coupon is based on the blended interest
rate of the underlying holdings, which may have different coupons. The
coupon may change in any period.
(f) 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 (the "Advisor"). Although market instability can result in periods
of increased overall market illiquidity, liquidity for each security is
determined based on security specific factors and assumptions, which
require subjective judgment. At April 30, 2019, securities noted as such
amounted to $437,912,093 or 16.4% of net assets.
(g) All or portion of this security is part of a mortgage dollar roll
agreement (see Note 2I- Mortgage Dollar Rolls and TBA Transactions in the
Notes to Financial Statements).
(h) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(i) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(j) Investment in an affiliated fund.
(k) Rate shown reflects yield as of April 30, 2019.
(l) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $24,112,759 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $16,190,527. The net unrealized appreciation
was $7,922,232. The amounts presented are inclusive of investments sold
short and derivative contracts.
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
IO - Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
LIBOR - London Interbank Offered Rate
PO - Principal-Only Security
STRIPS - Separate Trading of Registered Interest and Principal of Securities
TBA - To-Be-Announced Security
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 1,948,655,928 $ -- $ 1,948,655,928 $ --
Mortgage-Backed Securities............................ 255,897,517 -- 255,897,517 --
U.S. Government Bonds and Notes....................... 209,615,265 -- 209,615,265 --
Asset-Backed Securities............................... 140,923,791 -- 140,923,791 --
Exchange-Traded Funds*................................ 9,473,382 9,473,382 -- --
Foreign Corporate Bonds*.............................. 2 -- 2 --
Money Market Funds.................................... 296,528,746 296,528,746 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... 2,861,094,631 306,002,128 2,555,092,503 --
Call Options Purchased................................ 84,531 84,531 -- --
Futures Contracts**................................... 448,346 448,346 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 2,861,627,508 $ 306,535,005 $ 2,555,092,503 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Government Agency Mortgage-Backed Securities
Sold Short......................................... $ (130,190,645) $ -- $ (130,190,645) $ --
Put Options Written................................... (60,156) (60,156) -- --
Call Options Written.................................. (59,571) (59,571) -- --
Futures Contracts**................................... (1,820,208) (1,820,208) -- --
--------------- --------------- --------------- ---------------
Total................................................. $ (132,130,580) $ (1,939,935) $ (130,190,645) $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
** Includes cumulative appreciation/depreciation on futures contracts as
reported in the Futures Contracts table. Only the current day's variation
margin is presented on the Statement of Assets and Liabilities.
Page 46 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated..................................... $ 2,860,900,418
Investments, at value - Affiliated....................................... 194,213
----------------
Total investments, at value.............................................. 2,861,094,631
Options contracts purchased, at value.................................... 84,531
Cash..................................................................... 4,466,231
Cash segregated as collateral for open futures contracts................. 6,866,367
Receivables:
Investment securities sold............................................ 730,882,920
Capital shares sold................................................... 12,823,857
Interest.............................................................. 10,912,051
Dividends............................................................. 538,629
----------------
Total Assets....................................................... 3,627,669,217
----------------
LIABILITIES:
Investments sold short, at value (proceeds $130,215,235)................. 130,190,645
Options contracts written, at value...................................... 119,727
Payables:
Investment securities purchased....................................... 822,142,631
Investment advisory fees.............................................. 1,393,033
Variation margin...................................................... 746,661
----------------
Total Liabilities................................................. 954,592,697
----------------
NET ASSETS............................................................... $ 2,673,076,520
================
NET ASSETS CONSIST OF:
Paid-in capital.......................................................... $ 2,680,876,016
Par value................................................................ 521,500
Accumulated distributable earnings (loss)................................ (8,320,996)
----------------
NET ASSETS............................................................... $ 2,673,076,520
================
NET ASSET VALUE, per share............................................... $ 51.26
================
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................ 52,150,002
================
Investments, at cost - Unaffiliated...................................... $ 2,851,605,636
================
Investments, at cost - Affiliated........................................ $ 193,275
================
Total investments, at cost............................................... $ 2,851,798,911
================
Premiums paid on options contracts purchased............................. $ 116,492
================
Premiums received on options contracts written........................... $ 125,472
================
</TABLE>
See Notes to Financial Statements Page 47
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest................................................................. $ 32,553,626
Dividends - Unaffiliated................................................. 3,559,497
Dividends - Affiliated................................................... 380
----------------
Total investment income............................................... 36,113,503
----------------
EXPENSES:
Investment advisory fees................................................. 7,180,283
----------------
Total expenses........................................................ 7,180,283
----------------
NET INVESTMENT INCOME (LOSS)............................................. 28,933,220
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................ 2,010,864
Investments - Affiliated.............................................. --
Investments sold short................................................ (9,130,293)
Futures contracts..................................................... (4,577,442)
Purchased options contracts........................................... (647)
Written options contracts............................................. 465,586
----------------
Net realized gain (loss)................................................. (11,231,932)
----------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................ 38,246,587
Investments - Affiliated.............................................. 938
Investments sold short................................................ (534,210)
Futures contracts..................................................... (4,682,849)
Purchased options contracts........................................... (20,703)
Written options contracts............................................. (32,160)
----------------
Net change in unrealized appreciation (depreciation)..................... 32,977,603
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS).................................. 21,745,671
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS....................................................... $ 50,678,891
================
</TABLE>
Page 48 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2019 ENDED
(UNAUDITED) 10/31/2018
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)............................................. $ 28,933,220 $ 29,137,467
Net realized gain (loss)................................................. (11,231,932) 4,560,050
Net change in unrealized appreciation (depreciation)..................... 32,977,603 (23,638,622)
-------------- --------------
Net increase (decrease) in net assets resulting from operations.......... 50,678,891 10,058,895
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................... (31,349,001) (34,897,503)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................ 924,668,429 910,174,583
Cost of shares redeemed.................................................. -- (2,579,752)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions.............................................. 924,668,429 907,594,831
-------------- --------------
Total increase (decrease) in net assets.................................. 943,998,319 882,756,223
NET ASSETS:
Beginning of period...................................................... 1,729,078,201 846,321,978
-------------- --------------
End of period............................................................ $2,673,076,520 $1,729,078,201
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period.................................. 34,050,002 16,350,002
Shares sold.............................................................. 18,100,000 17,750,000
Shares redeemed.......................................................... -- (50,000)
-------------- --------------
Shares outstanding, end of period........................................ 52,150,002 34,050,002
============== ==============
</TABLE>
See Notes to Financial Statements Page 49
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2019 -------------------------------------------- ENDED
(UNAUDITED) 2018 2017 2016 10/31/2015 (a)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 50.78 $ 51.76 $ 52.54 $ 50.32 $ 50.00
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................... 0.65 1.17 1.13 1.31 1.23 (b)
Net realized and unrealized gain (loss)......... 0.54 (0.74) (0.50) 2.41 0.55
---------- ---------- ---------- ---------- ----------
Total from investment operations................ 1.19 0.43 0.63 3.72 1.78
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................... (0.66) (1.13) (1.14) (1.50) (1.46)
Net realized gain............................... (0.05) (0.28) (0.02) -- --
Return of capital............................... -- -- (0.25) -- --
---------- ---------- ---------- ---------- ----------
Total distributions............................. (0.71) (1.41) (1.41) (1.50) (1.46)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.................. $ 51.26 $ 50.78 $ 51.76 $ 52.54 $ 50.32
========== ========== ========== ========== ==========
TOTAL RETURN (c)................................ 2.35% 0.84% 1.22% 7.49% 3.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............ $2,673,077 $1,729,078 $ 846,322 $ 270,586 $ 10,065
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets (d)............................... 0.65% (e) 0.65% 0.65% 0.65% 0.65% (e)
Ratio of net investment income (loss) to average
net assets................................... 2.62% (e) 2.32% 2.20% 2.06% 2.55% (e)
Portfolio turnover rate (f)..................... 229% (g) 331% (g) 190% (g) 92% 157%
</TABLE>
(a) Inception date is November 4, 2014, 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.
(d) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(e) Annualized.
(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.
(g) The portfolio turnover rate not including mortgage dollar rolls was 140%,
117% and 97% for the periods ended April 30, 2019, October 31, 2018 and
October 31, 2017, respectively.
Page 50 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Low Duration Opportunities ETF (the "Fund"), a
non-diversified series of the Trust, which trades under the ticker "LMBS" on The
Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund
issues and redeems shares on a continuous basis, at net asset value ("NAV"),
only in large specified blocks consisting of 50,000 shares called a "Creation
Unit." Creation Units are generally issued and redeemed for cash and, in certain
circumstances, in-kind for securities in which the Fund invests, and only to and
from broker-dealers and large institutional investors that have entered into
participation agreements. Except when aggregated in Creation Units, the Fund's
shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's primary
investment objective is to generate current income. The Fund's secondary
investment objective is to provide capital appreciation. The Fund seeks to
achieve its investment objectives by investing, under normal market conditions,
at least 80% of its net assets (including investment borrowings) in
mortgage-related debt securities and other mortgage-related instruments
(collectively, "Mortgage-Related Investments"). The Fund normally expects to
invest in Mortgage-Related Investments tied to residential and commercial
mortgages. Mortgage-Related Investments include residential mortgage-backed
securities, commercial mortgage-backed securities, stripped mortgage-backed
securities, collateralized mortgage obligations and real estate mortgage
investment conduits. The Fund may also invest in investment companies, such as
ETFs, that invest primarily in Mortgage-Related Investments. The Fund will limit
its investments in Mortgage-Related Investments that are not issued or
guaranteed by Government Entities(1) to 20% of its net assets (including
investment borrowings). The Fund may invest, without limitation, in mortgage
dollar rolls. The Fund intends to enter into mortgage dollar rolls only with
high quality securities dealers and banks, as determined by the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor").
The Fund may also invest in to-be-announced transactions ("TBA Transactions").
Further, the Fund may enter into short sales as part of its overall portfolio
management strategies or to offset a potential decline in the value of a
security; however, the Fund does not expect, under normal market conditions, to
engage in short sales with respect to more than 30% of the value of its net
assets (including investment borrowings). Although the Fund intends to invest
primarily in investment grade securities, the Fund may invest up to 20% of its
net assets (including investment borrowings) in securities of any credit
quality, including securities that are below investment grade, which are also
known as high yield securities, or commonly referred to as "junk" bonds, or
unrated securities that have not been judged by the Advisor to be of comparable
quality to rated investment grade securities. In the case of a split rating
between one or more of the nationally recognized statistical rating
organizations, the Fund will consider the highest rating. Under normal market
conditions, the Fund targets an estimated effective duration of three years or
less.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee, in
-----------------------------
(1) "Government Entities" means the U.S. government, its agencies and
instrumentalities, and U.S. government-sponsored entities.
Page 51
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
accordance with valuation procedures adopted by the Trust's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
U.S. government securities, mortgage-backed securities, asset-backed
securities and other debt securities are fair valued on the basis of
valuations provided by dealers who make markets in such securities or by a
third-party pricing service approved by the Trust's Board of Trustees,
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.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Common stocks and other equity securities listed on any national or
foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of 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
Page 52
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
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 fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities of the
issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
12) other relevant factors.
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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
The Fund invests in interest-only securities. For these securities, if there is
a change in the estimated cash flows, based on an evaluation of current
information, then the estimated yield is adjusted. Additionally, if the
evaluation of current information indicates a permanent impairment of the
security, the cost basis of the security is written down and a loss is
recognized. Debt obligations may be placed on non-accrual status and the related
interest income may be reduced by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectability of interest is reasonably assured.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. The
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed-delivery or forward purchase commitments until
payment is made. At April 30, 2019, the Fund had no when-issued or
delayed-delivery securities. At April 30, 2019, the Fund held $133,785,083 of
forward purchase commitments.
Page 53
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
C. SHORT SALES
Short sales are utilized to manage interest rate and spread risk, and are
transactions in which securities or other instruments (such as options,
forwards, futures or other derivative contracts) are sold that 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 is charged 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 effected 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 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.
D. 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. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are included in "Variation margin" receivable or payable 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.
E. OPTIONS CONTRACTS
In the normal course of pursuing its investment objectives, the Fund may invest
up to 20% of its net assets in derivative instruments in connection with hedging
strategies. The Fund may invest in exchange-listed options on U.S. Treasury
securities, exchange-listed options on U.S. Treasury futures contracts and
exchange-listed U.S. Treasury futures contracts. The Fund uses derivative
instruments primarily to hedge interest rate risk and actively manage interest
rate exposure. The primary risk exposure is interest rate risk.
The Fund may purchase (buy) or write (sell) put and call options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position. A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. Prior to
exercise or expiration, a futures option contract may be closed out by an
offsetting purchase or sale of a futures option of the same series. When the
Fund writes (sells) an option, an amount equal to the premium received by the
Fund is included in "Options contracts written, at value" on the Statement of
Assets and Liabilities. When the Fund purchases (buys) an option, the premium
paid represents the cost of the option, which is included in "Premiums paid on
options contracts purchased" on the Statement of Assets and Liabilities. Options
are marked-to-market daily and their value is affected by changes in the value
of the underlying security, changes in interest rates, changes in the actual or
perceived volatility of the securities markets and the underlying securities,
and the remaining time to the option's expiration. The value of options may also
be adversely affected if the market for the options becomes less liquid or the
trading volume diminishes.
The Fund uses options on futures contracts in connection with hedging
strategies. Generally, these strategies are applied under the same market and
market sector conditions in which the Fund uses put and call options on
securities. The purchase of put options on futures contracts is analogous to the
purchase of puts on securities so as to hedge the Fund's securities holdings
against the risk of declining market prices. The writing of a call option or the
purchasing of a put option on a futures contract constitutes a partial hedge
Page 54
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
against declining prices of securities which are deliverable upon exercise of
the futures contract. If the price at expiration of a written call option is
below the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's holdings of securities. If the price when the option is
exercised is above the exercise price, however, the Fund will incur a loss,
which may be offset, in whole or in part, by the increase in the value of the
securities held by the Fund that were being hedged. Writing a put option or
purchasing a call option on a futures contract serves as a partial hedge against
an increase in the value of the securities the Fund intends to acquire. Realized
gains and losses on written options are included in "Net realized gain (loss) on
written options contracts" on the Statement of Operations. Realized gains and
losses on purchased options are included in "Net realized gain (loss) on
purchased options contracts" on the Statement of Operations.
The Fund is required to deposit and maintain margin with respect to put and call
options on futures contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund. The Fund will pledge in a segregated account
at the Fund's custodian, liquid assets, such as cash, U.S. government securities
or other high-grade liquid debt obligations equal in value to the amount due on
the underlying obligation. Such segregated assets will be marked-to-market
daily, and additional assets will be pledged in the segregated account whenever
the total value of the pledged assets falls below the amount due on the
underlying obligation.
The risks associated with the use of options on future contracts include the
risk that the Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on futures contracts depends on the Advisor's
ability to correctly predict the movement in prices on futures contracts and the
underlying instruments, which may prove to be incorrect. In addition, there may
be imperfect correlation between the instruments being hedged and the futures
contract subject to option.
F. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.
G. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
H. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage-backed securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security known as an IO Security and all
of the principal is distributed to holders of another type of security known as
a PO Security. These securities, if any, are identified on the Portfolio of
Investments.
I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS
The Fund may invest, without limitation, in mortgage dollar rolls. The Fund
intends to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Fund's investment advisor. In a mortgage
dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery
on a specified date and simultaneously contract to repurchase (or sell)
substantially similar (same type, coupon and maturity) securities on a future
date. Mortgage dollar rolls are recorded as separate purchase and sales in the
Fund. The Fund may also invest in TBA Transactions. A TBA Transaction is a
method of trading mortgage-backed securities. TBA Transactions generally are
conducted in accordance with widely-accepted guidelines which establish commonly
observed terms and conditions for execution, settlement and delivery. In a TBA
Transaction, the buyer and the seller agree on general trade parameters such as
agency, settlement date, par amount and price.
Page 55
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
J. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. Dividend income and realized
gains and losses, and change in appreciation (depreciation) from affiliated
funds are presented on the Statement of Operations. The Fund's investment
performance and risks are directly related to the investment performance and
risks of the affiliated funds.
Amounts related to these investments at April 30, 2019, and for the six month
period then ended are as follows:
<TABLE>
<CAPTION>
CHANGES IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 4/30/2019 10/31/2018 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2019 INCOME
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust Long Duration
Opportunities ETF 7,500 $ -- $ 193,275 $ -- $ 938 $ -- $ 194,213 $ 380
=======================================================================================
</TABLE>
K. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
Distributions in cash may be reinvested automatically in additional whole shares
only if the broker through whom the shares were purchased makes such option
available. Such shares will generally be reinvested by the broker based upon the
market price of those shares and investors may be subject to customary brokerage
commissions charged by the broker.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions paid during the fiscal year ended October 31,
2018 was as follows:
Distributions paid from:
Ordinary income................................. $ 31,634,253
Capital gains................................... 1,254,000
Return of capital............................... --
As of October 31, 2018, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ (3,586,484)
Accumulated capital and other gain (loss)....... 1,877,704
Net unrealized appreciation (depreciation)...... (25,942,106)
L. 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.
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 2015,
2016, 2017, and 2018 remain open to federal and state audit. As of April 30,
2019, 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.
Page 56
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2018, the
Fund had no non-expiring capital loss carryforwards for federal income tax
purposes.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no
net ordinary losses.
M. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
N. NEW ACCOUNTING PRONOUNCEMENTS
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities", which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. The ASU 2017-08 is effective for
public business entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. Earlier application is
permitted for all entities, including adoption in an interim period. If an
entity early adopts the ASU in an interim period, any adjustments must be
reflected as of the beginning of the fiscal year that includes that interim
period. Management is still assessing the impact of the adoption of ASU 2017-08
on the financial statements but does not expect it to have a material impact.
On August 28, 2018, the FASB issued ASU 2018-13, "Disclosure Framework - Changes
to the Disclosure Requirements for Fair Value Measurement," which amends the
fair value measurement disclosure requirements of ASC 820. The amendments of ASU
2018-13 include new, eliminated, and modified disclosure requirements of ASC
820. In addition, the amendments clarify that materiality is an appropriate
consideration of entities when evaluating disclosure requirements. The ASU is
effective for fiscal years beginning after December 15, 2019, including interim
periods therein. Early adoption is permitted for any eliminated or modified
disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13
for these financial statements, which did not result in a material impact.
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, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), 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. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets. In addition, the
Fund incurs acquired fund fees and expenses. The total of the unitary management
fee and acquired fund fees and expenses represents the Fund's total annual
operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Page 57
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases of U.S. Government securities and non-U.S. Government
securities, excluding investments sold short and short-term investments, for the
six months ended April 30, 2019, were $5,864,828,035 and $193,486,151,
respectively. The proceeds from sales and paydowns of U.S. Government securities
and non-U.S. Government securities, excluding investments sold short and
short-term investments, for the six months ended April 30, 2019, were
$5,100,882,212 and $173,141,990, respectively. The cost of purchases to cover
investments sold short and the proceeds of investments sold short were
$2,323,495,863 and $2,341,518,110, respectively.
For the six months ended April 30, 2019, the Fund had no in-kind transactions.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2019, the primary underlying risk exposure and the location of these
instruments as presented on the Statement of Assets and Liabilities.
<TABLE>
<CAPTION>
ASSET DERIVATIVES LIABILITY DERIVATIVES
---------------------------------------- --------------------------------------
DERIVATIVE RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
----------- --------- ---------------------------- ---------- -------------------------- ----------
<S> <C> <C> <C> <C> <C>
Futures Interest Unrealized appreciation on Unrealized depreciation on
rate risk futures contracts* $ 448,346 futures contracts* $1,820,208
Options Interest Options contracts purchased, Options contracts written,
rate risk at value 84,531 at value 119,727
</TABLE>
* Includes cumulative appreciation/depreciation on futures contracts as reported
in the Portfolio of Investments. Only the current day's variation margin is
reported within the Statement of Assets and Liabilities.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2019, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS LOCATION INTEREST RATE RISK
----------------------------------------------------------------------------------
<S> <C>
Net realized gain (loss) on:
Futures contracts $ (4,577,442)
Purchased options contracts (647)
Written options contracts 465,586
Net change in unrealized appreciation (depreciation) on:
Futures contracts (4,682,849)
Purchased options contracts (20,703)
Written options contracts (32,160)
</TABLE>
For the six months ended April 30, 2019, the notional value of futures contracts
opened and closed were $2,250,606,453 and $2,008,215,466, respectively.
During the six months ended April 30, 2019, the premiums for purchased options
contracts opened were $336,915 and the premiums for purchased options contracts
closed, exercised and expired were $270,118.
Page 58
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
During the six months ended April 30, 2019, the premiums for written options
contracts opened were $996,629 and the premiums for written options contracts
closed, exercised and expired were $1,023,437.
The Fund does not have the right to offset financial assets and financial
liabilities related to futures and options contracts on the Statement of Assets
and Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Due to the nature of the Fund's investments, the
Fund's Creation Units are generally issued and redeemed for cash, although
Creation Units may be issued in-kind for securities in which the Fund invests in
limited circumstances. Authorized Participants purchasing Creation Units must
pay to BNYM, as transfer agent, a creation transaction fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in the Fund's portfolio and/or the
countries in which the transactions are settled. The Creation Transaction Fee is
currently $500. The price for each Creation Unit will equal the daily NAV per
share 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 or stamp taxes. When Creation Units are issued for cash, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing portfolio securities, including 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 such securities. Authorized
Participants redeeming Creation Units must pay to BNYM, as transfer agent, a
standard redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and/or the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $500. When
shares are redeemed for cash, the Authorized Participant may also be assessed an
amount to cover other costs, including 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 portfolio securities sold
in connection with the redemption.
7. 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 March 31, 2020.
8. 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.
9. 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 59
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--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
Etf Risk. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
Page 60
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2019 (UNAUDITED)
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 61
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
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First Trust Exchange-Traded Fund IV
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2019
Caution Regarding Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. (“First Trust” or the “Advisor”) and/or SSI Investment Management Inc. (“SSI” or the “Sub-Advisor”) and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as “anticipate,” “estimate,” “intend,” “expect,” “believe,” “plan,” “may,” “should,” “would” or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the “Trust”) described in this report (First Trust SSI Strategic Convertible Securities ETF; hereinafter referred to as the “Fund”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
Performance and Risk Disclosure
There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visitwww.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on the Fund’s web page atwww.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 and analysis that provide insight into the Fund’s performance and investment approach.
The statistical information that follows may help you understand the Fund’s performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Letter from the Chairman and CEO
April 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), which contains detailed information about the Fund for the six months ended April 30, 2019. We encourage you to read this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six months, you were rewarded for your perseverance. As 2018 came to a close, the “six weeks of madness” sent markets into negative territory for the year, then rallied back in the first quarter of 2019 like a mirror image of the fourth quarter of 2018. Global investors saw the worst quarter since 2011 and the best quarter since 2012, as measured by the MSCI All Country World Index. Similarly, U.S. markets reversed their course, and the S&P 500® Index, the Dow Jones Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and 16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher as the S&P 500® Index was up 18.25%, giving it the best four-month start in the last 30 years. The Federal Reserve provided momentum to the markets by indicating no new rate hikes for the remainder of 2019 and bond markets gained steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index, returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate hovers near 2% as it has, on average, for the last decade; a higher than expected U.S. gross domestic product growth rate of 3.2% was reported for March; and the U.S. unemployment rate of 3.6% for April is at the lowest level since December of 1969.
Having a long-term perspective when it comes to investing and looking for opportunities when they arise is a drum worth beating, as no one can predict the inevitable ups and downs that occur in the market. We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial plan. We value our relationship with you and will report on the Fund again in six months.
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
The First Trust SSI Strategic Convertible Securities ETF (the “Fund”) is an actively managed exchange-traded fund that seeks to deliver total return by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in a portfolio of U.S. and non-U.S. convertible securities. The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol “FCVT.”
| Performance | | | | |
| | | | Average Annual
Total Returns | Cumulative
Total Returns |
| | 6 Months Ended
4/30/19 | 1 Year Ended
4/30/19 | Inception (11/3/15)
to 4/30/19 | Inception (11/3/15)
to 4/30/19 |
| Fund Performance | | | | |
| NAV | 9.42% | 9.56% | 8.69% | 33.71% |
| Market Price | 9.46% | 9.14% | 8.70% | 33.77% |
| Index Performance | | | | |
| ICE BofAML All US Convertible Index | 9.29% | 10.96% | 9.45% | 37.02% |
Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the period indicated. “Cumulative Total Returns” represent the total change in value of an investment over the period indicated.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT) (Continued)
| Sector Allocation | % of Total
Investments |
| Information Technology | 36.0% |
| Health Care | 20.8 |
| Financials | 8.0 |
| Industrials | 7.6 |
| Consumer Discretionary | 5.9 |
| Communication Services | 5.9 |
| Utilities | 5.8 |
| Energy | 4.6 |
| Real Estate | 2.1 |
| Consumer Staples | 1.8 |
| Materials | 1.5 |
| Total | 100.0% |
| Top Ten Holdings | % of Total
Investments |
| Wells Fargo & Co., Series L | 2.7% |
| Bank of America Corp., Series L | 2.4 |
| Palo Alto Networks, Inc., 7/01/23 | 2.3 |
| Microchip Technology, Inc., 2/15/27 | 2.0 |
| Microchip Technology, Inc., 2/15/25 | 1.9 |
| Becton Dickinson and Co., Series A | 1.7 |
| Splunk, Inc., 9/15/23 | 1.5 |
| Advanced Micro Devices, Inc., 9/01/26 | 1.5 |
| Illumina, Inc., 8/15/23 | 1.5 |
| Workday, Inc., 10/01/22 | 1.4 |
| Total | 18.9% |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Frequency Distribution of Discounts and Premiums
Bid/Ask Midpoint vs. NAV through April 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 4, 2015 (commencement of trading) through April 30, 2019. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
| Number of Days Bid/Ask Midpoint At/Above NAV |
| For the Period | 0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% |
| 11/4/15 – 10/31/16 | 77 | 60 | 12 | 16 |
| 11/1/16 – 10/31/17 | 149 | 47 | 3 | 2 |
| 11/1/17 – 10/31/18 | 184 | 31 | 1 | 0 |
| 11/1/18 – 4/30/19 | 32 | 4 | 0 | 0 |
| Number of Days Bid/Ask Midpoint Below NAV |
| For the Period | 0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% |
| 11/4/15 – 10/31/16 | 59 | 16 | 7 | 3 |
| 11/1/16 – 10/31/17 | 44 | 7 | 0 | 0 |
| 11/1/17 – 10/31/18 | 34 | 2 | 0 | 0 |
| 11/1/18 – 4/30/19 | 76 | 8 | 1 | 1 |
Portfolio Management
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2019 (Unaudited)
Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”) serves as the investment advisor to the First Trust SSI Strategic Convertible Securities ETF (the “Fund”). First Trust is responsible for the ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Sub-Advisor
SSI Investment Management Inc.
SSI Investment Management Inc. (“SSI” or the “Sub-Advisor”) is the sub-advisor to the Fund and is a registered investment advisor based in Los Angeles, California. SSI is an innovative investment management firm specializing in alternative investment solutions utilizing convertible assets, equity securities and hedging strategies.
Portfolio Management Team
George M. Douglas – CFA, Chief Investment Officer, Principal of SSI
Ravi Malik – CFA, Portfolio Manager, Principal of SSI
Michael J. Opre – CFA, Portfolio Manager of SSI
Florian Eitner – CFA, Portfolio Manager of SSI
Ethan Ganz – Portfolio Manager of SSI
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Understanding Your Fund Expenses
April 30, 2019 (Unaudited)
As a shareholder of the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended April 30, 2019.
Actual Expenses
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | Beginning
Account Value
November 1, 2018 | Ending
Account Value
April 30, 2019 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
| First Trust SSI Strategic Convertible Securities ETF (FCVT) |
| Actual | $1,000.00 | $1,094.20 | 0.95% | $4.93 |
| Hypothetical (5% return before expenses) | $1,000.00 | $1,020.08 | 0.95% | $4.76 |
| (a) | Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (November 1, 2018 through April 30, 2019), multiplied by 181/365 (to reflect the six-month period). |
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments
April 30, 2019 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS – 81.9% |
| | | Air Freight & Logistics – 1.6% | | | | | | |
| $1,060,000 | | Air Transport Services Group, Inc.
| | 1.13% | | 10/15/24 | | $1,061,987 |
| 1,935,000 | | Atlas Air Worldwide Holdings, Inc.
| | 2.25% | | 06/01/22 | | 2,009,191 |
| | | | | 3,071,178 |
| | | Automobiles – 0.6% | | | | | | |
| 1,105,000 | | Tesla, Inc.
| | 2.38% | | 03/15/22 | | 1,137,244 |
| | | Biotechnology – 5.3% | | | | | | |
| 1,525,000 | | BioMarin Pharmaceutical, Inc.
| | 0.60% | | 08/01/24 | | 1,571,548 |
| 1,790,000 | | Exact Sciences Corp.
| | 0.38% | | 03/15/27 | | 2,019,476 |
| 915,000 | | Insmed, Inc.
| | 1.75% | | 01/15/25 | | 955,603 |
| 1,455,000 | | Intercept Pharmaceuticals, Inc.
| | 3.25% | | 07/01/23 | | 1,361,467 |
| 1,660,000 | | Ionis Pharmaceuticals, Inc.
| | 1.00% | | 11/15/21 | | 2,138,123 |
| 800,000 | | Neurocrine Biosciences, Inc.
| | 2.25% | | 05/15/24 | | 967,469 |
| 600,000 | | Sarepta Therapeutics, Inc.
| | 1.50% | | 11/15/24 | | 1,072,500 |
| | | | | 10,086,186 |
| | | Communications Equipment – 1.3% | | | | | | |
| 785,000 | | Lumentum Holdings, Inc.
| | 0.25% | | 03/15/24 | | 978,949 |
| 1,275,000 | | Viavi Solutions, Inc.
| | 1.00% | | 03/01/24 | | 1,491,855 |
| | | | | 2,470,804 |
| | | Construction & Engineering – 0.3% | | | | | | |
| 630,000 | | Dycom Industries, Inc.
| | 0.75% | | 09/15/21 | | 597,620 |
| | | Diversified Consumer Services – 1.2% | | | | | | |
| 2,370,000 | | Chegg, Inc. (a)
| | 0.13% | | 03/15/25 | | 2,278,162 |
| | | Electronic Equipment, Instruments & Components – 1.1% | | | | | | |
| 745,000 | | II-VI, Inc.
| | 0.25% | | 09/01/22 | | 815,463 |
| 1,390,000 | | Vishay Intertechnology, Inc. (a)
| | 2.25% | | 06/15/25 | | 1,337,800 |
| | | | | 2,153,263 |
| | | Energy Equipment & Services – 0.9% | | | | | | |
| 870,000 | | Oil States International, Inc.
| | 1.50% | | 02/15/23 | | 783,544 |
| 845,000 | | Transocean, Inc.
| | 0.50% | | 01/30/23 | | 906,801 |
| | | | | 1,690,345 |
| | | Entertainment – 1.1% | | | | | | |
| 1,140,000 | | Live Nation Entertainment, Inc.
| | 2.50% | | 03/15/23 | | 1,342,989 |
| 245,000 | | World Wrestling Entertainment, Inc.
| | 3.38% | | 12/15/23 | | 844,157 |
| | | | | 2,187,146 |
| | | Equity Real Estate Investment Trusts – 1.5% | | | | | | |
| 1,625,000 | | Extra Space Storage LP (a)
| | 3.13% | | 10/01/35 | | 1,900,598 |
| 830,000 | | IH Merger Sub LLC
| | 3.50% | | 01/15/22 | | 964,842 |
| | | | | 2,865,440 |
| | | Health Care Equipment & Supplies – 4.7% | | | | | | |
| 1,110,000 | | CONMED Corp. (a)
| | 2.63% | | 02/01/24 | | 1,217,155 |
| 2,385,000 | | DexCom, Inc. (a)
| | 0.75% | | 12/01/23 | | 2,489,346 |
| 1,870,000 | | Insulet Corp.
| | 1.38% | | 11/15/24 | | 2,135,430 |
| 1,045,000 | | NuVasive, Inc.
| | 2.25% | | 03/15/21 | | 1,203,086 |
| 1,720,000 | | Wright Medical Group, Inc. (a)
| | 1.63% | | 06/15/23 | | 1,874,628 |
| | | | | 8,919,645 |
Page 6
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2019 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Health Care Providers & Services – 0.9% | | | | | | |
| $255,000 | | Anthem, Inc.
| | 2.75% | | 10/15/42 | | $928,838 |
| 265,000 | | Molina Healthcare, Inc.
| | 1.13% | | 01/15/20 | | 845,768 |
| | | | | 1,774,606 |
| | | Health Care Technology – 0.5% | | | | | | |
| 750,000 | | Teladoc Health, Inc.
| | 1.38% | | 05/15/25 | | 993,017 |
| | | Hotels, Restaurants & Leisure – 0.8% | | | | | | |
| 1,075,000 | | Caesars Entertainment Corp.
| | 5.00% | | 10/01/24 | | 1,593,763 |
| | | Independent Power and Renewable Electricity Producers – 0.8% | | | | | | |
| 1,360,000 | | NRG Energy, Inc. (a)
| | 2.75% | | 06/01/48 | | 1,534,030 |
| | | Insurance – 0.7% | | | | | | |
| 1,150,000 | | AXA S.A. (a)
| | 7.25% | | 05/15/21 | | 1,254,736 |
| | | Interactive Media & Services – 2.0% | | | | | | |
| 825,000 | | IAC FinanceCo., Inc. (a)
| | 0.88% | | 10/01/22 | | 1,283,390 |
| 1,895,000 | | Twitter, Inc. (a)
| | 0.25% | | 06/15/24 | | 1,918,147 |
| 705,000 | | Zillow Group, Inc.
| | 2.00% | | 12/01/21 | | 716,016 |
| | | | | 3,917,553 |
| | | Internet & Direct Marketing Retail – 2.6% | | | | | | |
| 860,000 | | Booking Holdings, Inc.
| | 0.35% | | 06/15/20 | | 1,231,555 |
| 1,450,000 | | Booking Holdings, Inc.
| | 0.90% | | 09/15/21 | | 1,655,580 |
| 350,000 | | Etsy, Inc.
| | (b) | | 03/01/23 | | 682,719 |
| 945,000 | | Wayfair, Inc. (a)
| | 1.13% | | 11/01/24 | | 1,474,221 |
| | | | | 5,044,075 |
| | | IT Services – 5.9% | | | | | | |
| 2,055,000 | | Akamai Technologies, Inc. (a)
| | 0.13% | | 05/01/25 | | 2,180,411 |
| 1,760,000 | | Euronet Worldwide, Inc. (a)
| | 0.75% | | 03/15/49 | | 1,968,738 |
| 790,000 | | KBR, Inc. (a)
| | 2.50% | | 11/01/23 | | 863,563 |
| 355,000 | | Okta, Inc.
| | 0.25% | | 02/15/23 | | 787,323 |
| 850,000 | | Perficient, Inc. (a)
| | 2.38% | | 09/15/23 | | 858,994 |
| 1,835,000 | | Square, Inc. (a)
| | 0.50% | | 05/15/23 | | 2,195,522 |
| 640,000 | | Twilio, Inc.
| | 0.25% | | 06/01/23 | | 1,283,135 |
| 1,010,000 | | Wix.com Ltd. (a)
| | (b) | | 07/01/23 | | 1,190,348 |
| | | | | 11,328,034 |
| | | Life Sciences Tools & Services – 2.4% | | | | | | |
| 2,600,000 | | Illumina, Inc. (a)
| | (b) | | 08/15/23 | | 2,815,541 |
| 665,000 | | Illumina, Inc.
| | 0.50% | | 06/15/21 | | 912,713 |
| 800,000 | | QIAGEN NV
| | 0.50% | | 09/13/23 | | 887,400 |
| | | | | 4,615,654 |
| | | Machinery – 2.2% | | | | | | |
| 445,000 | | Chart Industries, Inc. (a)
| | 1.00% | | 11/15/24 | | 712,715 |
| 1,850,000 | | Fortive Corp. (a)
| | 0.88% | | 02/15/22 | | 1,956,421 |
| 1,485,000 | | Meritor, Inc.
| | 3.25% | | 10/15/37 | | 1,534,480 |
| | | | | 4,203,616 |
| | | Media – 2.7% | | | | | | |
| 2,025,000 | | DISH Network Corp.
| | 3.38% | | 08/15/26 | | 1,862,621 |
| 1,775,000 | | GCI Liberty, Inc. (a)
| | 1.75% | | 09/30/46 | | 2,006,138 |
| 1,050,000 | | Liberty Media Corp.
| | 1.38% | | 10/15/23 | | 1,228,920 |
| | | | | 5,097,679 |
See Notes to Financial Statements
Page 7
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2019 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Metals & Mining – 0.7% | | | | | | |
| $360,000 | | Cleveland-Cliffs, Inc.
| | 1.50% | | 01/15/25 | | $496,384 |
| 805,000 | | SSR Mining, Inc. (a)
| | 2.50% | | 04/01/39 | | 776,870 |
| | | | | 1,273,254 |
| | | Mortgage Real Estate Investment Trusts – 1.6% | | | | | | |
| 1,900,000 | | Blackstone Mortgage Trust, Inc.
| | 4.38% | | 05/05/22 | | 1,937,483 |
| 1,135,000 | | Two Harbors Investment Corp.
| | 6.25% | | 01/15/22 | | 1,153,444 |
| | | | | 3,090,927 |
| | | Oil, Gas & Consumable Fuels – 3.7% | | | | | | |
| 2,275,000 | | Cheniere Energy, Inc.
| | 4.25% | | 03/15/45 | | 1,808,625 |
| 1,085,000 | | Chesapeake Energy Corp.
| | 5.50% | | 09/15/26 | | 986,627 |
| 685,000 | | Oasis Petroleum, Inc.
| | 2.63% | | 09/15/23 | | 656,664 |
| 780,000 | | PDC Energy, Inc.
| | 1.13% | | 09/15/21 | | 744,497 |
| 1,400,000 | | TOTAL S.A., Series FP
| | 0.50% | | 12/02/22 | | 1,487,570 |
| 1,380,000 | | Whiting Petroleum Corp.
| | 1.25% | | 04/01/20 | | 1,342,945 |
| | | | | 7,026,928 |
| | | Personal Products – 1.4% | | | | | | |
| 2,475,000 | | Herbalife Nutrition Ltd.
| | 2.63% | | 03/15/24 | | 2,603,219 |
| | | Pharmaceuticals – 3.8% | | | | | | |
| 1,260,000 | | Horizon Pharma Investment Ltd.
| | 2.50% | | 03/15/22 | | 1,418,288 |
| 2,065,000 | | Jazz Investments I Ltd.
| | 1.88% | | 08/15/21 | | 2,055,966 |
| 1,260,000 | | Medicines Co. (The)
| | 2.50% | | 01/15/22 | | 1,368,325 |
| 1,210,000 | | Pacira BioSciences, Inc.
| | 2.38% | | 04/01/22 | | 1,210,756 |
| 1,290,000 | | Supernus Pharmaceuticals, Inc.
| | 0.63% | | 04/01/23 | | 1,307,064 |
| | | | | 7,360,399 |
| | | Professional Services – 0.8% | | | | | | |
| 1,510,000 | | FTI Consulting, Inc. (a)
| | 2.00% | | 08/15/23 | | 1,623,445 |
| | | Semiconductors & Semiconductor Equipment – 10.6% | | | | | | |
| 810,000 | | Advanced Micro Devices, Inc.
| | 2.13% | | 09/01/26 | | 2,860,159 |
| 1,500,000 | | Cree, Inc. (a)
| | 0.88% | | 09/01/23 | | 1,902,873 |
| 675,000 | | Cypress Semiconductor Corp.
| | 4.50% | | 01/15/22 | | 942,612 |
| 870,000 | | Inphi Corp.
| | 0.75% | | 09/01/21 | | 926,550 |
| 570,000 | | Intel Corp.
| | 3.25% | | 08/01/39 | | 1,424,869 |
| 1,810,000 | | Microchip Technology, Inc.
| | 1.63% | | 02/15/25 | | 3,599,202 |
| 2,925,000 | | Microchip Technology, Inc.
| | 1.63% | | 02/15/27 | | 3,802,093 |
| 190,000 | | Micron Technology, Inc., Series F
| | 2.13% | | 02/15/33 | | 731,367 |
| 175,000 | | Novellus Systems, Inc.
| | 2.63% | | 05/15/41 | | 1,102,692 |
| 1,390,000 | | ON Semiconductor Corp.
| | 1.00% | | 12/01/20 | | 1,860,592 |
| 900,000 | | Silicon Laboratories, Inc.
| | 1.38% | | 03/01/22 | | 1,148,814 |
| | | | | 20,301,823 |
| | | Software – 16.1% | | | | | | |
| 1,350,000 | | Atlassian, Inc.
| | 0.63% | | 05/01/23 | | 1,999,731 |
| 1,530,000 | | DocuSign, Inc. (a)
| | 0.50% | | 09/15/23 | | 1,655,284 |
| 1,051,000 | | Envestnet, Inc. (a)
| | 1.75% | | 06/01/23 | | 1,269,999 |
| 720,000 | | FireEye, Inc. (a)
| | 0.88% | | 06/01/24 | | 725,298 |
| 586,000 | | Five9, Inc.
| | 0.13% | | 05/01/23 | | 833,032 |
| 1,145,000 | | Guidewire Software, Inc.
| | 1.25% | | 03/15/25 | | 1,308,478 |
| 345,000 | | HubSport, Inc.
| | 0.25% | | 06/01/22 | | 689,017 |
| 925,000 | | LivePerson, Inc. (a)
| | 0.75% | | 03/01/24 | | 958,577 |
| 1,160,000 | | New Relic, Inc.
| | 0.50% | | 05/01/23 | | 1,358,456 |
| 731,000 | | Nutanix, Inc.
| | (b) | | 01/15/23 | | 836,228 |
Page 8
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2019 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Software (Continued) | | | | | | |
| $3,775,000 | | Palo Alto Networks, Inc. (a)
| | 0.75% | | 07/01/23 | | $4,297,685 |
| 1,175,000 | | Pluralsight, Inc. (a)
| | 0.38% | | 03/01/24 | | 1,342,184 |
| 880,000 | | Q2 Holdings, Inc.
| | 0.75% | | 02/15/23 | | 1,237,626 |
| 890,000 | | RingCentral, Inc.
| | (b) | | 03/15/23 | | 1,348,609 |
| 1,140,000 | | ServiceNow, Inc.
| | (b) | | 06/01/22 | | 2,309,912 |
| 2,550,000 | | Splunk, Inc. (a)
| | 0.50% | | 09/15/23 | | 2,910,220 |
| 1,260,000 | | Verient Systems, Inc.
| | 1.50% | | 06/01/21 | | 1,417,019 |
| 1,840,000 | | Workday, Inc.
| | 0.25% | | 10/01/22 | | 2,740,185 |
| 1,020,000 | | Zendesk, Inc.
| | 0.25% | | 03/15/23 | | 1,539,190 |
| | | | | 30,776,730 |
| | | Specialty Retail – 0.6% | | | | | | |
| 1,380,000 | | RH (a)
| | (b) | | 06/15/23 | | 1,200,963 |
| | | Technology Hardware, Storage & Peripherals – 0.8% | | | | | | |
| 1,310,000 | | Pure Storage, Inc.
| | 0.13% | | 04/15/23 | | 1,452,712 |
| | | Trading Companies & Distributors – 0.7% | | | | | | |
| 1,200,000 | | Kaman Corp.
| | 3.25% | | 05/01/24 | | 1,367,250 |
| | | Total Convertible Corporate Bonds
| | 156,891,446 |
| | | (Cost $141,191,331) | | | | | | |
| Shares | | Description | | Stated
Rate | | Stated
Maturity (c) | | Value |
| CONVERTIBLE PREFERRED SECURITIES – 17.2% |
| | | Banks – 5.1% | | | | | | |
| 3,510 | | Bank of America Corp., Series L
| | 7.25% | | (d) | | 4,634,990 |
| 3,970 | | Wells Fargo & Co., Series L
| | 7.50% | | (d) | | 5,190,537 |
| | | | | 9,825,527 |
| | | Chemicals – 0.8% | | | | | | |
| 31,060 | | International Flavors & Frangrances, Inc.
| | 6.00% | | 09/15/21 | | 1,628,476 |
| | | Electric Utilities – 1.5% | | | | | | |
| 18,200 | | American Electric Power Co., Inc.
| | 6.13% | | 03/15/22 | | 946,036 |
| 30,300 | | NextEra Energy, Inc.
| | 6.12% | | 09/01/19 | | 1,890,720 |
| | | | | 2,836,756 |
| | | Equity Real Estate Investment Trusts – 1.1% | | | | | | |
| 1,890 | | Crown Castle International Corp., Series A
| | 6.88% | | 08/01/20 | | 2,181,041 |
| | | Food Products – 0.4% | | | | | | |
| 7,500 | | Bunge Ltd.
| | 4.88% | | (d) | | 742,500 |
| | | Health Care Equipment & Supplies – 3.0% | | | | | | |
| 55,100 | | Becton Dickinson and Co., Series A
| | 6.13% | | 05/01/20 | | 3,279,001 |
| 2,275 | | Danaher Corp., Series A
| | 4.75% | | 04/15/22 | | 2,396,713 |
| | | | | 5,675,714 |
| | | Machinery – 1.8% | | | | | | |
| 1,775 | | Fortive Corp., Series A
| | 5.00% | | 07/01/21 | | 1,916,006 |
| 13,000 | | Rexnord Corp., Series A
| | 5.75% | | 11/15/19 | | 762,450 |
| 8,625 | | Stanley Black & Decker, Inc.
| | 5.38% | | 05/15/20 | | 883,286 |
| | | | | 3,561,742 |
| | | Multi-Utilities – 3.0% | | | | | | |
| 21,325 | | CenterPoint Energy, Inc., Series B
| | 7.00% | | 09/01/21 | | 1,135,343 |
See Notes to Financial Statements
Page 9
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2019 (Unaudited)
| Shares | | Description | | Stated
Rate | | Stated
Maturity (c) | | Value |
| CONVERTIBLE PREFERRED SECURITIES (Continued) |
| | | Multi-Utilities (Continued) | | | | | | |
| 27,000 | | Dominion Energy, Inc., Series A
| | 6.75% | | 08/15/19 | | $1,356,210 |
| 14,700 | | DTE Energy Co.
| | 6.50% | | 10/01/19 | | 820,407 |
| 22,250 | | Sempra Energy, Series A
| | 6.00% | | 01/15/21 | | 2,378,302 |
| | | | | 5,690,262 |
| | | Water Utilities – 0.5% | | | | | | |
| 16,515 | | Aqua America, Inc.
| | 6.00% | | 04/30/22 | | 901,389 |
| | | Total Convertible Preferred Securities
| | 33,043,407 |
| | | (Cost $31,735,675) | | | | | | |
| | | Total Investments – 99.1%
| | 189,934,853 |
| | | (Cost $172,927,006) (e) | | | | | | |
| | Net Other Assets and Liabilities – 0.9%
| | 1,678,448 |
| | Net Assets – 100.0%
| | $191,613,301 |
|
| (a) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by SSI Investment Management Inc. (“SSI”), the Fund’s sub-advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2019, securities noted as such amounted to $53,974,002 or 28.2% of net assets. |
| (b) | Zero coupon security. |
| (c) | Stated maturity represents the mandatory conversion date. |
| (d) | Perpetual maturity. |
| (e) | Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of April 30, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $19,159,286 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,151,439. The net unrealized appreciation was $17,007,847. |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of April 30, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | Total
Value at
4/30/2019 | Level 1
Quoted
Prices | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Convertible Corporate Bonds*
| $ 156,891,446 | $ — | $ 156,891,446 | $ — |
| Convertible Preferred Securities: | | | | |
Food Products
| 742,500 | — | 742,500 | — |
Other industry categories*
| 32,300,907 | 32,300,907 | — | — |
Total Investments
| $ 189,934,853 | $ 32,300,907 | $ 157,633,946 | $— |
| * | See Portfolio of Investments for industry breakout. |
Page 10
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statement of Assets and Liabilities
April 30, 2019 (Unaudited)
| ASSETS: | |
Investments, at value
(Cost $172,927,006)
| $ 189,934,853 |
Cash
| 1,217,618 |
| Receivables: | |
Interest
| 513,206 |
Dividends
| 95,570 |
Total Assets
| 191,761,247 |
| LIABILITIES: | |
Investment advisory fees payable
| 147,946 |
Total Liabilities
| 147,946 |
NET ASSETS
| $191,613,301 |
| NET ASSETS consist of: | |
Paid-in capital
| $ 179,522,602 |
Par value
| 61,500 |
Accumulated distributable earnings (loss)
| 12,029,199 |
NET ASSETS
| $191,613,301 |
NET ASSET VALUE,per share
| $31.16 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)
| 6,150,002 |
See Notes to Financial Statements
Page 11
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statement of Operations
For the Six Months Ended April 30, 2019 (Unaudited)
| INVESTMENT INCOME: | |
Dividends
| $ 804,056 |
Interest
| (753,013) |
Total investment income
| 51,043 |
| EXPENSES: | |
Investment advisory fees
| 835,797 |
Total expenses
| 835,797 |
NET INVESTMENT INCOME (LOSS)
| (784,754) |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on investments
| 1,653,587 |
Net change in unrealized appreciation (depreciation) on investments
| 13,408,488 |
NET REALIZED AND UNREALIZED GAIN (LOSS)
| 15,062,075 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
| $ 14,277,321 |
Page 12
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statements of Changes in Net Assets
| | Six Months
Ended
4/30/2019
(Unaudited) | | Year
Ended
10/31/2018 |
| OPERATIONS: | | | |
Net investment income (loss)
| $ (784,754) | | $ (2,671,854) |
Net realized gain (loss)
| 1,653,587 | | 1,537,494 |
Net change in unrealized appreciation (depreciation)
| 13,408,488 | | (1,625,775) |
Net increase (decrease) in net assets resulting from operations
| 14,277,321 | | (2,760,135) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | |
Investment operations
| (1,517,341) | | (2,562,416) |
| SHAREHOLDER TRANSACTIONS: | | | |
Proceeds from shares sold
| 27,535,111 | | 164,774,570 |
Cost of shares redeemed
| (51,149,148) | | (15,000,954) |
Net increase (decrease) in net assets resulting from shareholder transactions
| (23,614,037) | | 149,773,616 |
Total increase (decrease) in net assets
| (10,854,057) | | 144,451,065 |
| NET ASSETS: | | | |
Beginning of period
| 202,467,358 | | 58,016,293 |
End of period
| $191,613,301 | | $202,467,358 |
| CHANGES IN SHARES OUTSTANDING: | | | |
Shares outstanding, beginning of period
| 7,050,002 | | 2,000,002 |
Shares sold
| 900,000 | | 5,550,000 |
Shares redeemed
| (1,800,000) | | (500,000) |
Shares outstanding, end of period
| 6,150,002 | | 7,050,002 |
See Notes to Financial Statements
Page 13
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Financial Highlights
For a share outstanding throughout each period
| | Six Months
Ended
4/30/2019
(Unaudited) | | Year Ended October 31, | | Period
Ended
10/31/2016 (a) |
| 2018 | | 2017 |
Net asset value, beginning of period
| $ 28.72 | | $ 29.01 | | $ 25.21 | | $ 25.00 |
| Income from investment operations: | | | | | | | |
Net investment income (loss)
| (0.18) | | (0.09) | | (0.14) | | (0.24) |
Net realized and unrealized gain (loss)
| 2.87 | | 0.52 | | 4.45 | | 0.90 |
Total from investment operations
| 2.69 | | 0.43 | | 4.31 | | 0.66 |
| Distributions paid to shareholders from: | | | | | | | |
Net investment income
| (0.25) | | (0.67) | | (0.51) | | (0.45) |
Net realized gain
| — | | (0.05) | | — | | — |
Total distributions
| (0.25) | | (0.72) | | (0.51) | | (0.45) |
Net asset value, end of period
| $31.16 | | $28.72 | | $29.01 | | $25.21 |
Total return (b)
| 9.42% | | 1.46% | | 17.29% | | 2.68% |
| Ratios to average net assets/supplemental data: | | | | | | | |
Net assets, end of period (in 000’s)
| $ 191,613 | | $ 202,467 | | $ 58,016 | | $ 7,564 |
Ratio of total expenses to average net assets
| 0.95% (c) | | 0.95% | | 0.95% | | 0.95% (c) |
Ratio of net investment income (loss) to average net assets
| (0.89)% (c) | | (2.16)% | | (1.86)% | | (2.34)% (c) |
Portfolio turnover rate (d)
| 38% | | 71% | | 56% | | 54% |
| (a) | Inception date is November 3, 2015, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
| (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) | Annualized. |
| (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. |
Page 14
See Notes to Financial Statements
Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
1. Organization
First Trust Exchange-Traded Fund IV (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of eight funds that are offering shares. This report covers the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), a non-diversified series of the Trust, which trades under the ticker “FCVT” on The Nasdaq Stock Market LLC (“Nasdaq”). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large specified blocks consisting of 50,000 shares called a “Creation Unit.” Creation Units are issued and redeemed for cash and, in certain circumstances, in-kind for securities in which the Fund invests. Except when aggregated in Creation Units, the Fund’s shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund. The investment objective of the Fund is to seek total return. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio U.S. and non-U.S. convertible securities. There can be no assurances that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors.
2. Significant Accounting Policies
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 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 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 adopted by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Convertible preferred stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market (“AIM”)) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Convertible corporate bonds, notes and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust’s Board of Trustees, 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. |
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor’s Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following:
| 1) | the credit conditions in the relevant market and changes thereto; |
| 2) | the liquidity conditions in the relevant market and changes thereto; |
| 3) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
| 4) | issuer-specific conditions (such as significant credit deterioration); and |
| 5) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust’s Board of Trustees or its delegate, the Advisor’s Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of 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.
Fair valuation of a debt security will be based on the consideration of all available information, including, but not limited to, the following:
| 1) | the fundamental business data relating to the issuer; |
| 2) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
| 3) | the type, size and cost of the security; |
| 4) | the financial statements of the issuer; |
| 5) | the credit quality and cash flow of the issuer, based on the sub-advisor’s or external analysis; |
| 6) | the information as to any transactions in or offers for the security; |
| 7) | the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies; |
| 8) | the coupon payments; |
| 9) | the quality, value and salability of collateral, if any, securing the security; |
| 10) | the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer’s management; |
| 11) | the prospects for the issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; and |
| 12) | other relevant factors. |
Fair valuation of an equity security will be based on the consideration of all available information, including, but not limited to the following:
| 1) | the type of security; |
| 2) | the size of the holding; |
| 3) | the initial cost of the security; |
| 4) | transactions in comparable securities; |
| 5) | price quotes from dealers and/or third-party pricing services; |
| 6) | relationships among various securities; |
| 7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
| 8) | an analysis of the issuer’s financial statements; and |
| 9) | the existence of merger proposals or tender offers that might affect the value of the security. |
The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
| • | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| • | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
| o | Quoted prices for similar investments in active markets. |
| o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
| o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund’s investments as of April 30, 2019, is included with the Fund’s Portfolio of Investments.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method.
The Fund invests in convertible securities that are acquired at a price significantly above the principal value. Consequently, the amortization of premium may exceed the interest income earned on the securities.
C. Dividends and Distributions to Shareholders
Dividends from net investment income, if any, are declared and paid monthly by the Fund, 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.
Distributions from income and capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the 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 by the Fund during the fiscal year ended October 31, 2018, was as follows:
| Distributions paid from: | |
Ordinary income
| $2,445,317 |
Capital gains
| 117,099 |
Return of capital
| — |
As of October 31, 2018, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income
| $177,663 |
Accumulated capital and other gain (loss)
| (1,168,982) |
Net unrealized appreciation (depreciation)
| 260,538 |
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
D. 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.
The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2018, the Fund had $1,168,982 of non-expiring capital loss carryforwards for federal income tax purposes.
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no net ordinary losses.
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 years ended 2016, 2017, and 2018 remain open to federal and state audit. As of April 30, 2019, 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.
E. Expenses
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (See Note 3).
F. New Accounting Pronouncement
On August 28, 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13 for these financial statements, which did not result in a material impact.
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.
The Fund and First Trust have retained SSI Investment Management Inc. (“SSI” or the “Sub-Advisor”) to serve as its investment sub-advisor. In this capacity, SSI is responsible for the selection and on-going monitoring of the securities in the Fund’s investment portfolio. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust will supervise SSI and its management of the investment of the Fund’s assets and will pay SSI for its services as the Fund’s sub-advisor. First Trust will also be 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, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. SSI receives a sub-advisory fee from First Trust. First Trust also provides fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which is covered under the annual unitary management fee.
The Trust has multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BBH is responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH is responsible for maintaining shareholder records for the Fund.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
The cost of purchases and proceeds from sales of securities, excluding short-term investments and in-kind transactions, for the six months ended April 30, 2019, were $65,970,506 and $85,594,142, respectively.
For the six months ended April 30, 2019, the Fund had no in-kind transactions.
5. Creations, Redemptions and Transaction Fees
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an “Authorized Participant”). In order to purchase Creation Units of the Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the “Deposit Securities”) and generally make or receive a cash payment referred to as the “Cash Component,” which is an amount equal to the difference between the NAV of the Fund shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BBH, as transfer agent, a creation transaction fee (the “Creation Transaction Fee”) regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and the countries in which the transactions are settled. The Creation Transaction Fee is currently $500. The price for each Creation Unit will equal the daily NAV per share 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 or stamp taxes. When the Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including 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 such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BBH, as transfer agent, a redemption transaction fee (the “Redemption Transaction Fee”), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee is currently $500. The Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, the Fund may, in its discretion, reject any such request.
6. Distribution Plan
The Board of Trustees (the “Board”) 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 to provide 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 March 31, 2020.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
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 to the Fund through the date the financial statements were issued, and has determined that there was the following subsequent event:
On March 14, 2019, FTA announced that the Board voted to approve SSI Investment Management LLC (“SSI LLC”) as investment sub-advisor to the Fund to replace SSI. SSI LLC began serving as investment sub-advisor to the Fund effective on the closing of the Transaction (defined below). SSI engaged in an internal reorganization pursuant to which it created a subsidiary, SSI LLC, and transfered its advisory business to SSI LLC. In connect with this reorganization, Resolute Investment Managers, Inc. (“Resolute”) acquired a majority interest in SSI LLC on May 31, 2019 (the “Transaction”). The acquisition of the interests in SSI LLC by Resolute is considered an “assignment” (as defined in the 1940 Act) which resulted in the automatic termination of the existing investment sub-advisory agreement among the Fund, FTA and SSI (the “Sub-Advisory Agreement”), in accordance with the terms of such Sub-Advisory Agreement. Prior to the Transaction, on March 14, 2019, the Board approved an interim investment sub-advisory agreement (the “New Agreement”) among the Fund, FTA and SSI LLC to become effective upon the termination of the Sub-Advisory Agreement. The New Agreement will be submitted to shareholders of the Fund for approval and would take effect upon such shareholder approval.
Additional Information
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website atwww.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website atwww.sec.gov.
Portfolio Holdings
The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC’s website atwww.sec.gov. The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Risk Considerations
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
Credit Risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer’s ability to make such payments.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than
Additional Information (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index Constituent Risk. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk.To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a Fund seeks to track an index, the Fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A Fund generally will not attempt to take defensive positions in declining markets.
| NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
Additional Information (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
Sub-Advisory Agreements
Board Considerations Regarding Approval of Interim Investment Sub-Advisory Agreement and Investment Sub-Advisory Agreement
The Board of Trustees (the “Board”) of First Trust Exchange-Traded Fund IV (the “Trust”), including the Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Trust (the “Independent Trustees”), unanimously approved (1) an Interim Investment Sub-Advisory Agreement (the “Interim Agreement”) among the Trust on behalf of First Trust SSI Strategic Convertible Securities ETF (the “Fund”), First Trust Advisors L.P. (the “Advisor”) and SSI Investment Management LLC (“SSI LLC”); and (2) a new Investment Sub-Advisory Agreement (the “New Agreement”) among the Trust on behalf of the Fund, the Advisor and SSI LLC. The Interim Agreement and the New Agreement are collectively referred to as the “Agreements.” The Board approved the Agreements at a meeting held on March 11, 2019. The Board determined that each Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
SSI Investment Management Inc. (“SSI Inc.”) currently serves as investment sub-advisor to the Fund pursuant to an Investment Sub-Advisory Agreement (the “Current Agreement”) among the Trust on behalf of the Fund, the Advisor and SSI Inc. In January 2019, the Board was informed that SSI Inc. intended to enter into a strategic alliance with Resolute Investment Managers, Inc. (“Resolute”) and, in connection therewith, intended to transfer its advisory business to a newly formed subsidiary, SSI LLC (the “Internal Reorganization”), and then sell a majority ownership interest in SSI LLC to Resolute (the “Resolute Transaction”). The Board was also informed that the consummation of the Resolute Transaction, which is expected to occur in June 2019, would result in an “assignment” of the Current Agreement under the 1940 Act, and as a result the Current Agreement would terminate pursuant to its terms and the requirements of the 1940 Act. The Agreements were proposed to the Board in connection with the Resolute Transaction to provide for the continuous management of the Fund following the consummation of the Resolute Transaction. In this regard, the Board noted SSI Inc.’s representation that it anticipates that the Resolute Transaction will have no effect on SSI LLC’s ability to provide sub-advisory services to the Fund. The Board also noted that the New Agreement will be submitted to shareholders of the Fund for their approval and that the Interim Agreement would only become effective if shareholders do not approve the New Agreement prior to the consummation of the Resolute Transaction and would remain in effect until the earlier of 150 days from the consummation of the Resolute Transaction or shareholder approval of the New Agreement.
To reach its determination in approving the Agreements, the Board considered its duties under 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. On February 1, 2019, counsel to the Independent Trustees provided SSI Inc. with a request for information regarding SSI Inc., SSI LLC, the Internal Reorganization and the Resolute Transaction. Following receipt of materials provided by SSI Inc. in response to the request, counsel to the Independent Trustees requested certain clarifications and supplements to the materials provided. At an executive session held on March 5, 2019, as well as at the meeting held on March 11, 2019, the Board, including the Independent Trustees, discussed the Internal Reorganization and the Resolute Transaction and reviewed materials provided by SSI Inc. that, among other things, outlined the structure and details of the Internal Reorganization and the Resolute Transaction and their expected impact on SSI Inc. and SSI LLC’s management of the Fund under the Agreements. The materials also provided or discussed financial data and other information on Resolute; the services to be provided by SSI LLC (including the relevant personnel responsible for these services and their experience); the sub-advisory fee rate as compared to fees charged to other clients of SSI Inc.; performance information for the Fund; the nature of expenses to be incurred in providing services to the Fund and the potential for economies of scale, if any; financial data on SSI LLC; any fall-out benefits to SSI LLC; and information on SSI LLC’s compliance program. The Board applied its business judgment to determine whether the arrangements among the Trust on behalf of the Fund, the Advisor and SSI LLC would 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 approve the Agreements.
In reviewing the Agreements, the Board considered the nature, extent and quality of the services to be provided by SSI LLC under the Agreements, which are not expected to change from the services provided by SSI Inc. under the Current Agreement. The Board reviewed the materials provided by SSI Inc. and considered the services that SSI LLC would provide to the Fund, including SSI LLC’s day-to-day management of the Fund’s investments. In considering SSI LLC’s management of the Fund, the Board noted that the same portfolio management team currently providing sub-advisory services to the Fund under the Current Agreement would continue to provide services to the Fund under the Agreements. The Board also noted SSI Inc.’s statements that the Internal Reorganization and the Resolute Transaction will not result in any diminution in the nature, quality and extent of the services provided to the Fund and that SSI Inc. anticipates no changes to the key personnel or other employees who provide services to the Fund, including compliance personnel. Finally, the Board considered SSI Inc.’s statement that it believed in the longer run that the Resolute Transaction would create more stability for SSI LLC and provide deeper resources for SSI LLC’s investment advisory services to the Fund. In light of the
Additional Information (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2019 (Unaudited)
information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by SSI LLC under the Agreements are expected to be satisfactory.
The Board considered the sub-advisory fee rate to be payable under the Agreements for the services provided, noting that it would be the same as the sub-advisory fee rate paid under the Current Agreement and therefore, as required by Rule 15a-4 under the 1940 Act, the sub-advisory fee under the Interim Agreement would be no greater than the fee under the Current Agreement. The Board noted that the sub-advisory fee would be paid by the Advisor from its advisory fee. The Board considered information provided by SSI Inc. as to the fees it charges to other clients with investment objectives and policies broadly similar to those of the Fund, noting that the sub-advisory fee rate for the Fund was lower than the fee rates charged to these other clients. The Board also noted SSI Inc.’s statement that SSI Inc. does not currently charge a lower advisory or sub-advisory fee to any other client for which it provides comparable services and that this would continue to be the case following the Internal Reorganization and the Resolute Transaction. In connection with its deliberations regarding the Interim Agreement, the Board noted that, based on information provided by the Advisor and SSI Inc., apart from the substitution of SSI LLC for SSI Inc., the effective and termination dates and any provisions of the Interim Agreement required by Rule 15a-4 under the 1940 Act, any differences in the terms and conditions of the Interim Agreement and the terms and conditions of the Current Agreement were immaterial.
Because the same portfolio management team that currently manages the Fund’s investment portfolio under the Current Agreement will continue to manage the Fund’s investment portfolio under the Agreements, 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 SSI Inc. 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 the one- and three-year periods ended December 31, 2018 to the performance of a peer group of funds (all of which were mutual funds) compiled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source (the “Peer Group”), and to that of a benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Peer Group average for the one-year period ended December 31, 2018 and underperformed the Peer Group average for the three-year period ended December 31, 2018. The Board also noted that the Fund underperformed the ICE BofAML All US Convertibles Index for the one- and three-year periods ended December 31, 2018. The Board noted information provided by SSI Inc. on reasons for the Fund’s relative underperformance.
On the basis of all the information provided on the fees and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the sub-advisory fee rate was reasonable and appropriate in light of the nature, extent and quality of the services to be provided by SSI LLC under the Agreements.
The Board considered SSI Inc.’s statement that it believes that expenses incurred by it and SSI LLC in managing the Fund will increase materially over the next twelve months and that it and SSI LLC are investing in the relationship with the Advisor. The Board did not review the expected profitability of SSI LLC with respect to the Fund. The Board noted that the Advisor will pay SSI LLC from its advisory fee and its understanding that the Fund’s sub-advisory fee rate was the product of an arm’s length negotiation. The Board considered fall-out benefits that may be realized by SSI LLC from its relationship with the Fund. The Board noted that SSI Inc. utilizes and SSI LLC will continue to utilize soft dollars in connection with the management of the Fund’s portfolio, as well as SSI Inc.’s statement that the Fund produces very little soft dollar commissions. The Board concluded that the character and amount of potential fall-out benefits to SSI LLC 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 were fair and reasonable and that the approval of the Agreements is in the best interests of the Fund. No single factor was determinative in the Board’s analysis.
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
SSI Investment Management Inc.
9440 Santa Monica Blvd, 8th Floor
Beverly Hills, CA 90210
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
Brown Brothers Harriman & Co.
50 Post Office Square
Boston, MA 02110
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
First Trust Exchange-Traded Fund IV
First Trust Heitman Global Prime Real Estate ETF (PRME)
Semi-Annual Report
For the Six Months Ended
April 30, 2019
First Trust Heitman Global Prime Real Estate ETF (PRME)
Semi-Annual Report
April 30, 2019
Caution Regarding Forward-Looking Statements
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. (“First Trust” or the “Advisor”) and/or Heitman Real Estate Securities LLC (“Heitman” or the “Sub-Advisor”) and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as “anticipate,” “estimate,” “intend,” “expect,” “believe,” “plan,” “may,” “should,” “would” or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund IV (the “Trust”) described in this report (First Trust Heitman Global Prime Real Estate ETF; hereinafter referred to as the “Fund”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
Performance and Risk Disclosure
There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visitwww.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on the Fund’s web page atwww.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 and analysis that provide insight into the Fund’s performance and investment approach.
The statistical information that follows may help you understand the Fund’s performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
First Trust Heitman Global Prime Real Estate ETF (PRME)
Semi-Annual Letter from the Chairman and CEO
April 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First Trust Heitman Global Prime Real Estate ETF (the “Fund”), which contains detailed information about the Fund for the six months ended April 30, 2019. We encourage you to read this report carefully and discuss it with your financial advisor.
If you were thinking (and acting) like a long-term investor over the last six months, you were rewarded for your perseverance. As 2018 came to a close, the “six weeks of madness” sent markets into negative territory for the year, then rallied back in the first quarter of 2019 like a mirror image of the fourth quarter of 2018. Global investors saw the worst quarter since 2011 and the best quarter since 2012, as measured by the MSCI All Country World Index. Similarly, U.S. markets reversed their course, and the S&P 500® Index, the Dow Jones Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and 16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher as the S&P 500® Index was up 18.25%, giving it the best four-month start in the last 30 years. The Federal Reserve provided momentum to the markets by indicating no new rate hikes for the remainder of 2019 and bond markets gained steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index, returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate hovers near 2% as it has, on average, for the last decade; a higher than expected U.S. gross domestic product growth rate of 3.2% was reported for March; and the U.S. unemployment rate of 3.6% for April is at the lowest level since December of 1969.
Having a long-term perspective when it comes to investing and looking for opportunities when they arise is a drum worth beating, as no one can predict the inevitable ups and downs that occur in the market. We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial plan. We value our relationship with you and will report on the Fund again in six months.
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust Heitman Global Prime Real Estate ETF (PRME)
First Trust Heitman Global Prime Real Estate ETF (the “Fund”) is an actively managed exchange-traded fund that seeks to deliver long-term total return by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in U.S. and non-U.S. exchange-traded real estate securities, which includes real estate investment trusts (“REITs”), real estate operating companies (“REOCs”) and common stocks or depositary receipts of companies primarily engaged in the real estate industry. Accordingly, the Fund is concentrated in REITs and/or real estate management and development companies (including REOCs), sub-industries of the real estate industry group. The Fund will not invest directly in real estate. The Fund is non-diversified. Shares of the Fund are listed on the NYSE Arca, Inc. under the ticker symbol “PRME.”
| Performance | | | | |
| | | | Average Annual
Total Returns | Cumulative
Total Returns |
| | 6 Months Ended
4/30/19 | 1 Year Ended
4/30/19 | Inception (11/11/15)
to 4/30/19 | Inception (11/11/15)
to 4/30/19 |
| Fund Performance | | | | |
| NAV | 10.70% | 8.83% | 5.29% | 19.57% |
| Market Price | 8.65% | 9.46% | 4.93% | 18.14% |
| Index Performance | | | | |
| FTSE EPRA/NAREIT Developed Index | 11.29% | 10.63% | 7.72% | 29.41% |
Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the period indicated. “Cumulative Total Returns” represent the total change in value of an investment over the period indicated.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund’s NAV is calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME) (Continued)
| Sub-Industry Classification | % of Total
Investments |
| Office REITs | 25.9% |
| Retail REITs | 21.9 |
| Industrial REITs | 15.1 |
| Residential REITs | 12.2 |
| Real Estate Operating Companies | 9.5 |
| Diversified Real Estate Activities | 6.1 |
| Diversified REITs | 5.4 |
| Specialized REITs | 2.6 |
| Hotel & Resort REITs | 1.3 |
| Total | 100.0% |
| Top Ten Holdings | % of Total
Investments |
| Prologis, Inc. | 6.9% |
| AvalonBay Communities, Inc. | 6.2 |
| Equity Residential | 6.1 |
| Simon Property Group, Inc. | 4.9 |
| Fabege AB | 4.6 |
| Rexford Industrial Realty, Inc. | 4.2 |
| Inmobiliaria Colonial Socimi S.A. | 4.1 |
| Federal Realty Investment Trust | 4.1 |
| Boston Properties, Inc. | 3.4 |
| Hudson Pacific Properties, Inc. | 3.1 |
| Total | 47.6% |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Frequency Distribution of Discounts and Premiums
Bid/Ask Midpoint vs. NAV through April 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 12, 2015 (commencement of trading) through April 30, 2019. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
| Number of Days Bid/Ask Midpoint At/Above NAV |
| For the Period | 0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% |
| 11/12/15 – 10/31/16 | 106 | 5 | 0 | 0 |
| 11/1/16 – 10/31/17 | 32 | 10 | 0 | 0 |
| 11/1/17 – 10/31/18 | 35 | 27 | 24 | 36 |
| 11/1/18 – 04/30/19 | 9 | 4 | 0 | 0 |
| Number of Days Bid/Ask Midpoint Below NAV |
| For the Period | 0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% |
| 11/12/15 – 10/31/16 | 123 | 8 | 2 | 0 |
| 11/1/16 – 10/31/17 | 68 | 103 | 31 | 7 |
| 11/1/17 – 10/31/18 | 39 | 50 | 33 | 8 |
| 11/1/18 – 04/30/19 | 32 | 53 | 22 | 2 |
Portfolio Management
First Trust Heitman Global Prime Real Estate ETF (PRME)
Semi-Annual Report
April 30, 2019 (Unaudited)
Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”) serves as the investment advisor to the First Trust Heitman Global Prime Real Estate ETF (the “Fund”). First Trust is responsible for the ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.
Sub-Advisor
Heitman Real Estate Securities LLC, a registered investment advisor (the “Sub-Advisor”) located in Chicago, Illinois, serves as the sub-advisor to the Fund with responsibility for North America. Heitman International Real Estate Securities HK Limited and Heitman International Real Estate Securities GmbH, each a registered investment advisor located in Hong Kong and Germany, respectively, and each an affiliate of the Sub-Advisor, serve as sub-sub-advisors to the Fund with responsibility for investments in the Asia-Pacific region and Europe.
Portfolio Management Team
Jerry Ehlinger, CFA – Managing Director of the Sub-Advisor and Lead Portfolio Manager in the Sub-Advisor’s North American Public Real Estate Securities group
John White – Managing Director of Heitman International Real Estate Securities HK Limited and Lead Portfolio Manager in Sub-Advisor’s the Asia-Pacific Public Real Estate Securities group
Jacques Perdrix – Senior Vice President of the Sub-Advisor’s European Public Real Estate Securities group
Andreas Welter – Senior Vice President of the Sub-Advisor’s European Public Real Estate Equity group
First Trust Heitman Global Prime Real Estate ETF (PRME)
Understanding Your Fund Expenses
April 30, 2019 (Unaudited)
As a shareholder of the First Trust Heitman Global Prime Real Estate ETF (the “Fund”), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended April 30, 2019.
Actual Expenses
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | Beginning
Account Value
November 1, 2018 | Ending
Account Value
April 30, 2019 | Annualized
Expense Ratio
Based on the
Six-Month
Period | Expenses Paid
During the
Six-Month
Period (a) |
| First Trust Heitman Global Prime Real Estate ETF (PRME) |
| Actual | $1,000.00 | $1,086.50 | 0.95% | $4.91 |
| Hypothetical (5% return before expenses) | $1,000.00 | $1,020.08 | 0.95% | $4.76 |
| (a) | Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (November 1, 2018 through April 30, 2019), multiplied by 181/365 (to reflect the six-month period). |
First Trust Heitman Global Prime Real Estate ETF (PRME)
Portfolio of Investments
April 30, 2019 (Unaudited)
| Shares | | Description | | Value |
| REAL ESTATE INVESTMENT TRUSTS (a) – 83.6% |
| | | Australia – 6.7% | | |
| 3,905 | | Dexus | | $34,410 |
| 4,584 | | Goodman Group | | 42,527 |
| 10,278 | | Scentre Group | | 27,678 |
| 20,126 | | Vicinity Centres | | 36,037 |
| | | | | 140,652 |
| | | France – 1.6% | | |
| 217 | | Gecina S.A. | | 32,395 |
| | | Hong Kong – 2.4% | | |
| 58,849 | | Champion REIT | | 49,811 |
| | | Japan – 5.6% | | |
| 37 | | GLP J-REIT | | 39,791 |
| 3 | | Kenedix Office Investment Corp. | | 20,064 |
| 9 | | Nippon Building Fund, Inc. | | 57,929 |
| | | | | 117,784 |
| | | Multinational – 2.2% | | |
| 273 | | Unibail-Rodamco-Westfield | | 46,925 |
| | | Singapore – 2.2% | | |
| 16,000 | | CapitaLand Commercial Trust | | 22,822 |
| 16,500 | | Mapletree Commercial Trust | | 23,414 |
| | | | | 46,236 |
| | | Spain – 4.1% | | |
| 7,867 | | Inmobiliaria Colonial Socimi S.A. | | 84,663 |
| | | United Kingdom – 4.7% | | |
| 5,139 | | British Land (The) Co., PLC | | 39,805 |
| 801 | | Derwent London PLC | | 33,111 |
| 6,105 | | Hammerson PLC | | 25,626 |
| | | | | 98,542 |
| | | United States – 54.1% | | |
| 1,058 | | Acadia Realty Trust | | 29,878 |
| 436 | | Alexandria Real Estate Equities, Inc. | | 62,082 |
| 636 | | AvalonBay Communities, Inc. | | 127,791 |
| 511 | | Boston Properties, Inc. | | 70,324 |
| 1,860 | | Brookfield Property REIT, Inc. | | 38,744 |
| 2,302 | | Empire State Realty Trust, Inc., Class A | | 35,589 |
| 120 | | Equinix, Inc. | | 54,564 |
| 1,646 | | Equity Residential | | 125,787 |
| 630 | | Federal Realty Investment Trust | | 84,326 |
| 1,817 | | Hudson Pacific Properties, Inc. | | 63,341 |
| 758 | | Kilroy Realty Corp. | | 58,298 |
| 820 | | Pebblebrook Hotel Trust | | 26,699 |
| 1,855 | | Prologis, Inc. | | 142,223 |
| 2,315 | | Rexford Industrial Realty, Inc. | | 87,715 |
| 582 | | Simon Property Group, Inc. | | 101,093 |
| Shares | | Description | | Value |
|
| | | United States (Continued) | | |
| 830 | | Washington Real Estate Investment Trust | | $23,439 |
| | | | | 1,131,893 |
| | | Total Real Estate Investment Trusts | | 1,748,901 |
| | | (Cost $1,629,700) | | |
| COMMON STOCKS (a) – 15.5% |
| | | Canada – 2.8% | | |
| 3,617 | | First Capital Realty, Inc. | | 57,642 |
| | | Hong Kong – 4.4% | | |
| 2,726 | | Sun Hung Kai Properties Ltd. | | 47,050 |
| 11,122 | | Swire Properties Ltd. | | 45,156 |
| | | | | 92,206 |
| | | Japan – 3.8% | | |
| 1,384 | | Mitsubishi Estate Co., Ltd. | | 23,302 |
| 1,587 | | Mitsui Fudosan Co., Ltd. | | 36,571 |
| 531 | | Sumitomo Realty & Development Co., Ltd. | | 19,558 |
| | | | | 79,431 |
| | | Sweden – 4.5% | | |
| 6,805 | | Fabege AB | | 94,474 |
| | | Total Common Stocks | | 323,753 |
| | | (Cost $304,100) | | |
| | | Total Investments – 99.1% | | 2,072,654 |
| | | (Cost $1,933,800) (b) | | |
| | | Net Other Assets and Liabilities – 0.9% | | 19,570 |
| | | Net Assets – 100.0% | | $2,092,224 |
|
| (a) | Portfolio securities are categorized based upon their country of incorporation. |
| (b) | Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of April 30, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $168,447 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $29,593. The net unrealized appreciation was $138,854. |
Page 6
See Notes to Financial Statements
First Trust Heitman Global Prime Real Estate ETF (PRME)
Portfolio of Investments (Continued)
April 30, 2019 (Unaudited)
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of April 30, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | Total
Value at
4/30/2019 | Level 1
Quoted
Prices | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
| Real Estate Investment Trusts* | $ 1,748,901 | $ 1,748,901 | $ — | $ — |
| Common Stocks* | 323,753 | 323,753 | — | — |
| Total Investments | $ 2,072,654 | $ 2,072,654 | $— | $— |
| * | See Portfolio of Investments for country breakout. |
Currency Exposure
Diversification | % of Total
Investments |
| USD | 54.6% |
| JPY | 9.5 |
| EUR | 7.9 |
| HKD | 6.8 |
| AUD | 6.8 |
| GBP | 4.8 |
| SEK | 4.6 |
| CAD | 2.8 |
| SGD | 2.2 |
| Total | 100.0% |
| Currency Abbreviations |
| AUD | Australian Dollar |
| CAD | Canadian Dollar |
| EUR | Euro |
| GBP | British Pound Sterling |
| HKD | Hong Kong Dollar |
| JPY | Japanese Yen |
| SEK | Swedish Krona |
| SGD | Singapore Dollar |
| USD | United States Dollar |
See Notes to Financial Statements
Page 7
First Trust Heitman Global Prime Real Estate ETF (PRME)
Statement of Assets and Liabilities
April 30, 2019 (Unaudited)
| ASSETS: | |
Investments, at value
(Cost $1,933,800)
| $ 2,072,654 |
Cash
| 16,347 |
Foreign currency (Cost $541)
| 539 |
| Receivables: | |
Dividends
| 3,215 |
Dividend reclaims
| 1,102 |
Total Assets
| 2,093,857 |
| LIABILITIES: | |
Investment advisory fees payable
| 1,633 |
Total Liabilities
| 1,633 |
NET ASSETS
| $2,092,224 |
| NET ASSETS consist of: | |
Paid-in capital
| $ 2,120,164 |
Par value
| 1,000 |
Accumulated distributable earnings (loss)
| (28,940) |
NET ASSETS
| $2,092,224 |
NET ASSET VALUE,per share
| $20.92 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)
| 100,002 |
Page 8
See Notes to Financial Statements
First Trust Heitman Global Prime Real Estate ETF (PRME)
Statement of Operations
For the Six Months Ended April 30, 2019 (Unaudited)
| INVESTMENT INCOME: | |
Dividends
| $ 33,535 |
Foreign withholding tax
| (1,728) |
Total investment income
| 31,807 |
| EXPENSES: | |
Investment advisory fees
| 9,348 |
Total expenses
| 9,348 |
NET INVESTMENT INCOME (LOSS)
| 22,459 |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | |
| Net realized gain (loss) on: | |
Investments
| (34,792) |
Foreign currency transactions
| 52 |
Net realized gain (loss)
| (34,740) |
| Net change in unrealized appreciation (depreciation) on: | |
Investments
| 214,330 |
Foreign currency translation
| (8) |
Net change in unrealized appreciation (depreciation)
| 214,322 |
NET REALIZED AND UNREALIZED GAIN (LOSS)
| 179,582 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
| $ 202,041 |
See Notes to Financial Statements
Page 9
First Trust Heitman Global Prime Real Estate ETF (PRME)
Statements of Changes in Net Assets
| | Six Months
Ended
4/30/2019
(Unaudited) | | Year
Ended
10/31/2018 |
| OPERATIONS: | | | |
Net investment income (loss)
| $ 22,459 | | $ 64,387 |
Net realized gain (loss)
| (34,740) | | (21,873) |
Net change in unrealized appreciation (depreciation)
| 214,322 | | (93,728) |
Net increase (decrease) in net assets resulting from operations
| 202,041 | | (51,214) |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | |
Investment operations
| (21,330) | | (73,927) |
| SHAREHOLDER TRANSACTIONS: | | | |
Proceeds from shares sold
| — | | 1,966,321 |
Cost of shares redeemed
| — | | (938,142) |
Net increase (decrease) in net assets resulting from shareholder transactions
| — | | 1,028,179 |
Total increase (decrease) in net assets
| 180,711 | | 903,038 |
| NET ASSETS: | | | |
Beginning of period
| 1,911,513 | | 1,008,475 |
End of period
| $2,092,224 | | $1,911,513 |
| CHANGES IN SHARES OUTSTANDING: | | | |
Shares outstanding, beginning of period
| 100,002 | | 50,002 |
Shares sold
| — | | 100,000 |
Shares redeemed
| — | | (50,000) |
Shares outstanding, end of period
| 100,002 | | 100,002 |
Page 10
See Notes to Financial Statements
First Trust Heitman Global Prime Real Estate ETF (PRME)
Financial Highlights
For a share outstanding throughout each period
| | Six Months
Ended
4/30/2019
(Unaudited) | | Year Ended October 31, | | Period
Ended
10/31/2016 (a) |
| 2018 | | 2017 |
Net asset value, beginning of period
| $ 19.11 | | $ 20.17 | | $ 19.67 | | $ 20.16 |
| Income from investment operations: | | | | | | | |
Net investment income (loss)
| 0.22 | | 1.08 | | 0.31 | | 0.40 |
Net realized and unrealized gain (loss)
| 1.80 | | (0.89) | | 1.13 | | (0.45) |
Total from investment operations
| 2.02 | | 0.19 | | 1.44 | | (0.05) |
| Distributions paid to shareholders from: | | | | | | | |
Net investment income
| (0.21) | | (1.25) | | (0.94) | | (0.44) |
Net asset value, end of period
| $20.92 | | $19.11 | | $20.17 | | $19.67 |
Total return (b)
| 10.70% | | 0.77% | | 7.48% | | (0.28)% |
| Ratios to average net assets/supplemental data: | | | | | | | |
Net assets, end of period (in 000’s)
| $ 2,092 | | $ 1,912 | | $ 1,008 | | $ 984 |
Ratio of total expenses to average net assets
| 0.95% (c) | | 0.95% | | 0.95% | | 0.95% (c) |
Ratio of net investment income (loss) to average net assets
| 2.28% (c) | | 5.55% | | 1.51% | | 2.10% (c) |
Portfolio turnover rate (d)
| 21% | | 85% | | 104% | | 78% |
| (a) | Inception date is November 11, 2015, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
| (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) | Annualized. |
| (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 11
Notes to Financial Statements
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
1. Organization
First Trust Exchange-Traded Fund IV (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on September 15, 2010, and is registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).
The Trust currently consists of nine funds that are offering shares. This report covers the First Trust Heitman Global Prime Real Estate ETF (the “Fund”), a non-diversified series of the Trust, which trades under the ticker PRME on the NYSE Arca, Inc. Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large specified blocks consisting of 50,000 shares called a “Creation Unit.” Creation Units are issued and redeemed in-kind for securities in which the Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund’s shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund. The investment objective of the Fund is to provide long-term total return. Under normal market conditions, the Fund will seek to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in U.S. and non-U.S. exchange-traded real estate securities, which includes real estate investment trusts (“REITs”), real estate operating companies (“REOCs”) and common stocks or depositary receipts of companies primarily engaged in the real estate industry. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors.
The Board of Trustees of the Trust has approved a transaction to combine the Fund with First Trust FTSE EPRA/NAREIT Developed Markets Real Estate Index Fund (“FFR”), an exchange-traded index fund that seeks investment results that correspond generally to the price and yield (before fees and expenses) of an equity index called the FTSE EPRA/NAREIT Developed Index. Pursuant to this transaction, Fund shareholders will become shareholders of FFR. FFR is a series of First Trust Exchange-Traded Fund II, which is an open-end management investment company organized as a Massachusetts business trust on July 6, 2006, and is registered wih the SEC under the 1940 Act.
In order for the transaction to occur, the shareholders of the Fund must approve the transaction. If approved, shares of the Fund would be exchanged, on a tax-free basis for federal income tax purposes, for shares of FFR with an equal aggregate NAV, and Fund shareholders will become shareholders of FFR.
A special meeting of shareholders of the Fund for the purpose of voting on the transaction will be held. If the required approval is obtained, it is anticipated that the transaction will be consummated shortly after the special shareholder meeting.
The Fund will continue sales and redemptions of shares as described in the Fund’s prospectus. Holders of shares of the Fund purchased after the record date set for the special meeting of shareholders will not be entitled to vote those shares at the special meeting.
2. Significant Accounting Policies
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the 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. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities.The Fund’s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The Fund’s investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent 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. (the “Advisor”), in accordance with valuation procedures adopted by the Trust’s Board of
Notes to Financial Statements (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Common stocks, REITs, and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market (“AIM”)) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust’s Board of Trustees or its delegate, the Advisor’s Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of 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 type of security; |
| 2) | the size of the holding; |
| 3) | the initial cost of the security; |
| 4) | transactions in comparable securities; |
| 5) | price quotes from dealers and/or third-party pricing services; |
| 6) | relationships among various securities; |
| 7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
| 8) | an analysis of the issuer’s financial statements; and |
| 9) | the existence of merger proposals or tender offers that might affect the value of the security. |
If the securities in question are foreign securities, the following additional information may be considered:
| 1) | the value of similar foreign securities traded on other foreign markets; |
| 2) | ADR trading of similar securities; |
| 3) | closed-end fund or exchange-traded fund trading of similar securities; |
| 4) | foreign currency exchange activity; |
| 5) | the trading prices of financial products that are tied to baskets of foreign securities; |
| 6) | factors relating to the event that precipitated the pricing problem; |
| 7) | whether the event is likely to recur; and |
| 8) | whether the effects of the event are isolated or whether they affect entire markets, countries or regions. |
Because foreign markets may be open on different days than the days during which investors may transact in the shares of the 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 securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE.
The 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. |
Notes to Financial Statements (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
| • | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
| o | Quoted prices for similar investments in active markets. |
| o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
| o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund’s investments as of April 30, 2019, 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 on the accrual basis.
Distributions received from the Fund’s investments in REITs may be comprised of return of capital, capital gains, and income. The actual character of the amounts received during the year are not known until after the REITs’ fiscal year end. 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.
C. Foreign Currency
The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statement of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are included in “Net change in unrealized appreciation (depreciation) on investments” on the Statement of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in “Net realized gain (loss) on foreign currency transactions” on the Statement of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in “Net realized gain (loss) on investments” on the Statement of Operations.
D. Dividends and Distributions to Shareholders
Dividends from net investment income, if any, are declared and paid quarterly by the Fund, 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.
Distributions from income and capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the 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 by the Fund during the fiscal year ended October 31, 2018, was as follows:
Notes to Financial Statements (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
| Distributions paid from: | |
Ordinary income
| $73,927 |
Capital gains
| — |
Return of capital
| — |
As of October 31, 2018, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income
| $10,432 |
Accumulated capital and other gain (loss)
| (129,936) |
Net unrealized appreciation (depreciation)
| (90,147) |
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.
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 years ended 2016, 2017, and 2018 remain open to federal and state audit. As of April 30, 2019, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2018, the Fund had $129,936 ofnon-expiring capital loss carryforwards for federal income tax purposes.
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2018, the Fund had no net ordinary losses.
F. Expenses
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (See Note 3).
G. New Accounting Pronouncement
On August 28, 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13 for these financial statements, which did not result in a material impact.
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.
The Fund and First Trust have retained Heitman Real Estate Securities LLC (“Heitman” or the “Sub-Advisor”) to serve as its investment sub-advisor and Heitman International Real Estate Securities HK Limited and Heitman International Real Estate Securities GmbH (the “Sub-Sub-Advisors”) to serve as the investment sub-sub-advisors. In this capacity, the Sub-Advisor is responsible for the selection and on-going monitoring of the securities in the Fund’s investment portfolio and overseeing the Sub-Sub-Advisors. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust will supervise Heitman and its management
Notes to Financial Statements (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
of the investment of the Fund’s assets and will pay Heitman for its services as the Fund’s sub-advisor. The Sub-Sub-Advisors’ fees are paid by the Sub-Advisor out of its sub-advisory fee. First Trust will also be 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 pursuant to a 12b-1 plan, if any, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. First Trust also provides fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which is covered under the annual unitary management fee.
The Trust has multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BBH is responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH is responsible for maintaining shareholder records for the Fund.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
4. Purchases and Sales of Securities
For the six months ended April 30, 2019, the cost of purchases and proceeds from sales of investments, excluding short term investments and in-kind transactions, were $409,360 and $424,084, respectively.
For the six months ended April 30, 2019, the Fund had no in-kind transactions.
5. Creations, Redemptions and Transaction Fees
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an “Authorized Participant”). In order to purchase Creation Units of the Fund, an Authorized Participant must deposit (i) a designated portfolio of securities and other instruments determined by First Trust (the “Deposit Securities”) and generally make or receive a cash payment referred to as the “Cash Component,” which is an amount equal to the difference between the NAV of the Fund shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BBH, as transfer agent, a creation transaction fee (the “Creation Transaction Fee”) regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and the countries in which the transactions are settled. The Creation Transaction Fee is currently $600. The price for each Creation Unit will equal the daily NAV per share 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 or stamp taxes. When the Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including 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 such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BBH, as transfer agent, a redemption transaction fee (the “Redemption Transaction Fee”), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in the Fund’s portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee is currently $600. The Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, the Fund may, in its discretion, reject any such request.
Notes to Financial Statements (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
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 to provide 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 March 31, 2020.
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 to 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.
Additional Information
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website atwww.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website atwww.sec.gov.
Portfolio Holdings
The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC’s website atwww.sec.gov. The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Risk Considerations
Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.
Concentration Risk. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
Credit Risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer’s ability to make such payments.
Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
Derivatives Risk. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF Risk. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than
Additional Information (Continued)
First Trust Heitman Global Prime Real Estate ETF (PRME)
April 30, 2019 (Unaudited)
net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
Index Constituent Risk. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods.
Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
Investment Companies Risk.To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations.
Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a Fund seeks to track an index, the Fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A Fund generally will not attempt to take defensive positions in declining markets.
This page intentionally left blank
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Heitman Real Estate Securities LLC
191 North Wacker Drive, Suite 2500
Chicago, IL 60606
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
Brown Brothers Harriman & Co.
50 Post Office Square
Boston, MA 02110
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Long Duration Opportunities ETF (LGOV)
Semi-Annual Report
For the Period
January 22, 2019
(Commencement of Operations)
through April 30, 2019
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2019
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 10
Statement of Operations...................................................... 11
Statement of Changes in Net Assets........................................... 12
Financial Highlights......................................................... 13
Notes to Financial Statements................................................ 14
Additional Information....................................................... 22
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Long Duration Opportunities ETF; hereinafter referred
to as the "Fund") to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. When evaluating the information included in this report, you are
cautioned not to place undue reliance on these forward-looking statements, which
reflect the judgment of the Advisor and its representatives only as of the date
hereof. We undertake no obligation to publicly revise or update these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of other risks of investing
in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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 and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2019
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust Long Duration Opportunities ETF (the "Fund"), which contains detailed
information about the Fund since its inception on January 22, 2019, to April 30,
2019. We encourage you to read this report carefully and discuss it with your
financial advisor.
If you were thinking (and acting) like a long-term investor over the last six
months, you were rewarded for your perseverance. As 2018 came to a close, the
"six weeks of madness" sent markets into negative territory for the year, then
rallied back in the first quarter of 2019 like a mirror image of the fourth
quarter of 2018. Global investors saw the worst quarter since 2011 and the best
quarter since 2012, as measured by the MSCI All Country World Index. Similarly,
U.S. markets reversed their course, and the S&P 500(R) Index, the Dow Jones
Industrial Average and the Nasdaq Composite Index returned 13.65%, 11.81% and
16.81%, respectively, for the first quarter of 2019.
By the close on April 30, 2019, U.S. equity markets continued their climb higher
as the S&P 500(R) Index was up 18.25%, giving it the best four-month start in
the last 30 years. The Federal Reserve provided momentum to the markets by
indicating no new rate hikes for the remainder of 2019 and bond markets gained
steam as reflected by the Bloomberg Barclays U.S. Aggregate Bond Index,
returning 2.94% for the first quarter of 2019 compared to 1.64% for the fourth
quarter of 2018.
Key economic indicators suggest a healthy outlook. The U.S. inflation rate
hovers near 2% as it has, on average, for the last decade; a higher than
expected U.S. gross domestic product growth rate of 3.2% was reported for March;
and the U.S. unemployment rate of 3.6% for April is at the lowest level since
December of 1969.
Having a long-term perspective when it comes to investing and looking for
opportunities when they arise is a drum worth beating, as no one can predict the
inevitable ups and downs that occur in the market. We continue to believe that
you should invest for the long term and be prepared for market movements, which
can happen at any time. You can do this by keeping current on your portfolio and
speaking regularly with your investment professional. Markets go up and they
also go down, but savvy investors are prepared for either through careful
attention to investment goals.
Thank you for giving First Trust the opportunity to be a part of your financial
plan. We value our relationship with you and will report on the Fund again in
six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
<PAGE>
FUND PERFORMANCE OVERVIEW (UNAUDITED)
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
The First Trust Long Duration Opportunities ETF's (the "Fund") primary
investment objective is to generate current income with a focus on preservation
of capital. Under normal market conditions, the Fund will invest at least 80% of
its net assets (including investment borrowings) in a portfolio of
investment-grade debt securities issued or guaranteed by the U.S. government,
its agencies or government-sponsored entities, including publicly-issued U.S.
Treasury securities and mortgage-related securities. The Fund may also invest in
exchange-traded funds ("ETFs") that principally invest in such securities. The
Fund may purchase mortgage-related securities in "to-be-announced" transactions
("TBA Transactions"), including mortgage dollar rolls.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PERFORMANCE
--------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
Inception (1/22/19)
to 4/30/18
<S> <C>
FUND PERFORMANCE
NAV 4.25%
Market Price 4.21%
INDEX PERFORMANCE
ICE BofAML 5+ Year US Treasury Index 2.73%
--------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative Total Returns" represent the total change in value
of an investment over the period indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint between the highest bid and the lowest offer on the stock
exchange on which shares of the Fund are listed for trading as of the time that
the Fund's NAV is calculated. Since shares of the Fund did not trade in the
secondary market until after its inception, for the period from inception to the
first day of secondary market trading in shares of the Fund, the NAV of the Fund
is used as a proxy for the secondary market trading price to calculate market
returns. NAV and market returns assume that all distributions have been
reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
-----------------------------------------------------------
% OF LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
U.S. Government Agency Mortgage-
Backed Securities 70.32%
U.S. Government Bonds and Notes 25.35
Exchange-Traded Funds 4.33
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
-----------------------------------------------------------
Government and Agency 93.48%
Not Rated 4.23
Cash 2.29
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(1)
-----------------------------------------------------------
Federal National Mortgage Association,
Pool TBA, 3.50%, 05/01/41 10.87%
U.S. Treasury Bond 2.88%, 05/15/43 10.72
U.S. Treasury Bond 2.25%, 08/15/46 9.38
U.S. Treasury Bond 2.75%, 11/15/42 5.25
Federal National Mortgage Association,
Series 2005-74, Class NZ, 6.00%, 09/25/35 5.24
Federal National Mortgage Association,
Pool AS8310, 3.00%, 11/01/46 5.23
iShares 20+ Year Treasury Bond ETF 4.33
Federal National Mortgage Association,
Series 2018-9, Class PL, 3.50%, 02/25/48 4.15
Government National Mortgage Association,
Series 2018-112, Class CG, 3.50%, 08/20/48 4.15
Federal National Mortgage Association,
Series 2012-93, Class LY, 2.50%, 09/25/42 3.96
-------
Total 63.28%
=======
-----------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
-----------------------------------------------------------
April 30, 2019 12.36 Years
High - April 30, 2019 12.36 Years
Low - March 31, 2019 11.07 Years
(1) Percentages are based on the long positions only. Money market funds are
excluded.
(2) The ratings are by Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO), of the
creditworthiness of an issuer with respect to debt obligations. Ratings
are measured highest to lowest on a scale that generally ranges from AAA
to D for long-term ratings and A-1+ to C for short-term ratings.
Investment grade is defined as those issuers that have a long-term credit
rating of BBB- or higher or a short-term credit rating of A-3 or higher.
The credit ratings shown relate to the credit worthiness of the issuers of
the underlying securities in the Fund, and not to the Fund or its shares.
U.S. Treasury and U.S. Agency mortgage-backed securities appear under
"Government and Agency". Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JANUARY 22, 2019 - APRIL 30, 2019
First Trust Long Duration ICE BofAML 5+ Year
Opportunities ETF US Treasury Index
1/22/19 $10,000 $10,000
4/30/19 10,425 10,273
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH APRIL 30, 2019
The following Frequency Distribution of Discounts and Premiums charts are
provided to show the frequency at which the bid/ask midpoint price for the Fund
was at a discount or premium to the daily NAV. The following tables are for
comparative purposes only and represent the period January 23, 2019
(commencement of trading) through April 30, 2019. Shareholders may pay more than
NAV when they buy Fund shares and receive less than NAV when they sell those
shares because shares are bought and sold at current market price. Data
presented represents past performance and cannot be used to predict future
results.
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
1/23/19 - 4/30/19 47 0 0 0
--------------------------------------------------------------------------------
NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV
--------------------------------------------------------------------------------
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
1/23/19 - 4/30/19 21 0 0 0
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2019 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to First Trust Long Duration Opportunities ETF (the "Fund" or "LGOV").
First Trust is responsible for the selection and ongoing monitoring of the
securities in the Fund's portfolio and certain other services necessary for the
management of the portfolio.
PORTFOLIO MANAGEMENT TEAM
JEREMIAH CHARLES - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER JIM SNYDER - SENIOR
VICE PRESIDENT, PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2019 (UNAUDITED)
As a shareholder of First Trust Long Duration Opportunities ETF (the "Fund"),
you incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service fees, if any, and other
Fund expenses. This Example is intended to help you understand your ongoing
costs of investing in the Fund and to compare these costs with the ongoing costs
of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended April 30, 2019.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE JANUARY 22, 2019 (a)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
JANUARY 22, 2019 (a) APRIL 30, 2019 IN THE PERIOD (b) APRIL 30, 2019 (b) (c)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
Actual $1,000.00 $1,042.50 0.65% $1.80
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
</TABLE>
(a) Inception date.
(b) Annualized expense ratio and expenses paid during the period do not
include fees and expenses of the underlying funds in which the Fund
invests.
(c) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (January
22, 2019 through April 30, 2019), multiplied by 99/365. Hypothetical
expenses are assumed for the most recent six-month period.
Page 6
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 63.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 42.9%
Federal Home Loan Mortgage Corporation
$ 300,774 Series 2003-2649, Class IM, IO............................... 7.00% 07/15/33 $ 73,483
264,000 Series 2010-3653, Class UJ................................... 5.00% 04/15/40 305,713
137,194 Series 2013-4255, Class SN,
1 Mo. LIBOR x -2.67 + 12.27% (a).......................... 5.60% 05/15/35 155,520
Federal National Mortgage Association
224,032 Series 2005-69, Class JI, IO................................. 6.00% 08/25/35 55,125
368,237 Series 2005-74, Class NZ..................................... 6.00% 09/25/35 486,601
1,435,885 Series 2005-113, Class AI, IO,
1 Mo. LIBOR x -1 + 7.23% (a).............................. 4.75% 01/25/36 268,345
159,204 Series 2008-94, Class JS,
1 Mo. LIBOR x -6 + 30.00% (a)............................. 15.14% 04/25/36 227,906
433,000 Series 2012-93, Class LY..................................... 2.50% 09/25/42 367,434
162,000 Series 2013-3, Class BC...................................... 2.50% 12/25/42 158,021
100,000 Series 2015-34, Class OK, PO................................. (b) 03/25/44 87,785
298,685 Series 2016-23, Class PL..................................... 3.00% 11/25/45 275,951
395,045 Series 2018-9, Class PL...................................... 3.50% 02/25/48 385,688
155,308 Series 2018-94, Class KZ..................................... 4.50% 01/25/49 169,333
82,222 Series 2018-94, Class LZ..................................... 4.50% 01/25/49 88,081
Government National Mortgage Association
249,246 Series 2009-32, Class ZA..................................... 5.50% 05/20/39 315,112
896,708 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 212,840
78,552 Series 2016-63, Class NZ..................................... 3.00% 05/20/46 62,529
403,000 Series 2018-112, Class CG.................................... 3.50% 08/20/48 385,233
401,605 Series 2018-125, Class KZ.................................... 3.50% 09/20/48 364,752
--------------
4,445,452
--------------
COMMERCIAL MORTGAGE-BACKED SECURITIES-- 3.1%
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates
15,436,610 Series 2010-K005, Class AX, IO (c)........................... 1.53% 11/25/19 86,548
8,075,569 Series 2014-K036, Class X1, IO (c)........................... 0.89% 10/25/23 234,913
--------------
321,461
--------------
PASS-THROUGH SECURITIES -- 17.0%
Federal National Mortgage Association
488,612 Pool AS8310.................................................. 3.00% 11/01/46 485,535
1,000,000 Pool TBA (d)................................................. 3.50% 05/01/41 1,009,121
Government National Mortgage Association........................
252,566 Pool 770005.................................................. 4.00% 11/15/33 266,709
--------------
1,761,365
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 6,528,278
(Cost $6,291,094) --------------
U.S. GOVERNMENT BONDS AND NOTES -- 22.7%
500,000 U.S. Treasury Bond.............................................. 2.75% 11/15/42 487,324
1,000,000 U.S. Treasury Bond.............................................. 2.88% 05/15/43 995,078
1,000,000 U.S. Treasury Bond.............................................. 2.25% 08/15/46 871,016
--------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 2,353,418
(Cost $2,294,819) --------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- --------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 3.9%
CAPITAL MARKETS -- 3.9%
3,250 iShares 20+ Year Treasury Bond ETF........................................................... $ 401,863
--------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 401,863
(Cost $390,810) --------------
MONEY MARKET FUNDS -- 19.6%
2,028,063 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class -
2.32% (e)................................................................................. 2,028,063
(Cost $2,028,063) --------------
TOTAL INVESTMENTS -- 109.2%.................................................................. 11,311,622
(Cost $11,004,786) (f)
NET OTHER ASSETS AND LIABILITIES -- (9.2)%................................................... (953,083)
--------------
NET ASSETS -- 100.0%......................................................................... $ 10,358,539
==============
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2019 (see Note 2C - Futures Contracts in the
Notes to Financial Statements):
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
----------------------------------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
U.S. 10-Year Ultra Treasury Notes Long 1 Jun-2019 $ 131,781 $ 277
U.S. Treasury Long Bond Futures Long 1 Jun-2019 147,469 (130)
------------ ------------
$ 279,250 $ 147
============ ============
</TABLE>
-----------------------------
(a) Inverse floating rate security.
(b) Zero coupon security.
(c) Collateral Strip Rate bond. Coupon is based on the weighted net interest
rate of the investment's underlying collateral. The interest rate resets
periodically.
(d) All or portion of this security is part of a mortgage dollar roll
agreement (see Note 2H- Mortgage Dollar Rolls and TBA Transactions in the
Notes to Financial Statements).
(e) Rate shown reflects yield as of April 30, 2019.
(f) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposess. As of April 30, 2019, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $312,977 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $5,994. The net unrealized appreciation was
$306,983. The amounts presented are inclusive of derivative contracts.
IO - Interest-Only Security - Principal amount shown represents par value
on which interest payments are based.
LIBOR - London Interbank Offered Rate
PO - Principal-Only Security
TBA - To-Be-Announced Security
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2019 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
<TABLE>
<CAPTION>
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed
Securities...................................... $ 6,528,278 $ -- $ 6,528,278 $ --
U.S. Government Bonds and Notes.................... 2,353,418 -- 2,353,418 --
Exchange-Traded Funds*............................. 401,863 401,863 -- --
Money Market Funds................................. 2,028,063 2,028,063 -- --
-------------- -------------- -------------- --------------
Total Investments.................................. 11,311,622 2,429,926 8,881,696 --
Futures Contracts**................................ 277 277 -- --
-------------- -------------- -------------- --------------
Total.............................................. $ 11,311,899 $ 2,430,203 $ 8,881,696 $ --
============== ============== ============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2019 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Futures Contracts**................................ $ (130) $ (130) $ -- $ --
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
** Includes cumulative appreciation/depreciation on futures contracts as
reported in the Futures Contracts table. Only the current day's variation
margin is presented on the Statement of Assets and Liabilities.
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 11,311,622
Cash................................................................... 99,424
Cash segregated as collateral for open futures contracts............... 118,002
Receivables:
Interest............................................................ 72,607
Dividends........................................................... 4,525
Variation margin.................................................... 777
--------------
Total Assets..................................................... 11,606,957
--------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 1,242,892
Investment advisory fees............................................ 5,526
--------------
Total Liabilities................................................ 1,248,418
--------------
NET ASSETS............................................................. $ 10,358,539
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 10,003,550
Par value.............................................................. 4,000
Accumulated distributable earnings (loss).............................. 350,989
--------------
NET ASSETS............................................................. $ 10,358,539
==============
NET ASSET VALUE, per share............................................. $ 25.90
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 400,002
==============
Investments, at cost................................................... $ 11,004,786
==============
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 22, 2019 (A) THROUGH APRIL 30, 2019 (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST:
<S> <C>
Interest............................................................... $ 64,015
Dividends.............................................................. 18,978
--------------
Total investment income............................................. 82,993
--------------
EXPENSES:
Investment advisory fees............................................... 17,703
--------------
Total expenses...................................................... 17,703
--------------
NET INVESTMENT INCOME (LOSS)........................................... 65,290
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 25,659
Futures contracts................................................... 17,723
Purchased options contracts......................................... 134
--------------
Net realized gain (loss)............................................... 43,516
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 306,836
Futures contracts................................................... 147
--------------
Net change in unrealized appreciation (depreciation)................... 306,983
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 350,499
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 415,789
==============
</TABLE>
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 22, 2019 (a)
THROUGH
APRIL 30, 2019
(UNAUDITED)
--------------------
OPERATIONS:
<S> <C>
Net investment income (loss)........................................... $ 65,290
Net realized gain (loss)............................................... 43,516
Net change in unrealized appreciation (depreciation)................... 306,983
--------------
Net increase (decrease) in net assets resulting from operations........ 415,789
--------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (64,800)
--------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 10,007,550
Cost of shares redeemed................................................ --
--------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 10,007,550
--------------
Total increase (decrease) in net assets................................ 10,358,539
NET ASSETS:
Beginning of period.................................................... --
--------------
End of period.......................................................... $ 10,358,539
==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ --
Shares sold............................................................ 400,002
Shares redeemed........................................................ --
--------------
Shares outstanding, end of period...................................... 400,002
==============
</TABLE>
(a) Inception date is consistent with the commencement of investment
operations and is the date the initial creation units were established.
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
PERIOD
ENDED
4/30/2019 (A)
(UNAUDITED)
------------
Net asset value, beginning of period $ 25.00
----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.16
Net realized and unrealized gain (loss) 0.90
----------
Total from investment operations 1.06
----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16)
----------
Net asset value, end of period $ 25.90
==========
TOTAL RETURN (b) 4.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 10,359
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (c) 0.65% (d)
Ratio of net investment income (loss) to
average net assets 2.40% (d)
Portfolio turnover rate (e) 82% (f)
(a) Inception date is January 22, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(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 indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. The ratio does
not include these indirect fees and expenses.
(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. (f) The portfolio turnover rate not including mortgage
dollar rolls was 49%.
See Notes to Financial Statements Page 13
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund IV (the "Trust") is an open-end management
investment company organized as a Massachusetts business trust on September 15,
2010, and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of nine funds that are offering shares. This report
covers the First Trust Long Duration Opportunities ETF (the "Fund"), a
non-diversified series of the Trust, which trades under the ticker "LGOV" on the
NYSE Arca, Inc. ("NYSE Arca"). Unlike conventional mutual funds, the Fund issues
and redeems shares on a continuous basis, at net asset value ("NAV"), only in
large specified blocks consisting of 50,000 shares called a "Creation Unit."
Creation Units are generally issued and redeemed for cash and, in certain
circumstances, in-kind for securities in which the Fund invests, and only to and
from broker-dealers and large institutional investors that have entered into
participation agreements. Except when aggregated in Creation Units, the Fund's
shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund ("ETF"). The Fund's primary
investment objective is to generate current income with a focus on preservation
of capital. The Fund seeks to achieve its investment objectives by investing,
under normal market conditions, at least 80% of its net assets (including
investment borrowings) in a portfolio of investment-grade debt securities issued
or guaranteed by the U.S. government, its agencies or government-sponsored
entities, including publicly-issued U.S. Treasury securities and
mortgage-related securities. The Fund may also invest in exchange-traded funds
("ETFs") that principally invest in such securities. The Fund's investments in
mortgage-related securities may include investments in fixed or adjustable-rate
securities structured as "pass-through" securities and collateralized mortgage
obligations, including residential and commercial mortgage-backed securities,
stripped mortgage-backed securities and real estate mortgage investment
conduits. The Fund will invest in mortgage-related securities issued or
guaranteed by the U.S. government, its agencies (such as Ginnie Mae), and U.S.
government-sponsored entities (such as FannieMae and FreddieMac). The Fund may
purchase government-sponsored mortgage-related securities in "to-be-announced"
transactions ("TBA Transactions"), including mortgage dollar rolls. The Fund
intends to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Fund's investment advisor, First Trust
Advisors L.P. ("First Trust" or the "Advisor"). In addition to its investment in
securities issued or guaranteed by the U.S. government, its agencies and
government-sponsored entities, the Fund may invest up to 20% of its net assets
in other types of debt securities, including privately-issued, non-agency
sponsored asset-backed and mortgage-related securities, futures contracts,
options, swap agreements, cash and cash equivalents, and ETFs that invest
principally in fixed income securities. Further, the Fund may enter into short
sales as part of its overall portfolio management strategy, or to offset a
potential decline in the value of a security; however, the Fund does not expect,
under normal market conditions, to engage in short sales with respect to more
than 30% of the value of its net assets. Although the Fund intends to invest
primarily in investment grade securities, the Fund may invest up to 20% of its
net assets in securities of any credit quality, including securities that are
below investment grade, which are also known as high yield securities, or
commonly referred to as "junk" bonds, or unrated securities that have not been
judged by the Advisor to be of comparable quality to rated investment grade
securities. In the case of a split rating between one or more of the nationally
recognized statistical rating organizations, the Fund will consider the highest
rating. The Fund targets a weighted average effective duration of eight or more
years.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the 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 and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid), by
the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Advisor's Pricing Committee, in
Page 14
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
accordance with valuation procedures adopted by the Trust's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
U.S. government securities, mortgage-backed securities, asset-backed
securities and other debt securities are fair valued on the basis of
valuations provided by dealers who make markets in such securities or by a
third-party pricing service approved by the Trust's Board of Trustees,
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.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Exchange-traded options contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded options contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of 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:
Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities of the
issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
12) other relevant factors.
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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2019, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
The Fund invests in interest-only securities. For these securities, if there is
a change in the estimated cash flows, based on an evaluation of current
information, then the estimated yield is adjusted. Additionally, if the
evaluation of current information indicates a permanent impairment of the
security, the cost basis of the security is written down and a loss is
recognized. Debt obligations may be placed on non-accrual status and the related
interest income may be reduced by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectability of interest is reasonably assured.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. The
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed-delivery or forward purchase commitments until
payment is made. At April 30, 2019, the Fund had no when-issued or
delayed-delivery securities. At April 30, 2019, the Fund held $1,009,121 of
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
Page 16
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
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. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are included in "Variation margin" receivable or payable 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.
D. OPTIONS CONTRACTS
In the normal course of pursuing its investment objectives, the Fund may invest
up to 20% of its net assets in derivative instruments in connection with hedging
strategies. The Fund may invest in exchange-listed options on U.S. Treasury
securities, exchange-listed options on U.S. Treasury futures contracts and
exchange-listed U.S. Treasury futures contracts. The Fund uses derivative
instruments primarily to hedge interest rate risk and actively manage interest
rate exposure. The primary risk exposure is interest rate risk.
The Fund may purchase (buy) or write (sell) put and call options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position. A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price prior to the
expiration of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the opposite is true. Prior to
exercise or expiration, a futures option contract may be closed out by an
offsetting purchase or sale of a futures option of the same series. When the
Fund writes (sells) an option, an amount equal to the premium received by the
Fund is included in "Options contracts written, at value" on the Statement of
Assets and Liabilities. When the Fund purchases (buys) an option, the premium
paid represents the cost of the option, which is included in "Premiums paid on
options contracts purchased" on the Statement of Assets and Liabilities. Options
are marked-to-market daily and their value is affected by changes in the value
of the underlying security, changes in interest rates, changes in the actual or
perceived volatility of the securities markets and the underlying securities,
and the remaining time to the option's expiration. The value of options may also
be adversely affected if the market for the options becomes less liquid or the
trading volume diminishes.
The Fund uses options on futures contracts in connection with hedging
strategies. Generally, these strategies are applied under the same market and
market sector conditions in which the Fund uses put and call options on
securities. The purchase of put options on futures contracts is analogous to the
purchase of puts on securities so as to hedge the Fund's securities holdings
against the risk of declining market prices. The writing of a call option or the
purchasing of a put option on a futures contract constitutes a partial hedge
against declining prices of securities which are deliverable upon exercise of
the futures contract. If the price at expiration of a written call option is
below the exercise price, the Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Fund's holdings of securities. If the price when the option is
exercised is above the exercise price, however, the Fund will incur a loss,
which may be offset, in whole or in part, by the increase in the value of the
securities held by the Fund that were being hedged. Writing a put option or
purchasing a call option on a futures contract serves as a partial hedge against
an increase in the value of the securities the Fund intends to acquire. Realized
gains and losses on written options are included in "Net realized gain (loss) on
written options contracts" on the Statement of Operations. Realized gains and
losses on purchased options are included in "Net realized gain (loss) on
purchased options contracts" on the Statement of Operations.
The Fund is required to deposit and maintain margin with respect to put and call
options on futures contracts written by it. Such margin deposits will vary
depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option and other
futures positions held by the Fund. The Fund will pledge in a segregated account
at the Fund's custodian, liquid assets, such as cash, U.S. government securities
or other high-grade liquid debt obligations equal in value to the amount due on
the underlying obligation. Such segregated assets will be marked-to-market
daily, and additional assets will be pledged in the segregated account whenever
the total value of the pledged assets falls below the amount due on the
underlying obligation.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
The risks associated with the use of options on future contracts include the
risk that the Fund may close out its position as a writer of an option only if a
liquid secondary market exists for such options, which cannot be assured. The
Fund's successful use of options on futures contracts depends on the Advisor's
ability to correctly predict the movement in prices on futures contracts and the
underlying instruments, which may prove to be incorrect. In addition, there may
be imperfect correlation between the instruments being hedged and the futures
contract subject to option.
As of April 30, 2019, the Fund had no open options contracts.
E. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.
F. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
G. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage-backed securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security known as an IO Security and all
of the principal is distributed to holders of another type of security known as
a PO Security. These securities, if any, are identified on the Portfolio of
Investments.
H. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS
The Fund may invest, without limitation, in mortgage dollar rolls. The Fund
intends to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Fund's investment advisor. In a mortgage
dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery
on a specified date and simultaneously contract to repurchase (or sell)
substantially similar (same type, coupon and maturity) securities on a future
date. Mortgage dollar rolls are recorded as a separate purchase and sale in the
Fund. The Fund may also invest in TBA Transactions. A TBA Transaction is a
method of trading mortgage-backed securities. TBA Transactions generally are
conducted in accordance with widely-accepted guidelines which establish commonly
observed terms and conditions for execution, settlement and delivery. In a TBA
Transaction, the buyer and the seller agree on general trade parameters such as
agency, settlement date, par amount and price.
I. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by
the Fund. The Fund distributes its net realized capital gains, if any, to
shareholders at least annually.
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.
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
J. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. As of April 30, 2019, 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.
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.
K. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
L. NEW ACCOUNTING PRONOUNCEMENT
On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Disclosure Framework - Changes to the Disclosure Requirements for Fair Value
Measurement," which amends the fair value measurement disclosure requirements of
ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified
disclosure requirements of ASC 820. In addition, the amendments clarify that
materiality is an appropriate consideration of entities when evaluating
disclosure requirements. The ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods therein. Early adoption is
permitted for any eliminated or modified disclosures upon issuance of this ASU.
The Fund has early adopted ASU 2018-13 for these financial statements, which did
not result in a material impact.
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, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), 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. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases of U.S. Government securities and non-U.S. Government
securities, excluding short-term investments, for the fiscal period ended April
30, 2019, were $14,529,651 and $948,183, respectively. The proceeds from sales
and paydowns of U.S. Government securities and non-U.S. Government securities,
excluding short-term investments, for the fiscal period ended April 30, 2019,
were $6,018,983 and $557,020, respectively.
For the fiscal period ended April 30, 2019, the Fund had no in-kind
transactions.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2019, the primary underlying risk exposure and the location of these
instruments as presented on the Statement of Assets and Liabilities.
<TABLE>
<CAPTION>
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------------ -----------------------------------
DERIVATIVE RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
------------------ ------------- ----------------------- ---------- ----------------------- ---------
<S> <C> <C> <C> <C> <C>
Futures Interest Unrealized appreciation Unrealized depreciation
rate risk on futures contracts* $277 on futures contracts* $130
</TABLE>
* Includes cumulative appreciation/depreciation on futures contracts as reported
in the Portfolio of Investments. Only the current day's variation margin is
reported within the Statement of Assets and Liabilities.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the fiscal period
ended April 30, 2019, on derivative instruments, as well as the primary
underlying risk exposure associated with the instruments.
STATEMENT OF OPERATIONS LOCATION INTEREST RATE RISK
--------------------------------------------------------------------------------
Net realized gain (loss) on:
Futures contracts $ 17,723
Purchased options contracts 134
Net change in unrealized appreciation (depreciation) on:
Futures contracts 147
For the fiscal period ended April 30, 2019, the notional value of futures
contracts opened and closed were $3,779,027 and $3,499,924, respectively.
During the fiscal period ended April 30, 2019, the premiums for purchased
options contracts opened were $910 and the premiums for purchased options
contracts closed, exercised and expired were $910.
The Fund does not have the right to offset financial assets and financial
liabilities related to futures and options contracts on the Statement of Assets
and Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size
aggregations of 50,000 shares in transactions with broker dealers or large
institutional investors that have entered into a participation agreement (an
"Authorized Participant"). Due to the nature of the Fund's investments, the
Fund's Creation Units are generally issued and redeemed for cash, although
Creation Units may be issued in-kind for securities in which the Fund invests in
limited circumstances. Authorized Participants purchasing Creation Units must
pay to BNYM, as transfer agent, a creation transaction fee (the "Creation
Transaction Fee") regardless of the number of Creation Units purchased in the
transaction. The Creation Transaction Fee may vary and is based on the
composition of the securities included in the Fund's portfolio and/or the
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
countries in which the transactions are settled. The Creation Transaction Fee is
currently $250. The price for each Creation Unit will equal the daily NAV per
share 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 or stamp taxes. When Creation Units are issued for cash, the
Authorized Participant may also be assessed an amount to cover the cost of
purchasing portfolio securities, including 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 such securities. Authorized
Participants redeeming Creation Units must pay to BNYM, as transfer agent, a
standard redemption transaction fee (the "Redemption Transaction Fee"),
regardless of the number of Creation Units redeemed in the transaction. The
Redemption Transaction Fee may vary and is based on the composition of the
securities included in the Fund's portfolio and/or the countries in which the
transactions are settled. The Redemption Transaction Fee is currently $250. When
shares are redeemed for cash, the Authorized Participant may also be assessed an
amount to cover other costs, including 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 portfolio securities sold
in connection with the redemption.
7. 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 December 31, 2020.
8. 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.
9. 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.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE
APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS
RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW
APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT
IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY
FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE,
RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF
ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT
WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO
REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
Page 22
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more
indices. As a result, such a fund may be included in one or more index-tracking
exchange-traded funds or mutual funds. Being a component security of such a
vehicle could greatly affect the trading activity involving a fund, the size of
the fund and the market volatility of the fund. Inclusion in an index could
significantly increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities; lack
of liquidity; currency exchange rates; excessive taxation; government seizure of
assets; different legal or accounting standards; and less government supervision
and regulation of exchanges in foreign countries. Investments in non-U.S.
securities may involve higher costs than investments in U.S. securities,
including higher transaction and custody costs, as well as additional taxes
imposed by non-U.S. governments. These risks may be heightened for securities of
companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
Page 23
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees (the "Board") of First Trust Exchange-Traded Fund IV (the
"Trust"), including the Independent Trustees, unanimously approved the
Investment Management Agreement (the "Agreement") with First Trust Advisors L.P.
(the "Advisor"), on behalf of First Trust Long Duration Opportunities ETF (the
"Fund"), for an initial two-year term at a meeting held on June 11, 2018. The
Board determined that the Agreement is in the best interests of the Fund in
light of the nature, extent and quality of the services expected to be provided
and such other matters as the Board considered to be relevant in the exercise of
its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreement for
the Fund, the Independent Trustees received a report from the Advisor in advance
of the Board meeting responding to a request for information provided on behalf
of the Independent Trustees that, among other things, outlined the services to
be provided by the Advisor to the Fund (including the relevant personnel
responsible for these services and their experience); the proposed unitary fee
rate payable by the Fund as compared to fee rates charged to a peer group of
funds (all of which were exchange-traded funds ("ETFs")) compiled by Management
Practice, Inc. ("MPI"), an independent source (the "Peer Group"), and as
compared to fee rates charged to other ETFs managed by the Advisor; the
estimated expenses of the Fund as compared to expense ratios of the peer funds
in the Peer Group; the nature of the expenses to be incurred in providing
services to the Fund and the potential for economies of scale, if any; financial
data on the Advisor; any fall-out benefits to the Advisor and its affiliate,
First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance
program. The Independent Trustees also met separately with their independent
legal counsel to discuss the information provided by the Advisor. The Board
applied its business judgment to determine whether the arrangement between the
Trust and the Advisor is a reasonable business arrangement from the Fund's
perspective.
In evaluating whether to approve the Agreement for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor under the Agreement and considered that employees of the Advisor provide
management services to other ETFs and to other investment companies in the First
Trust fund complex with diligence and care. The Board considered that the
Advisor will be responsible for the overall management and administration of the
Fund and reviewed all of the services to be 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 Fund will be an actively-managed ETF not designed
to track the performance of an index and considered that the Advisor manages
other ETFs with a similar structure in the First Trust fund complex. The Board
noted that the Advisor's Mortgage Securities Team will be responsible for the
day-to-day management of the Fund and considered the background and experience
of the members of the Mortgage Securities Team. The Board considered that the
Advisor applies the same oversight model internally with the Mortgage Securities
Team as it uses for overseeing external sub-advisors, including portfolio risk
monitoring and performance review. In reviewing the services to be 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 objective, policies and restrictions. At the meeting, the
Trustees received a presentation from a representative of the Mortgage
Securities Team and were able to ask questions about the proposed investment
strategies for the Fund, including the hedging strategy. Since the Fund had yet
to commence investment operations, the Board could not consider the historical
investment performance of the Fund. In light of the information presented and
the considerations made, the Board concluded that the nature, extent and quality
of the services to be provided to the Fund by the Advisor under the Agreement
are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Agreement for the services to be provided. The Board noted that, under the
unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to
an annual rate of 0.65% of its average daily net assets. The Board noted that
the Advisor would be 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 payments under the Agreement,
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. The Board received and
reviewed information for the Fund showing the advisory or unitary fee rates and
expense ratios of the peer funds in the Peer Group, as well as advisory and
unitary fee rates charged by the Advisor to other ETFs it manages. Because the
Fund's Peer Group included peer funds that pay unitary fees and because the Fund
will pay 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 its Peer Group. With respect to the Peer
Group, the Board discussed with representatives of the Advisor how the Peer
Group was assembled and how the Fund compared and differed from the peer funds.
Page 24
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2019 (UNAUDITED)
The Board took this information into account in considering the peer data. The
Board noted that the Fund's unitary fee rate was in line with the total (net)
expense ratios of comparable actively-managed fixed income ETFs advised by the
Advisor. In light of the information considered and the nature, extent and
quality of the services expected to be provided to the Fund under the Agreement,
the Board determined that the proposed unitary fee rate for the Fund was fair
and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass the benefits of any economies of scale on to shareholders as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor, but that the unitary fee
structure provides a level of certainty in expenses for the Fund. The Board
noted that the Advisor has continued to invest in infrastructure and personnel
for the First Trust fund complex. The Board took the types of costs to be borne
by the Advisor in connection with its services to be performed for the Fund
under the Agreement into consideration and noted that the Advisor was unable to
estimate the profitability of the Agreement for the Fund to the Advisor at this
time. The Board considered fall-out benefits described by the Advisor that may
be realized from its and FTP's relationship with the Fund. The Board considered
that the Advisor had identified as a fall-out benefit to the Advisor and FTP
their exposure to investors and brokers who, absent their exposure to the Fund,
may have had no dealings with the Advisor or FTP. The Board also noted that the
Advisor would not utilize soft dollars in connection with its management of the
Fund's portfolio. The Board concluded that the character and amount of potential
fall-out 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 are fair and reasonable and that the approval of the Agreement
is in the best interests of the Fund. No single factor was determinative in the
Board's analysis.
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
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Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Items 6. Investments.
| (a) | | Schedules of Investments in securities of unaffiliated issuers as of the close of the reporting period are included as part of the report to shareholders filed under Item 1 of this form. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(2) | | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (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 IV | | |
| By (Signature and Title)* | | /s/ James M. Dykas | | |
| | | James M. Dykas, President and Chief Executive Officer
(principal executive officer) | | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | | /s/ James M. Dykas | | |
| | | James M. Dykas, President and Chief Executive Officer
(principal executive officer) | | |
| By (Signature and Title)* | | /s/ Donald P. Swade | | |
| | | Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer) | | |
* Print the name and title of each signing officer under his or her signature.
