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, 2020
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)
First Trust EIP Carbon Impact
ETF (ECLN)
Semi-Annual Report
For the Six Months Ended
April 30, 2020
Energy Income Partners, LLC
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<PAGE>
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview
First Trust North American Energy Infrastructure Fund (EMLP).............. 2
First Trust EIP Carbon Impact ETF (ECLN).................................. 4
Notes to Fund Performance Overview........................................... 6
Portfolio Management......................................................... 7
Understanding Your Fund Expenses............................................. 8
Portfolio of Investments
First Trust North American Energy Infrastructure Fund (EMLP).............. 9
First Trust EIP Carbon Impact ETF (ECLN).................................. 11
Statements of Assets and Liabilities......................................... 13
Statements of Operations..................................................... 14
Statements of Changes in Net Assets.......................................... 15
Financial Highlights......................................................... 16
Notes to Financial Statements................................................ 17
Additional Information....................................................... 23
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
any series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and/or Sub-Advisor and their respective representatives
only as of the date hereof. We undertake no obligation to publicly revise or
update these forward-looking statements to reflect events and circumstances that
arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in each Fund are spelled out in 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 EXCHANGE-TRADED FUND IV
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First
Trust North American Energy Infrastructure Fund and the First Trust EIP Carbon
Impact ETF (the "Funds"), which contains detailed information about the Funds
for the six months ended April 30, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
The First Trust North American Energy Infrastructure Fund (the "Fund") is an
actively managed exchange-traded fund. The Fund's investment objective is to
seek total return. The Fund will invest, 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, 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 and Canada.
<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)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -16.05% -14.36% -1.96% 3.98% -9.43% 35.90%
Market Price -16.16% -14.41% -1.99% 3.96% -9.55% 35.75%
INDEX PERFORMANCE
Blended Benchmark(1) -18.15% -17.90% -1.94% 2.89% -9.35% 25.13%
S&P 500(R) Index -3.16% 0.86% 9.12% 12.53% 54.74% 152.84%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 6.)
-----------------------------
(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. The Blended Benchmark returns are
calculated by using the monthly return of the two indices during each
period shown above. At the beginning of each month the two indices are
rebalanced to a 50-50 ratio to account for divergence from that ratio that
occurred during the course of each month. The monthly returns are then
compounded for each period shown above, giving the performance for the
Blended Benchmark for each period shown above.
Page 2
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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 39.44%
Natural Gas Transmission 30.89
Petroleum Product Transmission 18.22
Crude Oil Transmission 10.10
Coal 0.23
Other 1.12
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
TC Energy Corp. 9.44%
Enterprise Products Partners, L.P. 8.11
NextEra Energy Partners, L.P. 5.79
Kinder Morgan, Inc. 4.99
ONEOK, Inc. 4.92
TC PipeLines, L.P. 4.32
NextEra Energy, Inc. 4.14
Public Service Enterprise Group, Inc. 3.93
Plains GP Holdings L.P., Class A 3.76
Magellan Midstream Partners, L.P. 3.72
-------
Total 53.12%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 20, 2012 - APRIL 30, 2020
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 10,582 10,495
4/30/13 12,379 12,241 12,008
10/31/13 12,138 12,064 13,347
4/30/14 13,341 13,381 14,463
10/31/14 14,861 14,383 15,652
4/30/15 15,005 13,803 16,341
10/31/15 12,793 12,040 16,467
4/30/16 13,004 12,531 16,538
10/31/16 14,330 13,087 17,209
4/30/17 14,896 14,126 19,501
10/31/17 14,768 13,897 21,276
4/30/18 13,914 13,586 22,089
10/31/18 14,171 14,142 22,840
4/30/19 15,869 15,242 25,068
10/31/19 16,188 15,288 26,111
4/30/20 13,590 12,513 25,286
</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, 2020
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, 2014 through
April 30, 2020. 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%
11/1/14 - 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 - 10/31/19 169 4 0 1 76 1 0 0
11/1/19 - 4/30/20 77 0 1 0 45 0 1 0
</TABLE>
Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
The First Trust EIP Carbon Impact ETF (the "Fund") seeks to achieve a
competitive risk-adjusted total return balanced between dividends and capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (including investment borrowings) in the equity securities of
companies identified by the Fund's investment sub-advisor, Energy Income
Partners, LLC ("EIP" or the "Sub Advisor"), as having or seeking to have a
positive carbon impact.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE
TOTAL RETURNS
6 Months Ended Inception (8/19/19)
4/30/20 to 4/30/20
<S> <C> <C>
FUND PERFORMANCE
NAV -4.72% -1.83%
Market Price -4.91% -1.98%
INDEX PERFORMANCE
PHLX Utility Sector Index -8.61% -4.15%
S&P 500(R) Index -3.16% 0.95%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Fund Performance Overview on page 6.)
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EIP CARBON IMPACT ETF (ECLN) (CONTINUED)
-----------------------------------------------------------
% OF TOTAL LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS
-----------------------------------------------------------
Electric Power & Transmission 74.28%
Natural Gas Transmission 20.81
Petroleum Product Transmission 1.29
Other 3.62
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
NextEra Energy Partners, L.P. 8.41%
TC PipeLines, L.P. 7.29
NextEra Energy, Inc. 6.18
Eversource Energy 5.46
Xcel Energy, Inc. 4.97
Alliant Energy Corp. 4.91
Sempra Energy 4.67
CMS Energy Corp. 4.53
Fortis, Inc. 4.51
Public Service Enterprise Group, Inc. 4.01
-------
Total 54.94%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2019 - APRIL 30, 2020
First Trust EIP PHLX Utility S&P 500(R)
Carbon Impact ETF Sector Index Index
<S> <C> <C> <C>
8/19/19 $10,000 $10,000 $10,000
10/31/19 10,304 10,489 10,424
4/30/20 9,817 9,585 10,095
</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, 2020
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 20, 2019 (commencement
of trading) through April 30, 2020. 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%
8/20/19 - 10/31/19 27 0 0 0 25 0 0 0
11/1/19 - 4/30/20 24 0 0 0 100 0 0 0
</TABLE>
Page 5
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NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint 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 each 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
each Fund is used as a proxy for the secondary market trading price to calculate
market returns. NAV and market returns assume that all distributions have been
reinvested in each Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 6
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PORTFOLIO MANAGEMENT
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors, L.P. ("First Trust") is the investment advisor to the
First Trust North American Energy Infrastructure Fund ("EMLP") and the First
Trust EIP Carbon Impact ETF ("ECLN") (each a "Fund"). First Trust is responsible
for the ongoing monitoring of each Fund's investment portfolio, managing each
Fund's business affairs and providing certain administrative services necessary
for the management of each Fund.
SUB-ADVISOR
ENERGY INCOME PARTNERS, LLC
Energy Income Partners, LLC ("EIP" or the "Sub-Advisor"), located in Westport,
CT, serves as the investment sub-advisor to the Funds. EIP was founded in 2003
and provides 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. As
of April 30, 2020, EIP had approximately $4.1 billion of assets under management
or supervision. 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 Funds, 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, CEO AND PRINCIPAL 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 7
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND IV
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (UNAUDITED)
As a shareholder of First Trust North American Energy Infrastructure Fund or
First Trust EIP Carbon Impact ETF (each a "Fund" and collectively, the "Funds"),
you incur two types of costs: (1) transaction costs; and (2) ongoing costs,
including management fees, distribution and/or service (12b-1) fees, if any, and
other Fund expenses. This Example is intended to help you understand your
ongoing costs of investing in the Funds and to compare these costs with the
ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended April 30, 2020.
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 each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Funds and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
NOVEMBER 1, 2019 APRIL 30, 2020 PERIOD PERIOD (a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NORTH AMERICAN ENERGY
INFRASTRUCTURE FUND (EMLP)
Actual $1,000.00 $ 839.50 0.95% $4.34
Hypothetical (5% return before expenses) $1,000.00 $1,020.14 0.95% $4.77
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
Actual $1,000.00 $ 952.80 0.95% $4.61
Hypothetical (5% return before expenses) $1,000.00 $1,020.14 0.95% $4.77
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 8
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 62.8%
CONSTRUCTION & ENGINEERING
-- 0.5%
263,756 Quanta Services, Inc. $ 9,590,168
--------------
ELECTRIC UTILITIES -- 20.7%
671,959 Alliant Energy Corp. 32,623,609
445,105 American Electric Power Co.,
Inc. 36,992,677
297,317 Duke Energy Corp. 25,170,857
215,206 Emera, Inc. (CAD) 8,566,805
446,544 Eversource Energy 36,036,101
840,625 Exelon Corp. 31,170,375
328,592 FirstEnergy Corp. 13,560,992
457,112 Fortis, Inc. (CAD) 17,713,726
362,588 IDACORP, Inc. 33,278,327
322,824 NextEra Energy, Inc. 74,611,083
49,676 Orsted A/S, ADR 1,674,578
1,025,330 PPL Corp. 26,063,889
293,370 Southern (The) Co. 16,642,880
519,918 Xcel Energy, Inc. 33,045,988
--------------
387,151,887
--------------
GAS UTILITIES -- 3.8%
2,039,440 AltaGas Ltd. (CAD) 24,380,388
238,897 Atmos Energy Corp. 24,360,327
13,595 Chesapeake Utilities Corp. 1,194,729
657,104 New Jersey Resources Corp. 22,196,973
--------------
72,132,417
--------------
MULTI-UTILITIES -- 13.0%
652,305 ATCO Ltd., Class I (CAD) 18,318,620
939,054 Canadian Utilities Ltd., Class A
(CAD) 22,910,502
503,636 CMS Energy Corp. 28,752,579
214,857 Dominion Energy, Inc. 16,571,920
214,202 DTE Energy Co. 22,221,315
1,397,060 Public Service Enterprise
Group, Inc. 70,844,913
392,916 Sempra Energy 48,662,647
173,591 WEC Energy Group, Inc. 15,718,665
--------------
244,001,161
--------------
OIL, GAS & CONSUMABLE FUELS
-- 24.5%
905,835 Enbridge, Inc. 27,791,018
886,666 Equitrans Midstream Corp. 7,430,261
1,411,566 Keyera Corp. (CAD) 20,941,009
5,910,507 Kinder Morgan, Inc. 90,017,022
2,964,514 ONEOK, Inc. 88,727,904
3,672,373 TC Energy Corp. 170,251,212
2,812,174 Williams (The) Cos., Inc. 54,471,811
--------------
459,630,237
--------------
WATER UTILITIES -- 0.3%
45,155 American Water Works Co., Inc. 5,494,912
--------------
TOTAL COMMON STOCKS -- 62.8% 1,178,000,782
(Cost $1,162,149,018) --------------
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS
-- 33.4%
CHEMICALS -- 0.3%
288,702 Westlake Chemical Partners,
L.P. $ 5,190,862
--------------
INDEPENDENT POWER AND
RENEWABLE ELECTRICITY
PRODUCERS -- 5.6%
2,078,054 NextEra Energy Partners,
L.P. (a) 104,505,336
--------------
OIL, GAS & CONSUMABLE FUELS
-- 27.5%
1,082,560 Alliance Resource Partners, L.P. 4,200,333
864,944 BP Midstream Partners, L.P. 9,894,959
154,364 Cheniere Energy Partners, L.P. 5,206,698
4,726,918 Energy Transfer, L.P. 39,706,111
8,325,750 Enterprise Products Partners,
L.P. 146,200,170
1,455,921 Holly Energy Partners, L.P. 21,445,716
1,630,195 Magellan Midstream Partners,
L.P. 67,049,920
1,018,078 Phillips 66 Partners, L.P. 43,319,219
7,380,305 Plains GP Holdings, L.P.,
Class A (a) 67,825,003
2,264,527 Shell Midstream Partners, L.P. 33,265,902
2,323,696 TC PipeLines, L.P. 77,843,816
--------------
515,957,847
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 33.4% 625,654,045
(Cost $812,477,325) --------------
MONEY MARKET FUNDS -- 2.8%
51,605,620 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.07% (b) 51,605,620
(Cost $51,605,620) --------------
TOTAL INVESTMENTS -- 99.0% 1,855,260,447
(Cost $2,026,231,963) (c)
NET OTHER ASSETS AND
LIABILITIES -- 1.0% 19,345,506
--------------
NET ASSETS -- 100.0% $1,874,605,953
==============
(a) This security is taxed as a "C" corporation for federal income tax
purposes.
(b) Rate shown reflects yield as of April 30, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $134,038,646 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $305,010,162. The net unrealized depreciation
was $170,971,516.
ADR - American Depositary Receipt
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
Currency Abbreviations:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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* $1,178,000,782 $ -- $ --
Master Limited
Partnerships* 625,654,045 -- --
Money Market
Funds 51,605,620 -- --
------------------------------------------
Total Investments $1,855,260,447 $ -- $ --
==========================================
* See Portfolio of Investments for industry breakout.
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 70.6%
ELECTRIC UTILITIES -- 40.5%
1,732 Alliant Energy Corp. $ 84,089
502 American Electric Power Co.,
Inc. 41,721
824 Edison International 48,377
1,303 Emera, Inc. (CAD) 51,869
2,880 Enel S.p.A., ADR 19,455
1,159 Eversource Energy 93,531
400 FirstEnergy Corp. 16,508
1,994 Fortis, Inc. (CAD) 77,270
606 Iberdrola S.A., ADR 23,973
554 IDACORP, Inc. 50,846
458 NextEra Energy, Inc. 105,853
396 Orsted A/S (DKK) (a) (b) (c) 40,000
2,038 PPL Corp. 51,806
1,340 Xcel Energy, Inc. 85,171
--------------
790,469
--------------
GAS UTILITIES -- 5.4%
475 Atmos Energy Corp. 48,436
1,181 New Jersey Resources Corp. 39,894
218 ONE Gas, Inc. 17,377
--------------
105,707
--------------
INDEPENDENT POWER AND
RENEWABLE ELECTRICITY
PRODUCERS -- 1.8%
2,802 EDP Renovaveis S.A. (EUR) (a) 34,353
--------------
MULTI-UTILITIES -- 16.2%
1,358 CMS Energy Corp. 77,528
165 DTE Energy Co. 17,117
190 National Grid PLC, ADR 11,127
1,354 Public Service Enterprise Group,
Inc. 68,661
646 Sempra Energy 80,007
692 WEC Energy Group, Inc. 62,661
--------------
317,101
--------------
OIL, GAS & CONSUMABLE FUELS
-- 3.5%
504 Cheniere Energy, Inc. (d) 23,532
2,366 Williams (The) Cos., Inc. 45,829
--------------
69,361
--------------
WATER UTILITIES -- 3.2%
509 American Water Works Co., Inc. 61,940
--------------
TOTAL COMMON STOCKS -- 70.6% 1,378,931
(Cost $1,462,315) --------------
MASTER LIMITED PARTNERSHIPS
-- 17.1%
INDEPENDENT POWER AND
RENEWABLE ELECTRICITY
PRODUCERS -- 9.6%
900 Brookfield Renewable Partners,
L.P. (CAD) 42,493
2,862 NextEra Energy Partners,
L.P. (e) 143,930
--------------
186,423
--------------
SHARES/
UNITS DESCRIPTION VALUE
------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
-- 7.5%
655 Cheniere Energy Partners, L.P. $ 22,093
3,724 TC PipeLines, L.P. 124,754
--------------
146,847
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 17.1% 333,270
(Cost $311,997) --------------
MONEY MARKET FUNDS -- 12.2%
237,683 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.07% (f) 237,683
196 Dreyfus Government Cash
Management Fund,
Institutional Shares
- 0.17% (f) 196
--------------
TOTAL MONEY MARKET FUNDS
-- 12.2% 237,879
(Cost $237,879) --------------
TOTAL INVESTMENTS -- 99.9% 1,950,080
(Cost $2,012,191) (g)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 2,220
--------------
NET ASSETS -- 100.0% $ 1,952,300
==============
(a) 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, 2020, securities noted as such are valued at $74,353
or 3.8% of net assets. Certain of these securities are fair valued using a
factor provided by a third-party pricing service due to the change in
value between the foreign markets' close and the New York Stock Exchange
("NYSE") close exceeding a certain threshold. On days when this threshold
is not exceeded, these securities are typically valued at the last sale
price on the exchange on which they are principally traded.
(b) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(c) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(d) Non-income producing security.
(e) This security is taxed as a "C" corporation for federal income tax
purposes.
(f) Rate shown reflects yield as of April 30, 2020.
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
(g) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $37,661 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $99,772. The net unrealized depreciation was
$62,111.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
DKK - Danish Krone
EUR - Euro
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2020 PRICES INPUTS INPUTS
------------------------------------------------------
Common
Stocks:
Electric
Utilities $ 790,469 $ 750,469 $ 40,000 $ --
Independent
Power and
Renewable
Electricity
Producers 34,353 -- 34,353 --
Other
Industry
Categories* 554,109 554,109 -- --
Master
Limited
Partnerships* 333,270 333,270 -- --
Money
Market
Funds 237,879 237,879 -- --
------------------------------------------------------
Total
Investments $ 1,950,080 $ 1,875,727 $ 74,353 $ --
======================================================
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
FIRST TRUST NORTH FIRST TRUST
AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
--------------------- ---------------------
ASSETS:
<S> <C> <C>
Investments, at value.................................................. $ 1,855,260,447 $ 1,950,080
Cash................................................................... 3,113,625 --
Foreign currency, at value............................................. 774 --
Receivables:
Dividends........................................................... 11,304,552 1,187
Investment securities sold.......................................... 11,220,898 2,420
Reclaims............................................................ -- 98
----------------- -----------------
Total Assets........................................................ 1,880,900,296 1,953,785
----------------- -----------------
LIABILITIES:
Payables:
Capital shares redeemed............................................. 4,068,379 --
Investment advisory fees............................................ 1,410,020 1,485
Investment securities purchased..................................... 815,944 --
----------------- -----------------
Total Liabilities................................................... 6,294,343 1,485
----------------- -----------------
NET ASSETS............................................................. $ 1,874,605,953 $ 1,952,300
================= =================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 2,311,526,014 $ 2,008,968
Par value.............................................................. 921,550 1,000
Accumulated distributable earnings (loss).............................. (437,841,611) (57,668)
----------------- -----------------
NET ASSETS............................................................. $ 1,874,605,953 $ 1,952,300
================= =================
NET ASSET VALUE, per share............................................. $ 20.34 $ 19.52
================= =================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 92,155,000 100,002
================= =================
Investments, at cost................................................... $ 2,026,231,963 $ 2,012,191
================= =================
Foreign currency, at cost (proceeds)................................... $ 774 $ --
================= =================
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
FIRST TRUST NORTH FIRST TRUST
AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
--------------------- ---------------------
INVESTMENT INCOME:
<S> <C> <C>
Dividends.............................................................. $ 45,905,732 $ 27,680
Foreign withholding tax................................................ (1,976,978) (783)
----------------- -----------------
Total investment income............................................. 43,928,754 26,897
----------------- -----------------
EXPENSES:
Investment advisory fees............................................... 11,715,218 9,665
----------------- -----------------
Total expenses...................................................... 11,715,218 9,665
----------------- -----------------
NET INVESTMENT INCOME (LOSS)........................................... 32,213,536 17,232
----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (84,996,088) 5,176
In-kind redemptions................................................. 50,765,792 --
Foreign currency transactions....................................... (165,594) (163)
----------------- -----------------
Net realized gain (loss)............................................... (34,395,890) 5,013
----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... (474,619,027) (119,296)
Foreign currency translation........................................ 5,670 (2)
----------------- -----------------
Net change in unrealized appreciation (depreciation)................... (474,613,357) (119,298)
----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (509,009,247) (114,285)
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (476,795,711) $ (97,053)
================= =================
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND IV
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FIRST TRUST FIRST TRUST
NORTH AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD
4/30/2020 ENDED 4/30/2020 ENDED
(UNAUDITED) 10/31/2019 (UNAUDITED) 10/31/2019 (a)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............................ $ 32,213,536 $ 36,342,647 $ 17,232 $ 4,870
Net realized gain (loss)................................ (34,395,890) (51,786,622) 5,013 (1,680)
Net change in unrealized appreciation (depreciation).... (474,613,357) 317,830,513 (119,298) 57,185
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations...................................... (476,795,711) 302,386,538 (97,053) 60,375
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... (54,837,149) (28,709,335) (20,990) --
Return of capital....................................... -- (67,709,012) -- --
--------------- --------------- --------------- ---------------
Total distributions to shareholders..................... (54,837,149) (96,418,347) (20,990) --
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 214,644,355 392,227,615 -- 2,009,968
Cost of shares redeemed................................. (373,765,565) (150,641,145) -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions........................ (159,121,210) 241,586,470 -- 2,009,968
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................. (690,754,070) 447,554,661 (118,043) 2,070,343
NET ASSETS:
Beginning of period..................................... 2,565,360,023 2,117,805,362 2,070,343 --
--------------- --------------- --------------- ---------------
End of period........................................... $ 1,874,605,953 $ 2,565,360,023 $ 1,952,300 $ 2,070,343
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 103,305,000 93,555,000 100,002 --
Shares sold............................................. 8,700,000 16,250,000 -- 100,002
Shares redeemed......................................... (19,850,000) (6,500,000) -- --
--------------- --------------- --------------- ---------------
Shares outstanding, end of period....................... 92,155,000 103,305,000 100,002 100,002
=============== =============== =============== ===============
</TABLE>
(a) Inception date is August 19, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST EXCHANGE-TRADED FUND IV
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2020 --------------------------------------------------------------
(UNAUDITED) 2019 2018 2017 2016 2015
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.83 $ 22.64 $ 24.55 $ 24.76 $ 23.03 $ 27.72
----------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.28 0.36 0.35 0.44 0.30 0.39
Net realized and unrealized gain (loss) (4.25) 2.81 (1.33) 0.32 2.37 (4.18)
----------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (3.97) 3.17 (0.98) 0.76 2.67 (3.79)
----------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.52) (0.29) (0.45) (0.48) (0.30) (0.90)
Return of capital -- (0.69) (0.48) (0.49) (0.64) --
----------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.52) (0.98) (0.93) (0.97) (0.94) (0.90)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 20.34 $ 24.83 $ 22.64 $ 24.55 $ 24.76 $ 23.03
=========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) (16.05)% 14.22% (4.03)% 3.06% 12.01% (13.92)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,874,606 $2,565,360 $2,117,805 $1,910,977 $1,379,029 $ 952,609
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 2.81%(b) 1.52% 1.40% 1.59% 1.44% 1.47%
Portfolio turnover rate (c) 22% 33% 35% 24% 40% 34%
</TABLE>
<TABLE>
<CAPTION>
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
SIX MONTHS
ENDED PERIOD
4/30/2020 ENDED
(UNAUDITED) 10/31/2019 (d)
----------- --------------
<S> <C> <C>
Net asset value, beginning of period $ 20.70 $ 20.09
----------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.17 0.05
Net realized and unrealized gain (loss) (1.14) 0.56
----------- ----------
Total from investment operations (0.97) 0.61
----------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.21) --
----------- ----------
Net asset value, end of period $ 19.52 $ 20.70
=========== ==========
TOTAL RETURN (a) (4.72)% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,952 $ 2,070
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95% (b) 0.95% (b)
Ratio of net investment income (loss) to
average net assets 1.69% (b) 1.18% (b)
Portfolio turnover rate (c) 7% 3%
</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.
(d) Inception date is August 19, 2019, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 16 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (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 two funds listed below. The shares of each fund are listed and traded
on the NYSE Arca, Inc. ("NYSE Arca").
First Trust North American Energy Infrastructure Fund - (NYSE Arca ticker
"EMLP")
First Trust EIP Carbon Impact ETF - (NYSE Arca ticker "ECLN")
Each fund represents a separate series of shares of beneficial interest in the
Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual
funds, each 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." Each Fund's 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, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. EMLP's investment
objective is to seek total return. EMLP will invest, 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, 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 and Canada. ECLN's investment
objective is to seek to achieve a competitive risk-adjusted total return
balanced between dividends and capital appreciation. ECLN will invest, under
normal market conditions, at least 80% of its net assets (including investment
borrowings) in equity securities of companies identified by EIP as having or
seeking to have a positive carbon impact, defined as companies that reduce, have
a publicly available plan to reduce, or enable the reduction of carbon and other
greenhouse gas emissions from the production, transportation, conversion,
storage and use of energy. ECLN's investments will be concentrated in the
industries constituting the energy infrastructure sector, which principally
include utilities, natural gas pipeline companies, manufacturers, contracted
developers and/or owners of renewable energy, and other companies that derive
the majority of their earnings from manufacturing, operating or providing
services in support of infrastructure assets and/or infrastructure activities
such as renewable energy equipment, energy storage, carbon capture and
sequestration, fugitive methane abatement and energy transmission and
distribution equipment.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Funds in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the
New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day
the NYSE is open for trading. If the NYSE closes early on a valuation day, the
NAV is determined as of that time. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of each Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Funds'
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures 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. Each 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.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
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 a Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the 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 a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
The Funds are subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value each Fund's investments as of April 30, 2020, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
Distributions received from a Fund's investments in MLPs generally are comprised
of return of capital and investment income. A Fund records estimated return of
capital and investment income based on historical information available from
each MLP. These estimates may subsequently be revised based on information
received from the MLPs after their tax reporting periods are concluded.
C. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and is included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
D. DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid
quarterly, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by each 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 Funds and have no impact on net assets or NAV per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future.
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
The tax character of distributions paid by each Fund during the fiscal period
ended October 31, 2019 was as follows:
<TABLE>
<CAPTION>
Distributions Distributions Distributions
paid from paid from paid from
Ordinary Income Capital Gains Return of Capital
--------------- ------------- -----------------
<S> <C> <C> <C>
First Trust North American Energy Infrastructure Fund $ 28,709,335 $ -- $ 67,709,012
First Trust EIP Carbon Impact ETF -- -- --
</TABLE>
As of October 31, 2019, the components of distributable earnings on a tax basis
for each Fund were as follows:
<TABLE>
<CAPTION>
Accumulated
Undistributed Capital and Net Unrealized
Ordinary Other Appreciation
Income Gain (Loss) (Depreciation)
--------------- ------------- -----------------
<S> <C> <C> <C>
First Trust North American Energy Infrastructure Fund $ -- $(202,873,457) $ 296,664,706
First Trust EIP Carbon Impact ETF 3,879 (1,204) 57,700
</TABLE>
E. INCOME TAXES
Each Fund intends to qualify or continue to qualify as a regulated investment
company by complying with the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended, which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, each Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of each Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
Each Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
Each Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2019, EMLP
and ECLN had non-expiring capital loss carryforwards available for federal
income tax purposes of $202,873,457 and $1,204, respectively.
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 period ended October 31, 2019, the Funds had
no net late year ordinary or capital losses.
The Funds are subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. For EMLP, the taxable years ended
2016, 2017, 2018, and 2019 remain open to federal and state audit. For ECLN, the
taxable period ended 2019 remains open to federal and state audit. As of April
30, 2020, management has evaluated the application of these standards to the
Funds and has determined that no provision for income tax is required in the
Funds' financial statements for uncertain tax positions.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the securities in each Fund's
portfolio, managing the Funds' business affairs and providing certain
administrative services necessary for the management of the Funds.
The Trust, on behalf of the Funds, and First Trust have retained EIP, an
affiliate of First Trust, to serve as the Funds' investment sub- advisor. In
this capacity, EIP is responsible for the selection and ongoing monitoring of
the securities in each 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 each Fund's assets and
will pay EIP for its services as the Funds' sub-advisor. First Trust will also
be responsible for each 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
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
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.
Each 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 for
EMLP from First Trust equal to 45% of any remaining monthly investment
management fee paid to First Trust after the Fund's average Fund expenses
accrued during the most recent twelve months are subtracted from the investment
management fee in a given month. EIP receives a sub-advisory fee for ECLN from
First Trust equal to an annual rate of 0.475% of the Fund's average daily net
assets less one-half of the Fund's expenses, for which EIP is responsible.
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
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or 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, 2020, the cost of purchases and proceeds from
sales of investments for each Fund, excluding short-term investments and in-kind
transactions, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust North American Energy Infrastructure Fund $ 532,766,843 $ 510,001,680
First Trust EIP Carbon Impact ETF 135,625 233,157
</TABLE>
For the six months ended April 30, 2020, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------------- ---------------
<S> <C> <C>
First Trust North American Energy Infrastructure Fund $ 208,736,658 $ 363,880,018
First Trust EIP Carbon Impact ETF -- --
</TABLE>
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each 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 each 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
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
purchased in the transaction. The Creation Transaction Fee may increase or
decrease with changes in each Fund's portfolio. 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 a 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 increase or decrease with changes in each Fund's
portfolio. Each Fund reserves the right to effect redemptions in cash. An
Authorized Participant may request cash redemption in lieu of securities;
however, a 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 Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before March 31, 2021 for EMLP,
and August 14, 2021 for ECLN.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued, and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how each Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
each Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal
quarter within 60 days after the end of the relevant fiscal quarter on Form
N-PORT. Portfolio holdings information for the third month of each fiscal
quarter will be publicly available on the SEC's website at www.sec.gov. Each
Fund's complete schedule of portfolio holdings for the second and fourth
quarters of each fiscal year is included in the semi-annual and annual reports
to shareholders, respectively, and is filed with the SEC on Form N-CSR. The
semi-annual and annual report for each Fund is available to investors within 60
days after the period to which it relates. Each Fund's Forms N-PORT and Forms
N-CSR are available on the SEC's website listed above.
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
Page 24
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2020 (UNAUDITED)
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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 25
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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-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, 2020
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 17
Statement of Operations...................................................... 18
Statements of Changes in Net Assets.......................................... 19
Financial Highlights......................................................... 20
Notes to Financial Statements................................................ 21
Additional Information....................................................... 28
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's
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, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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. 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)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -4.42% -3.53% 1.78% 2.17% 9.21% 16.20%
Market Price -4.66% -4.17% 1.71% 2.11% 8.83% 15.70%
INDEX PERFORMANCE
Markit iBoxx USD Liquid Leveraged Loan
Index -6.57% -6.36% 0.98% 1.53% 4.98% 11.22%
S&P/LSTA U.S. Leveraged Loan 100 Index -4.65% -4.05% 2.13% 2.35% 11.13% 17.67%
------------------------------------------------------------------------------------------------------------------------------------
</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)
-------------------------------------------------------
Software 16.6%
Health Care Providers & Services 16.3
Media 11.3
Pharmaceuticals 10.7
Insurance 10.0
Hotels, Restaurants & Leisure 6.1
Diversified Telecommunication Services 3.8
Diversified Financial Services 2.9
Containers & Packaging 2.8
Diversified Consumer Services 2.7
Entertainment 2.3
Auto Components 2.1
Health Care Technology 1.9
Food Products 1.4
Building Products 1.1
Professional Services 1.1
Aerospace & Defense 1.0
Commercial Services & Supplies 1.0
Capital Markets 0.9
Wireless Telecommunication Services 0.9
Food & Staples Retailing 0.8
Technology Hardware, Storage & Peripherals 0.5
Life Sciences Tools & Services 0.4
Oil, Gas & Consumable Fuels 0.4
Communications Equipment 0.4
Household Durables 0.3
Trading Companies & Distributors 0.2
Specialty Retail 0.1
Construction & Engineering 0.0*
Real Estate Management & Development 0.0*
Electric Utilities 0.0*
-------
Total 100.0%
=======
* Amount is less than 0.1%.
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
ASSET CLASSIFICATION SECURITIES(1)
-------------------------------------------------------
Senior Floating-Rate Loan Interests 91.3%
Corporate Bonds and Notes 8.6
Foreign Corporate Bonds and Notes 0.1
Rights 0.0*
-------
Total 100.0%
=======
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1)
-------------------------------------------------------
BBB- 4.3%
BB+ 2.2
BB 11.3
BB- 12.0
B+ 23.4
B 31.6
B- 12.2
CCC+ 2.5
CCC 0.2
CC 0.3
-------
Total 100.0%
=======
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
TOP 10 ISSUERS SECURITIES(1)
-------------------------------------------------------
HUB International Ltd. 3.1%
Bausch Health Cos., Inc. (Valeant) 3.1
Micro Focus International
(MA Financeco LLC) 2.9
Nexstar Broadcasting, Inc. 2.8
Multiplan, Inc. (MPH) 2.7
AmWINS Group, Inc. 2.7
Alliant Holdings I, LLC 2.6
Asurion, LLC 2.6
Cablevision (aka CSC Holdings, LLC) 2.1
Pharmaceutical Product Development,
Inc. (PPDI) 2.1
-------
Total 26.7%
=======
(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, 2020
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 11,706
10/31/18 11,760 11,602 11,929
4/30/19 12,044 11,877 12,262
10/31/19 12,156 11,905 12,339
4/30/20 11,620 11,122 11,767
</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, 2020
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, 2014 through
April 30, 2020. 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%
11/1/14 - 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 - 10/31/19 114 0 0 0 132 5 0 0
11/1/19 - 4/30/20 74 1 0 0 23 5 11 10
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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, 2020, the First
Trust Leveraged Finance Team managed or supervised approximately $3.77 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,
three exchange-traded funds, and a series of unit investment trusts on behalf of
retail and institutional clients.
PORTFOLIO MANAGEMENT TEAM
WILLIAM HOUSEY, CFA - MANAGING DIRECTOR OF FIXED INCOME, SENIOR PORTFOLIO
MANAGER
JEFFREY SCOTT, CFA - SENIOR VICE PRESIDENT, DEPUTY CREDIT OFFICER AND PORTFOLIO
MANAGER
ORLANDO PURPURA, CFA, CMT - SENIOR VICE PRESIDENT, CHIEF CREDIT OFFICER AND
PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (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 (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, 2020.
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, 2019 APRIL 30, 2020 PERIOD (a) PERIOD (a) (b)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST SENIOR LOAN FUND (FTSL)
Actual $1,000.00 $ 955.80 0.85% $4.13
Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 82.8%
AEROSPACE & DEFENSE -- 0.9%
$ 2,892,750 Transdigm, Inc., Term Loan E, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 2.65% 05/30/25 $ 2,526,094
11,448,089 Transdigm, Inc., Term Loan G, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 2.65% 08/22/24 9,996,356
---------------
12,522,450
---------------
ALTERNATIVE CARRIERS -- 0.2%
3,074,067 Level 3 Financing, Inc., Tranche B 2027 Term Loan, 1 Mo.
LIBOR + 1.75%, 0.00% Floor................................... 2.15% 03/01/27 2,938,286
---------------
APPAREL RETAIL -- 0.1%
1,199,890 Burlington Coat Factory Warehouse Corp., Term Loan B-5,
1 Mo. LIBOR + 1.75%, 0.00% Floor............................. 2.58% 11/17/24 1,121,897
---------------
APPLICATION SOFTWARE -- 7.7%
4,673,317 CCC Information Services, Inc., Term Loan B, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 3.75% 04/26/24 4,427,968
18,716,010 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.75% Floor.................................................. 4.00% 07/01/24 17,885,581
6,267,840 Internet Brands, Inc. (MH Sub I LLC), Term Loan, 3 Mo. LIBOR
+ 3.75%, 0.00% Floor......................................... 4.82% 09/13/24 5,786,533
3,545,403 Micro Focus International (MA Financeco LLC), Miami Escrow
Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 2.90% 06/21/24 3,254,680
24,138,703 Micro Focus International (MA Financeco LLC), Seattle Spinco
Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor................ 2.90% 06/21/24 22,159,329
11,437,632 Micro Focus International (MA Financeco LLC), Term Loan B2,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 2.65% 11/19/21 10,830,065
6,037,822 Mitchell International, Inc., Term Loan (First Lien),
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.65% 11/30/24 5,249,524
2,294,839 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
2019 Incremental Term Loan B, 6 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 6.13% 04/26/24 2,180,097
13,299,634 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor................ 5.38% 04/26/24 12,568,154
18,003,839 SolarWinds Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 02/05/24 17,437,078
779,371 TIBCO Software, Term Loan B-3, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 4.16% 07/03/26 728,712
768 Ultimate Software Group, Inc., Term Loan B, 1 Mo. LIBOR +
3.75%, 0.00% Floor........................................... 4.74% 05/03/26 731
3,658,591 Veeam Software Holdings Ltd. (VS Buyer, LLC), Term Loan B,
3 Mo. LIBOR + 3.25%, 0.00% Floor............................. 4.86% 02/28/27 3,439,075
---------------
105,947,527
---------------
AUTO PARTS & EQUIPMENT -- 1.6%
6,017,592 American Axle & Manufacturing Holdings, Inc., Term Loan B,
1 Mo. LIBOR + 2.25%, 0.75% Floor............................. 3.00% 04/06/24 5,182,651
15,105,960 Gates Global LLC, Initial B-2 Dollar Term Loan, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 3.75% 03/31/24 13,867,875
21,865 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.95% 06/30/24 6,546
8,495,195 Lumileds (Bright Bidco B.V.), Term Loan B, 6 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.57% 06/30/24 2,543,292
---------------
21,600,364
---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
BROADCASTING -- 4.9%
$ 6,995,534 Cumulus Media Holdings, Inc., Term Loan B, 6 Mo. LIBOR +
3.75%, 1.00% Floor........................................... 4.82% 03/31/26 $ 5,864,566
1,844,755 Diamond Sports Group LLC, Term Loan B, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.82% 08/23/26 1,496,945
7,888,055 E.W. Scripps Co., Term Loan B-2, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 2.90% 05/01/26 7,341,807
876,984 Entercom Media Corp. (CBS Radio), Term Loan B, 1 Mo. LIBOR
+ 2.50%, 0.00% Floor......................................... 2.90% 11/17/24 771,965
5,489,186 Gray Television, Inc., Term Loan C, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 3.49% 01/02/26 5,155,279
22,968,078 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.40% 04/29/26 20,524,504
18,961,904 Nexstar Broadcasting, Inc., Incremental Term Loan B-4,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 3.73% 09/19/26 17,753,082
1,646,442 Nexstar Broadcasting, Inc., Mission Term Loan B-3,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 3.23% 01/17/24 1,544,708
6,399,946 Nexstar Broadcasting, Inc., Nexstar Term Loan B-3,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 2.65% 01/17/24 6,004,494
---------------
66,457,350
---------------
BUILDING PRODUCTS -- 1.0%
1,121 JELD-WEN, Inc., Term Loan B-4, 3 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 3.45% 12/14/24 996
14,687,619 Quikrete Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 2.90% 01/31/27 13,579,144
---------------
13,580,140
---------------
CABLE & SATELLITE -- 2.2%
3,236,502 Cablevision (aka CSC Holdings, LLC), March 2017 Term Loan
B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor........................ 3.06% 07/17/25 3,074,159
11,296,012 Cablevision (aka CSC Holdings, LLC), October 2018 Incremental
Term Loan B-3, 1 Mo. LIBOR + 2.25%, 0.00% Floor.............. 3.06% 01/15/26 10,717,092
11,205,774 Cablevision (aka CSC Holdings, LLC), September 2019 Term
Loan B-5, 1 Mo. LIBOR + 2.50%, 0.00% Floor................... 3.31% 04/15/27 10,647,502
658,910 Mediacom Broadband LLC, Term Loan N, 1 Wk. LIBOR +
1.75%, 0.00% Floor........................................... 1.90% 02/15/24 630,083
5,999,184 Virgin Media Investment Holdings Ltd., Term Loan N,
1 Mo. LIBOR + 2.50%, 0.00% Floor............................. 3.31% 01/31/28 5,664,729
---------------
30,733,565
---------------
CASINOS & GAMING -- 4.9%
1,831,260 Caesars Entertainment Operating Co., Inc. (CEOC), Term Loan,
1 Mo. LIBOR + 2.00%, 0.00% Floor............................. 2.40% 10/07/24 1,763,742
27,639,839 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 12/22/24 23,263,623
21,463,538 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 3.00% 04/18/24 18,849,065
7,707,579 Golden Nugget, Inc., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.25% 10/04/23 6,149,723
6,792,439 Golden Nugget, Inc., Term Loan B, 3 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.70% 10/04/23 5,419,552
7,787,376 Station Casinos, Inc. (Red Rocks), Term Loan B, 1 Mo. LIBOR +
2.25%, 0.25% Floor........................................... 2.66% 01/31/27 6,845,337
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 5,213,720 Twin River Worldwide Holdings, Inc., Term Loan B,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 3.15% 05/10/26 $ 4,400,171
---------------
66,691,213
---------------
COAL & CONSUMABLE FUELS -- 0.1%
2,969,697 Peabody Energy Corp., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 03/31/25 1,615,515
---------------
COMMUNICATIONS EQUIPMENT -- 0.4%
5,275,601 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.65% 04/06/26 4,947,775
---------------
CONSTRUCTION & ENGINEERING -- 0.0%
542,297 Pike Corp., 2019 New Term Loans, 1 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 07/24/26 520,269
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 0.8%
11,647,972 Packers Holdings LLC, Term Loan B, 1 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 12/04/24 10,813,161
---------------
FOOD DISTRIBUTORS -- 0.3%
4,539,381 US Foods, Inc., 2019 Incremental Term Loan B, 6 Mo. LIBOR +
2.00%, 0.00% Floor........................................... 3.07% 08/31/26 4,024,932
---------------
HEALTH CARE FACILITIES -- 1.3%
4,989,336 Acadia Healthcare Co., Inc., Term Loan B4, 1 Mo. LIBOR +
2.50%, 0.00% Floor........................................... 2.90% 02/16/23 4,778,337
7,558,512 Gentiva Health Services, Inc. (Kindred at Home), Term Loan B,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.69% 07/02/25 7,105,001
6,662,255 Select Medical Corp., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 3.07% 03/06/25 6,314,552
---------------
18,197,890
---------------
HEALTH CARE SERVICES -- 8.1%
1,148,614 21st Century Oncology Holdings, Inc., Tranche B Term Loan,
1 Mo. LIBOR + 6.13%, 1.00% Floor............................. 7.13% 01/16/23 1,119,899
803,061 Air Medical Group Holdings, Inc. (Global Medical Response),
2018 New Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor......... 5.86% 03/14/25 712,492
7,769,885 Air Medical Group Holdings, Inc. (Global Medical Response),
Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor................ 4.25% 04/28/22 7,116,748
6,928,537 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.95% 04/21/24 5,149,635
14,433,757 Athenahealth, Inc. (VVC Holding Corp.), Term Loan B,
3 Mo. LIBOR + 4.50%, 0.00% Floor............................. 5.28% 02/15/26 13,279,056
66,116 CHG Healthcare Services, Inc., Term Loan, 3 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.45% 06/07/23 62,492
25,657,962 CHG Healthcare Services, Inc., Term Loan, 6 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.07% 06/07/23 24,251,392
3,991,984 DaVita, Inc., Term Loan B, 1 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 2.15% 08/12/26 3,871,825
11,595,663 DuPage Medical Group (Midwest Physician Admin. Services
LLC), Term Loan B, 1 Mo. LIBOR + 2.75%, 0.75% Floor.......... 3.50% 08/15/24 9,943,281
23,676,630 Envision Healthcare Corp., Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 4.15% 10/10/25 16,178,952
1,000,000 Surgery Centers Holdings, Inc., Incremental Term Loan,
1 Mo. LIBOR + 8.00%, 1.00% Floor............................. 9.00% 08/31/24 995,000
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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 SERVICES (CONTINUED)
$ 9,307,307 Surgery Centers Holdings, Inc., Term Loan B,
1 Mo. LIBOR + 3.25%, 1.00% Floor............................. 4.25% 08/31/24 $ 8,283,503
8,209,301 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 3.75% 02/06/24 6,015,037
6,065,749 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%,
0.00% Floor.................................................. 5.44% 06/28/26 5,718,849
8,450,003 Verscend Technologies, Inc., Term Loan B, 1 Mo. LIBOR +
4.50%, 0.00% Floor........................................... 4.90% 08/27/25 7,940,890
---------------
110,639,051
---------------
HEALTH CARE TECHNOLOGY -- 1.8%
4,305,763 Change Healthcare Holdings, Term Loan B, 1 Mo. LIBOR +
2.50%, 1.00% Floor........................................... 3.50% 03/01/24 3,743,820
16,645,729 Change Healthcare Holdings, Term Loan B, 3 Mo. LIBOR +
2.50%, 1.00% Floor........................................... 3.50% 03/01/24 14,473,302
15,679 Press Ganey (Azalea TopCo, Inc.), Term Loan B, 1 Mo. LIBOR +
3.50%, 0.00% Floor........................................... 3.90% 07/25/26 14,691
6,224,409 Press Ganey (Azalea TopCo, Inc.), Term Loan B, 3 Mo. LIBOR +
3.50%, 0.00% Floor........................................... 4.26% 07/25/26 5,832,272
---------------
24,064,085
---------------
HOUSEHOLD APPLIANCES -- 0.2%
3,823,773 Traeger Grills (TGP Holdings III LLC), Term Loan B,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 09/25/24 3,059,018
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.8%
11,782,121 Alight, Inc. (fka Tempo Acq.), Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 05/01/24 11,038,434
---------------
HYPERMARKETS & SUPER CENTERS -- 0.3%
3,888,818 BJ's Wholesale Club, Inc., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 3.08% 02/03/24 3,767,292
---------------
INSURANCE BROKERS -- 9.0%
1,653,658 Alliant Holdings I, LLC, 2019 New Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.97% 05/10/25 1,549,064
33,206,875 Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 05/09/25 30,948,808
34,965,348 AmWINS Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 3.75% 01/25/24 33,714,288
12,829,080 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.90% 02/15/27 11,957,728
7,490,620 BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.65% 01/31/27 7,016,838
2,891,304 HUB International Ltd., 2019 Incremental Term Loan B2,
3 Mo. LIBOR + 4.00%, 1.00% Floor............................. 5.69% 04/25/25 2,764,781
37,862,791 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.87% - 4.02% 04/25/25 35,393,002
---------------
123,344,509
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 3.2%
10,706,791 CenturyLink, Inc. (Qwest), Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 2.65% 03/15/27 10,104,534
8,863,403 Numericable (Altice France S.A. or SFR), Term Loan B-11,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 3.15% 07/31/25 8,076,776
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INTEGRATED TELECOMMUNICATION SERVICES (CONTINUED)
$ 1,989,796 Numericable (Altice France S.A. or SFR), Term Loan B-12,
1 Mo. LIBOR + 3.69%, 0.00% Floor............................. 4.50% 01/31/26 $ 1,832,324
1,334,714 Numericable (Altice France S.A. or SFR), Term Loan B13,
1 Mo. LIBOR + 4.00%, 0.00% Floor............................. 4.81% 07/11/26 1,235,559
24,472,976 Zayo Group Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.40% 02/28/27 22,936,317
---------------
44,185,510
---------------
INTERACTIVE HOME ENTERTAINMENT -- 0.3%
3,754,365 Playtika Holding Corp., Term Loan B, 6 Mo. LIBOR + 6.00%,
1.00% Floor.................................................. 7.07% 12/10/24 3,707,436
---------------
INVESTMENT BANKING & BROKERAGE -- 0.8%
11,621,591 Citadel Securities LP, Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 02/27/26 11,098,619
---------------
LEISURE FACILITIES -- 0.6%
11,382,626 ClubCorp Holdings, Inc., Term Loan B, 3 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 4.20% 09/18/24 8,306,471
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.4%
2,735,001 Grifols Worldwide Operations Ltd., Term Loan B, 1 Wk. LIBOR
+ 2.00%, 0.00% Floor......................................... 2.14% 11/15/27 2,643,843
3,063,649 Ortho-Clinical Diagnostics, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 4.27% 05/31/25 2,715,159
---------------
5,359,002
---------------
MANAGED HEALTH CARE -- 2.7%
31,399,273 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 4.20% 06/07/23 28,828,614
8,684,130 Versant Health (Wink Holdco, Inc.), Initial Term Loan,
3 Mo. LIBOR + 3.00%, 1.00% Floor............................. 4.45% 12/02/24 8,050,189
---------------
36,878,803
---------------
METAL & GLASS CONTAINERS -- 0.7%
9,772,486 Berry Global, Inc., Term Loan Y, 1 Mo. LIBOR + 2.00%,
0.00% Floor.................................................. 2.83% 07/01/26 9,307,315
---------------
MOVIES & ENTERTAINMENT -- 1.8%
8,352,630 AMC Entertainment, Inc., Term Loan B, 6 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 4.08% 04/22/26 6,085,058
23,081,423 Cineworld Group PLC (Crown), Term Loan B, 6 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 3.32% 02/05/25 14,464,435
5,618,374 PUG LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.90% 01/31/27 4,550,883
---------------
25,100,376
---------------
OTHER DIVERSIFIED FINANCIAL SERVICES -- 2.7%
16,836,220 AlixPartners, LLP, Term Loan B, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 2.90% 04/04/24 16,181,460
20,596,420 Refinitiv US Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.65% 10/01/25 20,126,616
---------------
36,308,076
---------------
PACKAGED FOODS & MEATS -- 1.3%
1,274,682 BellRing Brands, LLC, Term Loan B, 1 Mo. LIBOR + 5.00%,
1.00% Floor.................................................. 6.00% 10/21/24 1,257,155
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
PACKAGED FOODS & MEATS (CONTINUED)
$ 3,518,835 Froneri International Ltd., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 2.65% 01/31/27 $ 3,247,603
3,429,638 Hostess Brands, LLC (HB Holdings), Term Loan B, 1 Mo. LIBOR
+ 2.25%, 0.75% Floor......................................... 3.00% 08/03/25 3,268,891
31,916 Hostess Brands, LLC (HB Holdings), Term Loan B, 2 Mo. LIBOR
+ 2.25%, 0.75% Floor......................................... 3.00% 08/03/25 30,421
9,241,127 Hostess Brands, LLC (HB Holdings), Term Loan B, 3 Mo. LIBOR
+ 2.25%, 0.75% Floor......................................... 3.01% 08/03/25 8,807,996
1,110,579 Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B,
1 Mo. LIBOR + 3.75%, 1.00% Floor............................. 4.75% 07/07/24 1,074,485
---------------
17,686,551
---------------
PAPER PACKAGING -- 1.6%
2,953,252 Reynolds Consumer Products LLC, Term Loan B, 1 Mo. LIBOR
+ 1.75%, 0.00% Floor......................................... 2.15% 01/31/27 2,841,117
20,795,504 Reynolds Group Holdings, Inc., U.S. Term Loan, 1 Mo. LIBOR
+ 2.75%, 0.00% Floor......................................... 3.15% 02/05/23 19,786,090
---------------
22,627,207
---------------
PHARMACEUTICALS -- 9.6%
5,025,759 Akorn, Inc., Loan, 1 Mo. LIBOR + 14.50%, 1.00% Floor............ 15.50% 04/16/21 4,176,758
38,971,943 Bausch Health Cos., Inc. (Valeant), Term Loan B, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 3.72% 06/01/25 37,656,640
23,615,463 Endo LLC, Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor......... 5.00% 04/29/24 21,416,391
19,987,986 GoodRX, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 10/15/25 19,105,117
187,065 IQVIA, Inc. (Quintiles), Term Loan B3, 3 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 3.20% 06/11/25 178,601
13,407,413 Mallinckrodt International Finance S.A., 2017 Term Loan B,
3 Mo. LIBOR + 2.75%, 0.75% Floor............................. 4.20% 09/24/24 9,351,671
4,282,235 Mallinckrodt International Finance S.A., 2018 Incremental Term
Loan, 3 Mo. LIBOR + 3.00%, 0.75% Floor....................... 4.70% 02/24/25 2,968,488
11,665,117 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 09/27/24 10,652,701
26,500,062 Pharmaceutical Product Development, Inc. (PPDI), Term Loan B,
1 Mo. LIBOR + 2.50%, 1.00% Floor............................. 2.90% 08/18/22 25,943,031
---------------
131,449,398
---------------
RESEARCH & CONSULTING SERVICES -- 0.2%
1,404,768 Clarivate Analytics PLC (Camelot), Term Loan B, 1 Mo. LIBOR
+ 3.25%, 0.00% Floor......................................... 3.65% 10/31/26 1,341,554
1,000,000 Trans Union LLC, Term Loan B5, 3 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 3.35% 11/13/26 956,410
---------------
2,297,964
---------------
SECURITY & ALARM SERVICES -- 0.1%
1,230,679 Garda World Security Corp., Term Loan B, 3 Mo. LIBOR +
4.75%, 0.00% Floor........................................... 6.39% 10/30/26 1,179,913
---------------
SPECIALIZED CONSUMER SERVICES -- 2.4%
1,188,166 Aramark Services, Inc., Term Loan B-4, 1 Mo. LIBOR + 1.75%,
0.00% Floor.................................................. 2.15% 12/31/26 1,110,935
6,547,400 Asurion LLC, Replacement B-2 Term Loan (Second Lien),
1 Mo. LIBOR + 6.50%, 0.00% Floor............................. 6.90% 08/04/25 6,318,241
22,147,096 Asurion LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 3.40% 11/03/23 21,099,096
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SPECIALIZED CONSUMER SERVICES (CONTINUED)
$ 4,499,024 Asurion LLC, Term Loan B7, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 3.40% 11/03/24 $ 4,281,316
---------------
32,809,588
---------------
SYSTEMS SOFTWARE -- 7.3%
20,946,307 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 4.70% 09/19/24 20,025,088
2,331,175 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR
+ 7.00%, 1.00% Floor......................................... 8.45% 09/19/25 2,214,617
22,737,416 McAfee, LLC, Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 4.19% 09/30/24 21,701,500
3,941,307 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 3,408,127
38,478 Riverbed Technology, Inc., Term Loan B, 2 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 04/24/22 30,835
14,583,039 Riverbed Technology, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 04/24/22 11,686,556
10,561,505 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 4.81% 03/05/27 9,657,228
8,591,307 SS&C European Holdings, S.A.R.L., Term Loan B-3,
1 Mo. LIBOR + 1.75%, 0.00% Floor............................. 2.15% 04/16/25 8,248,600
6,104,904 SS&C European Holdings, S.A.R.L., Term Loan B-4,
1 Mo. LIBOR + 1.75%, 0.00% Floor............................. 2.15% 04/16/25 5,861,380
7,365,042 SS&C European Holdings, S.A.R.L., Term Loan B-5,
1 Mo. LIBOR + 1.75%, 0.00% Floor............................. 2.15% 04/16/25 7,067,936
4,947,091 SUSE (Marcel Lux IV S.A.R.L.), Facility Term Loan B1 USD,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.65% 03/15/26 4,675,001
5,315,925 Vertafore, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.65% 07/02/25 4,868,058
---------------
99,444,926
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.5%
6,929,743 T-Mobile USA, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 3.40% 04/01/27 6,883,938
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 1,132,255,816
(Cost $1,237,863,529) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 7.8%
AUTO PARTS & EQUIPMENT -- 0.3%
5,397,000 American Axle & Manufacturing, Inc.............................. 6.63% 10/15/22 4,544,544
---------------
BROADCASTING -- 3.0%
2,000,000 Cumulus Media New Holdings, Inc. (c)............................ 6.75% 07/01/26 1,638,400
6,356,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (c)....... 5.38% 08/15/26 4,860,433
2,848,000 E.W. Scripps (The) Co. (c)...................................... 5.13% 05/15/25 2,434,470
7,343,000 Gray Television, Inc. (c)....................................... 5.13% 10/15/24 7,231,387
2,148,000 Gray Television, Inc. (c)....................................... 5.88% 07/15/26 2,072,068
10,145,000 Nexstar Broadcasting, Inc. (c).................................. 5.63% 08/01/24 9,969,492
13,348,000 Sinclair Television Group, Inc. (c)............................. 5.63% 08/01/24 12,245,722
791,000 Sinclair Television Group, Inc. (c)............................. 5.88% 03/15/26 689,831
---------------
41,141,803
---------------
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
CABLE & SATELLITE -- 0.1%
$ 125,000 CCO Holdings LLC / CCO Holdings Capital Corp. (c)............... 5.88% 04/01/24 $ 129,088
1,621,000 CSC Holdings LLC (c)............................................ 5.50% 05/15/26 1,691,027
---------------
1,820,115
---------------
COAL & CONSUMABLE FUELS -- 0.3%
4,900,000 Peabody Energy Corp. (c)........................................ 6.00% 03/31/22 3,656,625
---------------
FOOD RETAIL -- 0.1%
2,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (c)........................................... 3.50% 02/15/23 1,972,500
---------------
HEALTH CARE FACILITIES -- 2.2%
3,478,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 3,348,271
2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,155,400
6,665,000 Tenet Healthcare Corp........................................... 8.13% 04/01/22 6,746,646
6,130,000 Tenet Healthcare Corp. (c)...................................... 4.63% 09/01/24 6,038,050
8,764,000 Tenet Healthcare Corp. (c)...................................... 4.88% 01/01/26 8,648,753
3,008,000 Tenet Healthcare Corp. (c)...................................... 5.13% 11/01/27 2,979,875
---------------
29,916,995
---------------
HEALTH CARE SERVICES -- 0.1%
1,023,000 MEDNAX, Inc. (c)................................................ 5.25% 12/01/23 972,055
---------------
INSURANCE BROKERS -- 0.1%
893,000 HUB International Ltd. (c)...................................... 7.00% 05/01/26 886,526
---------------
MANAGED HEALTH CARE -- 0.4%
5,740,000 MPH Acquisition Holdings LLC (c)................................ 7.13% 06/01/24 5,151,478
976,000 Polaris Intermediate Corp. (c) (d).............................. 8.50% 12/01/22 823,500
---------------
5,974,978
---------------
METAL & GLASS CONTAINERS -- 0.2%
2,000,000 Berry Global, Inc............................................... 5.50% 05/15/22 2,012,980
---------------
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 1,008,400
---------------
REAL ESTATE SERVICES -- 0.0%
250,000 KB Home......................................................... 7.00% 12/15/21 260,562
---------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.4%
4,616,000 Dell International LLC / EMC Corp. (c).......................... 5.88% 06/15/21 4,630,540
1,000,000 Dell International LLC / EMC Corp. (c).......................... 5.85% 07/15/25 1,090,147
---------------
5,720,687
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.2%
2,250,000 Ashtead Capital, Inc. (c)....................................... 5.25% 08/01/26 2,261,250
250,000 United Rentals North America, Inc............................... 5.88% 09/15/26 258,450
---------------
2,519,700
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
2,000,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,029,700
2,000,000 T-Mobile USA, Inc. (c).......................................... 3.50% 04/15/25 2,124,840
---------------
4,154,540
---------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 106,563,010
(Cost $112,257,339) ---------------
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES -- 0.1%
PHARMACEUTICALS -- 0.1%
$ 611,000 Bausch Health Cos., Inc. (c).................................... 5.88% 05/15/23 $ 607,365
250,000 Mallinckrodt International Finance SA / Mallinckrodt CB
LLC (c)...................................................... 5.63% 10/15/23 73,587
---------------
680,952
---------------
REAL ESTATE SERVICES -- 0.0%
250,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (c)........................................ 5.88% 04/15/23 244,325
---------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 925,277
(Cost $1,107,331) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
4,887 Vista Energy Corp. (e) (f)................................................................... 5,254
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.0%
1 New Millennium Holdco, Inc., Corporate Claim Trust (e) (f) (g) (h)........................... 0
1 New Millennium Holdco, Inc., Corporate Claim Trust (e) (f) (g) (h)........................... 0
---------------
0
---------------
TOTAL RIGHTS................................................................................. 5,254
(Cost $8,491) ---------------
MONEY MARKET FUNDS -- 7.2%
98,523,522 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.07% (i)........................................................... 98,523,522
(Cost $98,523,522) ---------------
TOTAL INVESTMENTS -- 97.9%................................................................... 1,338,272,879
(Cost $1,449,760,212) (j)
NET OTHER ASSETS AND LIABILITIES -- 2.1%..................................................... 28,725,305
---------------
NET ASSETS -- 100.0%......................................................................... $ 1,366,998,184
===============
</TABLE>
-----------------------------
(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 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
"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, 2020, securities noted as such amounted
to $86,131,734 or 6.3% of net assets.
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
(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, 2020, this security paid all of its
interest in cash.
(e) Non-income producing security.
(f) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(g) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(h) 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, 2020, securities noted as such are valued at $0 or
0.0% of net assets.
(i) Rate shown reflects yield as of April 30, 2020.
(j) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $1,545,470 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $113,032,803. The net unrealized depreciation
was $111,487,333.
LIBOR - London Interbank Offered Rate
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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
4/30/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Senior Floating-Rate Loan Interests*.............. $1,132,255,816 $ -- $1,132,255,816 $ --
Corporate Bonds and Notes*........................ 106,563,010 -- 106,563,010 --
Foreign Corporate Bonds and Notes*................ 925,277 -- 925,277 --
Rights
Electric Utilities............................. 5,254 -- 5,254 --
Life Science Tools & Services.................. --** -- -- --**
Money Market Funds................................ 98,523,522 98,523,522 -- --
-------------- -------------- -------------- --------------
Total Investments................................. $1,338,272,879 $ 98,523,522 $1,239,749,357 $ --**
============== ============== ============== ==============
</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 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $1,338,272,879
Cash...................................................................... 232,223
Receivables:
Investment securities sold............................................. 95,605,949
Interest............................................................... 3,149,922
Dividends.............................................................. 12,502
--------------
Total Assets........................................................... 1,437,273,475
--------------
LIABILITIES:
Payables:
Investment securities purchased........................................ 69,296,485
Investment advisory fees............................................... 978,806
--------------
Total Liabilities...................................................... 70,275,291
--------------
NET ASSETS................................................................ $1,366,998,184
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $1,546,563,265
Par value................................................................. 309,500
Accumulated distributable earnings (loss)................................. (179,874,581)
--------------
NET ASSETS................................................................ $1,366,998,184
==============
NET ASSET VALUE, per share................................................ $ 44.17
==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 30,950,002
==============
Investments, at cost...................................................... $1,449,760,212
==============
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 37,071,124
Dividends - Unaffiliated.................................................. 517,018
Dividends - Affiliated.................................................... 215,267
--------------
Total investment income................................................ 37,803,409
--------------
EXPENSES:
Investment advisory fees.................................................. 6,806,151
--------------
Total expenses......................................................... 6,806,151
--------------
NET INVESTMENT INCOME (LOSS).............................................. 30,997,258
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................. (39,641,506)
Investments - Affiliated............................................... 78,316
--------------
Net realized gain (loss).................................................. (39,563,190)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................. (82,712,629)
Investments - Affiliated............................................... (64,020)
--------------
Net change in unrealized appreciation (depreciation)...................... (82,776,649)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (122,339,839)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ (91,342,581)
==============
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
4/30/2020 YEAR ENDED
(UNAUDITED) 10/31/2019
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 30,997,258 $ 74,073,286
Net realized gain (loss).................................................. (39,563,190) (11,874,050)
Net change in unrealized appreciation (depreciation)...................... (82,776,649) (16,779,812)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... (91,342,581) 45,419,424
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (32,051,802) (74,733,494)
Return of capital......................................................... -- (385,786)
-------------- --------------
Total distributions to shareholders....................................... (32,051,802) (75,119,280)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 193,881,428 157,940,483
Cost of shares redeemed................................................... (306,636,794) (408,996,170)
-------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... (112,755,366) (251,055,687)
-------------- --------------
Total increase (decrease) in net assets................................... (236,149,749) (280,755,543)
NET ASSETS:
Beginning of period....................................................... 1,603,147,933 1,883,903,476
-------------- --------------
End of period............................................................. $1,366,998,184 $1,603,147,933
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 34,000,002 39,450,002
Shares sold............................................................... 4,100,000 3,300,000
Shares redeemed........................................................... (7,150,000) (8,750,000)
-------------- --------------
Shares outstanding, end of period......................................... 30,950,002 34,000,002
============== ==============
</TABLE>
See Notes to Financial Statements Page 19
<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,
4/30/2020 ------------------------------------------------------------------------
(UNAUDITED) 2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 47.15 $ 47.75 $ 48.26 $ 48.32 $ 48.07 $ 49.09
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.90 2.13 1.87 1.68 1.80 1.90
Net realized and unrealized gain (loss)... (2.95) (0.57) (0.43) (0.04) 0.27 (1.03)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... (2.05) 1.56 1.44 1.64 2.07 0.87
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income..................... (0.93) (2.15) (1.92) (1.70) (1.82) (1.89)
Return of capital......................... -- (0.01) (0.03) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.93) (2.16) (1.95) (1.70) (1.82) (1.89)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 44.17 $ 47.15 $ 47.75 $ 48.26 $ 48.32 $ 48.07
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a).......................... (4.42)% 3.37% 3.03% 3.43% 4.43% 1.75%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $1,366,998 $1,603,148 $1,883,903 $1,341,599 $ 594,277 $ 362,899
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..................... 3.87% (c) 4.50% 3.94% 3.53% 3.84% 3.97%
Portfolio turnover rate (d)............... 49% 44% 88% 110% 67% 71%
</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 20 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (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 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 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (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
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
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
(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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
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 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, 2020.
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,
2020.
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, 2020, and for the six months
then ended are as follows:
<TABLE>
<CAPTION>
CHANGES IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 4/30/2020 10/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2020 INCOME
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust Enhanced
Short Maturity ETF -- $32,058,015 $ -- $(32,072,311) $ (64,020) $ 78,316 $ -- $ 215,267
=============================================================================================
</TABLE>
E. 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 gains earned by the Fund, if any, are distributed
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,
2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 74,733,494
Capital gains................................... --
Return of capital............................... 385,786
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (26,461,099)
Net unrealized appreciation (depreciation)...... (30,019,099)
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 2016,
2017, 2018, and 2019 remain open to federal and state audit. As of April 30,
2020, 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, 2019, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $26,461,099.
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, 2019, the Fund had no
net late year ordinary or capital 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 PRONOUNCEMENT
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities," which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. ASU 2017-08 is effective for public
business entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. ASU 2017-08 was adopted for these
financial statements and did not have a material impact.
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
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
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,
defined-outcome 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, 2020, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $755,315,275 and $983,059,202, respectively.
For the six months ended April 30, 2020, 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 $410 million Credit Agreement with The
Bank of Nova Scotia ("Scotia") as administrative agent for a group of lenders.
Prior to November 25, 2019, the commitment amount was $385 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, 2020.
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 increase or decrease with changes
in the Fund's portfolio. 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 increase or decrease with changes in the Fund's
portfolio. When shares are redeemed for cash, the Authorized Participant may
Page 26
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
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, 2021.
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 27
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (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 28
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
Page 29
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2020 (UNAUDITED)
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 30
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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
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 Tactical High
Yield ETF (HYLS)
Semi-Annual Report
For the Six Months Ended
April 30, 2020
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 21
Statement of Operations...................................................... 22
Statements of Changes in Net Assets.......................................... 23
Statement of Cash Flows...................................................... 24
Financial Highlights......................................................... 25
Notes to Financial Statements................................................ 26
Additional Information....................................................... 33
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's
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 TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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 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 objectives will
be achieved. The Fund may not be appropriate for all investors.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
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)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -4.91% -2.68% 2.93% 4.04% 15.56% 32.84%
Market Price -4.12% -1.91% 3.08% 4.15% 16.39% 33.91%
INDEX PERFORMANCE
ICE BofA US High Yield
Constrained Index -7.69% -5.27% 3.20% 3.89% 17.03% 31.53%
------------------------------------------------------------------------------------------------------------------------------------
</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 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)
-----------------------------------------------------------
Media 17.1%
Health Care Providers & Services 16.3
Pharmaceuticals 9.9
Software 9.0
Insurance 8.5
Hotels, Restaurants & Leisure 4.8
Diversified Telecommunication
Services 3.3
Real Estate Management &
Development 2.7
Containers & Packaging 2.7
Technology Hardware, Storage &
Peripherals 2.5
Entertainment 2.3
Diversified Financial Services 2.2
Food Products 1.8
Building Products 1.6
Diversified Consumer Services 1.6
Professional Services 1.4
Health Care Technology 1.3
Capital Markets 1.2
Food & Staples Retailing 1.1
Auto Components 1.0
Trading Companies & Distributors 0.9
Specialty Retail 0.9
Oil, Gas & Consumable Fuels 0.8
Automobiles 0.7
Commercial Services & Supplies 0.6
Independent Power and Renewable
Electricity Producers 0.5
Wireless Telecommunication Services 0.4
Aerospace & Defense 0.4
Consumer Finance 0.4
Electric Utilities 0.4
Life Sciences Tools & Services 0.3
IT Services 0.3
Electronic Equipment, Instruments
& Components 0.3
Household Durables 0.2
Industrial Conglomerates 0.2
Metals & Mining 0.2
Semiconductors & Semiconductor
Equipment 0.1
Road & Rail 0.1
Health Care Equipment & Supplies 0.0*
Personal Products 0.0*
Chemicals 0.0*
--------
Total 100.0%
========
* Amount is less than 0.1%.
-----------------------------------------------------------
% OF TOTAL LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
Corporate Bonds 64.9%
Senior Floating-Rate Loan Interests 26.5
Foreign Corporate Bonds 8.6
Rights 0.0*
--------
Total 100.0%
========
-----------------------------------------------------------
% OF SENIOR LOANS AND
CREDIT QUALITY (S&P RATINGS)(2) OTHER DEBT SECURITIES(1)
-----------------------------------------------------------
BBB- 2.6%
BB+ 3.4
BB 12.0
BB- 12.8
B+ 14.7
B 29.3
B- 14.9
CCC+ 8.9
CCC 0.8
CCC- 0.3
CC 0.3
D 0.0*
--------
Total 100.0%
========
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP 10 ISSUERS INVESTMENTS(1)
-----------------------------------------------------------
Bausch Health Cos., Inc. (Valeant) 3.9%
Tenet Healthcare Corp. 3.5
Cablevision (aka CSC Holdings, LLC) 3.2
HUB International Ltd. 3.1
AmWINS Group, Inc. 2.7
Diamond 1/2 Finance Corp. (Dell) 2.5
Gray Television, Inc. 2.4
Alliant Holdings I, LLC 2.3
Refinitiv US Holdings Inc. 2.2
Nexstar Broadcasting Inc. 2.0
--------
Total 27.8%
========
(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
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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, 2020
First Trust Tactical ICE BofA 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 13,885
10/31/19 13,970 14,250
4/30/20 13,284 13,153
</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, 2020
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, 2014 through
April 30, 2020. 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%
11/1/14 - 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 - 10/31/19 165 1 0 0 81 4 0 0
11/1/19 - 4/30/20 77 9 5 1 16 8 5 3
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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, 2020, the First Trust Leveraged Finance
Team managed or supervised approximately $3.77 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, three exchange-traded funds,
and a series of unit investment trusts on behalf of retail and institutional
clients.
PORTFOLIO MANAGEMENT TEAM
WILLIAM HOUSEY, CFA - MANAGING DIRECTOR OF FIXED INCOME AND SENIOR PORTFOLIO
MANAGER
JEFFREY SCOTT, CFA - SENIOR VICE PRESIDENT, DEPUTY CREDIT OFFICER AND PORTFOLIO
MANAGER
ORLANDO PURPURA, CFA, CMT - SENIOR VICE PRESIDENT, CHIEF CREDIT OFFICER AND
PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (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 (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, 2020.
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
BEGINNING ENDING BASED ON THE EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH DURING THE
NOVEMBER 1, 2019 APRIL 30, 2020 PERIOD SIX-MONTH PERIOD (a)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
Actual $1,000.00 $ 950.90 1.00% $4.85
Hypothetical (5% return before expenses) $1,000.00 $1,019.89 1.00% $5.02
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 68.2%
AEROSPACE & DEFENSE -- 0.4%
$ 1,120,000 Science Applications International Corp. (a).................... 4.88% 04/01/28 $ 1,102,091
2,000,000 Spirit AeroSystems, Inc. (a).................................... 7.50% 04/15/25 1,980,000
1,500,000 TransDigm, Inc. (a)............................................. 8.00% 12/15/25 1,567,500
1,000,000 TransDigm, Inc. (a)............................................. 6.25% 03/15/26 983,450
---------------
5,633,041
---------------
ALTERNATIVE CARRIERS -- 0.9%
420,000 Level 3 Financing, Inc.......................................... 5.38% 08/15/22 421,134
2,070,000 Level 3 Financing, Inc.......................................... 5.63% 02/01/23 2,086,084
1,000,000 Level 3 Financing, Inc.......................................... 5.13% 05/01/23 1,000,200
5,000,000 Level 3 Financing, Inc.......................................... 5.38% 01/15/24 5,074,000
777,000 Level 3 Financing, Inc.......................................... 5.38% 05/01/25 786,557
500,000 Level 3 Financing, Inc. (a)..................................... 3.40% 03/01/27 502,550
3,000,000 Level 3 Financing, Inc. (a)..................................... 4.63% 09/15/27 2,986,200
---------------
12,856,725
---------------
APPAREL RETAIL -- 0.3%
3,040,000 Burlington Coat Factory Warehouse Corp. (a)..................... 6.25% 04/15/25 3,100,800
250,000 Hanesbrands, Inc. (a)........................................... 5.38% 05/15/25 250,000
1,000,000 Nordstrom, Inc. (a)............................................. 8.75% 05/15/25 1,070,023
200,000 QVC, Inc........................................................ 4.75% 02/15/27 180,980
---------------
4,601,803
---------------
APPLICATION SOFTWARE -- 1.7%
3,000,000 Expedia Group, Inc. (a)......................................... 6.25% 05/01/25 3,065,625
1,250,000 Expedia Group, Inc. (a)......................................... 7.00% 05/01/25 1,275,093
4,500,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (a)........... 5.25% 12/01/27 4,644,675
15,320,000 Infor US, Inc. (b).............................................. 6.50% 05/15/22 15,401,962
---------------
24,387,355
---------------
AUTO PARTS & EQUIPMENT -- 0.4%
5,492,000 American Axle & Manufacturing, Inc. (b)......................... 6.63% 10/15/22 4,624,539
1,000,000 Gates Global LLC / Gates Corp. (a).............................. 6.25% 01/15/26 914,710
---------------
5,539,249
---------------
AUTOMOBILE MANUFACTURERS -- 0.7%
3,000,000 Ford Motor Co................................................... 8.50% 04/21/23 2,970,000
3,000,000 Ford Motor Credit Co. LLC....................................... 2.43% 06/12/20 3,000,000
4,565,000 Ford Motor Credit Co. LLC....................................... 3.16% 08/04/20 4,553,587
---------------
10,523,587
---------------
AUTOMOTIVE RETAIL -- 0.6%
4,701,000 IAA, Inc. (a)................................................... 5.50% 06/15/27 4,712,518
3,819,000 KAR Auction Services, Inc. (a).................................. 5.13% 06/01/25 3,272,501
---------------
7,985,019
---------------
BROADCASTING -- 11.1%
10,500,000 Cumulus Media New Holdings, Inc. (a)............................ 6.75% 07/01/26 8,601,600
5,169,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (a)....... 5.38% 08/15/26 3,952,734
7,879,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (a)....... 6.63% 08/15/27 4,350,390
10,289,000 EW Scripps (The) Co. (a) (b).................................... 5.13% 05/15/25 8,795,037
26,086,000 Gray Television, Inc. (a) (b)................................... 5.88% 07/15/26 25,163,860
10,199,000 Gray Television, Inc. (a)....................................... 7.00% 05/15/27 10,297,420
9,475,000 iHeartCommunications, Inc. (a).................................. 5.25% 08/15/27 8,642,621
1,000,000 iHeartCommunications, Inc. (a).................................. 4.75% 01/15/28 879,650
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
BROADCASTING (CONTINUED)
$ 19,781,000 Nexstar Broadcasting, Inc. (a) (b).............................. 5.63% 08/01/24 $ 19,438,789
11,032,000 Nexstar Broadcasting, Inc. (a) (b).............................. 5.63% 07/15/27 10,586,859
12,355,000 Scripps Escrow, Inc. (a) (b).................................... 5.88% 07/15/27 10,497,426
19,421,000 Sinclair Television Group, Inc. (a) (b)......................... 5.63% 08/01/24 17,817,214
10,599,000 Sinclair Television Group, Inc. (a) (b)......................... 5.88% 03/15/26 9,243,388
2,394,000 Sinclair Television Group, Inc. (a)............................. 5.13% 02/15/27 2,033,942
3,000,000 Sirius XM Radio, Inc. (a)....................................... 4.63% 07/15/24 3,074,400
8,700,000 TEGNA, Inc. (a)................................................. 4.63% 03/15/28 7,838,265
4,500,000 TEGNA, Inc. (a)................................................. 5.00% 09/15/29 4,009,365
---------------
155,222,960
---------------
BUILDING PRODUCTS -- 0.6%
1,000,000 American Builders & Contractors Supply Co., Inc. (a)............ 4.00% 01/15/28 953,470
2,388,000 CEMEX Finance LLC (a)........................................... 6.00% 04/01/24 2,225,138
1,100,000 Standard Industries, Inc. (a)................................... 5.50% 02/15/23 1,106,875
417,000 Standard Industries, Inc. (a)................................... 5.38% 11/15/24 420,649
2,295,000 Standard Industries, Inc. (a)................................... 6.00% 10/15/25 2,378,194
892,000 Standard Industries, Inc. (a)................................... 5.00% 02/15/27 899,403
---------------
7,983,729
---------------
CABLE & SATELLITE -- 4.8%
3,560,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.88% 04/01/24 3,676,412
7,076,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a) (b)........... 5.75% 02/15/26 7,409,633
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.50% 05/01/26 2,091,820
2,828,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.13% 05/01/27 2,949,604
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.00% 02/01/28 2,062,675
500,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 5.38% 06/01/29 529,830
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............... 4.75% 03/01/30 2,043,700
15,902,000 CSC Holdings LLC (a) (b)........................................ 7.75% 07/15/25 16,682,470
9,183,000 CSC Holdings LLC (a) (b)........................................ 5.50% 05/15/26 9,579,706
819,000 CSC Holdings LLC (a)............................................ 5.50% 04/15/27 855,312
1,800,000 CSC Holdings LLC (a)............................................ 5.38% 02/01/28 1,859,940
3,800,000 CSC Holdings LLC (a)............................................ 7.50% 04/01/28 4,198,003
13,200,000 CSC Holdings LLC (a) (b)........................................ 5.75% 01/15/30 13,765,455
---------------
67,704,560
---------------
CASINOS & GAMING -- 2.2%
500,000 Boyd Gaming Corp. (a)........................................... 4.75% 12/01/27 433,050
3,863,000 Eldorado Resorts, Inc........................................... 6.00% 04/01/25 3,728,568
426,000 Eldorado Resorts, Inc........................................... 6.00% 09/15/26 430,004
4,430,000 Golden Nugget, Inc. (a)......................................... 6.75% 10/15/24 3,483,088
3,000,000 Golden Nugget, Inc. (a)......................................... 8.75% 10/01/25 1,728,750
8,600,000 MGM Resorts International (b)................................... 7.75% 03/15/22 8,786,104
5,100,000 MGM Resorts International (b)................................... 6.00% 03/15/23 4,986,270
1,000,000 MGM Resorts International....................................... 6.75% 05/01/25 985,120
5,544,000 MGM Resorts International....................................... 5.75% 06/15/25 5,356,945
653,000 MGM Resorts International....................................... 5.50% 04/15/27 602,980
---------------
30,520,879
---------------
COAL & CONSUMABLE FUELS -- 0.1%
483,000 Peabody Energy Corp. (a)........................................ 6.00% 03/31/22 360,439
967,000 Peabody Energy Corp. (a)........................................ 6.38% 03/31/25 578,411
---------------
938,850
---------------
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
CONSUMER FINANCE -- 0.4%
$ 5,406,000 FirstCash, Inc. (a)............................................. 5.38% 06/01/24 $ 5,458,979
---------------
DIVERSIFIED METALS & MINING -- 0.2%
2,500,000 Freeport-McMoRan, Inc........................................... 5.00% 09/01/27 2,449,125
---------------
DIVERSIFIED REAL ESTATE ACTIVITIES -- 0.1%
1,000,000 Meritage Homes Corp............................................. 7.00% 04/01/22 1,027,050
---------------
ELECTRIC UTILITIES -- 0.4%
5,000,000 Vistra Operations Co. LLC (a)................................... 5.63% 02/15/27 5,285,750
---------------
FERTILIZERS & AGRICULTURAL CHEMICALS -- 0.0%
250,000 Scotts Miracle-Gro (The) Co..................................... 4.50% 10/15/29 245,325
---------------
FINANCIAL EXCHANGES & DATA -- 0.1%
750,000 MSCI, Inc. (a).................................................. 4.00% 11/15/29 787,680
---------------
FOOD DISTRIBUTORS -- 0.2%
2,000,000 US Foods, Inc. (a).............................................. 5.88% 06/15/24 1,915,040
1,000,000 US Foods, Inc. (a).............................................. 6.25% 04/15/25 1,023,750
---------------
2,938,790
---------------
FOOD RETAIL -- 1.0%
7,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC............................................... 6.63% 06/15/24 7,280,000
3,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (a)........................................... 4.63% 01/15/27 3,043,950
3,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (a)........................................... 5.88% 02/15/28 3,148,050
---------------
13,472,000
---------------
HEALTH CARE EQUIPMENT -- 0.0%
250,000 Hill-Rom Holdings, Inc. (a)..................................... 4.38% 09/15/27 254,900
---------------
HEALTH CARE FACILITIES -- 6.7%
728,000 Acadia Healthcare Co., Inc...................................... 6.13% 03/15/21 721,193
3,212,000 Acadia Healthcare Co., Inc...................................... 5.63% 02/15/23 3,092,192
2,318,000 Acadia Healthcare Co., Inc...................................... 6.50% 03/01/24 2,242,201
670,000 Encompass Health Corp........................................... 5.13% 03/15/23 671,541
8,745,000 Encompass Health Corp. (b)...................................... 5.75% 11/01/24 8,834,199
1,652,000 Encompass Health Corp........................................... 5.75% 09/15/25 1,688,840
200,000 Encompass Health Corp........................................... 4.50% 02/01/28 200,930
200,000 Encompass Health Corp........................................... 4.75% 02/01/30 200,956
2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,155,400
6,530,000 HCA, Inc........................................................ 5.88% 02/15/26 7,315,559
13,435,000 Select Medical Corp. (a) (b).................................... 6.25% 08/15/26 13,001,049
34,514,000 Tenet Healthcare Corp. (b)...................................... 8.13% 04/01/22 34,936,797
1,168,000 Tenet Healthcare Corp. (a)...................................... 4.63% 09/01/24 1,150,480
1,500,000 Tenet Healthcare Corp. (a)...................................... 7.50% 04/01/25 1,620,750
7,492,000 Tenet Healthcare Corp. (a)...................................... 4.88% 01/01/26 7,393,480
6,281,000 Tenet Healthcare Corp. (a)...................................... 5.13% 11/01/27 6,222,273
2,250,000 Universal Health Services, Inc. (a)............................. 5.00% 06/01/26 2,288,475
---------------
93,736,315
---------------
HEALTH CARE SERVICES -- 3.5%
11,250,000 DaVita, Inc. (b)................................................ 5.13% 07/15/24 11,477,250
1,976,000 DaVita, Inc..................................................... 5.00% 05/01/25 2,009,345
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
HEALTH CARE SERVICES (CONTINUED)
$ 16,225,000 MEDNAX, Inc. (a) (b)............................................ 5.25% 12/01/23 $ 15,416,995
8,821,000 MEDNAX, Inc. (a)................................................ 6.25% 01/15/27 8,042,459
4,462,000 US Renal Care, Inc. (a)......................................... 10.63% 07/15/27 4,449,060
1,478,000 Verscend Escrow Corp. (a)....................................... 9.75% 08/15/26 1,550,126
6,366,000 Vizient, Inc. (a)............................................... 6.25% 05/15/27 6,733,955
---------------
49,679,190
---------------
HEALTH CARE TECHNOLOGY -- 1.4%
19,663,000 Change Healthcare Holdings LLC / Change Healthcare Finance,
Inc. (a) (b)................................................. 5.75% 03/01/25 19,346,819
---------------
HOTELS, RESORTS & CRUISE LINES -- 0.1%
100,000 Hilton Domestic Operating Co., Inc. (a)......................... 5.38% 05/01/25 99,875
500,000 Hilton Worldwide Finance LLC / Hilton Worldwide Finance
Corp......................................................... 4.63% 04/01/25 493,650
1,100,000 Vail Resorts, Inc. (a).......................................... 6.25% 05/15/25 1,139,875
---------------
1,733,400
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.9%
1,100,000 Tempo Acquisition LLC / Tempo Acquisition Finance
Corp. (a).................................................... 5.75% 06/01/25 1,105,500
11,478,000 Tempo Acquisition LLC / Tempo Acquisition Finance
Corp. (a) (b)................................................ 6.75% 06/01/25 11,205,398
---------------
12,310,898
---------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.6%
3,000,000 Calpine Corp.................................................... 5.50% 02/01/24 2,992,500
5,000,000 Calpine Corp. (a)............................................... 5.13% 03/15/28 4,906,250
---------------
7,898,750
---------------
INDUSTRIAL CONGLOMERATES -- 0.2%
2,725,000 RBS Global, Inc. / Rexnord LLC (a).............................. 4.88% 12/15/25 2,673,906
---------------
INSURANCE BROKERS -- 4.3%
10,834,000 Alliant Holdings Intermediate LLC / Alliant Holdings
Co-Issuer (a)................................................ 6.75% 10/15/27 10,858,376
26,986,000 AmWINS Group, Inc. (a) (b)...................................... 7.75% 07/01/26 27,987,181
2,678,000 AssuredPartners, Inc. (a)....................................... 7.00% 08/15/25 2,480,498
19,376,000 HUB International Ltd. (a) (b).................................. 7.00% 05/01/26 19,235,524
---------------
60,561,579
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 1.4%
5,320,000 CenturyLink, Inc................................................ 5.80% 03/15/22 5,471,021
12,509,000 Zayo Group Holdings, Inc. (a)................................... 6.13% 03/01/28 11,848,775
2,500,000 Zayo Group Holdings, Inc. (a)................................... 4.00% 03/01/27 2,436,325
---------------
19,756,121
---------------
INVESTMENT BANKING & BROKERAGE -- 0.6%
8,418,000 LPL Holdings, Inc. (a).......................................... 5.75% 09/15/25 8,344,342
500,000 LPL Holdings, Inc. (a).......................................... 4.63% 11/15/27 480,625
---------------
8,824,967
---------------
IT CONSULTING & OTHER SERVICES -- 0.3%
1,725,000 CDK Global, Inc................................................. 5.88% 06/15/26 1,814,959
2,261,000 CDK Global, Inc................................................. 4.88% 06/01/27 2,268,461
---------------
4,083,420
---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
LEISURE FACILITIES -- 1.9%
$ 250,000 Cedar Fair LP (a)............................................... 5.25% 07/15/29 $ 216,163
1,850,000 Cedar Fair LP / Canada's Wonderland Co. / Magnum
Management Corp. / Millennium Op............................. 5.38% 04/15/27 1,657,230
7,527,000 Constellation Merger Sub, Inc. (a).............................. 8.50% 09/15/25 4,684,052
20,250,000 Six Flags Entertainment Corp. (a) (b)........................... 4.88% 07/31/24 17,929,350
1,000,000 Six Flags Entertainment Corp. (a)............................... 5.50% 04/15/27 870,350
1,000,000 Six Flags Theme Parks, Inc. (a)................................. 7.00% 07/01/25 1,039,800
---------------
26,396,945
---------------
MANAGED HEALTH CARE -- 1.8%
2,000,000 Centene Corp. (a)............................................... 4.75% 01/15/25 2,072,300
1,500,000 Centene Corp. (a)............................................... 4.25% 12/15/27 1,576,350
1,000,000 Centene Corp. (a)............................................... 4.63% 12/15/29 1,099,650
250,000 Centene Corp. (a)............................................... 3.38% 02/15/30 252,662
14,747,000 MPH Acquisition Holdings LLC (a) (b)............................ 7.13% 06/01/24 13,234,990
8,894,000 Polaris Intermediate Corp. (a) (c).............................. 8.50% 12/01/22 7,504,313
---------------
25,740,265
---------------
METAL & GLASS CONTAINERS -- 1.1%
4,000,000 Berry Global, Inc............................................... 5.50% 05/15/22 4,025,960
3,000,000 Berry Global, Inc. (a).......................................... 4.50% 02/15/26 2,975,250
6,550,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.38% 08/15/25 6,672,812
2,200,000 Silgan Holdings, Inc. (a)....................................... 4.13% 02/01/28 2,175,250
---------------
15,849,272
---------------
MOVIES & ENTERTAINMENT -- 1.3%
1,254,000 Cinemark USA, Inc. (b).......................................... 4.88% 06/01/23 1,061,197
2,000,000 Cinemark USA, Inc. (a).......................................... 8.75% 05/01/25 2,040,000
2,000,000 Live Nation Entertainment, Inc. (a)............................. 4.88% 11/01/24 1,786,250
4,428,000 Live Nation Entertainment, Inc. (a)............................. 5.63% 03/15/26 3,928,079
10,895,000 Live Nation Entertainment, Inc. (a)............................. 4.75% 10/15/27 9,256,937
---------------
18,072,463
---------------
OIL & GAS EXPLORATION & PRODUCTION -- 0.0%
3,250,000 Sanchez Energy Corp. (d) (e) (f)................................ 7.75% 06/15/21 18,362
3,125,000 Sanchez Energy Corp. (d) (e) (f)................................ 6.13% 01/15/23 23,438
---------------
41,800
---------------
OIL & GAS REFINING & MARKETING -- 0.0%
415,000 Murphy Oil USA, Inc............................................. 5.63% 05/01/27 430,210
---------------
OIL & GAS STORAGE & TRANSPORTATION -- 0.8%
14,533,000 Crestwood Midstream Partners LP / Crestwood Midstream
Finance Corp. (b)............................................ 6.25% 04/01/23 10,684,662
---------------
PACKAGED FOODS & MEATS -- 1.9%
2,190,000 B&G Foods, Inc.................................................. 5.25% 04/01/25 2,228,763
1,000,000 Kraft Heinz Foods Co............................................ 3.95% 07/15/25 1,048,286
750,000 Performance Food Group, Inc. (a)................................ 5.50% 10/15/27 717,240
12,246,000 Post Holdings, Inc. (a) (b)..................................... 5.00% 08/15/26 12,158,441
3,240,000 Post Holdings, Inc. (a)......................................... 5.75% 03/01/27 3,335,742
3,000,000 Post Holdings, Inc. (a)......................................... 5.63% 01/15/28 3,066,450
1,000,000 Post Holdings, Inc. (a)......................................... 5.50% 12/15/29 1,009,650
3,000,000 Post Holdings, Inc. (a)......................................... 4.63% 04/15/30 2,958,720
---------------
26,523,292
---------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
PAPER PACKAGING -- 1.7%
$ 2,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/15/28 $ 1,907,500
20,677,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu (a) (b)............................. 7.00% 07/15/24 20,850,687
376,000 Sealed Air Corp. (a)............................................ 5.50% 09/15/25 403,185
1,000,000 Sealed Air Corp. (a)............................................ 4.00% 12/01/27 986,250
---------------
24,147,622
---------------
PERSONAL PRODUCTS -- 0.0%
250,000 Prestige Brands, Inc. (a)....................................... 5.13% 01/15/28 254,437
---------------
PHARMACEUTICALS -- 2.8%
500,000 Catalent Pharma Solutions, Inc. (a)............................. 5.00% 07/15/27 512,325
4,000,000 Charles River Laboratories International, Inc. (a).............. 5.50% 04/01/26 4,192,800
250,000 Charles River Laboratories International, Inc. (a).............. 4.25% 05/01/28 253,350
14,002,000 Horizon Therapeutics USA, Inc. (a) (b).......................... 5.50% 08/01/27 14,627,189
800,000 IQVIA, Inc. (a)................................................. 5.00% 10/15/26 828,640
1,278,000 IQVIA, Inc. (a)................................................. 5.00% 05/15/27 1,320,161
10,313,000 Jaguar Holding Co. II / Pharmaceutical Product Development
LLC (a) (b).................................................. 6.38% 08/01/23 10,506,369
7,000,000 Par Pharmaceutical, Inc. (a).................................... 7.50% 04/01/27 7,157,850
---------------
39,398,684
---------------
REAL ESTATE OPERATING COMPANIES -- 0.6%
1,379,000 Lennar Corp..................................................... 8.38% 01/15/21 1,423,473
6,785,000 Lennar Corp. (b)................................................ 5.25% 06/01/26 7,104,573
---------------
8,528,046
---------------
REAL ESTATE SERVICES -- 1.8%
8,810,000 KB Home (b)..................................................... 7.00% 12/15/21 9,182,223
500,000 MDC Holdings, Inc............................................... 3.85% 01/15/30 446,915
4,302,000 PulteGroup, Inc................................................. 5.50% 03/01/26 4,601,204
2,500,000 PulteGroup, Inc................................................. 5.00% 01/15/27 2,613,750
500,000 Taylor Morrison Communities, Inc. (a)........................... 5.75% 01/15/28 456,050
290,000 TRI Pointe Group, Inc........................................... 5.25% 06/01/27 264,509
7,545,000 TRI Pointe Group, Inc. / TRI Pointe Homes, Inc. (b)............. 5.88% 06/15/24 7,374,483
---------------
24,939,134
---------------
RESTAURANTS -- 0.0%
661,000 Brinker International, Inc. (a)................................. 5.00% 10/01/24 554,282
---------------
SECURITY & ALARM SERVICES -- 0.1%
2,061,000 Brink's (The) Co. (a)........................................... 4.63% 10/15/27 1,938,989
---------------
SEMICONDUCTOR EQUIPMENT -- 0.1%
1,500,000 Entegris, Inc. (a).............................................. 4.38% 04/15/28 1,509,375
---------------
SEMICONDUCTORS -- 0.1%
1,350,000 Qorvo, Inc. (a)................................................. 4.38% 10/15/29 1,351,283
---------------
SPECIALIZED CONSUMER SERVICES -- 0.3%
2,000,000 Aramark Services, Inc. (a)...................................... 6.38% 05/01/25 2,085,000
2,000,000 Aramark Services, Inc........................................... 4.75% 06/01/26 1,921,600
481,000 Aramark Services, Inc. (a)...................................... 5.00% 02/01/28 470,009
---------------
4,476,609
---------------
SPECIALTY CHEMICALS -- 0.3%
4,000,000 Avantor, Inc. (a)............................................... 9.00% 10/01/25 4,358,800
---------------
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
SYSTEMS SOFTWARE -- 1.2%
$ 250,000 PTC, Inc. (a)................................................... 3.63% 02/15/25 $ 247,687
5,075,000 PTC, Inc. (a)................................................... 4.00% 02/15/28 5,005,219
10,717,000 SS&C Technologies, Inc. (a)..................................... 5.50% 09/30/27 11,035,295
---------------
16,288,201
---------------
TECHNOLOGY DISTRIBUTORS -- 0.2%
1,250,000 CDW LLC / CDW Finance Corp...................................... 4.13% 05/01/25 1,260,937
1,000,000 CDW LLC / CDW Finance Corp...................................... 4.25% 04/01/28 1,009,200
---------------
2,270,137
---------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.6%
4,906,000 Dell International LLC / EMC Corp. (a).......................... 5.88% 06/15/21 4,921,454
22,225,000 Dell International LLC / EMC Corp. (a) (b)...................... 7.13% 06/15/24 23,099,554
6,440,000 Dell International LLC / EMC Corp. (a).......................... 6.02% 06/15/26 7,005,766
1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.10% 07/15/27 1,095,737
1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.20% 07/15/30 1,107,884
---------------
37,230,395
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.9%
940,000 Ashtead Capital, Inc. (a)....................................... 4.13% 08/15/25 932,950
2,000,000 Ashtead Capital, Inc. (a)....................................... 5.25% 08/01/26 2,010,000
750,000 Ashtead Capital, Inc. (a)....................................... 4.00% 05/01/28 718,125
250,000 United Rentals North America, Inc............................... 5.50% 07/15/25 254,425
4,276,000 United Rentals North America, Inc............................... 5.88% 09/15/26 4,420,529
2,596,000 United Rentals North America, Inc............................... 6.50% 12/15/26 2,698,931
2,257,000 United Rentals North America, Inc............................... 5.50% 05/15/27 2,293,789
---------------
13,328,749
---------------
TRUCKING -- 0.1%
1,000,000 XPO Logistics, Inc. (a)......................................... 6.25% 05/01/25 1,015,000
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.4%
1,719,000 SBA Communications Corp. (b).................................... 4.88% 09/01/24 1,782,603
250,000 SBA Communications Corp. (a).................................... 3.88% 02/15/27 256,875
2,329,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,363,586
1,180,000 T-Mobile USA, Inc............................................... 5.13% 04/15/25 1,202,125
416,000 T-Mobile USA, Inc............................................... 4.50% 02/01/26 430,539
---------------
6,035,728
---------------
TOTAL CORPORATE BONDS........................................................................ 957,787,101
(Cost $995,571,403) ---------------
FOREIGN CORPORATE BONDS -- 9.0%
APPLICATION SOFTWARE -- 0.3%
1,475,000 Open Text Corp. (a)............................................. 5.88% 06/01/26 1,555,609
2,336,000 Open Text Corp. (a)............................................. 3.88% 02/15/28 2,300,230
---------------
3,855,839
---------------
BUILDING PRODUCTS -- 1.1%
11,900,000 Cemex SAB de C.V. (a) (b)....................................... 7.75% 04/16/26 11,158,035
3,900,000 Cemex SAB de C.V. (a)........................................... 5.45% 11/19/29 3,229,785
100,000 Masonite International Corp. (a)................................ 5.75% 09/15/26 97,710
1,000,000 Masonite International Corp. (a)................................ 5.38% 02/01/28 957,150
---------------
15,442,680
---------------
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
CABLE & SATELLITE -- 1.2%
$ 6,183,000 Virgin Media Finance PLC (a).................................... 6.00% 10/15/24 $ 6,305,424
1,654,000 Virgin Media Finance PLC (a).................................... 5.75% 01/15/25 1,683,110
7,073,000 Virgin Media Secured Finance PLC (a) (b)........................ 5.50% 08/15/26 7,341,420
2,000,000 Virgin Media Secured Finance PLC (a)............................ 5.50% 05/15/29 2,085,700
---------------
17,415,654
---------------
CASINOS & GAMING -- 0.0%
200,000 International Game Technology PLC (a)........................... 6.25% 01/15/27 195,368
---------------
DIVERSIFIED SUPPORT SERVICES -- 0.1%
950,000 Ritchie Bros Auctioneers, Inc. (a).............................. 5.38% 01/15/25 964,440
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 0.0%
500,000 GFL Environmental, Inc. (a)..................................... 5.13% 12/15/26 523,125
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 0.9%
11,500,000 Altice France S.A. (a).......................................... 7.38% 05/01/26 12,070,975
---------------
PHARMACEUTICALS -- 4.9%
2,624,000 Bausch Health Cos., Inc. (a) (b)................................ 5.88% 05/15/23 2,608,387
48,720,000 Bausch Health Cos., Inc. (a) (b)................................ 6.13% 04/15/25 49,582,344
1,500,000 Bausch Health Cos., Inc. (a).................................... 5.00% 01/30/28 1,447,031
3,000,000 Bausch Health Cos., Inc. (a).................................... 7.25% 05/30/29 3,215,340
500,000 Bausch Health Cos., Inc. (a).................................... 5.25% 01/30/30 497,505
11,840,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (a).............. 5.88% 10/15/24 11,484,800
1,000,000 Mallinckrodt International Finance SA/Mallinckrodt CB
LLC (a)...................................................... 5.63% 10/15/23 294,350
1,750,000 Mallinckrodt International Finance SA/Mallinckrodt CB
LLC (a)...................................................... 5.50% 04/15/25 448,438
---------------
69,578,195
---------------
REAL ESTATE SERVICES -- 0.4%
5,346,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (a)........................................ 5.88% 04/15/23 5,224,646
804,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (a)........................................ 5.63% 03/01/24 761,629
---------------
5,986,275
---------------
RESEARCH & CONSULTING SERVICES -- 0.1%
1,000,000 Camelot Finance SA (a).......................................... 4.50% 11/01/26 1,012,200
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 127,044,751
(Cost $127,867,871) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (g) MATURITY (h) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 27.8%
APPLICATION SOFTWARE -- 4.3%
5,891,073 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR
+ 7.00%, 0.75% Floor......................................... 7.75% 07/10/25 5,449,243
9,996,043 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.75% Floor.................................................. 4.00% 07/01/24 9,552,519
7,916,664 Internet Brands, Inc. (MH Sub I LLC), Term Loan, 6 Mo. LIBOR
+ 3.75%, 0.00% Floor......................................... 4.82% 09/13/24 7,308,743
1,754,250 Micro Focus International (MA Financeco, LLC), Miami Escrow
Term Loan B3, 1 Mo. LIBOR + 2.50%, 0.00% Floor............... 2.90% 06/21/24 1,610,401
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (g) MATURITY (h) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
APPLICATION SOFTWARE (CONTINUED)
$ 11,846,507 Micro Focus International (MA Financeco, LLC), Seattle Spinco
Term Loan B, 1 Mo. LIBOR + 2.50%, 0.00% Floor................ 2.90% 06/21/24 $ 10,875,093
8,591,176 Micro Focus International (MA Financeco, LLC), Term Loan B2,
1 Mo. LIBOR + 2.25%, 0.00% Floor............................. 2.65% 11/19/21 8,134,813
5,291,867 Mitchell International, Inc., 1st Lien Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.65% 11/30/24 4,600,961
1,856,050 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
2019 Incremental Term Loan B, 6 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 6.13% 04/26/24 1,763,247
9,183,290 Qlik Technologies (Project Alpha Intermediate Holding, Inc.),
Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor................ 5.38% 04/26/24 8,678,209
2,092,779 SolarWinds Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 02/05/24 2,026,898
---------------
60,000,127
---------------
AUTO PARTS & EQUIPMENT -- 0.6%
7,020,038 Gates Global LLC, Initial B-2 Dollar Term Loan, 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 3.75% 03/31/24 6,444,676
17,678 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.95% 06/30/24 5,292
6,868,447 Lumileds (Bright Bidco B.V.), Term Loan B, 6 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.57% 06/30/24 2,056,276
---------------
8,506,244
---------------
BROADCASTING -- 0.9%
1,765,111 Cumulus Media Holdings, Inc., Term Loan B, 6 Mo. LIBOR +
3.75%, 1.00% Floor.......................................... 4.82% 03/31/26 1,479,746
12,361,048 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.40% 04/29/26 11,045,956
---------------
12,525,702
---------------
BUILDING PRODUCTS -- 0.0%
385,226 Quikrete Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.00% Floor.................................................. 2.90% 01/31/27 356,153
---------------
CASINOS & GAMING -- 0.8%
6,270,094 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 12/22/24 5,277,350
1,978,181 Golden Nugget, Inc., Term Loan B, 1 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.25% 10/04/23 1,578,351
1,688,563 Golden Nugget, Inc., Term Loan B, 3 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.70% 10/04/23 1,347,271
751,534 Scientific Games International, Inc., Term Loan B5, 1 Mo. LIBOR
+ 2.75%, 0.00% Floor......................................... 3.15% 08/14/24 619,392
19,608 Scientific Games International, Inc., Term Loan B5, 2 Mo. LIBOR
+ 2.75%, 0.00% Floor......................................... 3.45% 08/14/24 16,161
3,072,084 Scientific Games International, Inc., Term Loan B5, 6 Mo. LIBOR
+ 2.75%, 0.00% Floor......................................... 3.61% 08/14/24 2,531,919
---------------
11,370,444
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 0.3%
5,272,911 Packers Holdings, LLC, Term Loan B, 1 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 12/04/24 4,895,002
---------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (g) MATURITY (h) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE SERVICES -- 4.3%
$ 2,159,835 21st Century Oncology Holdings, Inc., Tranche B Term Loan,
1 Mo. LIBOR + 6.13%, 1.00% Floor............................. 7.13% 01/16/23 $ 2,105,839
537,279 Air Medical Group Holdings, Inc. (Global Medical Response),
2018 New Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor......... 5.86% 03/14/25 476,684
2,443,513 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.95% 04/21/24 1,816,141
12,031,743 athenahealth, Inc. (VVC Holding Corp.), Term Loan B,
3 Mo. LIBOR + 4.50%, 0.00% Floor............................. 5.28% 02/15/26 11,069,203
23,633 CHG Healthcare Services, Inc., Term Loan, 3 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.45% 06/07/23 22,337
9,171,357 CHG Healthcare Services, Inc., Term Loan, 6 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.07% 06/07/23 8,668,584
1,777,964 DuPage Medical Group (Midwest Physician Admin. Services,
LLC), Term Loan B, 1 Mo. LIBOR + 2.75%, 0.75% Floor.......... 3.50% 08/15/24 1,524,604
12,791,089 Envision Healthcare Corp., Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 4.15% 10/10/25 8,740,535
619 Exam Works (Gold Merger Co., Inc.), Term Loan B, 3 Mo. LIBOR
+ 3.25%, 1.00% Floor......................................... 4.70% 07/27/23 588
238,885 Exam Works (Gold Merger Co., Inc.), Term Loan B, 6 Mo. LIBOR
+ 3.25%, 1.00% Floor......................................... 4.32% 07/27/23 226,866
7,774,867 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 4.25% 08/31/24 6,919,631
5,962,030 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 3.75% 02/06/24 4,368,439
7,017,905 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%,
0.00% Floor.................................................. 5.44% 06/28/26 6,616,551
7,972,190 Verscend Technologies, Inc., Term Loan B, 1 Mo. LIBOR +
4.50%, 0.00% Floor........................................... 4.90% 08/27/25 7,491,866
---------------
60,047,868
---------------
HOUSEHOLD APPLIANCES -- 0.2%
3,613,411 Traeger Grills (TGP Holdings III LLC), Term Loan B,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 09/25/24 2,890,729
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.5%
7,293,085 Alight, Inc. (fka Tempo Acq.), Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 05/01/24 6,832,745
---------------
INSURANCE BROKERS -- 4.7%
8,904,561 Alliant Holdings I, LLC, 2019 New Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.97% 05/10/25 8,341,348
15,592,916 Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.15% 05/09/25 14,532,598
11,977,245 Amwins Group, Inc., Term Loan B (First Lien), 1 Mo. LIBOR +
2.75%, 1.00% Floor........................................... 3.75% 01/25/24 11,548,700
4,987,500 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.90% 02/15/27 4,648,749
5,095,924 HUB International Ltd., 2019 Incremental Term Loan B2,
3 Mo. LIBOR + 4.00%, 1.00% Floor............................. 5.69% 04/25/25 4,872,926
22,936,764 HUB International Ltd., Term Loan B, 2 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.87% - 4.02% 04/25/25 21,440,599
58,514 HUB International Ltd., Term Loan B, 3 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.87% 04/25/25 54,697
---------------
65,439,617
---------------
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (g) MATURITY (h) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INTEGRATED TELECOMMUNICATION SERVICES -- 0.3%
$ 4,503,246 Numericable (Altice France S.A. or SFR), Term Loan B-11,
1 Mo. LIBOR + 2.75%, 0.00% Floor............................. 3.15% 07/31/25 $ 4,103,583
---------------
INTERACTIVE HOME ENTERTAINMENT -- 0.2%
3,384,258 Playtika Holding Corp., Term Loan B, 6 Mo. LIBOR + 6.00%,
1.00% Floor.................................................. 7.07% 12/10/24 3,341,955
---------------
INVESTMENT BANKING & BROKERAGE -- 0.6%
8,110,793 Citadel Securities LP, Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 02/27/26 7,745,807
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.0%
401,295 Ortho-Clinical Diagnostics, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 4.27% 05/31/25 355,648
---------------
MANAGED HEALTH CARE -- 0.9%
10,236,014 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 4.20% 06/07/23 9,397,992
2,848,297 Versant Health (Wink Holdco, Inc.), Initial Term Loan,
3 Mo. LIBOR + 3.00%, 1.00% Floor............................. 4.45% 12/02/24 2,640,371
---------------
12,038,363
---------------
MOVIES & ENTERTAINMENT -- 0.9%
5,984,887 AMC Entertainment, Inc., Term Loan B, 6 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 4.08% 04/22/26 4,360,109
10,000,000 Cineworld Group PLC (Crown), 2020 Incremental Term Loan B,
6 Mo. LIBOR + 3.00%, 0.00% Floor............................. 4.07% 03/31/27 6,000,000
4,678,764 Cineworld Group PLC (Crown), Term Loan B, 6 Mo. LIBOR +
2.25%, 0.00% Floor........................................... 3.32% 02/05/25 2,932,041
---------------
13,292,150
---------------
OTHER DIVERSIFIED FINANCIAL SERVICES -- 2.3%
33,211,421 Refinitiv US Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.65% 10/01/25 32,453,868
---------------
PHARMACEUTICALS -- 2.6%
5,094,945 Akorn, Inc., Loan, 1 Mo. LIBOR + 14.50%, 1.00% Floor............ 15.50% 04/16/21 4,234,256
8,651,519 Endo LLC, Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor......... 5.00% 04/29/24 7,845,890
8,073,389 GoodRX, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 3.15% 10/15/25 7,716,787
11,801,160 Mallinckrodt International Finance S.A., 2017 Term Loan B,
3 Mo. LIBOR + 2.75%, 0.75% Floor............................. 4.20% 09/24/24 8,231,310
194,921 Mallinckrodt International Finance S.A., 2018 Incremental Term
Loan, 3 Mo. LIBOR + 3.00%, 0.75% Floor....................... 4.70% 02/24/25 135,121
9,527,561 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 3.15% 09/27/24 8,700,664
---------------
36,864,028
---------------
SPECIALIZED CONSUMER SERVICES -- 1.4%
15,184,000 Asurion, LLC, Second Lien Replacement B-2 Term Loan,
1 Mo. LIBOR + 6.50%, 0.00% Floor............................. 6.90% 08/04/25 14,652,560
3,936,223 Asurion, LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 3.40% 11/03/23 3,749,961
853,900 Asurion, LLC, Term Loan B7, 1 Mo. LIBOR + 3.00%,
0.00% Floor.................................................. 3.40% 11/03/24 812,580
---------------
19,215,101
---------------
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (g) MATURITY (h) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SYSTEMS SOFTWARE -- 2.0%
$ 5,976,347 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 4.70% 09/19/24 $ 5,713,507
1,262,391 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR
+ 7.00%, 1.00% Floor......................................... 8.45% 09/19/25 1,199,272
7,563,458 McAfee, LLC, Term Loan B, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 4.19% 09/30/24 7,218,867
5,385,573 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 4,657,012
24,134 Riverbed Technology, Inc., Term Loan B, 2 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 04/24/22 19,340
9,146,652 Riverbed Technology, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%,
1.00% Floor.................................................. 4.25% 04/24/22 7,329,944
1,545,265 SUSE (Marcel Lux IV S.A.R.L.), Facility B1 USD, 1 Mo. LIBOR
+ 3.25%, 0.00% Floor......................................... 3.65% 03/15/26 1,460,276
1,189,207 Vertafore, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.65% 07/02/25 1,089,016
---------------
28,687,234
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 390,962,368
(Cost $431,222,628) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
1,629 Vistra Energy Corp. (f) (i).................................................................. 1,751
(Cost $2,830) ---------------
MONEY MARKET FUNDS -- 0.8%
10,594,982 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.07% (j)........................................................... 10,594,982
(Cost $10,594,982) ---------------
TOTAL INVESTMENTS -- 105.8%.................................................................. 1,486,390,953
(Cost $1,565,259,714) (k) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS SOLD SHORT -- (6.4)%
$ (5,000,000) U.S. Treasury Bill.............................................. (l) 05/19/20 (4,999,819)
(10,000,000) U.S. Treasury Bill.............................................. (l) 05/26/20 (9,999,549)
(15,000,000) U.S. Treasury Bill.............................................. (l) 09/17/20 (14,994,063)
(10,000,000) U.S. Treasury Bill.............................................. (l) 12/03/20 (9,993,775)
(50,000,000) U.S. Treasury Bill.............................................. (l) 01/28/21 (49,948,055)
---------------
TOTAL U.S. TREASURY BILLS SOLD SHORT......................................................... (89,935,261)
(Proceeds $89,840,574) ---------------
NET OTHER ASSETS AND LIABILITIES -- 0.6%..................................................... 7,797,742
---------------
NET ASSETS -- 100.0%......................................................................... $ 1,404,253,434
===============
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
-----------------------------
(a) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P. ("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, 2020, securities noted as such
amounted to $846,440,822 or 60.3% of net assets.
(b) This security or a portion of this security is segregated as collateral
for investments sold short.
(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, 2020, this
security paid all of its interest in cash.
(d) The issuer has filed for protection in bankruptcy court.
(e) The issuer is in default and interest is not being accrued by the Fund nor
paid by the issuer.
(f) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(g) 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.
(h) 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.
(i) Non-income producing security.
(j) Rate shown reflects yield as of April 30, 2020.
(k) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $12,794,118 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $91,757,566. The net unrealized depreciation
was $78,963,448. The amounts presented are inclusive of investments sold
short.
(l) Zero coupon security.
LIBOR - London Interbank Offered Rate
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Corporate Bonds*.................................. $ 957,787,101 $ -- $ 957,787,101 $ --
Foreign Corporate Bonds*.......................... 127,044,751 -- 127,044,751 --
Senior Floating-Rate Loan Interests*.............. 390,962,368 -- 390,962,368 --
Rights*........................................... 1,751 -- 1,751 --
Money Market Funds................................ 10,594,982 10,594,982 -- --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 1,486,390,953 $ 10,594,982 $ 1,475,795,971 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Treasury Bills Sold Short.................... $ (89,935,261) $ -- $ (89,935,261) $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $ 1,486,390,953
Cash...................................................................... 122,493
Restricted Cash........................................................... 15,654,852
Receivables:
Capital shares sold.................................................... 67,147,234
Investment securities sold............................................. 23,509,896
Interest............................................................... 17,295,696
Dividends.............................................................. 1,797
---------------
Total Assets........................................................... 1,610,122,921
---------------
LIABILITIES:
Investments sold short, at value (proceeds $89,840,574)................... 89,935,261
Payables:
Investment securities purchased........................................ 106,022,260
Capital shares purchased............................................... 8,890,361
Investment advisory fees............................................... 983,817
Margin interest expense................................................ 37,788
---------------
Total Liabilities...................................................... 205,869,487
---------------
NET ASSETS................................................................ $ 1,404,253,434
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 1,542,865,958
Par value................................................................. 315,000
Accumulated distributable earnings (loss)................................. (138,927,524)
---------------
NET ASSETS................................................................ $ 1,404,253,434
===============
NET ASSET VALUE, per share................................................ $ 44.58
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 31,500,002
===============
Investments, at cost...................................................... $ 1,565,259,714
===============
</TABLE>
Page 21
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 41,044,569
Dividends................................................................. 172,421
---------------
Total investment income................................................ 41,216,990
---------------
EXPENSES:
Investment advisory fees.................................................. 6,788,823
Margin interest expense................................................... 196,731
Interest on investments sold short........................................ 131,731
---------------
Total expenses......................................................... 7,117,285
---------------
NET INVESTMENT INCOME (LOSS).............................................. 34,099,705
---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................................ (28,949,887)
Investments sold short................................................. (2,311,712)
---------------
Net realized gain (loss).................................................. (31,261,599)
---------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................ (80,827,967)
Investments sold short................................................. (94,687)
---------------
Net change in unrealized appreciation (depreciation)...................... (80,922,654)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (112,184,253)
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ (78,084,548)
===============
</TABLE>
Page 22
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2020 ENDED
(UNAUDITED) 10/31/2019
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 34,099,705 $ 64,768,034
Net realized gain (loss).................................................. (31,261,599) (1,271,330)
Net change in unrealized appreciation (depreciation)...................... (80,922,654) 23,388,851
--------------- ---------------
Net increase (decrease) in net assets resulting from operations........... (78,084,548) 86,885,555
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (35,835,603) (66,781,356)
Return of capital......................................................... -- (495,649)
--------------- ---------------
Total distributions to shareholders....................................... (35,835,603) (67,277,005)
--------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 355,793,999 378,687,649
Cost of shares redeemed................................................... (269,708,395) (219,243,496)
--------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... 86,085,604 159,444,153
--------------- ---------------
Total increase (decrease) in net assets................................... (27,834,547) 179,052,703
NET ASSETS:
Beginning of period....................................................... 1,432,087,981 1,253,035,278
--------------- ---------------
End of period............................................................. $ 1,404,253,434 $ 1,432,087,981
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 29,800,002 26,650,002
Shares sold............................................................... 7,800,000 7,900,000
Shares redeemed........................................................... (6,100,000) (4,750,000)
--------------- ---------------
Shares outstanding, end of period......................................... 31,500,002 29,800,002
=============== ===============
</TABLE>
Page 23
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net increase (decrease) in net assets resulting from operations........... $ (78,084,548)
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash used in operating activities:
Purchases of investments............................................ (979,039,654)
Borrowed investments sold short..................................... 194,572,479
Cost to cover short positions....................................... (107,085,974)
Sales, maturities and paydowns of investments....................... 887,936,789
Net amortization/accretion of premiums/discounts on investments..... 990,433
Net realized gain/loss on investments............................... 28,949,887
Net realized gain/loss on investments sold short.................... 2,311,712
Net change in unrealized appreciation/depreciation on investments... 80,827,967
Net change in unrealized appreciation/depreciation on investments
sold short....................................................... 94,687
CHANGES IN ASSETS AND LIABILITIES
Increase in interest receivable..................................... (3,145,673)
Decrease in dividends receivable.................................... 17,297
Decrease in margin interest rebate receivable....................... 1,186
Increase in margin interest expense payable......................... 33,765
Decrease in investment advisory fees payable........................ (151,430)
---------------
CASH PROVIDED BY OPERATING ACTIVITIES..................................... $ 28,228,923
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold........................................... 288,646,765
Cost of shares redeemed............................................. (260,818,034)
Distributions to shareholders from investment operations............ (35,835,603)
Net proceeds from borrowings........................................ (4,697,696)
---------------
CASH USED IN FINANCING ACTIVITIES......................................... (12,704,568)
---------------
Increase in cash and restricted cash...................................... 15,524,355
Cash and restricted cash at beginning of period........................... 252,990
---------------
CASH AND RESTRICTED CASH AT END OF PERIOD................................. $ 15,777,345
===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................................. $ 162,966
===============
CASH AND RESTRICTED CASH RECONCILIATION:
Cash................................................................ $ 122,493
Restricted Cash..................................................... 15,654,852
---------------
CASH AND RESTRICTED CASH AT END OF PERIOD:................................ $ 15,777,345
===============
</TABLE>
Page 24
<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,
4/30/2020 ------------------------------------------------------------------------
(UNAUDITED) 2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 48.06 $ 47.02 $ 48.95 $ 48.31 $ 48.69 $ 51.30
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.12 2.49 2.52 2.56 2.41 2.64
Net realized and unrealized gain (loss) (3.43) 1.13 (1.76) 0.66 (0.14) (2.23) (a)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (2.31) 3.62 0.76 3.22 2.27 0.41
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.17) (2.56) (2.69) (2.58) (2.48) (2.84)
Net realized gain -- -- -- -- -- (0.14)
Return of capital -- (0.02) (0.00) (b) -- (0.17) (0.04)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (1.17) (2.58) (2.69) (2.58) (2.65) (3.02)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 44.58 $ 48.06 $ 47.02 $ 48.95 $ 48.31 $ 48.69
========== ========== ========== ========== ========== ==========
TOTAL RETURN (c) (4.91)% 7.90% 1.60% 6.79% 4.89% 0.80% (a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,404,253 $1,432,088 $1,253,035 $1,250,565 $1,077,297 $ 520,954
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 1.00% (d) 1.23% 1.16% 1.10% 1.11% 1.23%
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 4.77% (d) 5.22% 5.26% 5.25% 5.04% 5.49%
Portfolio turnover rate (e) 40% 50% 52% 75% 45% 34%
</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 25
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (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 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.
Page 26
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (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, 2020 (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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
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, 2020.
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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (UNAUDITED)
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, 2020, the Fund had $15,654,852
in restricted cash associated with investments sold short and $89,935,261 of
investments sold short as shown on Statement of Assets and Liabilities. The Fund
is charged interest on debit margin balance at a rate equal to the 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, 2020, the Fund had
a debit margin balance of $74,267,198 with an interest rate of 0.79%. For the
six months ended April 30, 2020, the Fund had margin interest expense of
$196,731, as shown on the Statement of Operations. For the six months ended
April 30, 2020, the average margin balance and interest rates were $32,113,470
and 1.91%, respectively.
D. RESTRICTED CASH
Restricted cash includes cash on deposit with other banks or brokers that is
legally restricted as to the withdrawal and primarily serves as collateral for
investments sold short. The Fund presents restricted cash activity within
"Increase in cash and restricted cash" and as part of "Cash and restricted cash
at beginning of period" and "Cash and restricted cash at end of period" in the
Statement of Cash Flows, along with a reconciliation of those balances in the
Statement of Assets and Liabilities.
E. 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,
2020.
F. 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 gains earned by the Fund, if any, are distributed
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,
2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 66,781,356
Capital gains................................... --
Return of capital............................... 495,649
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (UNAUDITED)
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (22,759,325)
Net unrealized appreciation (depreciation)...... (2,248,048)
G. 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 2016,
2017, 2018, and 2019 remain open to federal and state audit. As of April 30,
2020, 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, 2019, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $22,759,325.
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, 2019, the Fund had no
net late year ordinary or capital losses.
H. 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.
I. 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. ASU 2017-08 is effective for public
business entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. ASU 2017-08 was adopted for these
financial statements and did not have a material impact.
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
Page 30
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (UNAUDITED)
commissions and other expenses connected with the execution of portfolio
transactions, expenses associated with short sale 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.
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,
defined-outcome 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, 2020, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, investments sold short
and in-kind transactions, were $718,957,000 and $568,534,829, respectively. The
cost of purchases to cover short sales and the proceeds of short sales were
$22,087,500 and $19,768,750, respectively.
For the six months ended April 30, 2020, 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, 2020.
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 increase or decrease with changes
in the Fund's portfolio. 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 increase or decrease with changes in the Fund's
portfolio. 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, 2020 (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, 2021.
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
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FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (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 TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
Page 34
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2020 (UNAUDITED)
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 35
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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
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, 2020
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 29
Statement of Operations...................................................... 30
Statements of Changes in Net Assets.......................................... 31
Financial Highlights......................................................... 32
Notes to Financial Statements................................................ 33
Additional Information....................................................... 39
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's
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, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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 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
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (8/5/14) Ended (8/5/14)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 0.12% 1.47% 1.42% 1.32% 7.29% 7.80%
Market Price 0.03% 1.40% 1.41% 1.31% 7.25% 7.73%
INDEX PERFORMANCE
ICE BofA 0-1 Year U.S. Treasury Index 1.30% 2.71% 1.40% 1.24% 7.21% 7.32%
------------------------------------------------------------------------------------------------------------------------------------
</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
--------------------------------------------------------
Corporate Bonds and Notes 41.30%
Commercial Paper 23.68
Foreign Corporate Bonds and Notes 16.98
Asset-Backed Securities 10.38
U.S. Government Agency Mortgage-
Backed Securities 3.94
U.S. Government Notes 1.96
Certificate of Deposit 1.12
Mortgage-Backed Securities 0.57
Cash 0.07
-------
Total 100.00%
=======
--------------------------------------------------------
% OF TOTAL
CREDIT QUALITY(1) INVESTMENTS & CASH
--------------------------------------------------------
Government and Agency 5.90%
AAA 4.81
AA+ 1.86
AA 0.66
AA- 5.03
A+ 8.41
A 8.00
A- 10.77
BBB+ 13.18
BBB 9.46
BBB- 1.20
A-1 (Short Term) 6.42
A-2 (Short Term) 16.40
A-3 (Short Term) 0.86
Not Rated 6.97
Cash 0.07
-------
Total 100.00%
=======
--------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
--------------------------------------------------------
U.S. Treasury Note 1.50%, 11/30/2021 0.83%
U.S. Treasury Note 1.50%, 6/15/2020 0.82
VMware, Inc. 0.52
Verizon Communications, Inc.,
3 Mo. LIBOR + 1.00% 0.52
AT&T, Inc. 0.51
BPCE S.A., Medium-Term Note,
3 Mo. LIBOR + 0.88% 0.51
Toronto-Dominion Bank (The), Medium-
Term Note, 3 Mo. LIBOR + 0.30% 0.51
Jackson National Life Global Funding,
SOFR + 0.60% 0.50
New York Life Global Funding,
3 Mo. LIBOR + 0.28% 0.50
Morgan Stanley, Global Medium-
Term Note, SOFR + 0.70% 0.49
-------
Total 5.71%
=======
-----------------------------
(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, 2020
First Trust Enhanced ICE BofA 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 10,138 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
10/31/19 10,767 10,594
4/30/20 10,780 10,732
</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, 2020
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, 2014 through
April 30, 2020. 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%
11/1/14 - 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 - 10/31/19 160 0 0 0 91 0 0 0
11/1/19 - 4/30/20 50 0 0 0 69 2 2 1
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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 - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER, FIRST TRUST
INVESTMENT GRADE FIXED INCOME GROUP
JEREMIAH CHARLES - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, FIRST TRUST
SECURITIZED PRODUCTS GROUP
JAMES SNYDER - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, FIRST TRUST
SECURITIZED PRODUCTS GROUP
ERIC MAISEL, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER, FIRST TRUST
INVESTMENT GRADE FIXED INCOME GROUP
Page 5
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (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, 2020.
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, 2019 APRIL 30, 2020 PERIOD (a) PERIOD (b)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
Actual $1,000.00 $1,001.20 0.40% $1.99
Hypothetical (5% return before expenses) $1,000.00 $1,022.87 0.40% $2.01
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 41.5%
AEROSPACE/DEFENSE -- 0.7%
$ 10,000,000 L3Harris Technologies, Inc. (a)................................. 4.95% 02/15/21 $ 10,170,204
10,505,000 Lockheed Martin Corp............................................ 2.50% 11/23/20 10,568,268
11,914,000 Northrop Grumman Corp........................................... 2.08% 10/15/20 11,978,743
1,492,000 Northrop Grumman Corp........................................... 2.55% 10/15/22 1,545,967
----------------
34,263,182
----------------
AGRICULTURE -- 0.9%
3,502,000 Altria Group, Inc............................................... 4.75% 05/05/21 3,614,294
15,190,000 BAT Capital Corp., 3 Mo. LIBOR + 0.59% (b)...................... 2.29% 08/14/20 15,130,831
7,452,000 BAT Capital Corp., 3 Mo. LIBOR + 0.88% (b)...................... 2.57% 08/15/22 7,159,339
1,550,000 Philip Morris International, Inc................................ 2.38% 08/17/22 1,595,183
17,577,000 Reynolds American, Inc.......................................... 3.25% 06/12/20 17,596,000
----------------
45,095,647
----------------
AUTO MANUFACTURERS -- 3.9%
6,000,000 American Honda Finance Corp., 3 Mo. LIBOR +
0.26% (b).................................................... 1.00% 06/16/20 5,996,742
3,800,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.47% (b)...................................... 1.82% 01/08/21 3,783,007
3,000,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.35% (b)...................................... 1.12% 06/11/21 2,972,316
20,000,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.37% (b)...................................... 2.10% 05/10/23 19,152,705
10,000,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.41% (a) (b)................. 1.72% 04/12/21 9,830,292
4,400,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.50% (a) (b)................. 2.21% 08/13/21 4,289,712
10,000,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.39% (a) (b)................................................ 2.14% 05/04/20 10,000,000
1,500,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.53% (a) (b)................................................ 2.27% 05/05/20 1,499,956
5,730,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.43% (a) (b)................................................ 2.14% 02/12/21 5,576,300
2,000,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (a) (b)................................................ 2.59% 02/15/22 1,894,394
5,000,000 Daimler Finance North America LLC (a)........................... 1.75% 03/10/23 4,779,602
14,742,000 General Motors Co., 3 Mo. LIBOR + 0.80% (b)..................... 2.54% 08/07/20 14,632,944
6,000,000 General Motors Financial Co., Inc............................... 3.20% 07/13/20 5,989,084
3,000,000 General Motors Financial Co., Inc., 3 Mo. LIBOR +
0.54% (b).................................................... 2.28% 11/06/20 2,948,330
8,000,000 General Motors Financial Co., Inc., 3 Mo. LIBOR +
1.10% (b).................................................... 2.84% 11/06/21 7,488,557
3,000,000 Hyundai Capital America (a)..................................... 3.00% 10/30/20 3,000,790
6,885,000 Hyundai Capital America (a)..................................... 2.38% 02/10/23 6,636,326
4,619,000 Nissan Motor Acceptance Corp., 3 Mo. LIBOR +
0.39% (a) (b)................................................ 1.70% 07/13/20 4,576,908
2,700,000 Nissan Motor Acceptance Corp., 3 Mo. LIBOR +
0.39% (a) (b)................................................ 1.76% 09/28/20 2,640,994
1,500,000 PACCAR Financial Corp., Medium-Term Note........................ 2.25% 02/25/21 1,511,915
2,000,000 PACCAR Financial Corp., Medium-Term Note,
3 Mo. LIBOR + 0.26% (b)...................................... 1.99% 05/10/21 1,987,619
5,000,000 Toyota Motor Credit Corp., Global Medium-Term Note,
3 Mo. LIBOR + 0.17% (b)...................................... 1.06% 09/18/20 4,994,037
4,000,000 Toyota Motor Credit Corp., Medium-Term Note,
3 Mo. LIBOR + 0.28% (b)...................................... 1.59% 04/13/21 3,979,012
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
AUTO MANUFACTURERS (CONTINUED)
$ 15,000,000 Toyota Motor Credit Corp., Medium-Term Note,
3 Mo. LIBOR + 0.29% (b)...................................... 1.68% 10/07/21 $ 14,824,244
9,677,000 Toyota Motor Credit Corp., Medium-Term Note..................... 1.80% 10/07/21 9,752,741
17,370,000 Volkswagen Group of America Finance LLC, 3 Mo. LIBOR
+ 0.77% (a) (b).............................................. 2.48% 11/13/20 17,203,826
10,000,000 Volkswagen Group of America Finance LLC, 3 Mo. LIBOR
+ 0.86% (a) (b).............................................. 2.06% 09/24/21 9,717,066
7,000,000 Volkswagen Group of America Finance LLC (a)..................... 2.50% 09/24/21 6,983,531
----------------
188,642,950
----------------
BANKS -- 8.5%
6,239,000 Bank of America Corp., 3 Mo. LIBOR + 0.38% (b).................. 1.42% 01/23/22 6,122,305
5,000,000 Bank of America Corp. (c)....................................... 2.74% 01/23/22 5,032,394
5,000,000 Bank of America Corp., Global Medium-Term Note,
3 Mo. LIBOR + 1.42% (b)...................................... 2.56% 04/19/21 5,027,052
4,000,000 Bank of America Corp., Global Medium-Term Note,
3 Mo. LIBOR + 0.66% (b)...................................... 1.77% 07/21/21 3,989,014
6,642,000 Bank of America Corp., Global Medium-Term Note (c).............. 2.37% 07/21/21 6,646,389
5,000,000 Bank of America Corp., Medium-Term Note......................... 2.63% 10/19/20 5,034,412
18,560,000 Bank of America Corp., Medium-Term Note, 3 Mo. LIBOR
+ 0.65% (b).................................................. 1.87% 06/25/22 18,333,607
3,000,000 Bank of America N.A., 3 Mo. LIBOR + 0.35% (b)................... 2.03% 05/24/21 2,982,314
15,000,000 Bank of America N.A., 3 Mo. LIBOR + 0.32% (b)................... 1.31% 07/26/21 14,882,127
5,000,000 Bank of New York Mellon (The), Medium-Term Note,
3 Mo. LIBOR + 0.28% (b)...................................... 1.53% 06/04/21 4,973,108
3,385,000 Capital One N.A., 3 Mo. LIBOR + 0.82% (b)....................... 2.55% 08/08/22 3,302,228
3,240,000 Capital One N.A................................................. 2.15% 09/06/22 3,232,154
3,000,000 Citibank N.A., 3 Mo. LIBOR + 0.30% (b).......................... 1.44% 10/20/20 2,997,229
10,760,000 Citibank N.A., 3 Mo. LIBOR + 0.35% (b).......................... 2.06% 02/12/21 10,727,298
15,000,000 Citibank N.A., 3 Mo. LIBOR + 0.60% (b).......................... 2.29% 05/20/22 14,883,599
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.19% (b)........................ 2.95% 08/02/21 999,653
2,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (b)........................ 2.07% 12/08/21 1,998,984
9,959,000 Citigroup, Inc., 3 Mo. LIBOR + 0.96% (b)........................ 1.95% 04/25/22 9,885,502
5,000,000 Citigroup, Inc., SOFR + 0.87% (b)............................... 1.55% 11/04/22 4,856,263
5,000,000 Citigroup, Inc. (c)............................................. 2.31% 11/04/22 5,047,883
6,425,000 Citizens Bank N.A./Providence RI, 3 Mo. LIBOR +
0.57% (b).................................................... 2.22% 05/26/20 6,427,631
2,013,000 Citizens Bank N.A./Providence RI................................ 2.25% 10/30/20 2,020,072
1,500,000 Citizens Bank N.A./Providence RI, Medium-Term Note.............. 2.55% 05/13/21 1,515,789
14,035,000 Discover Bank................................................... 3.10% 06/04/20 14,037,482
2,000,000 Fifth Third Bancorp............................................. 1.63% 05/05/23 1,998,720
7,725,000 Fifth Third Bank/Cincinnati OH, 3 Mo. LIBOR +
0.44% (b).................................................... 1.43% 07/26/21 7,669,488
5,194,000 Goldman Sachs Bank USA/New York NY, SOFR +
0.60% (b).................................................... 0.64% 05/24/21 5,155,982
7,000,000 Goldman Sachs Group, (The), Inc., 3 Mo. LIBOR +
1.20% (b).................................................... 1.94% 09/15/20 7,009,733
6,000,000 Goldman Sachs Group, (The), Inc................................. 2.60% 12/27/20 6,012,567
10,308,000 Goldman Sachs Group, (The), Inc., 3 Mo. LIBOR +
1.17% (b).................................................... 2.86% 11/15/21 10,294,969
5,000,000 Goldman Sachs Group, (The), Inc., 3 Mo. LIBOR +
1.11% (b).................................................... 2.10% 04/26/22 4,977,804
5,000,000 Goldman Sachs Group, (The), Inc................................. 3.00% 04/26/22 5,066,961
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 6,500,000 Goldman Sachs Group, (The), Inc. (c)............................ 2.88% 10/31/22 $ 6,607,278
5,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.68% (b)................... 2.26% 06/01/21 4,999,417
3,000,000 JPMorgan Chase & Co., 3 Mo. LIBOR + 0.61% (b)................... 1.50% 06/18/22 2,976,030
11,900,000 JPMorgan Chase & Co. (c)........................................ 3.51% 06/18/22 12,183,556
6,000,000 JPMorgan Chase & Co............................................. 2.97% 01/15/23 6,176,344
6,060,000 JPMorgan Chase & Co. (c)........................................ 2.78% 04/25/23 6,209,807
3,300,000 KeyBank N.A./Cleveland OH, 3 Mo. LIBOR + 0.81% (b).............. 2.49% 11/22/21 3,282,143
14,406,000 KeyCorp., Medium-Term Note...................................... 2.90% 09/15/20 14,489,624
15,784,000 Morgan Stanley, 3 Mo. LIBOR + 1.18% (b)......................... 2.32% 01/20/22 15,744,704
3,463,000 Morgan Stanley, Global Medium-Term Note......................... 2.50% 04/21/21 3,506,196
11,000,000 Morgan Stanley, Global Medium-Term Note, 3 Mo. LIBOR
+ 1.40% (b).................................................. 2.51% 04/21/21 11,039,138
25,000,000 Morgan Stanley, Global Medium-Term Note, SOFR +
0.70% (b).................................................... 0.71% 01/20/23 24,156,101
4,900,000 National Securities Clearing Corp. (a).......................... 1.20% 04/23/23 4,904,380
5,000,000 PNC Bank N.A., 3 Mo. LIBOR + 0.33% (b).......................... 2.00% 02/24/23 4,878,088
12,050,000 Regions Bank/Birmingham AL, 3 Mo. LIBOR +
0.38% (b).................................................... 1.81% 04/01/21 11,958,332
7,000,000 Regions Bank/Birmingham AL, 3 Mo. LIBOR +
0.50% (b).................................................... 2.21% 08/13/21 6,917,277
3,990,000 State Street Corp. (a) (c)...................................... 2.83% 03/30/23 4,103,165
260,000 Truist Bank, 3 Mo. LIBOR + 0.22% (b)............................ 1.80% 06/01/20 260,000
7,000,000 Truist Bank, 3 Mo. LIBOR + 0.50% (b)............................ 1.49% 10/26/21 6,946,392
10,000,000 Truist Bank, 3 Mo. LIBOR + 0.59% (b)............................ 2.28% 05/17/22 9,910,441
3,000,000 Truist Bank, SOFR + 0.73% (b)................................... 0.90% 03/09/23 2,897,002
1,031,000 Truist Financial Corp., Medium-Term Note, 3 Mo. LIBOR
+ 0.57% (b).................................................. 1.31% 06/15/20 1,031,011
2,852,000 Truist Financial Corp., Medium-Term Note, 3 Mo. LIBOR
+ 0.22% (b).................................................. 1.98% 02/01/21 2,834,861
2,000,000 US Bank N.A./Cincinnati OH, 3 Mo. LIBOR +
0.32% (b).................................................... 1.31% 04/26/21 1,995,808
6,952,000 Wells Fargo & Co., 3 Mo. LIBOR + 0.93% (b)...................... 2.66% 02/11/22 6,906,461
5,000,000 Wells Fargo & Co., Medium-Term Note............................. 3.00% 01/22/21 5,065,027
10,000,000 Wells Fargo & Co., Medium-Term Note............................. 3.50% 03/08/22 10,370,913
3,793,000 Wells Fargo Bank N.A., 3 Mo. LIBOR + 0.50% (b).................. 1.54% 07/23/21 3,775,082
4,646,000 Wells Fargo Bank N.A. (c)....................................... 2.08% 09/09/22 4,688,935
10,000,000 Wells Fargo Bank N.A., Medium-Term Note, 3 Mo. LIBOR
+ 0.38% (b).................................................. 2.08% 05/21/21 9,946,058
----------------
413,900,284
----------------
BEVERAGES -- 0.0%
2,200,000 Constellation Brands, Inc....................................... 2.25% 11/06/20 2,214,719
----------------
BIOTECHNOLOGY -- 0.5%
8,894,000 Amgen, Inc...................................................... 2.13% 05/01/20 8,894,000
15,500,000 Amgen, Inc., 3 Mo. LIBOR + 0.45% (b)............................ 2.18% 05/11/20 15,504,281
----------------
24,398,281
----------------
BUILDING MATERIALS -- 0.1%
3,566,000 Vulcan Materials Co., 3 Mo. LIBOR + 0.60% (b)................... 1.34% 06/15/20 3,559,730
----------------
CHEMICALS -- 0.3%
2,000,000 Chevron Phillips Chemical Co. LLC / Chevron Phillips
Chemical Co., L.P., 3 Mo. LIBOR + 0.75% (a) (b).............. 2.51% 05/01/20 2,000,000
10,527,000 DuPont de Nemours, Inc., 3 Mo. LIBOR + 0.71% (b)................ 2.40% 11/15/20 10,494,590
----------------
12,494,590
----------------
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
COMMERCIAL SERVICES -- 0.1%
$ 4,064,000 ERAC USA Finance LLC (a)........................................ 5.25% 10/01/20 $ 4,118,089
----------------
COMPUTERS -- 0.6%
3,000,000 Apple, Inc...................................................... 1.55% 08/04/21 3,029,885
12,340,000 Hewlett Packard Enterprise Co................................... 3.60% 10/15/20 12,418,724
3,905,000 Hewlett Packard Enterprise Co., 3 Mo. LIBOR +
0.68% (b).................................................... 1.46% 03/12/21 3,868,603
1,500,000 International Business Machines Corp............................ 1.63% 05/15/20 1,500,460
10,000,000 International Business Machines Corp., 3 Mo. LIBOR +
0.40% (b).................................................... 2.11% 05/13/21 9,998,675
----------------
30,816,347
----------------
DIVERSIFIED FINANCIAL SERVICES -- 1.8%
4,100,000 AIG Global Funding, 3 Mo. LIBOR + 0.65% (a) (b)................. 1.75% 01/22/21 4,071,085
8,111,000 American Express Co., 3 Mo. LIBOR + 0.33% (b)................... 1.09% 10/30/20 8,101,533
6,000,000 American Express Co., 3 Mo. LIBOR + 0.53% (b)................... 2.22% 05/17/21 5,970,992
11,000,000 American Express Co., 3 Mo. LIBOR + 0.60% (b)................... 2.34% 11/05/21 10,907,553
14,495,000 American Express Co., 3 Mo. LIBOR + 0.62% (b)................... 2.31% 05/20/22 14,330,353
3,000,000 American Express Co., 3 Mo. LIBOR + 0.75% (b)................... 2.51% 08/03/23 2,921,570
17,000,000 Capital One Financial Corp., 3 Mo. LIBOR + 0.76% (b)............ 2.47% 05/12/20 16,997,963
2,870,000 Capital One Financial Corp., 3 Mo. LIBOR + 0.45% (b)............ 1.21% 10/30/20 2,862,475
4,706,000 Capital One Financial Corp...................................... 2.40% 10/30/20 4,723,079
8,226,000 Capital One Financial Corp...................................... 3.45% 04/30/21 8,345,734
10,505,000 Charles Schwab (The) Corp., 3 Mo. LIBOR + 0.32% (b)............. 2.02% 05/21/21 10,420,791
----------------
89,653,128
----------------
ELECTRIC -- 2.7%
10,410,000 Alabama Power Co., Series 17A................................... 2.45% 03/30/22 10,692,974
2,080,000 Appalachian Power Co............................................ 4.60% 03/30/21 2,127,603
11,000,000 Consolidated Edison Co. of New York Inc., Series C,
3 Mo. LIBOR + 0.40% (b)...................................... 1.62% 06/25/21 10,878,847
10,000,000 Consolidated Edison, Inc........................................ 2.00% 05/15/21 10,063,778
8,510,000 Dominion Energy, Inc., Series B................................. 2.75% 01/15/22 8,703,484
2,135,000 Dominion Energy, Inc., Series C................................. 2.00% 08/15/21 2,150,269
10,000,000 DTE Energy Co., Series B........................................ 2.60% 06/15/22 10,139,090
5,000,000 Duke Energy Corp., 3 Mo. LIBOR + 0.50% (a) (b).................. 2.20% 05/14/21 4,984,915
5,900,000 Duke Energy Corp., 3 Mo. LIBOR + 0.65% (b)...................... 1.42% 03/11/22 5,862,492
3,000,000 Duke Energy Florida LLC, Series A, 3 Mo. LIBOR +
0.25% (b).................................................... 1.90% 11/26/21 2,970,153
8,962,000 Exelon Corp..................................................... 2.85% 06/15/20 8,967,415
13,000,000 Florida Power & Light Co., 3 Mo. LIBOR + 0.40% (b).............. 2.14% 05/06/22 12,887,878
7,425,000 NextEra Energy Capital Holdings, Inc............................ 2.40% 09/01/21 7,552,961
4,520,000 NextEra Energy Capital Holdings, Inc., 3 Mo. LIBOR +
0.72% (b).................................................... 2.40% 02/25/22 4,479,838
4,525,000 Southern (The) Co............................................... 2.35% 07/01/21 4,581,426
7,686,000 Southern Power Co., Series 15B.................................. 2.38% 06/01/20 7,693,101
16,000,000 WEC Energy Group, Inc........................................... 2.45% 06/15/20 16,002,982
----------------
130,739,206
----------------
ELECTRONICS -- 0.2%
2,000,000 Honeywell International, Inc., 3 Mo. LIBOR + 0.37% (b).......... 2.10% 08/08/22 1,984,102
6,565,000 Roper Technologies, Inc......................................... 3.00% 12/15/20 6,618,419
----------------
8,602,521
----------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
ENVIRONMENTAL CONTROL -- 0.5%
$ 8,876,000 Waste Management, Inc........................................... 4.75% 06/30/20 $ 8,927,135
14,855,000 Waste Management, Inc........................................... 4.60% 03/01/21 15,146,071
----------------
24,073,206
----------------
FOOD -- 0.8%
6,810,000 Conagra Brands, Inc., 3 Mo. LIBOR + 0.75% (b)................... 1.85% 10/22/20 6,801,486
13,477,000 General Mills, Inc., 3 Mo. LIBOR + 0.54% (b).................... 1.72% 04/16/21 13,407,408
5,348,000 Kroger (The) Co................................................. 2.60% 02/01/21 5,393,649
11,484,000 Tyson Foods, Inc., 3 Mo. LIBOR + 0.55% (b)...................... 2.13% 06/02/20 11,488,042
----------------
37,090,585
----------------
GAS -- 0.5%
4,313,000 Dominion Energy Gas Holdings LLC................................ 2.80% 11/15/20 4,335,032
18,010,000 Dominion Energy Gas Holdings LLC, Series A,
3 Mo. LIBOR + 0.60% (b)...................................... 1.34% 06/15/21 17,852,453
1,140,000 NiSource, Inc................................................... 2.65% 11/17/22 1,173,904
----------------
23,361,389
----------------
HEALTH CARE SERVICES -- 0.9%
7,383,000 Anthem, Inc..................................................... 2.50% 11/21/20 7,438,228
9,300,000 Humana, Inc..................................................... 2.50% 12/15/20 9,348,576
2,711,000 UnitedHealth Group, Inc......................................... 2.70% 07/15/20 2,719,723
1,000,000 UnitedHealth Group, Inc., 3 Mo. LIBOR + 0.07% (b)............... 1.29% 10/15/20 997,780
15,000,000 UnitedHealth Group, Inc......................................... 1.95% 10/15/20 15,001,477
1,001,000 UnitedHealth Group, Inc......................................... 2.13% 03/15/21 1,011,809
6,156,000 UnitedHealth Group, Inc., 3 Mo. LIBOR + 0.26% (b)............... 1.00% 06/15/21 6,108,335
----------------
42,625,928
----------------
INSURANCE -- 4.3%
1,000,000 Allstate (The) Corp., 3 Mo. LIBOR + 0.43% (b)................... 1.80% 03/29/21 994,369
16,056,000 Allstate (The) Corp., 3 Mo. LIBOR + 0.63% (b)................... 2.00% 03/29/23 15,676,812
4,328,000 American International Group, Inc............................... 3.38% 08/15/20 4,352,814
5,512,000 American International Group, Inc............................... 3.30% 03/01/21 5,593,419
13,125,000 Athene Global Funding, 3 Mo. LIBOR + 1.23% (a) (b).............. 2.67% 07/01/22 12,656,485
5,108,000 Athene Global Funding (a)....................................... 3.00% 07/01/22 5,133,447
3,750,000 Jackson National Life Global Funding, 3 Mo. LIBOR +
0.30% (a) (b)................................................ 1.52% 10/15/20 3,738,887
11,510,000 Jackson National Life Global Funding, 3 Mo. LIBOR +
0.48% (a) (b)................................................ 1.25% 06/11/21 11,382,333
25,600,000 Jackson National Life Global Funding, SOFR +
0.60% (a) (b)................................................ 0.61% 01/06/23 24,580,271
4,200,000 Massmutual Global Funding II (a)................................ 2.45% 11/23/20 4,235,014
25,000,000 MET Tower Global Funding, SOFR + 0.55% (a) (b).................. 0.56% 01/17/23 24,129,815
5,000,000 Metropolitan Life Global Funding I, SOFR +
0.57% (a) (b)................................................ 0.58% 09/07/20 4,979,579
10,000,000 Metropolitan Life Global Funding I, 3 Mo. LIBOR +
0.23% (a) (b)................................................ 1.58% 01/08/21 9,986,905
2,000,000 Metropolitan Life Global Funding I, SOFR +
0.57% (a) (b)................................................ 0.58% 01/13/23 1,929,882
2,000,000 New York Life Global Funding, 3 Mo. LIBOR +
0.28% (a) (b)................................................ 1.17% 01/28/21 1,993,307
20,000,000 New York Life Global Funding, 3 Mo. LIBOR +
0.28% (a) (b)................................................ 1.39% 01/21/22 19,730,945
10,550,000 New York Life Global Funding, 3 Mo. LIBOR +
0.44% (a) (b)................................................ 1.75% 07/12/22 10,419,054
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE (CONTINUED)
$ 25,000,000 New York Life Global Funding, 3 Mo. LIBOR +
0.28% (a) (b)................................................ 2.01% 01/10/23 $ 24,454,542
3,000,000 Principal Life Global Funding II, 3 Mo. LIBOR +
0.30% (a) (b)................................................ 1.53% 06/26/20 3,001,084
1,750,000 Principal Life Global Funding II (a)............................ 2.63% 11/19/20 1,761,139
14,300,000 Protective Life Global Funding, 3 Mo. LIBOR +
0.52% (a) (b)................................................ 1.89% 06/28/21 14,241,781
6,959,000 Unum Group...................................................... 5.63% 09/15/20 7,039,336
----------------
212,011,220
----------------
INTERNET -- 0.1%
6,633,000 TD Ameritrade Holding Corp., 3 Mo. LIBOR +
0.43% (b).................................................... 2.19% 11/01/21 6,574,547
----------------
LODGING -- 0.3%
1,850,000 Marriott International, Inc., 3 Mo. LIBOR + 0.65% (b)........... 1.65% 03/08/21 1,795,164
13,405,000 Marriott International, Inc., Series Y, 3 Mo. LIBOR +
0.60% (b).................................................... 2.18% 12/01/20 13,180,811
----------------
14,975,975
----------------
MACHINERY-CONSTRUCTION & MINING -- 0.8%
3,222,000 Caterpillar Financial Services Corp., Global Medium-Term
Note......................................................... 1.85% 09/04/20 3,231,892
2,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.25% (b)...................................... 1.90% 08/26/20 2,000,042
3,750,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.30% (b)...................................... 1.30% 03/08/21 3,732,727
6,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.23% (b)...................................... 0.97% 03/15/21 5,979,727
9,879,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.28% (b)...................................... 1.28% 09/07/21 9,770,849
15,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
Series I, 3 Mo. LIBOR + 0.39% (b)............................ 2.08% 05/17/21 14,906,443
----------------
39,621,680
----------------
MACHINERY-DIVERSIFIED -- 0.6%
2,580,000 John Deere Capital Corp., Medium-Term Note...................... 1.95% 06/22/20 2,584,512
15,000,000 John Deere Capital Corp., Medium-Term Note,
3 Mo. LIBOR + 0.49% (b)...................................... 1.26% 06/13/22 14,811,489
10,000,000 Otis Worldwide Corp., 3 Mo. LIBOR + 0.45% (a) (b)............... 2.09% 04/05/23 9,736,658
----------------
27,132,659
----------------
MEDIA -- 1.3%
3,630,000 Charter Communications Operating LLC / Charter
Communications Operating Capital............................. 3.58% 07/23/20 3,635,073
15,480,000 Comcast Corp., 3 Mo. LIBOR + 0.33% (b).......................... 1.76% 10/01/20 15,489,749
1,832,000 Comcast Corp., 3 Mo. LIBOR + 0.44% (b).......................... 1.87% 10/01/21 1,827,098
22,810,000 NBCUniversal Enterprise, Inc., 3 Mo. LIBOR +
0.40% (a) (b)................................................ 1.83% 04/01/21 22,814,112
5,000,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.25% (b).................. 1.83% 09/01/21 4,973,755
13,450,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.39% (b).................. 1.97% 09/01/22 13,371,866
----------------
62,111,653
----------------
MISCELLANEOUS MANUFACTURING -- 0.4%
5,675,000 General Electric Co., Medium-Term Note.......................... 5.55% 05/04/20 5,675,000
15,804,000 General Electric Co., Medium-Term Note.......................... 4.38% 09/16/20 15,921,812
----------------
21,596,812
----------------
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
OIL & GAS -- 1.5%
$ 9,169,000 BP Capital Markets America, Inc., 3 Mo. LIBOR +
0.65% (b).................................................... 1.70% 09/19/22 $ 8,805,986
3,500,000 Chevron Corp., 3 Mo. LIBOR + 0.95% (b).......................... 2.64% 05/16/21 3,501,895
2,235,000 Chevron Corp., 3 Mo. LIBOR + 0.48% (b).......................... 1.94% 03/03/22 2,214,613
12,796,000 Chevron Corp.................................................... 2.41% 03/03/22 13,091,036
16,153,000 ConocoPhillips Co., 3 Mo. LIBOR + 0.90% (b)..................... 2.59% 05/15/22 15,612,854
4,075,000 EOG Resources, Inc.............................................. 4.40% 06/01/20 4,082,923
10,000,000 Exxon Mobil Corp., 3 Mo. LIBOR + 0.33% (b)...................... 2.02% 08/16/22 9,903,895
4,507,000 Marathon Petroleum Corp......................................... 3.40% 12/15/20 4,516,187
7,419,000 Phillips 66, 3 Mo. LIBOR + 0.60% (b)............................ 2.25% 02/26/21 7,273,279
3,289,000 Pioneer Natural Resources Co.................................... 3.45% 01/15/21 3,300,147
955,000 Valero Energy Corp.............................................. 2.70% 04/15/23 954,319
----------------
73,257,134
----------------
PHARMACEUTICALS -- 3.3%
3,173,000 AbbVie, Inc..................................................... 2.50% 05/14/20 3,174,191
5,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.35% (a) (b)....................... 2.05% 05/21/21 4,973,613
5,400,000 AbbVie, Inc. (a)................................................ 2.15% 11/19/21 5,472,679
5,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.46% (a) (b)....................... 2.15% 11/19/21 4,960,668
12,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.65% (a) (b)....................... 2.35% 11/21/22 11,769,459
5,000,000 Bayer US Finance II LLC, 3 Mo. LIBOR + 0.63% (a) (b)............ 1.85% 06/25/21 4,915,744
1,500,000 Bayer US Finance II LLC (a)..................................... 3.50% 06/25/21 1,530,902
3,341,000 Becton Dickinson and Co......................................... 2.40% 06/05/20 3,340,491
15,060,000 Bristol-Myers Squibb Co. (a).................................... 2.88% 08/15/20 15,139,114
17,761,000 Bristol-Myers Squibb Co., 3 Mo. LIBOR + 0.20% (a) (b)........... 1.89% 11/16/20 17,758,663
5,855,000 Bristol-Myers Squibb Co. (a).................................... 2.55% 05/14/21 5,951,298
6,000,000 Bristol-Myers Squibb Co., 3 Mo. LIBOR + 0.38% (a) (b)........... 2.07% 05/16/22 5,970,741
6,107,000 Cigna Corp...................................................... 3.20% 09/17/20 6,148,527
11,000,000 Cigna Corp., Series WI, 3 Mo. LIBOR + 0.65% (b)................. 1.49% 09/17/21 10,817,217
19,620,000 CVS Health Corp................................................. 2.80% 07/20/20 19,618,476
6,000,000 CVS Health Corp., 3 Mo. LIBOR + 0.72% (b)....................... 1.72% 03/09/21 5,988,343
11,511,000 CVS Health Corp................................................. 3.35% 03/09/21 11,701,538
1,473,000 CVS Health Corp................................................. 2.13% 06/01/21 1,485,369
2,500,000 Express Scripts Holding Co., 3 Mo. LIBOR + 0.75% (b)............ 2.33% 11/30/20 2,477,683
1,573,000 Express Scripts Holding Co...................................... 2.60% 11/30/20 1,581,905
13,237,000 Zoetis, Inc..................................................... 3.45% 11/13/20 13,374,898
524,000 Zoetis, Inc..................................................... 3.25% 08/20/21 536,973
----------------
158,688,492
----------------
PIPELINES -- 0.9%
12,167,000 Enterprise Products Operating LLC............................... 5.20% 09/01/20 12,288,668
3,000,000 Enterprise Products Operating LLC............................... 2.80% 02/15/21 3,018,214
6,367,000 Kinder Morgan Energy Partners, L.P.............................. 5.30% 09/15/20 6,416,175
6,179,000 Kinder Morgan, Inc.............................................. 6.50% 09/15/20 6,250,561
5,000,000 MPLX, L.P., 3 Mo. LIBOR + 0.90% (b)............................. 1.90% 09/09/21 4,705,143
6,355,000 Spectra Energy Partners, L.P., 3 Mo. LIBOR + 0.70% (b).......... 2.01% 06/05/20 6,341,026
4,125,000 Williams Cos. (The), Inc........................................ 4.13% 11/15/20 4,138,803
----------------
43,158,590
----------------
REAL ESTATE INVESTMENT TRUSTS -- 0.1%
1,000,000 American Tower Corp............................................. 3.30% 02/15/21 1,011,790
5,483,000 Boston Properties, L.P.......................................... 4.13% 05/15/21 5,575,001
----------------
6,586,791
----------------
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL -- 0.7%
$ 3,000,000 Home Depot (The), Inc........................................... 4.40% 04/01/21 $ 3,071,916
7,366,000 Lowe's Cos., Inc................................................ 3.75% 04/15/21 7,500,628
10,000,000 McDonald's Corp., Medium-Term Note, 3 Mo. LIBOR +
0.43% (b).................................................... 1.32% 10/28/21 9,891,596
12,513,000 O'Reilly Automotive, Inc........................................ 4.88% 01/14/21 12,718,919
801,000 Starbucks Corp.................................................. 2.10% 02/04/21 806,840
----------------
33,989,899
----------------
SEMICONDUCTORS -- 0.2%
10,000,000 Intel Corp., 3 Mo. LIBOR + 0.35% (b)............................ 2.08% 05/11/22 9,943,830
----------------
SOFTWARE -- 0.7%
1,700,000 Fiserv, Inc..................................................... 2.70% 06/01/20 1,700,577
5,500,000 Oracle Corp..................................................... 2.80% 07/08/21 5,625,091
2,267,000 Oracle Corp..................................................... 1.90% 09/15/21 2,298,115
25,401,000 VMware, Inc..................................................... 2.30% 08/21/20 25,425,264
----------------
35,049,047
----------------
TELECOMMUNICATIONS -- 2.0%
2,000,000 AT&T, Inc., 3 Mo. LIBOR + 0.93% (b)............................. 2.30% 06/30/20 2,002,418
5,000,000 AT&T, Inc....................................................... 4.60% 02/15/21 5,073,869
5,000,000 AT&T, Inc....................................................... 2.80% 02/17/21 5,054,438
3,125,000 AT&T, Inc....................................................... 4.45% 05/15/21 3,223,083
7,940,000 AT&T, Inc., 3 Mo. LIBOR + 0.75% (b)............................. 2.33% 06/01/21 7,913,175
21,600,000 AT&T, Inc., 3 Mo. LIBOR + 0.95% (b)............................. 2.17% 07/15/21 21,574,511
5,000,000 Cisco Systems, Inc.............................................. 2.45% 06/15/20 5,010,344
9,049,000 Cisco Systems, Inc.............................................. 2.90% 03/04/21 9,217,734
9,000,000 Verizon Communications, Inc., 3 Mo. LIBOR +
0.55% (b).................................................... 2.23% 05/22/20 9,006,692
3,805,000 Verizon Communications, Inc..................................... 4.60% 04/01/21 3,931,471
25,385,000 Verizon Communications, Inc., 3 Mo. LIBOR +
1.00% (b).................................................... 1.74% 03/16/22 25,424,273
----------------
97,432,008
----------------
TRANSPORTATION -- 0.7%
7,448,000 Ryder System, Inc., Medium-Term Note............................ 2.88% 09/01/20 7,455,944
7,004,000 Union Pacific Corp.............................................. 4.00% 02/01/21 7,089,783
18,802,000 Union Pacific Corp.............................................. 3.20% 06/08/21 19,232,340
----------------
33,778,067
----------------
TRUCKING & LEASING -- 0.6%
7,365,000 Aviation Capital Group LLC, 3 Mo. LIBOR +
0.95% (a) (b)................................................ 2.53% 06/01/21 6,825,676
8,300,000 GATX Corp., 3 Mo. LIBOR + 0.72% (b)............................. 2.46% 11/05/21 8,142,669
16,846,000 Penske Truck Leasing Co., L.P. / PTL Finance Corp. (a).......... 3.20% 07/15/20 16,851,207
----------------
31,819,552
----------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 2,023,377,738
(Cost $2,038,200,737) ----------------
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 23.8%
AEROSPACE/DEFENSE -- 1.4%
$ 11,000,000 Airbus Finance BV............................................... 1.20% 05/26/20 $ 10,990,986
11,000,000 Airbus Finance BV............................................... 1.17% 05/28/20 10,990,512
15,000,000 Boeing (The) Co................................................. 2.10% 06/11/20 14,964,835
15,000,000 Boeing (The) Co................................................. 1.82% 07/01/20 14,954,628
15,000,000 General Dynamics Corp........................................... 2.06% 07/14/20 14,937,657
----------------
66,838,618
----------------
AUTO MANUFACTURERS -- 1.1%
15,000,000 American Honda Finance Corp..................................... 2.29% 05/06/20 14,995,303
10,000,000 Daimler Finance North America LLC............................... 1.53% 05/20/20 9,992,082
10,000,000 General Motors Financial Co., Inc............................... 3.82% 05/07/20 9,993,749
10,000,000 Hyundai Capital America......................................... 1.98% 05/12/20 9,994,040
10,000,000 Hyundai Capital America......................................... 2.09% 05/21/20 9,988,611
----------------
54,963,785
----------------
BANKS -- 0.4%
10,000,000 Canadian Imperial Bank of Commerce, Federal Funds Rate
+0.35%(b).................................................... 0.40% 08/27/20 10,000,000
10,000,000 National Australia Bank Ltd., 1 Mo. LIBOR +
0.16%(b)..................................................... 0.88% 05/20/20 9,999,843
----------------
19,999,843
----------------
CHEMICALS -- 2.2%
10,000,000 BASF SE......................................................... 2.09% 05/01/20 10,000,000
15,000,000 BASF SE......................................................... 0.77% 05/22/20 14,993,350
12,000,000 Eastman Chemical Co............................................. 2.29% 05/05/20 11,996,995
15,000,000 EI du Pont de Nemours & Co...................................... 1.04% 06/02/20 14,986,398
5,500,000 EI du Pont de Nemours & Co...................................... 0.92% 06/03/20 5,495,462
10,000,000 LyondellBasell Investment LLC................................... 0.86% 05/19/20 9,995,750
10,000,000 Nutrien Ltd..................................................... 2.04% 05/11/20 9,994,438
10,000,000 Nutrien Ltd..................................................... 2.04% 05/14/20 9,992,769
10,000,000 Nutrien Ltd..................................................... 1.68% 05/26/20 9,988,537
10,000,000 Nutrien Ltd..................................................... 2.24% 06/01/20 9,981,030
----------------
107,424,729
----------------
DIVERSIFIED FINANCIAL SERVICES -- 0.7%
20,000,000 CNPC Finance HK Ltd............................................. 1.27% 05/06/20 19,996,524
15,000,000 CNPC Finance HK Ltd............................................. 1.32% 05/12/20 14,994,039
----------------
34,990,563
----------------
ELECTRIC -- 2.9%
15,000,000 Alabama Power Co................................................ 1.48% 05/01/20 15,000,000
20,000,000 American Electric Power Co., Inc................................ 2.75% 05/08/20 19,989,477
10,000,000 CenterPoint Energy, Inc......................................... 1.80% 05/13/20 9,994,096
5,500,000 CenterPoint Energy, Inc......................................... 1.85% 05/15/20 5,496,104
10,000,000 CenterPoint Energy, Inc......................................... 2.07% 05/26/20 9,985,895
12,500,000 Consolidated Edison, Inc........................................ 0.45% 05/13/20 12,498,167
15,000,000 Consolidated Edison, Inc........................................ 0.47% 05/14/20 14,997,508
15,000,000 Duke Energy Corp................................................ 1.12% 05/20/20 14,991,289
10,000,000 Duke Energy Corp................................................ 1.10% 05/22/20 9,993,698
10,000,000 Duke Energy Corp................................................ 0.73% 05/27/20 9,994,800
15,000,000 Entergy Corp.................................................... 2.80% 05/05/20 14,995,407
5,000,000 Public Service Enterprise Group, Inc............................ 2.91% 05/05/20 4,998,413
----------------
142,934,854
----------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
ELECTRONICS -- 0.2%
$ 10,000,000 Hitachi America Capital Ltd..................................... 0.61% 05/01/20 $ 10,000,000
----------------
FOOD -- 0.5%
10,000,000 Mondelez International, Inc..................................... 1.50% 05/14/20 9,994,685
15,000,000 Mondelez International, Inc..................................... 1.13% 05/21/20 14,990,747
----------------
24,985,432
----------------
GAS -- 0.6%
10,000,000 NiSource, Inc................................................... 1.73% 05/28/20 9,987,245
10,000,000 Sempra Global................................................... 1.14% 05/04/20 9,999,066
10,000,000 Sempra Global................................................... 1.12% 05/05/20 9,998,777
----------------
29,985,088
----------------
HEALTH CARE SERVICES -- 1.5%
15,000,000 Anthem, Inc..................................................... 1.78% 05/01/20 15,000,000
7,210,000 Anthem, Inc..................................................... 1.32% 05/15/20 7,206,353
18,000,000 Humana, Inc..................................................... 2.04% 05/13/20 17,987,984
10,000,000 Humana, Inc..................................................... 2.19% 05/19/20 9,989,238
5,000,000 Humana, Inc..................................................... 2.45% 06/17/20 4,984,315
8,100,000 UnitedHealth Group, Inc......................................... 0.86% 05/21/20 8,096,174
10,000,000 UnitedHealth Group, Inc......................................... 0.81% 05/22/20 9,995,332
----------------
73,259,396
----------------
INSURANCE -- 0.8%
15,000,000 Aon Corp........................................................ 2.60% 05/13/20 14,987,224
15,000,000 Aon Corp........................................................ 2.76% 05/28/20 14,969,561
6,000,000 Marsh & McLennan Cos., Inc...................................... 1.53% 05/21/20 5,994,998
----------------
35,951,783
----------------
MACHINERY-DIVERSIFIED -- 0.5%
10,000,000 John Deere Canada ULC........................................... 0.43% 06/10/20 9,995,333
15,000,000 John Deere Capital Corp......................................... 1.73% 05/04/20 14,997,872
----------------
24,993,205
----------------
MEDIA -- 0.7%
15,000,000 ViacomCBS, Inc.................................................. 1.37% 05/14/20 14,992,683
10,000,000 ViacomCBS, Inc.................................................. 1.37% 05/19/20 9,993,247
10,000,000 Walt Disney (The) Co............................................ 1.84% 07/22/20 9,958,965
----------------
34,944,895
----------------
MINING -- 0.5%
10,000,000 Glencore Funding LLC............................................ 1.73% 05/08/20 9,996,692
15,000,000 Glencore Funding LLC............................................ 1.45% 05/19/20 14,989,275
----------------
24,985,967
----------------
MISCELLANEOUS MANUFACTURING -- 0.6%
10,000,000 General Electric Co............................................. 0.71% 05/29/20 9,994,555
10,000,000 Parker-Hannifin Corp............................................ 2.85% 05/07/20 9,995,323
10,000,000 Parker-Hannifin Corp............................................ 2.85% 05/08/20 9,994,543
----------------
29,984,421
----------------
OIL & GAS -- 2.3%
17,000,000 Canadian Natural Resources Ltd.................................. 1.10% - 1.48% 05/06/20 16,997,074
10,000,000 Canadian Natural Resources Ltd.................................. 1.42% 05/12/20 9,995,721
10,000,000 Eni Finance USA, Inc............................................ 1.81% 05/06/20 9,997,527
15,000,000 Eni Finance USA, Inc............................................ 2.26% 05/15/20 14,987,037
20,000,000 Exxon Mobil Corp................................................ 2.08% 05/07/20 19,993,188
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 16,000,000 Phillips 66..................................................... 1.22% 05/08/20 $ 15,996,266
10,000,000 Suncor Energy, Inc.............................................. 1.81% 05/07/20 9,997,031
15,000,000 Suncor Energy, Inc.............................................. 1.88% 05/19/20 14,986,113
----------------
112,949,957
----------------
OIL & GAS SERVICES -- 0.9%
15,000,000 Baker Hughes Holdings LLC....................................... 1.63% 05/28/20 14,981,997
10,000,000 Baker Hughes Holdings LLC....................................... 1.63% 05/29/20 9,987,553
10,000,000 Schlumberger Investment S.A..................................... 2.60% 05/05/20 9,997,161
10,000,000 Schlumberger Investment S.A..................................... 1.37% 05/08/20 9,997,373
----------------
44,964,084
----------------
PHARMACEUTICALS -- 1.8%
23,000,000 AstraZeneca PLC................................................. 1.94% 05/07/20 22,992,705
5,000,000 AstraZeneca PLC................................................. 2.02% 10/28/20 4,950,000
10,000,000 Bayer Corp...................................................... 2.42% 08/03/20 9,937,333
5,000,000 Bayer Corp...................................................... 2.46% 08/17/20 4,963,998
15,000,000 GlaxoSmithKline LLC............................................. 1.84% 06/10/20 14,969,964
10,000,000 GlaxoSmithKline LLC............................................. 1.84% 06/16/20 9,976,972
15,000,000 GlaxoSmithKline LLC............................................. 1.58% 07/16/20 14,950,881
2,365,000 Pfizer, Inc..................................................... 2.45% 05/04/20 2,364,526
----------------
85,106,379
----------------
PIPELINES -- 1.2%
7,500,000 Enbridge U.S., Inc.............................................. 1.83% 05/14/20 7,495,121
15,500,000 Enbridge U.S., Inc.............................................. 1.68% - 1.75% 05/18/20 15,487,733
10,000,000 TransCanada PipeLines Ltd....................................... 1.73% 05/13/20 9,994,327
20,000,000 TransCanada PipeLines Ltd....................................... 1.81% 05/27/20 19,974,353
5,000,000 TransCanada PipeLines Ltd....................................... 1.76% 05/29/20 4,993,266
----------------
57,944,800
----------------
RETAIL -- 0.2%
10,000,000 Walgreens Boots Alliance, Inc................................... 0.92% 05/28/20 9,993,250
----------------
SEMICONDUCTORS -- 0.6%
11,490,000 QUALCOMM, Inc................................................... 1.43% 05/06/20 11,487,763
15,000,000 QUALCOMM, Inc................................................... 0.94% 06/17/20 14,981,979
----------------
26,469,742
----------------
SOFTWARE -- 0.5%
12,500,000 Fidelity National Information Services, Inc..................... 1.53% 05/15/20 12,492,704
10,300,000 Fidelity National Information Services, Inc..................... 1.48% 05/26/20 10,289,625
----------------
22,782,329
----------------
TELECOMMUNICATIONS -- 1.3%
25,000,000 AT&T, Inc....................................................... 1.48% 06/09/20 24,960,645
10,000,000 Bell Canada, Inc................................................ 1.84% 05/01/20 10,000,000
15,000,000 Bell Canada, Inc................................................ 1.84% 05/05/20 14,996,987
10,000,000 Verizon Communications, Inc..................................... 1.53% 05/12/20 9,995,413
3,500,000 Verizon Communications, Inc..................................... 2.04% 06/08/20 3,492,602
----------------
63,445,647
----------------
TRANSPORTATION -- 0.4%
20,000,000 Union Pacific Corp.............................................. 2.65% 05/04/20 19,995,658
----------------
TOTAL COMMERCIAL PAPER....................................................................... 1,159,894,425
(Cost $1,159,894,425) ----------------
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES -- 17.1%
AGRICULTURE -- 0.3%
$ 14,180,000 Imperial Brands Finance PLC (a)................................. 2.95% 07/21/20 $ 14,207,000
----------------
AUTO MANUFACTURERS -- 0.4%
5,500,000 BMW Finance N.V., 3 Mo. LIBOR + 0.79% (a) (b)................... 2.50% 08/12/22 5,284,456
12,500,000 Volkswagen International Finance N.V. (a)....................... 4.00% 08/12/20 12,542,803
----------------
17,827,259
----------------
BANKS -- 13.8%
16,095,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.41% (a) (b)................. 1.55% 01/19/21 16,090,979
7,158,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.57% (a) (b)................. 2.21% 08/27/21 7,128,524
2,000,000 ANZ New Zealand Int'l Ltd./London (a)........................... 2.85% 08/06/20 2,008,359
5,000,000 ANZ New Zealand Int'l Ltd./London (a)........................... 2.75% 01/22/21 5,063,891
2,500,000 ANZ New Zealand Int'l Ltd./London, 3 Mo. LIBOR +
1.00% (a) (b)................................................ 1.89% 01/25/22 2,479,725
3,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.50% (a) (b).................................. 2.19% 08/19/20 3,000,446
12,090,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.46% (a) (b).................................. 2.15% 05/17/21 12,034,730
3,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.99% (a) (b).................................. 2.57% 06/01/21 3,009,216
4,000,000 Australia & New Zealand Banking Group Ltd.,
3 Mo. LIBOR + 0.49% (a) (b).................................. 2.19% 11/21/22 3,943,766
3,750,000 Bank of Montreal, Medium-Term Note, 3 Mo. LIBOR +
0.44% (b).................................................... 1.18% 06/15/20 3,750,282
1,222,000 Bank of Montreal, Medium-Term Note, 3 Mo. LIBOR +
0.34% (b).................................................... 1.65% 07/13/20 1,221,165
2,000,000 Bank of Montreal, Medium-Term Note, 3 Mo. LIBOR +
0.79% (b).................................................... 2.43% 08/27/21 2,001,812
13,026,000 Bank of Montreal, Medium-Term Note, Series D,
3 Mo. LIBOR + 0.46% (b)...................................... 1.77% 04/13/21 12,995,801
17,867,000 Bank of Nova Scotia (The), 3 Mo. LIBOR + 0.44% (b).............. 1.58% 04/20/21 17,827,182
3,000,000 Bank of Nova Scotia (The)....................................... 1.63% 05/01/23 3,001,236
1,770,000 Barclays Bank PLC, 3 Mo. LIBOR + 0.46% (b)...................... 1.77% 01/11/21 1,766,646
5,110,000 Barclays Bank PLC............................................... 2.65% 01/11/21 5,148,507
6,000,000 Barclays PLC.................................................... 2.88% 06/08/20 6,006,397
6,775,000 BNP Paribas S.A................................................. 5.00% 01/15/21 6,967,293
15,000,000 BNP Paribas S.A., 3 Mo. LIBOR + 0.39% (a) (b)................... 2.13% 08/07/21 14,814,418
380,000 BPCE S.A. (a)................................................... 3.15% 07/31/20 381,793
25,000,000 BPCE S.A., Medium-Term Note, 3 Mo. LIBOR +
0.88% (b).................................................... 2.46% 05/31/22 24,799,213
17,625,000 Canadian Imperial Bank of Commerce, SOFR +
0.80% (b).................................................... 0.90% 03/17/23 16,999,869
7,000,000 Commonwealth Bank of Australia, 3 Mo. LIBOR +
0.70% (a) (b)................................................ 1.60% 03/10/22 6,967,038
5,200,000 Cooperatieve Rabobank UA/NY, 3 Mo. LIBOR +
0.43% (b).................................................... 1.42% 04/26/21 5,201,158
9,816,000 Cooperatieve Rabobank UA/NY, 3 Mo. LIBOR +
0.83% (b).................................................... 2.14% 01/10/22 9,773,236
20,000,000 Credit Agricole Corporate & Investment Bank S.A.,
Medium-Term Note, 3 Mo. LIBOR + 0.40% (a) (b)................ 2.16% 05/03/21 19,833,509
10,715,000 Credit Agricole Corporate & Investment Bank S.A.,
Medium-Term Note, 3 Mo. LIBOR + 0.63% (b).................... 2.06% 10/03/21 10,602,125
1,400,000 Credit Agricole S.A./London, 3 Mo. LIBOR +
0.97% (a) (b)................................................ 1.87% 06/10/20 1,400,362
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 500,000 Credit Agricole S.A./London (a)................................. 2.75% 06/10/20 $ 500,700
3,000,000 Credit Agricole S.A./London, 3 Mo. LIBOR +
1.18% (a) (b)................................................ 2.61% 07/01/21 3,001,333
2,500,000 Credit Suisse AG/New York NY.................................... 2.10% 11/12/21 2,528,149
15,000,000 Credit Suisse AG/New York NY, SOFR + 0.45% (b).................. 0.49% 02/04/22 14,590,264
17,000,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.13% 12/10/20 17,128,736
5,500,000 Credit Suisse Group Funding Guernsey Ltd.,
3 Mo. LIBOR + 2.29% (b)...................................... 3.43% 04/16/21 5,553,989
1,125,000 Credit Suisse Group Funding Guernsey Ltd........................ 3.45% 04/16/21 1,142,515
445,000 Danske Bank A/S (a)............................................. 2.75% 09/17/20 447,054
500,000 Danske Bank A/S (a) (c)......................................... 3.00% 09/20/22 501,377
11,915,000 Danske Bank A/S, Medium-Term Note (a)........................... 2.80% 03/10/21 12,037,298
2,770,000 DNB Bank ASA (a)................................................ 2.13% 10/02/20 2,783,269
6,000,000 DNB Bank ASA, 3 Mo. LIBOR + 0.62% (a) (b)....................... 2.20% 12/02/22 5,900,437
2,000,000 HSBC Holdings PLC, 3 Mo. LIBOR + 2.24% (b)...................... 3.24% 03/08/21 2,014,707
17,000,000 HSBC Holdings PLC............................................... 3.40% 03/08/21 17,302,510
3,000,000 HSBC Holdings PLC............................................... 5.10% 04/05/21 3,105,526
19,262,000 HSBC Holdings PLC, 3 Mo. LIBOR + 0.60% (b)...................... 2.29% 05/18/21 19,260,831
6,000,000 HSBC Holdings PLC, 3 Mo. LIBOR + 0.65% (b)...................... 1.43% 09/11/21 5,956,391
2,980,000 ING Groep N.V., 3 Mo. LIBOR + 1.15% (b)......................... 2.52% 03/29/22 2,952,934
1,685,000 ING Groep N.V................................................... 3.15% 03/29/22 1,728,820
6,000,000 ING Groep N.V., 3 Mo. LIBOR + 1.00% (b)......................... 2.45% 10/02/23 5,800,063
3,410,000 Lloyds Banking Group PLC, 3 Mo. LIBOR + 0.80% (b)............... 2.00% 06/21/21 3,386,843
10,637,000 Lloyds Banking Group PLC........................................ 3.10% 07/06/21 10,762,374
6,631,000 Macquarie Bank Ltd. (a)......................................... 6.63% 04/07/21 6,878,369
19,221,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.65% (b).................................................... 1.64% 07/26/21 19,128,755
1,500,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.92% (b).................................................... 2.60% 02/22/22 1,488,464
13,685,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.79% (b).................................................... 1.78% 07/25/22 13,427,007
10,991,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.74% (b).................................................... 2.32% 03/02/23 10,702,929
5,000,000 Mizuho Financial Group, Inc. (a)................................ 2.63% 04/12/21 5,071,703
500,000 Mizuho Financial Group, Inc., 3 Mo. LIBOR +
1.48% (a) (b)................................................ 2.79% 04/12/21 502,237
9,200,000 Mizuho Financial Group, Inc., 3 Mo. LIBOR +
1.14% (b).................................................... 1.91% 09/13/21 9,200,005
5,000,000 National Australia Bank Ltd., 3 Mo. LIBOR +
0.41% (a) (b)................................................ 1.18% 12/13/22 4,918,977
10,125,000 National Bank of Canada......................................... 2.20% 11/02/20 10,189,076
2,175,000 NatWest Markets PLC, 3 Mo. LIBOR + 1.40% (a) (b)................ 2.77% 09/29/22 2,146,587
3,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.47% (a) (b).................... 2.08% 05/29/20 3,002,874
250,000 Nordea Bank Abp (a)............................................. 2.13% 05/29/20 250,283
5,000,000 Nordea Bank Abp (a)............................................. 2.50% 09/17/20 5,023,808
13,980,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.39% (b)...................................... 1.15% 04/30/21 13,967,231
9,000,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.47% (b)...................................... 1.31% 04/29/22 8,881,981
10,000,000 Royal Bank of Canada, Global Medium-Term Note, SOFR
+ 0.40% (b).................................................. 1.98% 08/05/22 9,757,976
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 1,875,000 Royal Bank of Canada, Global Medium-Term Note,
3 Mo. LIBOR + 0.36% (b)...................................... 1.49% 01/17/23 $ 1,830,593
1,042,000 Royal Bank of Canada, Medium-Term Note, 3 Mo. LIBOR
+ 0.40% (b).................................................. 1.39% 01/25/21 1,038,004
8,512,000 Santander UK Group Holdings PLC................................. 2.88% 10/16/20 8,563,116
6,250,000 Santander UK Group Holdings PLC................................. 3.13% 01/08/21 6,310,243
3,400,000 Santander UK PLC................................................ 2.13% 11/03/20 3,410,746
4,800,000 Skandinaviska Enskilda Banken AB (a)............................ 2.63% 11/17/20 4,843,233
1,000,000 Skandinaviska Enskilda Banken AB................................ 2.63% 03/15/21 1,015,042
9,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR +
0.43% (a) (b)................................................ 2.12% 05/17/21 8,968,476
4,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR +
0.65% (a) (b)................................................ 1.43% 12/12/22 3,949,605
410,000 Societe Generale S.A. (a)....................................... 2.63% 09/16/20 411,815
1,000,000 Societe Generale S.A., 3 Mo. LIBOR + 1.33% (a) (b).............. 2.68% 04/08/21 1,002,382
8,604,000 Standard Chartered PLC, 3 Mo. LIBOR + 1.20% (a) (b)............. 2.10% 09/10/22 8,499,074
9,975,000 Standard Chartered PLC, 3 Mo. LIBOR + 1.15% (a) (b)............. 2.29% 01/20/23 9,707,810
2,712,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
1.68% (b).................................................... 2.68% 03/09/21 2,723,181
7,104,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
1.11% (b).................................................... 2.42% 07/14/21 7,108,279
4,674,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
1.14% (b).................................................... 2.28% 10/19/21 4,676,947
4,139,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
0.97% (b).................................................... 2.28% 01/11/22 4,121,764
4,500,000 Svenska Handelsbanken AB, Medium-Term Note...................... 2.45% 03/30/21 4,561,223
3,500,000 Svenska Handelsbanken AB, Medium-Term Note,
3 Mo. LIBOR + 0.47% (b)...................................... 2.15% 05/24/21 3,488,486
4,804,000 Toronto-Dominion Bank (The), Global Medium-Term Note,
3 Mo. LIBOR + 0.26% (b)...................................... 1.10% 09/17/20 4,797,388
25,000,000 Toronto-Dominion Bank (The), Medium-Term Note,
3 Mo. LIBOR + 0.30% (b)...................................... 1.06% 07/30/21 24,727,020
7,000,000 UBS AG/London, 3 Mo. LIBOR + 0.58% (a) (b)...................... 1.58% 06/08/20 7,003,353
6,800,000 UBS AG/London, 3 Mo. LIBOR + 0.48% (a) (b)...................... 2.06% 12/01/20 6,796,500
1,000,000 UBS AG/London (a)............................................... 1.75% 04/21/22 1,004,500
15,681,000 UBS Group AG, 3 Mo. LIBOR + 1.53% (a) (b)....................... 3.29% 02/01/22 15,709,550
6,000,000 UBS Group Funding Switzerland AG, 3 Mo. LIBOR +
1.78% (a) (b)................................................ 3.09% 04/14/21 6,042,778
8,261,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.34% (b).................. 1.33% 01/25/21 8,224,457
8,275,000 Westpac Banking Corp............................................ 2.65% 01/25/21 8,369,994
5,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.71% (b).................. 2.08% 06/28/22 4,981,358
7,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.39% (b).................. 1.70% 01/13/23 6,904,054
----------------
669,934,031
----------------
BEVERAGES -- 0.2%
1,573,000 Diageo Capital PLC.............................................. 3.00% 05/18/20 1,574,504
7,012,000 Pernod Ricard S.A. (a).......................................... 5.75% 04/07/21 7,273,059
----------------
8,847,563
----------------
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
$ 18,965,000 AerCap Ireland Capital DAC / AerCap Global Aviation
Trust........................................................ 4.25% 07/01/20 $ 18,912,258
5,376,000 AerCap Ireland Capital DAC / AerCap Global Aviation
Trust........................................................ 4.63% 10/30/20 5,307,996
----------------
24,220,254
----------------
ELECTRONICS -- 0.0%
1,000,000 Tyco Electronics Group S.A., 3 Mo. LIBOR + 0.45% (b)............ 1.76% 06/05/20 999,393
----------------
MISCELLANEOUS MANUFACTURING -- 0.3%
5,990,000 Siemens Financieringsmaatschappij N.V. (a)...................... 2.15% 05/27/20 5,994,940
9,200,000 Siemens Financieringsmaatschappij N.V., 3 Mo. LIBOR +
0.61% (a) (b)................................................ 1.35% 03/16/22 9,051,686
----------------
15,046,626
----------------
OIL & GAS -- 0.5%
10,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.25% (b)................. 1.93% 11/24/20 9,922,448
2,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.87% (b)................. 1.61% 09/16/21 1,963,465
6,985,000 BP Capital Markets PLC.......................................... 2.50% 11/06/22 7,134,997
6,000,000 Shell International Finance B.V., 3 Mo. LIBOR +
0.45% (b).................................................... 2.18% 05/11/20 6,000,179
750,000 Total Capital International S.A................................. 2.88% 02/17/22 768,385
----------------
25,789,474
----------------
PHARMACEUTICALS -- 0.5%
12,375,000 AstraZeneca PLC................................................. 2.38% 11/16/20 12,448,053
10,300,000 Shire Acquisitions Investments Ireland DAC...................... 2.40% 09/23/21 10,461,400
----------------
22,909,453
----------------
PIPELINES -- 0.1%
6,657,000 Enbridge, Inc., 3 Mo. LIBOR + 0.70% (b)......................... 1.44% 06/15/20 6,647,658
----------------
TELECOMMUNICATIONS -- 0.5%
9,800,000 Deutsche Telekom International Finance BV (a)................... 1.95% 09/19/21 9,836,123
15,000,000 Telefonica Emisiones S.A........................................ 5.46% 02/16/21 15,452,940
----------------
25,289,063
----------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 831,717,774
(Cost $837,066,110) ----------------
ASSET-BACKED SECURITIES -- 10.4%
Ameriquest Mortgage Securities, Inc.
23,199 Series 2004-R9, Class M2, 1 Mo. LIBOR + 0.98% (b)............ 1.46% 10/25/34 23,211
Avis Budget Rental Car Funding AESOP LLC
8,900,000 Series 2015-1A, Class A (a).................................. 2.50% 07/20/21 8,589,589
12,440,000 Series 2015-2A, Class A (a).................................. 2.63% 12/20/21 11,704,537
15,815,000 Series 2016-1A, Class A (a).................................. 2.99% 06/20/22 14,964,765
8,060,000 Series 2016-2A, Class A (a).................................. 2.72% 11/20/22 7,607,613
BMW Vehicle Lease Trust
6,695,000 Series 2018-1, Class A3...................................... 3.26% 07/20/21 6,751,662
BMW Vehicle Owner Trust
1,405,792 Series 2018-A, Class A3...................................... 2.35% 04/25/22 1,414,074
California Republic Auto Receivables Trust
195,374 Series 2016-1, Class A4...................................... 2.24% 10/15/21 195,509
1,036,038 Series 2016-2, Class A4...................................... 1.83% 12/15/21 1,036,758
854,009 Series 2017-1, Class A4...................................... 2.28% 06/15/22 856,012
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Canadian Pacer Auto Receivables Trust
$ 185,101 Series 2017-1A, Class A3 (a)................................. 2.05% 03/19/21 $ 185,085
1,895,000 Series 2017-1A, Class A4 (a)................................. 2.29% 01/19/22 1,888,940
9,213,434 Series 2018-1A, Class A3 (a)................................. 3.00% 11/19/21 9,257,561
705,343 Series 2018-2A, Class A2A (a)................................ 3.00% 06/21/21 706,384
9,624,469 Series 2019-1A, Class A2 (a)................................. 2.78% 03/21/22 9,686,253
Carmax Auto Owner Trust
1,030,509 Series 2017-1, Class A3...................................... 1.98% 11/15/21 1,031,784
842,157 Series 2017-3, Class A3...................................... 1.97% 04/15/22 844,932
Carvana Auto Receivables Trust
5,000,000 Series 2019-4A, Class A2 (a)................................. 2.20% 07/15/22 5,004,261
Countrywide Asset-Backed Certificates
1,733,768 Series 2004-SD4, Class M1, 1 Mo. LIBOR +
0.75% (a) (b)................................................ 1.24% 12/25/34 1,721,303
Element Rail Leasing I LLC
1,357,095 Series 2014-1A, Class A1 (a)................................. 2.30% 04/19/44 1,358,686
Exeter Automobile Receivables Trust
317,283 Series 2019-1A, Class A (a).................................. 3.20% 04/15/22 317,423
Ford Credit Auto Lease Trust
850,000 Series 2018-A, Class A4...................................... 3.05% 08/15/21 853,251
4,728,541 Series 2018-B, Class A3...................................... 3.19% 12/15/21 4,756,743
6,527,687 Series 2019-A, Class A2A..................................... 2.84% 09/15/21 6,545,229
9,000,000 Series 2019-A, Class A3...................................... 2.90% 05/15/22 9,103,287
Ford Credit Auto Owner Trust
1,152,712 Series 2019-A, Class A2A..................................... 2.78% 02/15/22 1,159,452
15,000,000 Series 2019-C, Class A2A..................................... 1.88% 07/15/22 15,076,724
Foursight Capital Automobile Receivables Trust
6,911,301 Series 2019-1, Class A2 (a).................................. 2.58% 03/15/23 6,943,441
17,590,000 Series 2020-1, Class A2 (a).................................. 1.97% 09/15/23 17,552,166
GM Financial Automobile Leasing Trust
593,966 Series 2018-1, Class A3...................................... 2.61% 01/20/21 594,481
13,405,000 Series 2018-1, Class C....................................... 3.11% 12/20/21 13,442,842
1,860,131 Series 2018-2, Class A3...................................... 3.06% 06/21/21 1,863,695
2,946,748 Series 2018-3, Class A3...................................... 3.18% 06/21/21 2,962,247
8,332,000 Series 2018-3, Class B....................................... 3.48% 07/20/22 8,437,781
3,791,073 Series 2019-1, Class A2A..................................... 2.91% 04/20/21 3,798,487
7,500,000 Series 2019-1, Class A3...................................... 2.98% 12/20/21 7,568,897
639,000 Series 2019-1, Class B....................................... 3.37% 12/20/22 646,499
5,639,245 Series 2019-2, Class A2A..................................... 2.67% 06/21/21 5,656,634
GM Financial Consumer Automobile Receivables Trust
1,389,378 Series 2017-1A, Class A3 (a)................................. 1.78% 10/18/21 1,391,580
GSAA Home Equity Trust
1,081,984 Series 2005-MTR1, Class A4, 1 Mo. LIBOR +
0.37% (b).................................................... 0.86% 10/25/35 1,042,085
GTE Auto Receivables Trust
5,000,000 Series 2019-1, Class A2 (a).................................. 2.17% 12/15/22 5,017,136
Honda Auto Receivables Owner Trust
10,000,000 Series 2020-1, Class A2...................................... 1.63% 10/21/22 10,089,198
HPEFS Equipment Trust
11,000,000 Series 2020-1A, Class A2 (a)................................. 1.73% 02/20/30 10,967,346
Hyundai Auto Lease Securitization Trust
2,829,606 Series 2018-A, Class A3 (a).................................. 2.81% 04/15/21 2,834,715
1,100,000 Series 2018-B, Class A4 (a).................................. 3.20% 06/15/22 1,112,546
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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 (Continued)
$ 2,782,420 Series 2019-A, Class A2 (a).................................. 2.92% 07/15/21 $ 2,792,385
Mercedes-Benz Auto Lease Trust
2,167,305 Series 2019-A, Class A2...................................... 3.01% 02/16/21 2,169,076
21,366,952 Series 2019-B, Class A2...................................... 2.01% 12/15/21 21,426,374
15,000,000 Series 2019-B, Class A3...................................... 2.00% 10/17/22 15,047,985
Mill City Mortgage Loan Trust
3,410,529 Series 2016-1, Class A1 (a).................................. 2.50% 04/25/57 3,416,774
Nationstar Home Equity Loan Trust
2,024,471 Series 2006-B, Class AV4, 1 Mo. LIBOR + 0.28% (b)............ 0.77% 09/25/36 1,977,067
New Century Home Equity Loan Trust
396,753 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.68% (b)............. 1.16% 06/25/35 397,451
Nissan Auto Lease Trust
8,500,000 Series 2018-A, Class A3...................................... 3.25% 09/15/21 8,561,101
Nomura Home Equity Loan, Inc., Home Equity Loan Trust
373,998 Series 2005-HE1, Class M3, 1 Mo. LIBOR + 0.72% (b)........... 1.21% 09/25/35 374,574
OSCAR US Funding Trust IX LLC
6,915,000 Series 2018-2A, Class A3 (a)................................. 3.39% 09/12/22 6,907,823
OSCAR US Funding Trust V
18,173,958 Series 2016-2A, Class A4 (a)................................. 2.99% 12/15/23 18,323,279
OSCAR US Funding Trust VI LLC
12,934 Series 2017-1A, Class A3 (a)................................. 2.82% 06/10/21 13,025
7,930,000 Series 2017-1A, Class A4 (a)................................. 3.30% 05/10/24 8,039,958
OSCAR US Funding Trust VII LLC
4,267,973 Series 2017-2A, Class A3 (a)................................. 2.45% 12/10/21 4,265,639
3,580,000 Series 2017-2A, Class A4 (a)................................. 2.76% 12/10/24 3,585,454
OSCAR US Funding Trust VIII LLC
17,334,314 Series 2018-1A, Class A3 (a)................................. 3.23% 05/10/22 17,300,559
3,050,000 Series 2018-1A, Class A4 (a)................................. 3.50% 05/12/25 3,071,922
OSCAR US Funding X LLC
5,925,093 Series 2019-1A, Class A2 (a)................................. 3.10% 04/11/22 5,938,517
OSCAR US Funding XI LLC
18,765,040 Series 2019-2A, Class A2 (a)................................. 2.49% 08/10/22 18,747,448
Securitized Term Auto Receivables Trust
612,020 Series 2017-1A, Class A4 (a)................................. 2.21% 06/25/21 612,428
368,559 Series 2017-2A, Class A3 (a)................................. 2.04% 04/26/21 368,888
19,095,000 Series 2017-2A, Class A4 (a)................................. 2.29% 03/25/22 19,095,728
1,332,076 Series 2018-1A, Class A3 (a)................................. 3.07% 01/25/22 1,337,001
2,138,191 Series 2018-2A, Class A3 (a)................................. 3.33% 08/25/22 2,162,986
4,900,000 Series 2019-1A, Class A3 (a)................................. 2.99% 02/27/23 4,948,308
Sierra Timeshare Receivables Funding LLC
4,331,341 Series 2016-3A, Class A (a).................................. 2.43% 10/20/33 4,299,499
Structured Asset Investment Loan Trust
19,756 Series 2004-10, Class A7, 1 Mo. LIBOR + 1.06% (b)............ 1.55% 11/25/34 19,795
Towd Point Mortgage Trust
832,896 Series 2015-1, Class AES (a)................................. 3.00% 10/25/53 836,678
438,634 Series 2015-2, Class 1A12 (a)................................ 2.75% 11/25/60 440,795
1,581,429 Series 2015-4, Class A1B (a)................................. 2.75% 04/25/55 1,590,028
21,237,448 Series 2015-5, Class A1B (a)................................. 2.75% 05/25/55 21,268,875
21,597,983 Series 2015-6, Class A1B (a)................................. 2.75% 04/25/55 21,710,664
2,972,581 Series 2016-1, Class A1B (a)................................. 2.75% 02/25/55 2,988,454
12,039,453 Series 2016-2, Class A1 (a).................................. 3.00% 08/25/55 12,153,845
3,738,709 Series 2016-3, Class A1 (a).................................. 2.25% 04/25/56 3,741,918
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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
$ 1,089,185 Series 2018-C, Class A2A..................................... 2.77% 08/16/21 $ 1,091,887
Verizon Owner Trust
2,750,000 Series 2018-A, Class A1A..................................... 3.23% 04/20/23 2,807,469
22,539,350 Series 2018-1A, Class A1A (a)................................ 2.82% 09/20/22 22,723,501
1,945,000 Series 2019-C, Class A1A..................................... 1.94% 04/22/24 1,969,271
World Omni Automobile Lease Securitization Trust
6,405,000 Series 2018-A, Class A4...................................... 2.94% 05/15/23 6,431,504
2,640,403 Series 2018-B, Class A2A..................................... 2.96% 06/15/21 2,645,428
6,415,086 Series 2019-A, Class A2...................................... 2.89% 11/15/21 6,452,352
----------------
TOTAL ASSET-BACKED SECURITIES................................................................ 508,616,517
(Cost $510,625,552) ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 4.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.1%
Federal Home Loan Mortgage Corporation
1,739,349 Series 2003-2723, Class KN................................... 5.00% 12/15/23 1,823,669
2,531,556 Series 2004-2783, Class YB................................... 5.00% 04/15/24 2,661,958
61,076 Series 2009-3539, Class YA................................... 4.00% 02/15/24 61,110
514 Series 2010-3705, Class CA................................... 3.00% 08/15/20 514
8,869 Series 2010-3755, Class AJ................................... 2.00% 11/15/20 8,884
10,022 Series 2010-3766, Class HE................................... 3.00% 11/15/20 10,057
11,988 Series 2010-3773, Class GK................................... 2.50% 12/15/20 12,024
116,195 Series 2011-3790, Class AP................................... 4.50% 01/15/37 117,973
329,891 Series 2011-3925, Class VB................................... 4.00% 09/15/31 330,386
161,342 Series 2012-4001, Class A.................................... 3.50% 11/15/38 162,312
3,615,830 Series 2012-4002, Class MA................................... 2.00% 01/15/39 3,635,172
63,156 Series 2012-4011, Class KM................................... 2.00% 03/15/22 63,587
1,901,313 Series 2013-4199, Class YV................................... 3.50% 05/15/26 1,971,911
132,105 Series 2014-4305, Class KN................................... 2.50% 03/15/38 132,219
1,616,333 Series 2014-4387, Class DE................................... 2.00% 01/15/32 1,632,474
17,136,764 Series 2018-4821, Class BC................................... 3.00% 12/15/44 17,532,716
1,054,377 Series 2018-4822, Class BA................................... 4.00% 07/15/42 1,066,152
Federal National Mortgage Association
332,230 Series 2006-60, Class DF, 1 Mo. LIBOR + 0.43% (b)............ 0.92% 04/25/35 331,581
16 Series 2008-53, Class CA..................................... 5.00% 07/25/23 16
877 Series 2008-59, Class KB..................................... 4.50% 07/25/23 881
9,842 Series 2009-14, Class EB..................................... 4.50% 03/25/24 10,171
6,069 Series 2009-52, Class AJ..................................... 4.00% 07/25/24 6,253
197,136 Series 2009-71, Class BA..................................... 4.00% 08/25/24 198,222
237 Series 2009-96, Class JA..................................... 3.50% 10/25/24 237
7 Series 2010-116, Class AD.................................... 2.00% 08/25/20 7
26,223 Series 2010-145, Class MA.................................... 2.00% 12/25/20 26,276
25 Series 2011-3, Class EG...................................... 2.00% 05/25/20 25
12,681 Series 2011-13, Class AD..................................... 2.00% 07/25/21 12,684
7,179 Series 2011-15, Class HT..................................... 5.50% 03/25/26 7,285
52,887 Series 2011-60, Class UC..................................... 2.50% 09/25/39 53,344
576 Series 2011-68, Class AH..................................... 4.50% 12/25/20 579
13,132 Series 2011-71, Class KC..................................... 1.75% 08/25/21 13,155
16,313 Series 2011-86, Class DC..................................... 2.00% 09/25/21 16,371
5,277,541 Series 2012-6, Class E....................................... 3.00% 05/25/37 5,360,506
247,985 Series 2012-20, Class AB..................................... 2.50% 07/25/39 248,436
1,322,768 Series 2012-103, Class LE.................................... 1.75% 05/25/39 1,325,528
</TABLE>
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 6,422,703 Series 2013-1, Class KC...................................... 2.00% 07/25/40 $ 6,437,558
1,891,512 Series 2013-73, Class A...................................... 1.50% 06/25/30 1,893,317
2,744,527 Series 2013-74, Class HA..................................... 3.00% 10/25/37 2,786,256
Government National Mortgage Association
43,730 Series 2009-10, Class MD..................................... 4.50% 12/16/36 44,214
7,151 Series 2010-4, Class JC...................................... 3.00% 08/16/39 7,157
25,356 Series 2010-87, Class HE..................................... 3.00% 11/20/38 25,521
17,704 Series 2010-125, Class TE.................................... 3.00% 06/20/39 17,736
2,082 Series 2010-164, Class LE.................................... 3.00% 10/20/38 2,083
9,895 Series 2010-164, Class LH.................................... 3.50% 10/20/38 9,899
4,648 Series 2011-37, Class PG..................................... 3.00% 05/20/40 4,647
3,331 Series 2011-115, Class PD.................................... 2.00% 10/20/38 3,334
1,974,957 Series 2018-89, Class A...................................... 3.50% 06/20/39 2,014,988
NCUA Guaranteed Notes Trust
637,788 Series 2010-R1, Class 1A, 1 Mo. LIBOR + 0.45% (b)............ 1.43% 10/07/20 636,545
----------------
52,717,930
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.8%
Federal Home Loan Mortgage Corporation Multifamily
Structured Pass Through Certificates
8,082,217 Series 2011-K011, Class A2................................... 4.08% 11/25/20 8,188,031
13,725,000 Series 2011-K013, Class A2................................... 3.97% 01/25/21 13,927,124
10,940,191 Series 2013-K025, Class A1................................... 1.88% 04/25/22 11,023,936
8,150,068 Series 2013-K027, Class A1................................... 1.79% 09/25/22 8,257,868
1,400,992 Series 2013-K029, Class A1................................... 2.84% 10/25/22 1,429,024
23,554,761 Series 2014-K715, Class A2................................... 2.86% 01/25/21 23,810,926
4,261,364 Series 2014-K716, Class A2................................... 3.13% 06/25/21 4,355,669
13,148,357 Series 2015-K720, Class A1................................... 2.32% 11/25/21 13,313,774
FREMF Mortgage Trust
10,411,000 Series 2010-K8, Class B (a) (d).............................. 5.47% 09/25/43 10,415,790
6,160,000 Series 2011-K10, Class B (a) (d)............................. 4.78% 11/25/49 6,198,648
3,822,000 Series 2011-K14, Class B (a) (d)............................. 5.35% 02/25/47 3,869,549
23,047,000 Series 2012-K17, Class B (a) (d)............................. 4.47% 12/25/44 23,760,530
8,195,000 Series 2014-K715, Class B (a) (d)............................ 4.11% 02/25/46 8,256,962
Government National Mortgage Association
20,021 Series 2014-28, Class A...................................... 2.00% 01/16/46 20,143
----------------
136,827,974
----------------
PASS-THROUGH SECURITIES -- 0.1%
Federal Home Loan Mortgage Corporation
7,184 Pool G11777.................................................. 5.00% 10/01/20 7,548
2,528 Pool G11820.................................................. 5.50% 12/01/20 2,547
981 Pool G11879.................................................. 5.00% 10/01/20 1,031
6,250 Pool G11902.................................................. 5.00% 08/01/20 6,568
4,968 Pool G11966.................................................. 5.50% 11/01/20 4,982
2,013 Pool G12255.................................................. 5.50% 07/01/21 2,050
5,755 Pool G12673.................................................. 5.00% 09/01/21 6,047
21,663 Pool G13204.................................................. 6.00% 11/01/22 22,220
2,210 Pool G13235.................................................. 4.50% 08/01/20 2,334
1,013 Pool G13761.................................................. 5.50% 12/01/20 1,018
9,879 Pool G13812.................................................. 5.00% 12/01/20 10,380
9,992 Pool G14030.................................................. 4.50% 12/01/20 10,553
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 19,792 Pool G14035.................................................. 5.50% 12/01/21 $ 20,018
3,667 Pool G14187.................................................. 5.50% 12/01/20 3,676
284,122 Pool G15435.................................................. 5.00% 11/01/24 298,543
24,704 Pool G15821.................................................. 5.00% 07/01/25 25,958
121,260 Pool G15874.................................................. 5.00% 06/01/26 127,414
6,562 Pool G18056.................................................. 5.00% 06/01/20 6,895
19,379 Pool J02535.................................................. 5.00% 09/01/20 20,363
350 Pool P60959.................................................. 4.50% 09/01/20 349
Federal National Mortgage Association
175 Pool 310097.................................................. 5.00% 10/01/20 184
281 Pool 735646.................................................. 4.50% 07/01/20 297
1,260 Pool 735920.................................................. 4.50% 10/01/20 1,330
1,017 Pool 745238.................................................. 6.00% 12/01/20 1,020
38,269 Pool 745735.................................................. 5.00% 03/01/21 40,202
7,609 Pool 745749.................................................. 5.50% 03/01/21 7,658
127,603 Pool 745832.................................................. 6.00% 04/01/21 129,313
825 Pool 839226.................................................. 4.00% 09/01/20 827
7,149 Pool 844915.................................................. 4.50% 11/01/20 7,549
8,951 Pool 847919.................................................. 5.50% 11/01/20 9,029
6,238 Pool 888932.................................................. 4.50% 11/01/22 6,587
54 Pool 889191.................................................. 4.50% 04/01/21 57
1 Pool 889318.................................................. 5.50% 07/01/20 1
957 Pool 889531.................................................. 4.50% 05/01/22 1,011
997 Pool 889847.................................................. 4.50% 04/01/21 1,053
34,014 Pool 890403.................................................. 6.00% 05/01/23 34,629
1,230 Pool 898044.................................................. 4.50% 12/01/20 1,298
266,126 Pool 901931.................................................. 6.00% 10/01/21 271,919
156,387 Pool 962078.................................................. 4.50% 03/01/23 166,370
4,233 Pool 995158.................................................. 4.50% 12/01/20 4,470
240 Pool 995886.................................................. 6.00% 04/01/21 242
77,923 Pool AD0285.................................................. 5.00% 09/01/22 81,859
3,862 Pool AD0402.................................................. 5.00% 02/01/23 4,058
1,915 Pool AE0126.................................................. 5.00% 06/01/20 2,013
12,974 Pool AE0237.................................................. 5.50% 11/01/23 13,047
42,301 Pool AE0314.................................................. 5.00% 08/01/21 44,438
8,410 Pool AE0792.................................................. 5.00% 12/01/20 8,835
52,743 Pool AE0812.................................................. 5.00% 07/01/25 55,407
195,975 Pool AL5764.................................................. 5.00% 09/01/25 205,875
179,418 Pool AL5812.................................................. 5.50% 05/01/25 183,822
74,404 Pool AL6212.................................................. 4.50% 01/01/27 78,566
3 Pool AL6725.................................................. 4.50% 09/01/20 3
221,093 Pool AL6798.................................................. 5.00% 09/01/25 232,262
387 Pool AL8539.................................................. 4.50% 01/01/27 409
666,507 Pool BM1299.................................................. 5.00% 03/01/27 700,922
13,528 Pool MA0772.................................................. 4.00% 06/01/21 14,299
407,186 Pool MA1030.................................................. 3.00% 04/01/22 429,739
28,446 Pool 783524.................................................. 5.00% 09/15/24 29,982
----------------
3,351,076
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 192,896,980
(Cost $192,378,266) ----------------
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT NOTES -- 2.0%
$ 40,000,000 U.S. Treasury Note.............................................. 1.50% 06/15/20 $ 40,069,312
40,000,000 U.S. Treasury Note.............................................. 1.50% 11/30/21 40,832,031
15,000,000 U.S. Treasury Note.............................................. 1.13% 02/28/22 15,255,762
----------------
TOTAL U.S. GOVERNMENT NOTES.................................................................. 96,157,105
(Cost $95,128,228) ----------------
CERTIFICATES OF DEPOSIT -- 1.1%
BANKS -- 1.1%
15,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.32% (b)........................ 2.01% 11/19/21 14,814,796
20,000,000 Societe Generale, 1 Mo. LIBOR + 0.34% (b)....................... 1.06% 08/19/20 20,011,407
20,000,000 Svenska Handelsbanken, 1 Mo. LIBOR + 0.24% (b).................. 0.68% 08/28/20 19,991,387
----------------
TOTAL CERTIFICATES OF DEPOSIT................................................................ 54,817,590
(Cost $55,000,000) ----------------
MORTGAGE-BACKED SECURITIES -- 0.6%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.6%
COLT Mortgage Loan Trust
4,823,511 Series 2018-3, Class A1 (a).................................. 3.69% 10/26/48 4,875,456
Merrill Lynch Mortgage Investors Trust
1,129,896 Series 2005-A6, Class 2A3, 1 Mo. LIBOR + 0.38% (b)........... 0.87% 08/25/35 1,115,402
Sequoia Mortgage Trust
440,715 Series 2014-3, Class A14 (a)................................. 3.00% 10/25/44 440,858
1,379,261 Series 2015-1, Class A6 (a).................................. 2.50% 01/25/45 1,376,462
WinWater Mortgage Loan Trust
19,762,119 Series 2015-5, Class A5 (a).................................. 3.50% 08/20/45 19,910,260
----------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 27,718,438
(Cost $27,724,071) ----------------
TOTAL INVESTMENTS -- 100.5%.................................................................. 4,895,196,567
(Cost $4,916,017,389) (e)
NET OTHER ASSETS AND LIABILITIES -- (0.5)%................................................... (24,820,613)
----------------
NET ASSETS -- 100.0%......................................................................... $ 4,870,375,954
================
</TABLE>
-----------------------------
(a) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amende, 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, 2020, securities noted as such
amounted to 1,135,856,968 or 23.3% of net assets.
(b) Floating or variable rate security.
(c) Fixed-to-floating or fixed-to-variable rate security. The interest rate
shown reflects the fixed rate in effect at April 30, 2020. At a
predetermined date, the fixed rate will change to a floating rate or a
variable rate.
(d) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(e) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $7,969,004 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $28,789,826. The net unrealized depreciation
was $20,820,822.
LIBOR - London Interbank Offered Rate
SOFR - Secured Overnight Financing Rate
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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
4/30/2020 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Corporate Bonds*................................... $2,023,377,738 $ -- $2,023,377,738 $ --
Commercial Paper*.................................. 1,159,894,425 -- 1,159,894,425 --
Foreign Corporate Bonds*........................... 831,717,774 -- 831,717,774 --
Asset-Backed Securities............................ 508,616,517 -- 508,616,517 --
U.S. Government Agency Mortgage-Backed
Securities...................................... 192,896,980 -- 192,896,980 --
U.S. Government Notes.............................. 96,157,105 -- 96,157,105 --
Certificates of Deposit*........................... 54,817,590 -- 54,817,590 --
Mortgage-Backed Securities......................... 27,718,438 -- 27,718,438 --
-------------- -------------- -------------- --------------
Total Investments.................................. $4,895,196,567 $ -- $4,895,196,567 $ --
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $4,895,196,567
Cash...................................................................... 3,597,719
Interest receivable....................................................... 14,895,934
--------------
Total Assets........................................................... 4,913,690,220
--------------
LIABILITIES:
Due to broker............................................................. 94,099
Payables:
Investment securities purchased........................................ 34,759,575
Distributions to shareholders.......................................... 6,866,977
Investment advisory fees............................................... 1,593,615
--------------
Total Liabilities...................................................... 43,314,266
--------------
NET ASSETS................................................................ $4,870,375,954
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $4,908,209,140
Par value................................................................. 817,497
Accumulated distributable earnings (loss)................................. (38,650,683)
--------------
NET ASSETS................................................................ $4,870,375,954
==============
NET ASSET VALUE, per share................................................ $ 59.58
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................. 81,749,724
==============
Investments, at cost...................................................... $4,916,017,389
==============
</TABLE>
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 57,453,324
--------------
Total investment income................................................ 57,453,324
--------------
EXPENSES:
Investment advisory fees.................................................. 11,110,865
--------------
Total expenses......................................................... 11,110,865
Less fees waived by the investment advisor............................. (1,234,541)
--------------
Net expenses........................................................... 9,876,324
--------------
NET INVESTMENT INCOME (LOSS).............................................. 47,577,000
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments................................... (14,759,330)
Net change in unrealized appreciation (depreciation) on investments....... (30,842,503)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (45,601,833)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 1,975,167
==============
</TABLE>
Page 30 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
4/30/2020 ENDED
(UNAUDITED) 10/31/2019
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 47,577,000 $ 106,098,351
Net realized gain (loss).................................................. (14,759,330) (719,958)
Net change in unrealized appreciation (depreciation)...................... (30,842,503) 10,123,036
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 1,975,167 115,501,429
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (47,796,340) (105,441,956)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 748,997,283 2,558,526,535
Cost of shares redeemed................................................... (898,549,684) (573,290,488)
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder
transactions........................................................... (149,552,401) 1,985,236,047
-------------- --------------
Total increase (decrease) in net assets................................... (195,373,574) 1,995,295,520
NET ASSETS:
Beginning of period....................................................... 5,065,749,528 3,070,454,008
-------------- --------------
End of period............................................................. $4,870,375,954 $5,065,749,528
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 84,299,724 51,199,724
Shares sold............................................................... 12,550,000 42,650,000
Shares redeemed........................................................... (15,100,000) (9,550,000)
-------------- --------------
Shares outstanding, end of period......................................... 81,749,724 84,299,724
============== ==============
</TABLE>
See Notes to Financial Statements Page 31
<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,
4/30/2020 ------------------------------------------------------------------------
(UNAUDITED) 2019 2018 2017 2016 2015
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 60.09 $ 59.97 $ 60.02 $ 59.93 $ 59.94 $ 60.04
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.58 1.48 1.15 0.76 0.47 0.43
Net realized and unrealized gain (loss)... (0.51) 0.11 (0.01) 0.12 0.09 (0.26)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... 0.07 1.59 1.14 0.88 0.56 0.17
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income..................... (0.58) (1.47) (1.19) (0.79) (0.57) (0.27)
Return of capital......................... -- -- (0.00) (a) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.58) (1.47) (1.19) (0.79) (0.57) (0.27)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 59.58 $ 60.09 $ 59.97 $ 60.02 $ 59.93 $ 59.94
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b).......................... 0.12% 2.68% 1.92% 1.48% 0.94% 0.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $4,870,376 $5,065,750 $3,070,454 $1,158,324 $ 458,413 $ 149,829
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets................................. 0.45% (c) 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net expenses to average net
assets................................. 0.40% (c) 0.39% 0.33% 0.25% 0.25% 0.23%
Ratio of net investment income (loss) to
average net assets..................... 1.93% (c) 2.47% 2.04% 1.33% 1.06% 0.51%
Portfolio turnover rate (d)............... 37% 73% 45% 56% 115% 406%
</TABLE>
(a) Amount represents less than $0.01 per share.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year. The total returns would have been lower if certain
fees had not been waived by the investment advisor.
(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 32 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (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 invest in investment companies, such as
ETFs, that invest primarily in debt 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 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 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, U.S. government securities,
mortgage-backed securities, asset-backed securities, certificates of
deposit 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 33
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (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 is 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:
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.
Page 34
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (UNAUDITED)
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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
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 gains earned by the Fund, if any, are distributed
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,
2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 96,211,136
Capital gains................................... --
Return of capital............................... --
Page 35
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (UNAUDITED)
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 656,395
Accumulated capital and other gain (loss)....... (3,427,443)
Net unrealized appreciation (depreciation)...... 9,941,538
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 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 2016,
2017, 2018, and 2019 remain open to federal and state audit. As of April 30,
2020, 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, 2019, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $3,427,443.
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, 2019, the Fund had no
net 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 PRONOUNCEMENT
On March 30, 2017, the FASB issued Accounting Standards Update ("ASU") 2017-08
"Premium Amortization on Purchased Callable Debt Securities", which amends the
amortization period for certain purchased callable debt securities held at a
premium by shortening such period to the earliest call date. The new guidance
requires an entity to amortize the premium on a callable debt security within
its scope to the earliest call date, unless the guidance for considering
estimated prepayments is applied. If the call option is not exercised at the
earliest call date, the yield is reset to the effective yield using the payment
terms of the security. If the security has more than one call date and the
premium was amortized to a call price greater than the next call price, any
excess of the amortized cost basis over the amount repayable at the next call
date will be amortized to that date. If there are no other call dates, any
excess of the amortized cost basis over the par amount will be amortized to
maturity. Discounts on purchased callable debt securities will continue to be
amortized to the security's maturity date. 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. ASU 2017-08 was adopted for
these financial statements and did not have 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.
Page 36
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (UNAUDITED)
Pursuant to a contractual agreement, First Trust has agreed to waive management
fees of 0.05% of average daily net assets until March 1, 2021. 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, 2021. 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, 2021. 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, 2020,
the Advisor waived fees of $1,234,541.
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
a defined-outcome 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,
2020, were $279,027,451 and $1,005,761,998, 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,
2020, were $292,070,654 and $899,371,550, respectively.
For the six months ended April 30, 2020, 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 increase or decrease with changes
in the Fund's portfolio. 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 increase or decrease with changes in the Fund's
portfolio. 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 37
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (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, 2021.
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.
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ADDITIONAL INFORMATION
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (UNAUDITED)
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2020 (UNAUDITED)
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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FIRST TRUST
First Trust Exchange-Traded Fund IV
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First Trust Strategic Income
ETF (FDIV)
Semi-Annual Report
For the Six Months Ended
April 30, 2020
<PAGE>
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TABLE OF CONTENTS
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2020
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....................................................... 26
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's
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, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
The primary investment objective of 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 markets
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 directly or 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
securities 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 TOTAL RETURNS CUMULATIVE TOTAL RETURNS
6 Months 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (8/13/14) Ended (8/13/14)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -10.77% -7.81% 1.55% 1.93% 7.98% 11.54%
Market Price -10.83% -7.86% 1.58% 1.94% 8.16% 11.57%
INDEX PERFORMANCE
Blended Index(2) -8.87% -7.24% 1.38% 1.55% 7.11% 9.15%
Bloomberg Barclays U.S. Aggregate
Bond Index 4.86% 10.84% 3.80% 3.83% 20.49% 23.95%
Russell 3000(R) Index -4.33% -1.04% 8.33% 8.82% 49.22% 62.09%
------------------------------------------------------------------------------------------------------------------------------------
</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 BofA Fixed
Rate Preferred Securities Index, ICE BofA 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. The
Blended Index returns are calculated by using the monthly return of the
six indices during each period shown above. At the beginning of each month
the six indices are rebalanced to a 16.66 percentage weighting for each to
account for divergence from that percentage weighting the occurred during
the course of each month. The monthly returns are then compounded for each
period shown above, giving the performance of the Blended Index for each
period shown above.
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
-----------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
-----------------------------------------------------------
Exchange-Traded Funds 51.91%
Common Stocks 23.00
U.S. Government Agency Mortgage-
Backed Securities 10.91
Master Limited Partnerships 9.74
Real Estate Investment Trusts 4.38
Asset-Backed Securities 0.03
Mortgage-Backed Securities 0.03
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
First Trust Preferred Securities and
Income ETF 11.68%
First Trust Senior Loan ETF 10.18
First Trust Emerging Markets Local
Currency Bond ETF 9.48
First Trust Low Duration Opportunities
ETF 9.46
iShares J.P. Morgan USD Emerging
Markets Bond ETF 5.37
First Trust Institutional Preferred
Securities and Income ETF 3.85
Enterprise Products Partners, L.P. 2.24
TC Energy Corp. 1.43
ProShares Short 20+ Year Treasury 1.28
TC PipeLines, L.P. 1.21
-------
Total 56.18%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 13, 2014 - APRIL 30, 2020
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 $10,000 $10,000 $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
10/31/19 12,502 11,977 11,826 16,942
4/30/20 11,156 10,915 12,401 16,208
</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, 2020
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, 2014 through
April 30, 2020. 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%
11/1/14 - 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 - 10/31/19 123 0 0 0 128 0 0 0
11/1/19 - 4/30/20 21 0 0 0 101 2 0 0
</TABLE>
Page 3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER OF
FIRST TRUST, SECURITIZED PRODUCTS GROUP; AND
o JAMES SNYDER, SENIOR VICE PRESIDENT AND SENIOR 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, 2020 (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 (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, 2020.
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, 2019 APRIL 30, 2020 PERIOD (a) (b) PERIOD (b) (c)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
Actual $1,000.00 $ 892.30 0.48% $2.26
Hypothetical (5% return before expenses) $1,000.00 $1,022.48 0.48% $2.41
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 5
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 50.7%
CAPITAL MARKETS -- 50.7%
162,864 First Trust Emerging Markets Local Currency Bond ETF (a)..................................... $ 5,320,767
120,150 First Trust Institutional Preferred Securities and Income ETF (a)............................ 2,159,095
11,606 First Trust Long Duration Opportunities ETF (a).............................................. 344,698
102,840 First Trust Low Duration Opportunities ETF (a)............................................... 5,311,686
365,530 First Trust Preferred Securities and Income ETF (a).......................................... 6,553,953
129,922 First Trust Senior Loan ETF (a).............................................................. 5,713,970
30,014 iShares J.P. Morgan USD Emerging Markets Bond ETF............................................ 3,016,407
46,900 ProShares Short 20+ Year Treasury............................................................ 718,977
---------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 29,139,553
(Cost $31,463,901) ---------------
COMMON STOCKS -- 22.4%
BANKS -- 5.2%
17,586 Associated Banc-Corp......................................................................... 248,666
8,573 Columbia Banking System, Inc................................................................. 231,385
1,630 Credicorp Ltd................................................................................ 242,903
6,912 CVB Financial Corp........................................................................... 143,666
15,209 First Financial Bancorp...................................................................... 233,914
27,052 OceanFirst Financial Corp.................................................................... 455,826
12,505 PacWest Bancorp.............................................................................. 253,101
24,714 Regions Financial Corp....................................................................... 265,675
3,997 Sandy Spring Bancorp, Inc.................................................................... 101,924
12,714 Synovus Financial Corp....................................................................... 267,121
20,971 Umpqua Holdings Corp......................................................................... 262,662
9,828 Webster Financial Corp....................................................................... 277,641
---------------
2,984,484
---------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.8%
13,680 China Telecom Corp., Ltd., ADR............................................................... 459,648
---------------
ELECTRIC UTILITIES -- 5.5%
5,383 ALLETE, Inc.................................................................................. 309,845
8,282 Alliant Energy Corp.......................................................................... 402,091
925 American Electric Power Co., Inc............................................................. 76,877
772 Duke Energy Corp............................................................................. 65,357
950 Emera, Inc. (CAD)............................................................................ 37,817
5,709 Evergy, Inc.................................................................................. 333,577
940 Eversource Energy............................................................................ 75,858
1,999 Exelon Corp.................................................................................. 74,123
936 FirstEnergy Corp............................................................................. 38,629
2,482 Fortis, Inc. (CAD)........................................................................... 96,181
3,587 IDACORP, Inc................................................................................. 329,215
1,001 NextEra Energy, Inc.......................................................................... 231,351
4,985 Otter Tail Corp.............................................................................. 221,234
4,332 Pinnacle West Capital Corp................................................................... 333,521
6,721 Portland General Electric Co................................................................. 314,476
5,877 PPL Corp..................................................................................... 149,393
1,544 Xcel Energy, Inc............................................................................. 98,137
---------------
3,187,682
---------------
</TABLE>
Page 6 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
ELECTRICAL EQUIPMENT -- 0.8%
3,913 Hubbell, Inc................................................................................. $ 486,895
---------------
GAS UTILITIES -- 0.8%
374 Atmos Energy Corp............................................................................ 38,137
1,106 New Jersey Resources Corp.................................................................... 37,361
5,202 Southwest Gas Holdings, Inc.................................................................. 394,311
---------------
469,809
---------------
IT SERVICES -- 0.8%
6,873 Paychex, Inc................................................................................. 470,938
---------------
MACHINERY -- 0.9%
3,840 Snap-on, Inc................................................................................. 500,314
---------------
MULTI-UTILITIES -- 2.1%
1,365 ATCO Ltd., Class I (CAD)..................................................................... 38,333
762 Dominion Energy, Inc......................................................................... 58,773
385 DTE Energy Co................................................................................ 39,940
5,689 NorthWestern Corp............................................................................ 328,198
4,920 Public Service Enterprise Group, Inc......................................................... 249,493
656 Sempra Energy................................................................................ 81,246
4,363 WEC Energy Group, Inc........................................................................ 395,070
---------------
1,191,053
---------------
OIL, GAS & CONSUMABLE FUELS -- 3.8%
8,447 Enbridge, Inc................................................................................ 259,154
9,455 Equitrans Midstream Corp..................................................................... 79,233
7,762 Keyera Corp. (CAD)........................................................................... 115,152
27,114 Kinder Morgan, Inc........................................................................... 412,946
5,984 ONEOK, Inc................................................................................... 179,101
17,328 TC Energy Corp............................................................................... 803,326
18,858 Williams (The) Cos., Inc..................................................................... 365,279
---------------
2,214,191
---------------
THRIFTS & MORTGAGE FINANCE -- 0.8%
16,913 Washington Federal, Inc...................................................................... 452,254
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.9%
13,678 Fastenal Co.................................................................................. 495,417
---------------
TOTAL COMMON STOCKS.......................................................................... 12,912,685
(Cost $13,964,712) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 10.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.6%
Federal Home Loan Mortgage Corporation
$ 9,310 Series 1998-192, Class IO, IO, STRIPS........................ 6.50% 02/01/28 1,426
102,478 Series 2003-2564, Class PK................................... 4.00% 06/15/32 119,043
83,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 95,771
94,791 Series 2006-3114, Class GI, IO,
1 Mo. LIBOR (x) -1 + 6.60% (b)............................ 5.79% 02/15/36 19,597
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 6,413 Series 2006-3200, Class PO, PO............................... (c) 08/15/36 $ 6,211
8,509 Series 2007-3373, Class TO, PO............................... (c) 04/15/37 8,025
87,828 Series 2007-3382, Class CE................................... 6.00% 11/15/37 102,491
83,334 Series 2009-3589, Class ZW................................... 4.50% 10/15/39 99,021
232,000 Series 2010-3626, Class ME................................... 5.00% 01/15/40 281,348
54,116 Series 2011-3817, Class MA................................... 4.50% 10/15/37 55,315
9,055 Series 2011-3917, Class AI, IO............................... 4.50% 07/15/26 479
504,479 Series 2012-4101, Class QN................................... 3.50% 09/15/42 541,140
1,219,489 Series 2016-4619, Class IB, IO (d)........................... 4.00% 12/15/47 43,058
Federal National Mortgage Association
2,446 Series 1992-205, Class Z..................................... 7.00% 11/25/22 2,581
14,585 Series 1993-176, Class E, PO................................. (c) 08/25/23 14,464
12,576 Series 1993-247, Class 2, IO, STRIPS......................... 7.50% 10/25/23 1,055
52,904 Series 1997-22, Class PC..................................... 4.50% 03/18/27 56,907
7,396 Series 2002-1, Class HC...................................... 6.50% 02/25/22 7,599
69,029 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 12,694
12,978 Series 2003-W2, Class 1A1.................................... 6.50% 07/25/42 15,314
43,578 Series 2004-T2, Class 1PO, PO................................ (c) 11/25/43 41,676
9,080 Series 2006-125, Class FA, 1 Mo. LIBOR + 0.28% (e)........... 0.77% 01/25/37 8,981
52,923 Series 2007-32, Class KT..................................... 5.50% 04/25/37 63,016
16,381 Series 2007-42, Class AO, PO................................. (c) 05/25/37 15,406
103,842 Series 2008-24, Class WH..................................... 6.00% 02/25/38 136,909
12,132 Series 2008-44, Class PO, PO................................. (c) 05/25/38 11,093
227,000 Series 2010-45, Class EB..................................... 5.00% 05/25/40 284,821
41,219 Series 2011-30, Class MD..................................... 4.00% 02/25/39 41,520
80,655 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 12,465
112,463 Series 2015-14, Class IK, IO................................. 0.75% 03/25/45 10,466
45,011 Series 2015-72, Class PC..................................... 3.00% 10/25/43 45,336
Government National Mortgage Association
25,397 Series 2003-7, Class TA...................................... 4.50% 11/16/32 26,496
23,355 Series 2003-52, Class AP, PO................................. (c) 06/16/33 22,314
52,689 Series 2004-47, Class PD..................................... 6.00% 06/16/34 60,473
22,849 Series 2004-109, Class BC.................................... 5.00% 11/20/33 23,174
8,038 Series 2005-17, Class AD..................................... 5.00% 02/20/35 8,800
299,080 Series 2006-17, Class TW..................................... 6.00% 04/20/36 349,986
270,000 Series 2008-2, Class GC...................................... 4.75% 01/16/38 306,221
86,974 Series 2009-96, Class ZG..................................... 5.50% 10/16/39 104,431
10,000 Series 2010-84, Class YB..................................... 4.00% 07/20/40 10,959
111,974 Series 2010-111, Class JA.................................... 2.50% 09/16/40 113,509
459,000 Series 2010-167, Class WL.................................... 4.50% 09/20/40 536,381
29,742 Series 2012-34, Class SD, IO,
1 Mo. LIBOR (x) -1 + 6.05% (b)............................ 5.26% 03/16/42 6,363
30,263 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 3,543
1,735 Series 2013-31, Class TH, 1 Mo. LIBOR + 4.35% (e)............ 5.07% 08/20/39 1,737
37,635 Series 2013-67, Class PI, IO................................. 4.00% 12/16/42 4,147
NCUA Guaranteed Notes Trust
26,830 Series 2010-R3, Class 1A, 1 Mo. LIBOR + 0.56% (e)............ 1.54% 12/08/20 26,776
Vendee Mortgage Trust
25,009 Series 2011-2, Class DA...................................... 3.75% 12/15/33 25,136
---------------
3,785,674
---------------
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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 -- 4.1%
Federal Home Loan Mortgage Corporation
$ 64,352 Pool A47829.................................................. 4.00% 08/01/35 $ 69,463
69,249 Pool A80290.................................................. 5.00% 11/01/35 79,242
47,841 Pool A94951.................................................. 4.00% 11/01/40 53,132
27,382 Pool A95134.................................................. 4.50% 11/01/40 30,450
27,422 Pool A97601.................................................. 4.50% 03/01/41 31,034
12,262 Pool G03523.................................................. 6.00% 11/01/37 14,187
33,352 Pool G06501.................................................. 4.00% 04/01/41 36,600
43,076 Pool G07286.................................................. 6.50% 09/01/39 50,406
1,249 Pool G11973.................................................. 5.50% 02/01/21 1,258
20,905 Pool G13124.................................................. 6.00% 12/01/22 21,710
16,159 Pool G13465.................................................. 6.00% 01/01/24 16,774
21,855 Pool G13790.................................................. 4.50% 04/01/25 23,287
25,875 Pool G13844.................................................. 4.50% 07/01/25 27,715
15,496 Pool G14184.................................................. 5.00% 07/01/25 16,287
27,914 Pool G15725.................................................. 4.50% 09/01/26 29,812
2,024 Pool G18072.................................................. 4.50% 09/01/20 2,138
8,212 Pool O20138.................................................. 5.00% 11/01/30 8,998
31,837 Pool Q05201.................................................. 4.00% 12/01/41 35,181
Federal National Mortgage Association
79,415 Pool 724888.................................................. 5.50% 06/01/33 88,786
8,849 Pool 879398.................................................. 5.50% 02/01/21 8,951
14,104 Pool 888112.................................................. 6.50% 12/01/36 16,868
9,276 Pool 889780.................................................. 5.50% 03/01/23 9,697
464 Pool 890206.................................................. 5.50% 10/01/21 467
16,510 Pool 897936.................................................. 5.50% 08/01/21 16,871
21,480 Pool 923171.................................................. 7.50% 03/01/37 25,097
26,406 Pool 977130.................................................. 5.50% 08/01/23 27,720
15,317 Pool 983629.................................................. 4.50% 05/01/23 16,214
19,730 Pool 995400.................................................. 7.00% 06/01/23 20,650
52,041 Pool 995700.................................................. 6.50% 03/01/27 58,039
26,249 Pool AB2265.................................................. 4.00% 02/01/41 29,411
8,539 Pool AI1191.................................................. 4.50% 04/01/41 9,498
28,779 Pool AI7800.................................................. 4.50% 07/01/41 32,046
23,154 Pool AJ5299.................................................. 4.00% 11/01/41 25,964
40,981 Pool AJ5300.................................................. 4.00% 11/01/41 45,388
35,894 Pool AK3103.................................................. 4.00% 02/01/42 39,484
57,355 Pool AL1024.................................................. 4.50% 07/01/26 61,716
14,509 Pool AL6304.................................................. 5.50% 09/01/25 15,189
48,600 Pool AU4726.................................................. 4.00% 09/01/43 53,889
335,692 Pool BN0965.................................................. 4.50% 12/01/48 362,572
Government National Mortgage Association
15,606 Pool 3500.................................................... 5.50% 01/20/34 17,692
9,136 Pool 3513.................................................... 5.00% 02/20/34 10,282
18,317 Pool 3555.................................................... 5.00% 05/20/34 20,617
49,793 Pool 3975.................................................... 5.50% 04/20/37 56,058
17,836 Pool 4230.................................................... 6.00% 09/20/23 19,074
36,478 Pool 609116.................................................. 4.50% 02/15/44 42,133
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 341,884 Pool 769055.................................................. 3.75% 07/15/41 $ 367,136
250,778 Pool 770005.................................................. 4.00% 11/15/33 273,089
18,577 Pool MA2293.................................................. 3.50% 10/20/44 19,448
---------------
2,337,720
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 6,123,394
(Cost $5,892,356) ---------------
</TABLE>
<TABLE>
<CAPTION>
UNITS DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
MASTER LIMITED PARTNERSHIPS -- 9.5%
CHEMICALS -- 0.4%
11,128 Westlake Chemical Partners, L.P.............................................................. 200,081
---------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.6%
7,050 NextEra Energy Partners, L.P. (f)............................................................ 354,545
---------------
OIL, GAS & CONSUMABLE FUELS -- 8.5%
16,359 Alliance Resource Partners, L.P.............................................................. 63,473
880 BP Midstream Partners, L.P................................................................... 10,067
1,489 Cheniere Energy Partners, L.P................................................................ 50,224
49,579 Energy Transfer, L.P......................................................................... 416,464
71,695 Enterprise Products Partners, L.P............................................................ 1,258,964
17,428 Holly Energy Partners, L.P................................................................... 256,714
15,822 Magellan Midstream Partners, L.P............................................................. 650,759
717 MPLX, L.P.................................................................................... 12,978
12,177 Phillips 66 Partners, L.P.................................................................... 518,131
59,944 Plains All American Pipeline, L.P............................................................ 529,305
32,001 Shell Midstream Partners, L.P................................................................ 470,095
20,218 TC PipeLines, L.P............................................................................ 677,303
---------------
4,914,477
---------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................................ 5,469,103
(Cost $6,452,986) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 4.3%
EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.3%
5,637 Agree Realty Corp............................................................................ 367,025
5,435 Getty Realty Corp............................................................................ 147,615
6,854 National Health Investors, Inc............................................................... 377,381
11,254 National Retail Properties, Inc.............................................................. 367,330
7,076 Realty Income Corp........................................................................... 388,614
40,499 Retail Opportunity Investments Corp.......................................................... 393,043
12,883 Ventas, Inc.................................................................................. 416,765
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................................... 2,457,773
(Cost $2,802,582) ---------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 0.0%
FIRST ALLIANCE MORTGAGE LOAN TRUST
$ 16,446 Series 1999-1, Class A1...................................... 7.18% 06/20/30 $ 16,322
---------------
TOTAL ASSET-BACKED SECURITIES................................................................ 16,322
(Cost $16,446) ---------------
MORTGAGE-BACKED SECURITIES -- 0.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0%
BCAP LLC Trust
1,289 Series 2011-R11, Class 30A5 (g) (h).......................... 3.81% 01/26/34 1,285
Residential Accredit Loans, Inc.
1,653 Series 2003-QS5, Class A2, 1 Mo. LIBOR (x) -1.83 +
14.76% (b)................................................ 13.87% 03/25/18 1,570
1,586 Series 2003-QS14, Class A1................................... 5.00% 07/25/18 1,600
769 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 782
Residential Asset Securitization Trust
190 Series 2003-A14, Class A1.................................... 4.75% 02/25/19 124
Structured Asset Securities Corp.
9,470 Series 2003-37A, Class 3A7 (h)............................... 3.83% 12/25/33 9,030
---------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 14,391
(Cost $14,923) ---------------
TOTAL INVESTMENTS -- 97.6%................................................................... 56,133,221
(Cost $60,607,906) (i)
NET OTHER ASSETS AND LIABILITIES -- 2.4%..................................................... 1,405,407
---------------
NET ASSETS -- 100.0%......................................................................... $ 57,538,628
===============
</TABLE>
-----------------------------
(a) Investment in an affiliated fund.
(b) Inverse floating rate security.
(c) Zero coupon security.
(d) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors L.P.,
the Fund's advisor (the "Advisor").
(e) Floating or variable rate security.
(f) This security is taxed as a "C" corporation for federal income tax
purposes.
(g) 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 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, 2020,
securities noted as such amounted to $1,285 or 0.0% of net assets.
(h) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(i) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $1,350,794 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $5,825,479. The net unrealized depreciation was
$4,474,685.
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
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Exchange-Traded Funds*............................ $ 29,139,553 $ 29,139,553 $ -- $ --
Common Stocks*.................................... 12,912,685 12,912,685 -- --
U.S. Government Agency Mortgage-Backed
Securities..................................... 6,123,394 -- 6,123,394 --
Master Limited Partnerships*...................... 5,469,103 5,469,103 -- --
Real Estate Investment Trusts*.................... 2,457,773 2,457,773 -- --
Asset-Backed Securities........................... 16,322 -- 16,322 --
Mortgage-Backed Securities........................ 14,391 -- 14,391 --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 56,133,221 $ 49,979,114 $ 6,154,107 $ --
=============== =============== =============== ===============
</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, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated................................... $ 30,729,052
Investments, at value - Affiliated..................................... 25,404,169
----------------
Total investments, at value............................................ 56,133,221
Cash................................................................... 1,250,261
Foreign currency, at value............................................. 4,571
Due from broker........................................................ 60,591
Receivables:
Dividends........................................................... 102,204
Interest............................................................ 25,683
Investment securities sold.......................................... 15,299
Reclaims............................................................ 8,311
----------------
Total Assets........................................................ 57,600,141
----------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 37,900
Investment advisory fees............................................ 23,613
----------------
Total Liabilities................................................... 61,513
----------------
NET ASSETS............................................................. $ 57,538,628
================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 66,855,872
Par value.............................................................. 13,000
Accumulated distributable earnings (loss).............................. (9,330,244)
----------------
NET ASSETS............................................................. $ 57,538,628
================
NET ASSET VALUE, per share............................................. $ 44.26
================
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 1,300,002
================
Investments, at cost - Unaffiliated.................................... $ 33,205,391
================
Investments, at cost - Affiliated...................................... $ 27,402,515
================
Total investments, at cost............................................. $ 60,607,906
================
Foreign currency, at cost (proceeds)................................... $ 6,088
================
</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, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends - Unaffiliated............................................... $ 569,051
Dividends - Affiliated................................................. 832,289
Interest............................................................... 74,801
Foreign withholding tax................................................ (5,223)
----------------
Total investment income............................................. 1,470,918
----------------
EXPENSES:
Investment advisory fees............................................... 340,415
----------------
Total expenses...................................................... 340,415
Less fees waived by the investment advisor.......................... (149,725)
----------------
Net expenses........................................................ 190,690
----------------
NET INVESTMENT INCOME (LOSS)........................................... 1,280,228
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated.......................................... (2,500,150)
Investments - Affiliated............................................ (853,577)
In-kind redemptions - Unaffiliated.................................. (210,793)
In-kind redemptions - Affiliated.................................... (520,416)
Futures contracts................................................... 8,634
Foreign currency transactions....................................... (159)
----------------
Net realized gain (loss)............................................... (4,076,461)
----------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated.......................................... (4,397,103)
Investments - Affiliated............................................ (2,396,827)
Foreign currency translation........................................ (813)
----------------
Net change in unrealized appreciation (depreciation)................... (6,794,743)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (10,871,204)
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (9,590,976)
================
</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
4/30/2020 ENDED
(UNAUDITED) 10/31/2019
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 1,280,228 $ 2,621,165
Net realized gain (loss)............................................... (4,076,461) 577,341
Net change in unrealized appreciation (depreciation)................... (6,794,743) 4,790,638
---------------- ----------------
Net increase (decrease) in net assets resulting from operations........ (9,590,976) 7,989,144
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (1,587,002) (3,409,004)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. -- 17,620,172
Cost of shares redeemed................................................ (22,403,805) (14,583,948)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................................... (22,403,805) 3,036,224
---------------- ----------------
Total increase (decrease) in net assets................................ (33,581,783) 7,616,364
NET ASSETS:
Beginning of period.................................................... 91,120,411 83,504,047
---------------- ----------------
End of period.......................................................... $ 57,538,628 $ 91,120,411
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 1,800,002 1,750,002
Shares sold............................................................ -- 350,000
Shares redeemed........................................................ (500,000) (300,000)
---------------- ----------------
Shares outstanding, end of period...................................... 1,300,002 1,800,002
================ ================
</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,
4/30/2020 -------------------------------------------------------------------
(UNAUDITED) 2019 2018 2017 2016 2015
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 50.62 $ 47.72 $ 50.68 $ 49.89 $ 47.76 $ 50.59
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.73 1.63 1.69 1.56 1.60 1.67
Net realized and unrealized gain (loss) (6.12) 3.34 (2.26) 1.10 (a) 2.45 (2.58) (b)
--------- --------- --------- --------- --------- ---------
Total from investment operations (5.39) 4.97 (0.57) 2.66 4.05 (0.91)
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.97) (2.07) (2.10) (1.65) (1.92) (1.40)
Net realized gain -- -- -- (0.22) -- --
Return of capital -- -- (0.29) -- -- (0.52)
--------- --------- --------- --------- --------- ---------
Total distributions (0.97) (2.07) (2.39) (1.87) (1.92) (1.92)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 44.26 $ 50.62 $ 47.72 $ 50.68 $ 49.89 $ 47.76
========= ========= ========= ========= ========= =========
TOTAL RETURN (c) (10.77)% 10.60% (1.21)% 5.40% (a) 8.67% (1.85)% (b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 57,539 $ 91,120 $ 83,504 $ 96,286 $ 17,460 $ 19,102
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets (d) 0.85% (e) 0.85% 0.86% (f) 0.85% 0.85% 0.85%
Ratio of net expenses to average
net assets (d) 0.48% (e) 0.50% 0.50% (f) 0.52% 0.55% 0.61%
Ratio of net investment income (loss)
to average net assets 3.20% (e) 3.21% 3.40% 3.10% 3.30% 3.37%
Portfolio turnover rate (g) 57% 91% 113% 119% 88% 125%
</TABLE>
(a) 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.
(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) 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.
(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) 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.
(g) 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, 2020 (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 securities within its respective investment
category. The Fund may add or remove investment categories or Management Teams
at the discretion of the Advisor.
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 (including common stock) of companies (that
may be domiciled in or outside of the United States) 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 Team may seek exposure to these asset
classes directly or through investments in exchange-traded funds ("ETFs"). The
Advisor expects that the Fund may at times invest significantly in other ETFs,
including but not limited to, other ETFs 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 Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. Domestic debt securities 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, 2020 (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.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
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
Page 18
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
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.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
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. 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
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
Page 20
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
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. 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.
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. 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 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
Amounts related to these investments at April 30, 2020 and for the six months
then ended are as follows:
<TABLE>
<CAPTION>
CHANGE TO
SHARES VALUE UNREALIZED REALIZED VALUE
AT AT APPRECIATION GAIN AT DIVIDEND
SECURITY NAME 4/30/2020 10/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2020 INCOME
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust
Emerging Markets
Local Currency
Bond ETF 162,864 $ 8,279,392 $ 2,400,798 $ (3,796,397) $ (980,922) $ (582,104) $ 5,320,767 $ 231,528
First Trust
Institutional
Preferred
Securities and
Income ETF 120,150 2,875,710 404,392 (881,202) (236,777) (3,028) 2,159,095 67,998
First Trust
Long Duration
Opportunities
ETF 11,606 322,299 -- -- 22,399 -- 344,698 9,114
First Trust
Low Duration
Opportunities
ETF 102,840 3,217,919 3,301,263 (1,224,503) 20,613 (3,606) 5,311,686 38,756
First Trust
Preferred
Securities and
Income ETF 365,530 8,585,277 1,311,665 (2,629,134) (714,433) 578 6,553,953 206,268
First Trust
Senior Loan Fund 129,922 -- 15,259,854 (7,997,548) (523,417) (1,024,919) 5,713,970 156,026
First Trust
Tactical High
Yield ETF -- 15,842,027 -- (16,096,823) 15,710 239,086 -- 122,599
----------- ----------- ------------ -------------- ----------- ----------- ---------
Total Investments
in Affiliates $39,122,624 $22,677,972 $(32,625,607) $ (2,396,827) $(1,373,993) $25,404,169 $ 832,289
=========== =========== ============ ============== =========== =========== =========
</TABLE>
I. 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 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,
2019 was as follows:
Distributions paid from:
Ordinary income.............................. $ 3,409,004
Capital gains................................ --
Return of capital............................ --
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................ $ --
Accumulated capital and other gain (loss).... --
Net unrealized appreciation (depreciation)... 1,847,734
J. 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 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (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 2016,
2017, 2018, and 2019 remain open to federal and state audit. As of April 30,
2020, 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, 2019, the
Fund had no non-expiring capital loss carryforwards available for federal income
tax purposes. During the taxable year ended October 31, 2019, the Fund utilized
post-enactment capital loss carryforwards in the amount of $197,827.
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, 2019, the Fund had no
net late year ordinary or capital losses.
K. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for 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. RBA exercises discretion only
with respect to assets allocated to RBA by the Advisor. 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
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, 2020,
the Advisor waived fees of $149,725.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (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,
defined-outcome 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, 2020, were $464,503 and $43,680,934, 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, 2020, were $560,017 and $48,362,434,
respectively.
For the six months ended April 30, 2020, the cost of in-kind purchases and
proceeds from in-kind sales were $0 and $17,485,987, respectively.
5. DERIVATIVE TRANSACTIONS
As of April 30, 2020, 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, 2020, 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 $ 8,634
Net change in unrealized appreciation (depreciation) on
futures contracts --
During the six months ended April 30, 2020, the notional value of futures
contracts opened and closed were $128,988 and $128,988, respectively.
The Fund does not have the right to offset financial assets and financial
liabilities related to futures contracts on the Statement of Assets and
Liabilities.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
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.
Page 24
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
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 increase or decrease with changes in the Fund's portfolio.
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 increase or decrease with changes in the Fund's
portfolio. 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, 2021.
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 25
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (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.
Page 26
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
Page 27
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2020 (UNAUDITED)
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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 28
<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 Limited
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, 2020
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2020
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management ........................................................ 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 44
Statement of Operations...................................................... 45
Statements of Changes in Net Assets.......................................... 46
Financial Highlights......................................................... 47
Notes to Financial Statements................................................ 48
Additional Information....................................................... 57
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's
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, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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 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. James 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 60% 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 1 Year 5 Years Inception 5 Years Inception
Ended Ended Ended (11/4/14) Ended (11/4/14)
4/30/20 4/30/20 4/30/20 to 4/30/20 4/30/20 to 4/30/20
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 0.56% 3.05% 3.21% 3.36% 17.13% 19.90%
Market Price 0.75% 3.06% 3.15% 3.39% 16.79% 20.04%
INDEX PERFORMANCE
ICE BofA 1-5 Year US Treasury
& Agency Index 3.89% 6.73% 2.26% 2.24% 11.82% 12.90%
------------------------------------------------------------------------------------------------------------------------------------
</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
<PAGE>
--------------------------------------------------------------------------------
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 93.66%
Mortgage-Backed Securities 4.95
Asset-Backed Securities 1.38
Exchange-Traded Funds 0.01
-------
Total 100.00%
=======
-----------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
-----------------------------------------------------------
Government and Agency 93.23%
AAA 0.95
AA+ 0.01
AA 0.02
A+ 0.11
A 0.00*
BBB+ 0.05
BBB 0.00*
BBB- 0.00*
BB+ 0.06
BB 0.02
B+ 0.00*
B- 0.00*
CCC 0.03
D 0.10
Not Rated 4.94
Cash 0.48
-------
Total 100.00%
=======
* Amount is less than 0.01%.
-----------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(1)
-----------------------------------------------------------
Federal National Mortgage Association,
Pool TBA, 2.00%, 6/15/49 4.64%
Federal National Mortgage Association,
Pool TBA, 2.50%, 6/11/45 4.05
Federal National Mortgage Association,
Pool FM2500, 2.50%, 3/1/35 2.64
Federal National Mortgage Association,
Pool FM1194, 4.50%, 5/1/39 2.43
Federal National Mortgage Association,
Pool FM1725, 2.50%, 11/1/47 1.80
Federal Home Loan Mortgage Corporation,
Series 2018-4790, Class Z, 4.00%,
5/15/48 1.77
Federal National Mortgage Association,
Pool BM5508, 5.00%, 2/1/49 1.60
Federal National Mortgage Association,
Pool FM0085, 4.00%, 3/1/50 1.51
Federal Home Loan Mortgage Corporation,
Series 2017-4673, Class WZ, 3.50%,
4/15/47 1.40
Federal National Mortgage Association,
Pool MA4012, 2.00%, 5/1/35 1.03
-------
Total 22.87%
=======
-----------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
-----------------------------------------------------------
April 30, 2020 1.62 Years
High - December 31, 2019 2.56 Years
Low - April 30, 2020 1.62 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, 2020
First Trust Low Duration ICE BofA 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
10/31/19 11,923 10,867
4/30/20 11,990 11,290
</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, 2020
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, 2020. 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 - 10/31/19 246 0 0 0 5 0 0 0
11/1/19 - 4/30/20 108 1 0 0 13 1 1 0
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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 - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER,
FIRST TRUST SECURITIZED PRODUCTS GROUP
JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER,
FIRST TRUST SECURITIZED PRODUCTS GROUP
Page 5
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (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 (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, 2020.
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, 2019 APRIL 30, 2020 PERIOD (a) PERIOD (a) (b)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
Actual $1,000.00 $1,005.60 0.65% $3.24
Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27
</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,
2019 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 91.4%
ASSET-BACKED SECURITIES -- 0.0%
Fannie Mae Grantor Trust
$ 336,856 Series 2002-T7, Class A1, 1 Mo. LIBOR + 0.11% (a)............... 1.06% 07/25/32 $ 329,132
----------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 28.8%
Federal Home Loan Mortgage Corporation
33,512 Series 1992-133, Class B, IO, STRIPS......................... 8.50% 06/01/22 1,958
30 Series 1992-205, Class A, 1 Mo. LIBOR + 0.45% (a) (b)........ 1.15% 05/15/23 30
37,740 Series 1992-1206, Class IB, 1 Mo. LIBOR + 0.83% (a).......... 1.64% 03/15/22 37,629
13,296 Series 1993-1498, Class I, 1 Mo. LIBOR + 1.15% (a)........... 1.96% 04/15/23 13,277
10,879 Series 1993-1552, Class I, 10 Yr. Constant Maturity Treasury
Rate - 0.65% (a).......................................... 0.34% 08/15/23 10,689
103,704 Series 1993-1579, Class PM................................... 6.70% 09/15/23 111,377
85,147 Series 1993-1630, Class PK................................... 6.00% 11/15/23 90,745
6,170 Series 1993-1643, Class PK................................... 6.50% 12/15/23 6,555
248,821 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 2.31% 04/15/24 252,435
1,847 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 192
8,794 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 9,960
861,462 Series 1999-21, Class A, 1 Mo. LIBOR + 0.18% (a)............. 0.67% 10/25/29 857,179
1,940 Series 2001-2365, Class LO, PO............................... (c) 09/15/31 1,933
188,382 Series 2002-48, Class 1A (d)................................. 4.87% 07/25/33 210,510
62,054 Series 2002-2405, Class BF................................... 7.00% 03/25/24 66,212
150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 193,019
145,699 Series 2002-2427, Class GE................................... 6.00% 03/15/32 172,353
256,351 Series 2002-2437, Class SA, IO, 1 Mo. LIBOR (multiply) -1 +
7.90% (e)................................................. 7.09% 01/15/29 43,402
16,226 Series 2003-58, Class 2A..................................... 6.50% 09/25/43 18,818
315,753 Series 2003-2557, Class HL................................... 5.30% 01/15/33 364,811
119,179 Series 2003-2564, Class AC................................... 5.50% 02/15/33 136,440
500,637 Series 2003-2574, Class PE................................... 5.50% 02/15/33 583,685
212,093 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 34,419
1,693,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 1,912,264
347,862 Series 2003-2586, Class TG................................... 5.50% 03/15/23 361,469
85,741 Series 2003-2597, Class AE................................... 5.50% 04/15/33 93,365
1,995,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 2,215,075
231,617 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 279,034
504,926 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 658,089
116,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 133,849
41,000 Series 2003-2676, Class LL................................... 5.50% 09/15/33 46,366
658,946 Series 2004-2771, Class NL................................... 6.00% 03/15/34 795,857
518,108 Series 2004-2793, Class PE................................... 5.00% 05/15/34 600,321
1,255,624 Series 2004-2801, Class SE, IO, 1 Mo. LIBOR (x) -1 +
7.05% (e)................................................. 6.24% 07/15/32 243,298
231,022 Series 2004-2835, Class QY, IO, 1 Mo. LIBOR (x) -1 +
7.90% (b) (e)............................................. 7.09% 12/15/32 44,507
181,942 Series 2004-2890, Class ZA................................... 5.00% 11/15/34 209,733
543,319 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 822,343
419,648 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 453,815
1,940,786 Series 2005-233, Class 12, IO, STRIPS........................ 5.00% 09/15/35 373,952
515,211 Series 2005-234, Class IO, IO, STRIPS........................ 4.50% 10/01/35 80,805
678,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 864,452
162,623 Series 2005-3031, Class BI, IO, 1 Mo. LIBOR (x) -1 +
6.69% (e)................................................. 5.88% 08/15/35 40,667
19,852 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 28,260
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 452,256 Series 2006-238, Class 8, IO, STRIPS....................... 5.00% 04/15/36 $ 77,766
381,125 Series 2006-243, Class 11, IO, STRIPS (f).................. 7.00% 08/15/36 88,335
469,894 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)............................................... 5.79% 02/15/36 97,148
60,248 Series 2006-3117, Class ZU................................. 6.00% 02/15/36 97,422
38,082 Series 2006-3150, Class DZ................................. 5.50% 05/15/36 44,407
2,528,440 Series 2006-3174, Class LF, 1 Mo. LIBOR + 0.35% (a)........ 1.16% 05/15/36 2,519,800
2,102,202 Series 2006-3210, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)............................................... 5.79% 09/15/36 465,720
623,921 Series 2006-3223, Class FC, 1 Mo. LIBOR + 0.55% (a)........ 1.25% 04/15/32 625,544
222,219 Series 2006-3245, Class PO, PO............................. (c) 11/15/36 214,221
1,367,053 Series 2007-3262, Class KS, IO, 1 Mo. LIBOR (x) -1 +
6.41% (e)............................................... 5.60% 01/15/37 183,845
41,458 Series 2007-3274, Class B.................................. 6.00% 02/15/37 46,692
349,914 Series 2007-3322, Class NF, 1 Mo. LIBOR (x) 2,566.67 -
16,683.33%, 0.00% Floor (a)............................. 0.00% 05/15/37 339,088
53,680 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a)........ 1.11% 07/15/37 53,152
64,676 Series 2007-3349, Class MY................................. 5.50% 07/15/37 75,158
185,236 Series 2007-3360, Class CB................................. 5.50% 08/15/37 210,423
1,303,318 Series 2007-3370, Class FM, 1 Mo. LIBOR + 0.62% (a)........ 1.43% 10/15/47 1,310,143
125,690 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a)........ 1.16% 11/15/36 128,054
486,682 Series 2008-3406, Class B.................................. 6.00% 01/15/38 559,281
67,923 Series 2008-3413, Class B.................................. 5.50% 04/15/37 76,448
360,702 Series 2008-3420, Class AZ................................. 5.50% 02/15/38 418,087
212,642 Series 2008-3448, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)............................................... 5.24% 05/15/38 15,724
4,012,982 Series 2009-3522, Class SE, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)............................................... 5.29% 04/15/39 833,607
39,852 Series 2009-3523, Class SD, 1 Mo. LIBOR (x) -2.75 +
19.66% (e).............................................. 17.42% 06/15/36 57,428
1,118,458 Series 2009-3542, Class ZP................................. 5.00% 06/15/39 1,244,492
177,000 Series 2009-3550, Class LL................................. 4.50% 07/15/39 210,112
681,087 Series 2009-3563, Class ZP................................. 5.00% 08/15/39 856,701
2,976,273 Series 2009-3572, Class JS, IO, 1 Mo. LIBOR (x) -1 +
6.80% (e)............................................... 5.99% 09/15/39 493,122
30,392 Series 2009-3585, Class QZ................................. 5.00% 08/15/39 42,324
183,479 Series 2009-3587, Class FX, 1 Mo. LIBOR (a)................ 0.81% 12/15/37 171,599
1,006,951 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)......... 2.08% 03/15/36 1,010,357
2,147,970 Series 2009-3605, Class NC................................. 5.50% 06/15/37 2,486,966
500,000 Series 2010-3622, Class PB................................. 5.00% 01/15/40 586,636
182,000 Series 2010-3626, Class ME................................. 5.00% 01/15/40 220,712
695,099 Series 2010-3632, Class BS, 1 Mo. LIBOR (x) -3.33 +
17.50% (e).............................................. 14.79% 02/15/40 1,038,706
1,205 Series 2010-3637, Class LJ................................. 3.50% 02/15/25 1,208
107,000 Series 2010-3645, Class WD................................. 4.50% 02/15/40 123,245
661,000 Series 2010-3667, Class PL................................. 5.00% 05/15/40 749,445
49,227 Series 2010-3687, Class HB................................. 2.50% 07/15/38 49,349
90,318 Series 2010-3688, Class HI, IO............................. 5.00% 11/15/21 1,445
107,017 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a)........ 1.41% 07/15/40 107,493
1,869,652 Series 2010-3704, Class ED................................. 4.00% 12/15/36 1,959,800
400,000 Series 2010-3714, Class PB................................. 4.75% 08/15/40 501,687
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 11,644 Series 2010-3716, Class PC................................... 2.50% 04/15/38 $ 11,748
143,194 Series 2010-3722, Class AI, IO (b)........................... 3.50% 09/15/20 778
1,305,920 Series 2010-3726, Class BI, IO............................... 6.00% 07/15/30 19,313
988,468 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 51,025
151,493 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 18,337
52,822 Series 2010-3739, Class MB................................... 4.00% 06/15/37 53,666
561,622 Series 2010-3740, Class SC, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 10/15/40 103,903
260,104 Series 2010-3755, Class AI, IO (b)........................... 3.50% 11/15/20 1,657
564,116 Series 2010-3764, Class QA................................... 4.00% 10/15/29 571,759
76,038 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 102,643
31,303 Series 2010-3773, Class PH................................... 2.50% 06/15/25 31,398
32,875 Series 2010-3775, Class LD................................... 3.00% 12/15/20 33,038
95,536 Series 2010-3775, Class LI, IO (b)........................... 3.50% 12/15/20 675
312,000 Series 2010-3780, Class AV................................... 4.00% 04/15/31 350,381
169,907 Series 2011-3795, Class ED................................... 3.00% 10/15/39 175,478
600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 735,090
354,104 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 420,921
1,911,802 Series 2011-3820, Class GZ................................... 5.00% 03/15/41 2,358,012
300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 357,661
298,239 Series 2011-3827, Class BM................................... 5.50% 08/15/39 306,171
153,801 Series 2011-3828, Class SY, 1 Mo. LIBOR (x) -3 +
13.20% (e)................................................ 10.76% 02/15/41 283,832
1,687,558 Series 2011-3841, Class JZ................................... 5.00% 04/15/41 1,952,711
103,547 Series 2011-3842, Class BS, 1 Mo. LIBOR (x) -5 +
22.75% (e)................................................ 17.67% 04/15/41 258,795
300,000 Series 2011-3844, Class PC................................... 5.00% 04/15/41 384,799
1,331,159 Series 2011-3852, Class SW, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 05/15/41 228,563
1,591,552 Series 2011-3860, Class PZ................................... 5.00% 05/15/41 1,932,206
159,370 Series 2011-3884, Class DL................................... 3.00% 02/15/25 159,705
525,000 Series 2011-3890, Class ME................................... 5.00% 07/15/41 661,853
1,387,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,749,053
1,678,879 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 2,068,258
1,103,355 Series 2011-3926, Class SH, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 5.74% 05/15/40 89,962
381,068 Series 2011-3935, Class LI, IO............................... 3.00% 10/15/21 4,947
17,339,195 Series 2011-3954, Class GS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 11/15/41 3,571,318
25,808 Series 2011-3954, Class JE................................... 5.00% 08/15/29 26,033
1,193,410 Series 2011-3956, Class KI, IO............................... 3.00% 11/15/21 19,122
445,505 Series 2011-3960, Class BU................................... 3.50% 02/15/30 453,020
397,255 Series 2011-3968, Class AI, IO............................... 3.00% 12/15/21 6,298
867,877 Series 2012-267, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 +
6.00% (e)............................................... 5.19% 08/15/42 160,292
19,982,974 Series 2012-276, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 09/15/42 4,025,291
103,344 Series 2012-278, Class F1, STRIPS, 1 Mo. LIBOR +
0.45% (a)................................................. 1.26% 09/15/42 104,598
944,029 Series 2012-3994, Class AI, IO............................... 3.00% 02/15/22 16,238
841,057 Series 2012-3999, Class WA (f)............................... 5.39% 08/15/40 965,973
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 1,678,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 $ 2,234,143
859,029 Series 2012-4002, Class DE................................... 2.50% 03/15/30 866,942
59,000 Series 2012-4012, Class GC................................... 3.50% 06/15/40 62,971
35,947 Series 2012-4015, Class KB................................... 1.75% 05/15/41 36,515
833,692 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 45,976
1,028,613 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,346,091
1,570,389 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 101,701
241,132 Series 2012-4038, Class CS, 1 Mo. LIBOR (x) -3 +
12.00% (e)................................................ 8.95% 04/15/42 298,064
1,263,457 Series 2012-4048, Class FJ, 1 Mo. LIBOR + 0.40% (a).......... 1.98% 07/15/37 1,263,561
2,791,268 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 174,300
31,447,091 Series 2012-4057, Class ZA................................... 4.00% 06/15/42 35,053,821
3,944,728 Series 2012-4057, Class ZC................................... 3.50% 06/15/42 4,272,332
2,908,364 Series 2012-4077, Class TS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (b) (e)............................................. 5.19% 05/15/41 517,174
600,290 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 827,889
58,799 Series 2012-4097, Class ES, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.29% 08/15/42 11,185
5,782,590 Series 2012-4097, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.24% 08/15/42 1,166,428
1,447,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 1,699,644
569,342 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 39,482
68,763 Series 2012-4116, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.15% (e)................................................. 5.34% 10/15/42 13,889
3,016,389 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 234,520
2,943,809 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 467,421
761,115 Series 2012-4136, Class TU, IO, 1 Mo. LIBOR (x) -22.50 +
139.50%, 4.50% Cap (e).................................... 4.50% 08/15/42 132,182
655,169 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 42,188
670,509 Series 2013-299, Class S1, IO, STRIPS, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 01/15/43 137,623
751,854 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 59,520
11,111,624 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 1,239,009
25,374,130 Series 2013-303, Class C33, IO, STRIPS....................... 4.50% 01/15/43 4,154,579
6,375,738 Series 2013-304, Class C19, IO, STRIPS....................... 5.00% 06/15/42 1,321,062
635,924 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 36,181
3,064,845 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 166,544
24,852,426 Series 2013-311, Class PO, PO, STRIPS........................ (c) 08/15/43 23,241,175
3,720,170 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 229,705
6,582,146 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 519,730
16,314,029 Series 2013-4170, Class CO, PO............................... (c) 11/15/32 16,037,258
655,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 796,946
732,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 828,353
7,249,722 Series 2013-4193, Class AI, IO............................... 3.00% 04/15/28 536,506
826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 1,045,863
19,737,305 Series 2013-4194, Class GI, IO............................... 4.00% 04/15/43 2,996,344
6,429,021 Series 2013-4203, Class US, 1 Mo. LIBOR (x) -1.50 +
6.00% (e)................................................. 4.78% 05/15/33 7,059,839
500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 565,931
1,707,863 Series 2013-4213, Class MZ................................... 4.00% 06/15/43 1,914,914
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 391,440 Series 2013-4226, Class NS, 1 Mo. LIBOR (x) -3 +
10.50% (e)................................................ 7.45% 01/15/43 $ 492,977
510,483 Series 2013-4239, Class IO, IO............................... 3.50% 06/15/27 36,285
1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,836,327
877,343 Series 2013-4261, Class GS, 1 Mo. LIBOR (x) -2.75 +
10.98% (e)................................................ 8.75% 01/15/41 1,251,709
1,193,820 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 73,689
85,888 Series 2013-4270, Class AP................................... 2.50% 04/15/40 86,324
251,741 Series 2014-4300, Class IM, IO............................... 3.00% 03/15/37 12,790
594,016 Series 2014-4314, Class CI, IO............................... 6.00% 03/15/44 145,147
1,228,789 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 1,461,615
331,161 Series 2014-4318, Class CI, IO............................... 4.00% 03/15/22 5,358
13,970,882 Series 2014-4329, Class VZ................................... 4.00% 04/15/44 15,404,706
1,666,223 Series 2014-4332, Class PO, PO............................... (c) 01/15/33 1,659,840
483,750 Series 2014-4337, Class TV................................... 4.00% 10/15/45 486,946
15,014,427 Series 2014-4375, Class MZ................................... 3.50% 08/15/44 16,357,063
6,584,162 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 392,208
29,437,147 Series 2015-4483, Class ZX................................... 4.15% 06/15/44 34,204,060
1,119,595 Series 2015-4503, Class MI, IO............................... 5.00% 08/15/45 224,351
942,360 Series 2015-4512, Class W (d) (f)............................ 5.40% 05/15/38 1,076,603
182,867 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 18,410
541,080 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 577,859
252,883 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 328,541
428,068 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 554,470
131,398 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 172,017
19,224,005 Series 2016-4570, Class ST, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 04/15/46 4,346,259
7,430,253 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 1,070,960
13,463,233 Series 2016-4582, Class GZ................................... 3.75% 03/15/52 15,525,227
34,536,849 Series 2016-4585, Class DS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 05/15/46 7,783,432
6,469,583 Series 2016-4587, Class ZH, steps up 07/15/20 to
3.75% (g)................................................. 2.75% 03/15/44 7,935,340
2,905,195 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 404,426
1,605,753 Series 2016-4596, Class FL, 1 Mo. LIBOR + 0.50% (a).......... 2.08% 11/15/41 1,613,495
771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 949,526
415,869 Series 2016-4605, Class KS, 1 Mo. LIBOR (x) -1.57 +
4.71% (e)................................................. 3.11% 08/15/43 476,697
1,178,313 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 32,494
505,021 Series 2016-4613, Class AF, 1 Mo. LIBOR + 1.10% (a).......... 1.91% 11/15/37 518,510
1,343,956 Series 2016-4615, Class GT, 1 Mo. LIBOR (x) -4 + 16.00%,
4.00% Cap (e)............................................. 4.00% 10/15/42 1,404,408
29,073,474 Series 2016-4619, Class IB, IO (b)........................... 4.00% 12/15/47 1,026,547
3,835,225 Series 2016-4641, Class DI, IO............................... 5.00% 05/15/41 597,414
8,331,575 Series 2017-4649, Class AZ................................... 3.50% 05/15/46 9,276,649
1,173,000 Series 2017-4650, Class JH................................... 3.00% 01/15/47 1,335,461
10,509,548 Series 2017-4660, Class PO, PO............................... (c) 01/15/33 9,483,682
64,892,301 Series 2017-4673, Class WZ................................... 3.50% 04/15/47 71,980,214
600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 649,329
9,384,463 Series 2017-4682, Class KZ................................... 3.50% 09/15/46 10,504,357
21,735,069 Series 2018-4778, Class DZ................................... 4.00% 04/15/48 24,789,952
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 2,680,004 Series 2018-4780, Class VA................................... 4.00% 05/15/29 $ 2,946,595
6,138,136 Series 2018-4780, Class Z.................................... 4.00% 01/15/48 7,057,172
6,415,272 Series 2018-4790, Class IO, IO............................... 4.50% 05/15/48 1,103,787
82,801,798 Series 2018-4790, Class Z.................................... 4.00% 05/15/48 90,685,548
9,924,000 Series 2018-4826, Class ME................................... 3.50% 09/15/48 10,814,989
12,197,436 Series 2018-4851, Class PO, PO............................... (c) 08/15/57 10,667,567
6,542,343 Series 2018-4855, Class AZ................................... 4.00% 08/15/48 7,312,551
10,137,331 Series 2018-4857, Class ZB................................... 4.50% 01/15/49 11,582,446
10,001,000 Series 2018-4858, Class EK................................... 4.00% 01/15/49 11,035,123
2,953,534 Series 2019-4872, Class BZ................................... 4.00% 04/15/49 3,659,299
25,400,329 Series 2019-4938, Class BS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 12/25/49 3,671,450
19,977,853 Series 2019-4943, Class NS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.19% 01/25/50 3,330,967
2,515,155 Series 2020-4974, Class IA, IO............................... 3.50% 12/25/49 979,338
Federal National Mortgage Association
20 Series 1990-108, Class G..................................... 7.00% 09/25/20 21
871 Series 1991-30, Class PN..................................... 9.00% 10/25/21 877
132,731 Series 1992-38, Class GZ..................................... 7.50% 07/25/22 140,475
25 Series 1992-44, Class ZQ..................................... 8.00% 07/25/22 26
4,306 Series 1992-185, Class ZB.................................... 7.00% 10/25/22 4,544
781 Series 1993-3, Class K....................................... 7.00% 02/25/23 817
9,767 Series 1993-39, Class Z...................................... 7.50% 04/25/23 10,385
1,218 Series 1993-46, Class FH, 7 Yr. Constant Maturity Treasury
Rate - 0.20% (a).......................................... 0.49% 04/25/23 1,205
128,438 Series 1993-169, Class L..................................... 6.50% 09/25/23 137,573
42,072 Series 1993-171, Class SB, 10 Yr. Constant Maturity Treasury
Rate (x) -2.17 + 21.99% (e)............................... 20.24% 09/25/23 51,907
32,760 Series 1993-214, Class 2, IO, STRIPS......................... 7.50% 03/25/23 2,567
264,692 Series 1993-222, Class 2, IO, STRIPS......................... 7.00% 06/25/23 21,443
18,779 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 1.55% 12/25/23 18,615
189,867 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 2.45% 04/25/24 190,394
47,681 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 6,719
103,835 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 109,927
628,196 Series 2000-45, Class SD, IO, 1 Mo. LIBOR (x) -1 +
7.95% (e)................................................. 7.23% 12/18/30 86,362
723 Series 2001-8, Class SE, IO, 1 Mo. LIBOR (x) -1 +
8.60% (e)................................................. 7.85% 02/17/31 21
116,800 Series 2001-34, Class SR, IO, 1 Mo. LIBOR (x) -1 +
8.10% (e)................................................. 7.38% 08/18/31 11,540
3,104 Series 2001-42, Class SB, 1 Mo. LIBOR (x) -16 + 128.00%,
8.50% Cap (e)............................................. 8.50% 09/25/31 3,599
194,109 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 1.12% 09/18/31 193,777
9,428 Series 2002-22, Class G...................................... 6.50% 04/25/32 11,206
110,048 Series 2002-30, Class Z...................................... 6.00% 05/25/32 128,934
65,840 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 80,825
121,479 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 26,305
122,652 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 24,680
312,560 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 62,702
39,114 Series 2003-14, Class AT..................................... 4.00% 03/25/33 41,265
101,887 Series 2003-21, Class OA..................................... 4.00% 03/25/33 109,970
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 114,415 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 $ 23,361
454,327 Series 2003-45, Class JB..................................... 5.50% 06/25/33 526,314
61,640 Series 2003-52, Class NA..................................... 4.00% 06/25/23 62,880
4,676,395 Series 2003-61, Class MZ..................................... 5.00% 08/25/33 5,169,834
31,207 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 0.79% 11/25/27 30,479
1,981,066 Series 2003-63, Class IP, IO................................. 6.00% 07/25/33 395,971
355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 427,131
779,713 Series 2003-75, Class GI, IO................................. 5.00% 08/25/23 28,084
172,506 Series 2003-109, Class YB.................................... 6.00% 11/25/33 212,011
196,306 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 36,100
411,031 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 56,525
337,846 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 67,582
67,519 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 14,811
90,146 Series 2003-348, Class 18, IO, STRIPS (f).................... 7.50% 12/25/33 20,735
95,684 Series 2003-W3, Class 2A5.................................... 5.36% 06/25/42 110,316
950,135 Series 2003-W6, Class 1A41................................... 5.40% 10/25/42 1,092,085
35,157 Series 2003-W10, Class 1A4................................... 4.51% 06/25/43 39,519
72,196 Series 2003-W12, Class 1A8................................... 4.55% 06/25/43 80,440
311,516 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 362,449
948,187 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 1,121,584
347,645 Series 2004-25, Class LC..................................... 5.50% 04/25/34 409,458
305,782 Series 2004-25, Class UC..................................... 5.50% 04/25/34 364,085
38,497 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 54,485
602,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 693,493
13,294 Series 2004-W9, Class 1A3.................................... 6.05% 02/25/44 15,388
1,561,326 Series 2004-W10, Class A6.................................. 5.75% 08/25/34 1,791,504
2,795,185 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (e)... 6.11% 02/25/35 587,575
548,638 Series 2005-2, Class TB, IO, 1 Mo. LIBOR (x) -1 + 5.90%,
0.40% Cap (e)............................................. 0.40% 07/25/33 6,518
53,062 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 69,923
121,423 Series 2005-40, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.70% (e)................................................. 6.21% 05/25/35 23,621
262,995 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 402,200
2,653 Series 2005-52, Class WZ..................................... 6.50% 06/25/35 2,652
961,689 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,312,064
13,384 Series 2005-67, Class SC, 1 Mo. LIBOR (x) -2.15 +
14.41% (e)................................................ 13.36% 08/25/35 18,596
65,187 Series 2005-79, Class NS, IO, 1 Mo. LIBOR (x) -1 +
6.09% (e)................................................. 5.60% 09/25/35 13,745
6,538,360 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 7,461,357
19,665 Series 2005-87, Class SC, 1 Mo. LIBOR (x) -1.67 +
13.83% (e)................................................ 13.02% 10/25/35 29,167
36,790 Series 2005-90, Class ES, 1 Mo. LIBOR (x) -2.50 +
16.88% (e)................................................ 15.66% 10/25/35 53,290
50,016 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 77,916
47,761 Series 2005-102, Class DS, 1 Mo. LIBOR (x) -2.75 +
19.80% (e)................................................ 18.46% 11/25/35 63,813
677,943 Series 2005-104, Class UE.................................... 5.50% 12/25/35 812,162
199,729 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 29,981
564,826 Series 2005-359, Class 12, IO, STRIPS........................ 5.50% 10/25/35 111,963
158,672 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 35,177
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 85,645 Series 2005-W1, Class 1A2.................................... 6.50% 10/25/44 $ 102,961
45,063 Series 2006-5, Class 2A2 (d)................................. 3.52% 02/25/35 48,698
36,221,065 Series 2006-5, Class N2, IO (d).............................. 0.00% 02/25/35 362
84,089 Series 2006-15, Class IS, IO, 1 Mo. LIBOR (x) -1 +
6.58% (e)................................................. 6.09% 03/25/36 18,579
1,879,644 Series 2006-20, Class PI, IO, 1 Mo. LIBOR (x) -1 +
6.68% (e)................................................. 6.19% 11/25/30 255,338
23,115 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 36,532
70,848 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 0.94% 06/25/36 70,745
2,236,559 Series 2006-42, Class EI, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 6.06% 06/25/36 404,866
583,935 Series 2006-59, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.57% (b) (e)............................................. 6.08% 07/25/36 107,167
731,623 Series 2006-80, Class PH..................................... 6.00% 08/25/36 867,504
33,318 Series 2006-84, Class PK..................................... 5.50% 02/25/36 33,391
110,653 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 129,084
2,851,913 Series 2006-110, Class PI, IO................................ 5.50% 11/25/36 607,011
2,952,681 Series 2006-116, Class ES, IO, 1 Mo. LIBOR (x) -1 +
6.65% (e)................................................. 6.16% 12/25/36 643,663
266,309 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 0.84% 12/25/36 264,701
3,088,333 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 1.01% 12/25/36 3,072,093
1,392 Series 2006-126, Class DZ.................................... 5.50% 01/25/37 1,482
21,036 Series 2006-378, Class 31, IO, STRIPS (b).................... 4.50% 06/25/21 125
313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 397,147
36,653 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 0.82% 04/25/37 36,337
1,095,361 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 1,251,710
62,555 Series 2007-32, Class KT..................................... 5.50% 04/25/37 74,485
768,636 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 955,596
499,750 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 646,933
505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 662,744
388,874 Series 2007-116, Class PB.................................... 5.50% 08/25/35 455,119
217,468 Series 2007-117, Class MD.................................... 5.50% 07/25/37 236,330
119,480 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 1.04% 02/25/38 110,756
18,427 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 22,475
11,948 Series 2008-16, Class AB..................................... 5.50% 12/25/37 12,131
19,941 Series 2008-17, Class IP, IO................................. 6.50% 02/25/38 2,799
333,468 Series 2008-65, Class PE..................................... 5.75% 08/25/38 390,272
1,104,907 Series 2008-389, Class 4, IO, STRIPS......................... 6.00% 03/25/38 200,647
21,384 Series 2009-10, Class AB..................................... 5.00% 03/25/24 22,346
1,299,171 Series 2009-11, Class PI, IO................................. 5.50% 03/25/36 269,693
29,179 Series 2009-14, Class BS, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 5.76% 03/25/24 1,091
85,028 Series 2009-47, Class PE..................................... 4.00% 07/25/39 87,492
4,400,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 5,621,520
833,079 Series 2009-64, Class ZD..................................... 8.00% 08/25/39 1,060,414
147,264 Series 2009-69, Class PO, PO................................. (c) 09/25/39 139,820
4,190,882 Series 2009-85, Class J...................................... 4.50% 10/25/39 4,725,434
302,709 Series 2009-91, Class HL..................................... 5.00% 11/25/39 328,111
97,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 121,585
710,694 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 1,062,469
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 318,148 Series 2009-106, Class SN, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 5.76% 01/25/40 $ 63,557
248,832 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 310,340
103,958 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 110,070
1,880,080 Series 2009-397, Class 2, IO, STRIPS......................... 5.00% 09/25/39 329,064
503,821 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 26,763
550,000 Series 2010-2, Class LC...................................... 5.00% 02/25/40 657,311
179,069 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 227,910
276,774 Series 2010-21, Class KO, PO................................. (c) 03/25/40 264,957
500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 643,450
123,241 Series 2010-35, Class SJ, 1 Mo. LIBOR (x) -3.33 +
17.67% (e)................................................ 16.04% 04/25/40 175,846
400,000 Series 2010-38, Class KC..................................... 4.50% 04/25/40 466,523
476,000 Series 2010-45, Class WB..................................... 5.00% 05/25/40 566,108
58,357 Series 2010-49, Class SC, 1 Mo. LIBOR (x) -2 +
12.66% (e)................................................ 11.69% 03/25/40 79,473
883,249 Series 2010-55, Class YP..................................... 4.50% 10/25/38 894,478
581,245 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 118,462
58,626 Series 2010-75, Class MT (d)................................. 2.62% 12/25/39 62,067
15,181 Series 2010-106, Class BI, IO (b)............................ 3.50% 09/25/20 65
699,368 Series 2010-110, Class KI, IO................................ 5.50% 10/25/25 39,798
392,664 Series 2010-115, Class PO, PO................................ (c) 04/25/40 374,705
160,808 Series 2010-120, Class PD.................................... 4.00% 02/25/39 162,142
395,112 Series 2010-129, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.51% 11/25/40 56,803
2,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 3,433,843
336 Series 2010-145, Class PE.................................... 3.25% 10/25/24 339
2,789,193 Series 2010-147, Class KS, IO, 1 Mo. LIBOR (x) -1 +
5.95% (b) (e)............................................. 5.46% 01/25/41 378,801
409,519 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 452,903
507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 697,771
11,347 Series 2011-17, Class CD..................................... 2.00% 03/25/21 11,377
90,778 Series 2011-17, Class CJ..................................... 2.75% 03/25/21 91,261
230,224 Series 2011-30, Class LS, IO (f)............................. 2.08% 04/25/41 15,358
1,178,800 Series 2011-30, Class MD..................................... 4.00% 02/25/39 1,187,426
118,003 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 146,782
837,586 Series 2011-47, Class AI, IO................................. 5.50% 01/25/40 16,581
354,017 Series 2011-52, Class GB..................................... 5.00% 06/25/41 407,705
113,973 Series 2011-60, Class OA, PO................................. (c) 08/25/39 106,372
321 Series 2011-67, Class EI, IO (b)............................. 4.00% 07/25/21 1
76,552 Series 2011-72, Class TI, IO................................. 4.00% 09/25/40 1,364
3,060,200 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 245,282
403,114 Series 2011-74, Class TQ, IO, 1 Mo. LIBOR (x) -6.43 +
55.93%, 4.50% Cap (b) (e)................................. 4.50% 12/25/33 48,559
90,584 Series 2011-75, Class BL..................................... 3.50% 08/25/21 91,627
155,188 Series 2011-86, Class DI, IO................................. 3.50% 09/25/21 2,773
2,720,306 Series 2011-87, Class YI, IO................................. 5.00% 09/25/41 515,808
3,998 Series 2011-90, Class QI, IO................................. 5.00% 05/25/34 17
5,082,493 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 259,699
750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 852,483
4,324 Series 2011-107, Class CA.................................... 3.50% 11/25/29 4,324
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 1,605,526 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 $ 1,937,109
20,042 Series 2011-113, Class GA.................................... 2.00% 11/25/21 20,174
1,666,660 Series 2011-118, Class IC, IO................................ 3.50% 11/25/21 25,942
8,387,331 Series 2011-123, Class JS, IO, 1 Mo. LIBOR (x) -1 +
6.65% (e)................................................. 6.16% 03/25/41 1,429,281
1,291,590 Series 2011-123, Class ZP.................................... 4.50% 12/25/41 1,566,291
34,519 Series 2011-124, Class CG.................................... 3.00% 09/25/29 34,579
1,005,986 Series 2011-137, Class AI, IO................................ 3.00% 01/25/22 17,023
1,564,576 Series 2011-145, Class IO, IO................................ 3.00% 01/25/22 25,521
492,671 Series 2012-8, Class TI, IO.................................. 3.00% 10/25/21 7,283
1,858,465 Series 2012-28, Class PT..................................... 4.00% 03/25/42 2,062,214
776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 967,514
184,437 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 193,888
2,094,442 Series 2012-53, Class CI, IO................................. 3.00% 05/25/22 40,061
1,249,501 Series 2012-65, Class IO, IO................................. 5.50% 07/25/40 243,262
324,519 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 22,936
150,425 Series 2012-79, Class QA..................................... 2.00% 03/25/42 151,061
1,134,116 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 54,351
7,757,362 Series 2012-103, Class HI, IO................................ 3.00% 09/25/27 462,170
369,316 Series 2012-111, Class B..................................... 7.00% 10/25/42 443,144
5,795,848 Series 2012-118, Class DI, IO................................ 3.50% 01/25/40 279,577
351,555 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 50,217
19,454,599 Series 2012-122, Class SD, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.61% 11/25/42 3,625,787
435,138 Series 2012-133, Class KO, PO................................ (c) 12/25/42 346,932
1,789,666 Series 2012-134, Class GI, IO................................ 4.50% 03/25/29 109,129
967,698 Series 2012-138, Class MA.................................... 1.00% 12/25/42 958,126
3,888,930 Series 2012-146, Class QA.................................... 1.00% 01/25/43 3,784,390
596,962 Series 2012-409, Class 49, IO, STRIPS (f).................... 3.50% 11/25/41 72,319
821,304 Series 2012-409, Class 53, IO, STRIPS (f).................... 3.50% 04/25/42 100,557
147,076 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 22,731
690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 736,975
836,411 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 43,747
162,476 Series 2013-22, Class TS, 1 Mo. LIBOR (x) -1.50 +
6.08% (e)................................................. 4.60% 03/25/43 182,190
47,102 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 51,637
750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 835,949
1,889,556 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 371,056
643,439 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 56,260
1,041,017 Series 2013-52, Class MD..................................... 1.25% 06/25/43 1,049,023
1,203,484 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 116,614
122,721 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 132,649
271,039 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 0.74% 07/25/42 270,427
461,547 Series 2013-94, Class CA..................................... 3.50% 08/25/38 472,397
158,126 Series 2013-103, Class IO, IO................................ 3.50% 03/25/38 6,306
379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 447,367
330,422 Series 2013-105, Class KO, PO................................ (c) 10/25/43 319,049
195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 218,636
285,387 Series 2013-117, Class AC.................................... 2.50% 04/25/36 286,314
475,322 Series 2013-128, Class PO, PO................................ (c) 12/25/43 425,542
1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 1,250,522
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 4,448,112 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 $ 724,503
7,383,905 Series 2013-418, Class C1, IO, STRIPS........................ 3.50% 08/25/43 987,291
213,823 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 13,975
7,762,223 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 473,742
1,554,748 Series 2014-46, Class KA (f)................................. 4.82% 08/25/44 1,744,064
318,984 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 35,585
544,811 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 687,954
1,753,978 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 90,048
372,275 Series 2014-91, Class PB..................................... 3.00% 02/25/38 374,925
875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 1,061,497
430,593 Series 2015-38, Class GI, IO................................. 3.00% 09/25/43 20,007
2,438,056 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 170,294
475,178 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 29,569
6,927,993 Series 2015-97, Class AI, IO................................. 4.00% 09/25/41 407,850
5,300,946 Series 2016-2, Class EZ...................................... 2.50% 02/25/46 5,694,583
30,029,858 Series 2016-40, Class MS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.51% 07/25/46 7,107,323
11,433,881 Series 2016-44, Class Z...................................... 3.50% 07/25/46 12,497,168
13,377,841 Series 2016-62, Class SB, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.61% 09/25/46 2,575,642
1,442,011 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 185,374
11,153,563 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 1,145,925
568,676 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 85,750
591,065 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 2.00% 11/25/46 591,227
1,536,435 Series 2016-87, Class AF, 1 Mo. LIBOR + 0.40% (a)............ 1.98% 11/25/46 1,532,261
15,747,520 Series 2017-18, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.56% 03/25/47 3,590,475
597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 671,469
8,398,456 Series 2017-49, Class ZJ..................................... 4.00% 07/25/57 10,151,520
37,142,868 Series 2017-54, Class IG, IO................................. 4.00% 07/25/47 4,910,447
1,958,476 Series 2017-87, Class ZA..................................... 4.00% 11/25/57 2,438,617
2,380,767 Series 2018-17, Class Z...................................... 3.50% 03/25/48 2,881,195
28,163,705 Series 2018-76, Class ZL..................................... 4.00% 10/25/58 34,226,511
12,557,063 Series 2018-86, Class DL..................................... 3.50% 12/25/48 13,667,846
12,961,568 Series 2018-92, Class DA..................................... 3.50% 11/25/46 13,505,682
3,957,386 Series 2018-92, Class DB..................................... 3.50% 01/25/49 4,362,667
5,577,038 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 6,368,373
21,917,300 Series 2019-8, Class DY...................................... 3.50% 03/25/49 23,203,948
7,510,752 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 9,003,444
30,870,434 Series 2019-26, Class GA..................................... 3.50% 06/25/49 32,980,200
14,275,876 Series 2019-27, Class HA..................................... 3.00% 06/25/49 14,942,767
17,089,353 Series 2019-29, Class HT..................................... 3.00% 06/25/49 17,909,644
18,671,720 Series 2019-34, Class JA..................................... 3.00% 07/25/49 19,731,523
33,782,115 Series 2019-34, Class LA..................................... 3.00% 07/25/49 35,352,095
14,368,906 Series 2019-37, Class A...................................... 3.00% 07/25/49 15,168,507
26,346,659 Series 2019-41, Class SN, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.56% 08/25/49 5,108,757
7,805,000 Series 2019-45, Class BU..................................... 3.00% 08/25/49 8,554,995
31,060,462 Series 2019-57, Class JA..................................... 2.50% 10/25/49 31,929,844
18,965,558 Series 2019-59, Class PT..................................... 2.50% 10/25/49 19,650,723
29,065,098 Series 2019-66, Class C...................................... 3.00% 11/25/49 30,641,990
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 49,076,045 Series 2019-68, Class KP..................................... 2.50% 11/25/49 $ 51,362,017
41,241,640 Series 2019-70, Class WA, PO................................. (c) 11/25/42 38,333,222
41,791,321 Series 2020-9, Class SJ, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.51% 02/25/50 7,087,369
11,969,763 Series 2020-20, Class KI, IO................................. 4.00% 03/25/50 4,205,917
Government National Mortgage Association
34,240 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 34,236
169,301 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 175,372
337,444 Series 2002-75, Class PJ..................................... 5.50% 11/20/32 356,474
293,309 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 328,280
445,474 Series 2003-11, Class SM, IO, 1 Mo. LIBOR (x) -1 +
7.70% (e)................................................. 6.91% 02/16/33 4,029
525,680 Series 2003-18, Class PG..................................... 5.50% 03/20/33 585,070
1,325,801 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,464,443
255,337 Series 2003-42, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)................................................. 5.81% 07/16/31 15,370
1,103,978 Series 2003-42, Class SH, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 5.83% 05/20/33 64,303
112,821 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 135,452
314,605 Series 2003-84, Class Z...................................... 5.50% 10/20/33 360,545
166,807 Series 2004-37, Class B...................................... 6.00% 04/17/34 193,760
475,076 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 576,003
70,248 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 81,311
88,895 Series 2004-71, Class ST, 1 Mo. LIBOR (x) -6.25 + 44.50%,
7.00% Cap (e)............................................. 7.00% 09/20/34 98,068
143,802 Series 2004-83, Class AK, 1 Mo. LIBOR (x) -3.00 +
16.49% (e)................................................ 14.11% 10/16/34 205,779
678,107 Series 2004-88, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.31% 10/16/34 99,119
65,268 Series 2004-92, Class AK, 1 Mo. LIBOR (x) -3 +
16.50% (e)................................................ 14.12% 11/16/34 97,770
1,503,707 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,766,737
214,915 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 254,665
63,749 Series 2004-105, Class KA.................................... 5.00% 12/16/34 72,358
42,923 Series 2004-109, Class BC.................................... 5.00% 11/20/33 43,535
214,024 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 240,737
214,024 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 251,614
30,197 Series 2005-7, Class AJ, 1 Mo. LIBOR (x) -4 + 22.00% (e)..... 18.82% 02/16/35 50,510
154,282 Series 2005-7, Class KA, 1 Mo. LIBOR (x) -2.81 +
18.95% (e)................................................ 16.72% 12/17/34 176,902
417,686 Series 2005-7, Class MA, 1 Mo. LIBOR (x) -2.81 +
18.95% (e)................................................ 16.72% 12/17/34 517,140
189,900 Series 2005-33, Class AY..................................... 5.50% 04/16/35 217,543
169,569 Series 2005-41, Class PA..................................... 4.00% 05/20/35 187,900
459,745 Series 2005-44, Class IO, IO................................. 5.50% 07/20/35 59,528
4,269,911 Series 2005-78, Class ZA..................................... 5.00% 10/16/35 4,870,403
365,660 Series 2005-93, Class PO, PO................................. (c) 06/20/35 362,145
620,991 Series 2006-17, Class TW..................................... 6.00% 04/20/36 726,688
500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 603,866
171,877 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 197,204
396,605 Series 2007-16, Class OZ..................................... 6.00% 04/20/37 489,253
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 222,531 Series 2007-27, Class SD, IO, 1 Mo. LIBOR (x) -1 +
6.20% (e)................................................. 5.48% 05/20/37 $ 37,166
174,056 Series 2007-41, Class OL, PO................................. (c) 07/20/37 170,103
314,062 Series 2007-42, Class SB, IO, 1 Mo. LIBOR (x) -1 +
6.75% (e)................................................. 6.03% 07/20/37 56,179
166,517 Series 2007-68, Class NA..................................... 5.00% 11/20/37 188,521
992,741 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 1,134,903
148,838 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 1.07% 12/20/37 147,763
146,070 Series 2008-16, Class PO, PO................................. (c) 02/20/38 138,878
12,551 Series 2008-20, Class PO, PO................................. (c) 09/20/37 12,487
46,084 Series 2008-29, Class PO, PO................................. (c) 02/17/33 45,941
132,305 Series 2008-33, Class XS, IO, 1 Mo. LIBOR (x) -1 +
7.70% (e)................................................. 6.91% 04/16/38 25,822
784,972 Series 2008-47, Class ML..................................... 5.25% 06/16/38 906,539
187,500 Series 2008-54, Class PE..................................... 5.00% 06/20/38 225,071
686,000 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 83,082
144,943 Series 2009-10, Class PA..................................... 4.50% 12/20/38 153,744
189,297 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 34,104
62,113 Series 2009-14, Class KS, IO, 1 Mo. LIBOR (x) -1 +
6.30% (e)................................................. 5.58% 03/20/39 9,298
148,730 Series 2009-25, Class SE, IO, 1 Mo. LIBOR (x) -1 +
7.60% (b) (e)............................................. 6.88% 09/20/38 25,585
2,389,791 Series 2009-29, Class PC..................................... 7.00% 05/20/39 3,229,438
364,389 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 464,965
571,448 Series 2009-42, Class BI, IO................................. 6.00% 06/20/39 75,993
36,703 Series 2009-53, Class AB..................................... 4.50% 10/16/38 37,018
3,732,562 Series 2009-57, Class VB..................................... 5.00% 06/16/39 4,486,158
1,061,774 Series 2009-61, Class OW, PO................................. (c) 11/16/35 1,022,833
235,061 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 346,776
15,634,975 Series 2009-61, Class WQ, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 5.46% 11/16/35 3,363,699
946,730 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 1,124,115
1,106,353 Series 2009-72, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 5.46% 08/16/39 232,246
455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 570,862
70,326 Series 2009-76, Class PC..................................... 4.00% 03/16/39 71,227
546,940 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 717,136
187,725 Series 2009-79, Class OK, PO................................. (c) 11/16/37 180,609
128,692 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 167,737
1,388,109 Series 2009-87, Class EI, IO................................. 5.50% 08/20/39 153,130
39,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 47,134
260,353 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 342,713
6,836,261 Series 2009-106, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.38% 04/20/36 1,065,837
44,278 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 59,581
262,203 Series 2009-116, Class MS, IO, 1 Mo. LIBOR (x) -1 +
6.50% (e)................................................. 5.71% 11/16/38 5,843
1,552 Series 2009-118, Class KP.................................... 4.50% 05/20/38 1,558
732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 913,126
46,715 Series 2010-3, Class MF, 1 Mo. LIBOR + 0.45% (a)............. 1.17% 11/20/38 46,728
52,000 Series 2010-4, Class WA...................................... 3.00% 01/16/40 54,785
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 122,098 Series 2010-7, Class BC...................................... 4.00% 09/16/24 $ 124,214
114,997 Series 2010-11, Class HE..................................... 4.00% 04/20/39 117,674
15,362 Series 2010-14, Class AO, PO................................. (c) 12/20/32 15,331
1,755,840 Series 2010-14, Class BV, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 5.46% 02/16/40 304,215
6,036 Series 2010-29, Class CB..................................... 5.00% 12/20/38 6,037
799,714 Series 2010-42, Class CO, PO................................. (c) 06/16/39 795,677
2,507,326 Series 2010-46, Class FC, 1 Mo. LIBOR + 0.80% (a)............ 1.52% 03/20/35 2,543,074
798,790 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,182,750
2,000,350 Series 2010-85, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.60% (b) (e)............................................. 5.88% 07/20/37 244,947
87,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 111,329
2,666,293 Series 2010-116, Class JB.................................... 5.00% 06/16/40 3,148,791
302,125 Series 2010-129, Class PQ.................................... 3.00% 04/20/39 305,271
79,058 Series 2010-138, Class PD.................................... 3.50% 08/20/38 79,906
1,066,953 Series 2010-157, Class OP, PO................................ (c) 12/20/40 1,023,139
22,565 Series 2010-162, Class PQ.................................... 4.50% 06/16/39 22,594
360,862 Series 2010-166, Class DI, IO................................ 4.50% 02/20/39 25,390
138,027 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 167,608
1,495,423 Series 2011-19, Class MI, IO................................. 5.00% 06/16/40 65,810
771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 929,879
487,014 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 84,528
470,054 Series 2011-50, Class PZ..................................... 5.00% 04/20/41 593,369
120,183 Series 2011-63, Class BI, IO................................. 6.00% 02/20/38 11,460
1,038,721 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 1,190,300
2,757,830 Series 2011-81, Class IC, IO, 1 Mo. LIBOR (x) -1 + 6.72%,
0.62% Cap (e)............................................. 0.62% 07/20/35 42,645
890,189 Series 2011-112, Class IP, IO................................ 0.50% 08/16/26 1,440
239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 277,682
4,550 Series 2011-136, Class GB.................................... 2.50% 05/20/40 4,691
265,091 Series 2011-137, Class WA (f)................................ 5.57% 07/20/40 312,755
368,921 Series 2011-146, Class EI, IO................................ 5.00% 11/16/41 69,044
79,480 Series 2011-151, Class TB, IO, 1 Mo. LIBOR (x) -70 +
465.50%, 3.50% Cap (e).................................... 3.50% 04/20/41 4,965
2,369,915 Series 2012-10, Class LI, IO................................. 3.50% 07/20/40 59,559
77,479 Series 2012-16, Class AG..................................... 2.50% 10/20/38 77,907
3,923,658 Series 2012-18, Class IA, IO, 1 Mo. LIBOR (x) -1 + 6.68%,
0.58% Cap (e)............................................. 0.58% 07/20/39 45,530
1,692,969 Series 2012-48, Class MI, IO................................. 5.00% 04/16/42 323,103
14,407,115 Series 2012-84, Class QS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.31% 07/16/42 2,643,052
6,711,842 Series 2012-84, Class SJ, 1 Mo. LIBOR (x) -0.57 +
2.51% (e)................................................. 2.06% 07/16/42 7,112,119
251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 277,650
4,439,194 Series 2012-143, Class IB, IO................................ 3.50% 12/20/39 132,122
8,708,778 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 635,179
2,880,621 Series 2012-149, Class PC (f)................................ 6.30% 12/20/42 3,416,990
23,473,801 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 4,227,897
129,871 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 16,063
1,424,601 Series 2013-10, Class DI, IO................................. 3.50% 09/20/42 148,190
353,067 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 41,331
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 $ 2,423,841
2,454,495 Series 2013-22, Class IO, IO................................. 3.00% 02/20/43 279,988
7,338,587 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 878,416
3,748,092 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 386,359
3,223,816 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 416,565
401,953 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 49,433
953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 1,001,657
4,629,000 Series 2013-91, Class PB..................................... 3.50% 09/20/42 4,956,105
1,746,976 Series 2013-130, Class WS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.38% 09/20/43 341,324
7,350,175 Series 2013-170, Class IG, IO................................ 5.50% 11/16/43 1,010,206
688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 825,129
129,906 Series 2013-188, Class CF, 1 Mo. LIBOR + 0.45% (a)........... 1.17% 03/20/43 129,937
6,448,716 Series 2014-6, Class IJ, IO.................................. 4.50% 06/16/43 466,211
22,470,807 Series 2014-30, Class EA (f)................................. 1.98% 02/16/44 23,070,872
5,524,160 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 387,078
12,094,580 Series 2014-44, Class ID, IO (d) (f)......................... 0.34% 03/16/44 117,054
58,893 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 3,677
763,748 Series 2014-94, Class Z...................................... 4.50% 01/20/44 937,026
5,398,722 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 734,306
8,441,927 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 486,746
4,879,255 Series 2014-116, Class SB, IO, 1 Mo. LIBOR (x) -1 +
5.60% (e)................................................. 4.88% 08/20/44 865,831
3,172,716 Series 2014-118, Class TV, IO, 1 Mo. LIBOR (x) -1 +
6.25% (b) (e)............................................. 5.53% 05/20/44 573,034
4,208,836 Series 2014-178, Class LT.................................... 2.00% 11/20/43 4,261,070
6,634,870 Series 2015-3, Class ZD...................................... 4.00% 01/20/45 8,030,662
18,967,489 Series 2015-40, Class IO, IO................................. 4.00% 03/20/45 2,724,466
9,229,195 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 1,192,098
63,947 Series 2015-95, Class IK, IO (b) (f)......................... 1.32% 05/16/37 1,460
18,400,065 Series 2015-99, Class EI, IO................................. 5.50% 07/16/45 3,970,806
298,303 Series 2015-100, Class AI, IO................................ 3.50% 03/20/39 4,155
24,522,854 Series 2015-119, Class TI, IO................................ 3.50% 05/20/41 743,722
20,186,396 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 1,195,301
468,594 Series 2015-137, Class WA (d) (f)............................ 5.49% 01/20/38 553,673
979,180 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 112,566
246,473 Series 2015-151, Class KW (f)................................ 5.74% 04/20/34 272,844
7,006,672 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 1,379,454
181,275 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 200,904
415,998 Series 2016-55, Class PB (f)................................. 6.01% 03/20/31 459,459
2,159,270 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 465,301
5,775,933 Series 2016-75, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.28% 05/20/40 880,071
1,346,046 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 148,230
5,052,161 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 738,631
609,472 Series 2016-99, Class JA (f)................................. 5.52% 11/20/45 717,794
944,614 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 1,089,620
11,105,755 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 1,192,821
1,323,360 Series 2016-118, Class GI, IO................................ 4.50% 02/16/40 195,790
14,451,915 Series 2016-120, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.38% 09/20/46 3,354,015
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 $ 605,950
305,404 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 311,918
1,569,049 Series 2016-154, Class WF, 1 Mo. LIBOR + 0.40% (a)........... 1.38% 11/20/45 1,567,050
303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 314,900
347,338 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 64,830
858,182 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 1,136,121
7,592,511 Series 2017-32, Class DI, IO................................. 5.50% 05/20/35 1,644,445
4,739,976 Series 2017-32, Class IB, IO................................. 5.00% 02/16/47 654,325
8,251,893 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 1,678,762
18,503,612 Series 2017-57, Class IO, IO................................. 5.00% 04/20/47 2,840,384
5,831,878 Series 2017-113, Class IE, IO................................ 5.50% 07/20/47 971,404
6,767,853 Series 2017-117, Class ZN.................................... 3.00% 08/20/47 7,528,427
11,647,417 Series 2017-122, Class CZ.................................... 3.00% 08/20/47 13,022,194
8,830,426 Series 2017-130, Class LS, IO, 1 Mo. LIBOR (x) -1 +
6.20% (e)................................................. 5.41% 08/16/47 1,979,389
9,136,309 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 1,870,198
10,241,129 Series 2017-177, Class DI, IO................................ 4.50% 11/16/47 1,640,289
7,606,221 Series 2017-186, Class TI, IO, 1 Mo. LIBOR (x) -1 + 6.50%,
0.50% Cap (e)............................................. 0.50% 05/20/40 82,414
859,742 Series 2018-44, Class Z...................................... 2.50% 09/20/47 900,658
3,549,467 Series 2018-53, Class VA..................................... 3.50% 07/20/29 3,847,702
5,022,449 Series 2018-78, Class EZ..................................... 3.00% 04/20/48 5,351,095
9,393,726 Series 2018-79, Class IO, IO................................. 5.00% 06/20/48 1,654,726
7,616,785 Series 2018-89, Class A...................................... 3.50% 06/20/39 7,771,174
2,358,995 Series 2018-120, Class G..................................... 3.50% 09/20/48 2,368,402
11,453,916 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 1,606,868
10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 10,758,880
10,556,000 Series 2018-155, Class KD.................................... 4.00% 11/20/48 11,546,638
10,908,217 Series 2018-160, Class GY.................................... 4.50% 11/20/48 12,072,378
6,748,954 Series 2019-6, Class EI, IO.................................. 5.00% 09/20/39 905,539
11,625,971 Series 2019-15, Class MZ..................................... 4.50% 02/20/49 13,092,264
12,488,006 Series 2019-18, Class TP..................................... 3.50% 02/20/49 13,704,495
2,006,778 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 322,336
4,615,575 Series 2019-98, Class UZ..................................... 2.50% 08/20/49 4,600,421
32,821,638 Series 2020-31, Class IO, IO................................. 6.50% 03/20/50 6,824,009
Vendee Mortgage Trust
3,076,420 Series 2003-2, Class Z....................................... 5.00% 05/15/33 3,559,917
28,063 Series 2010-1, Class DA...................................... 4.25% 02/15/35 28,892
7,886,763 Series 2010-1, Class DZ...................................... 4.25% 04/15/40 8,995,164
12,981,426 Series 2011-1, Class DZ...................................... 3.75% 09/15/46 14,421,380
24,164,624 Series 2011-2, Class DZ...................................... 3.75% 10/15/41 27,567,670
----------------
1,513,503,318
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 8.5%
Freddie Mac Multifamily Structured Pass Through Certificates
88,865,239 Series 2011-K016, Class X1, IO (d)........................... 1.63% 10/25/21 1,571,573
59,949,999 Series 2012-K019, Class X1, IO (d)........................... 1.73% 03/25/22 1,509,577
65,439,769 Series 2012-K020, Class X1, IO (d)........................... 1.50% 05/25/22 1,526,016
123,990,939 Series 2013-K030, Class X1, IO (d)........................... 0.29% 04/25/23 593,879
78,996,315 Series 2014-K036, Class X1, IO (d)........................... 0.87% 10/25/23 1,776,738
21,598,714 Series 2014-K714, Class X3, IO (d)........................... 1.90% 01/25/42 89,801
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
Freddie Mac Multifamily Structured Pass Through
Certificates (Continued)
$ 95,276,642 Series 2015-K721, Class X1, IO (d)........................... 0.44% 08/25/22 $ 638,315
186,469,308 Series 2016-KIR1, Class X, IO (d)............................ 1.21% 03/25/26 9,897,250
282,725,406 Series 2018-K086, Class X1, IO (d)........................... 0.39% 11/25/28 5,698,839
144,672,839 Series 2018-K156, Class X1, IO (d)........................... 0.21% 06/25/33 1,553,743
353,086,366 Series 2018-K158, Class X1, IO (d)........................... 0.21% 10/25/33 4,348,117
113,709,129 Series 2018-K159, Class X1, IO (d)........................... 0.26% 11/25/33 1,644,655
28,666,917 Series 2019-1510, Class X1, IO (d)........................... 0.64% 01/25/34 1,405,886
123,318,108 Series 2019-1511, Class X1, IO (d)........................... 0.93% 03/25/34 9,434,242
159,003,653 Series 2019-1512, Class X1, IO (d)........................... 1.06% 04/25/34 13,827,784
57,725,360 Series 2019-1513, Class X1, IO (d)........................... 1.00% 08/25/34 4,841,853
152,941,685 Series 2019-1514, Class X1, IO (d)........................... 0.70% 10/25/34 9,220,304
40,617,221 Series 2019-K094, Class X1, IO (d)........................... 1.02% 06/25/29 2,732,727
56,953,054 Series 2019-K099, Class X1, IO (d)........................... 1.01% 09/25/29 3,905,334
57,790,000 Series 2019-K099, Class XAM, IO (d).......................... 1.26% 09/25/29 5,348,124
69,953,378 Series 2019-K101, Class X1, IO (f)........................... 0.84% 10/25/29 4,562,716
72,489,433 Series 2019-K102, Class X1, IO (f)........................... 0.95% 10/25/29 4,671,676
64,993,000 Series 2019-K102, Class XAM, IO (f).......................... 1.21% 10/25/29 6,299,798
92,478,771 Series 2019-K103, Class X1, IO (d)........................... 0.76% 11/25/29 4,699,762
59,029,000 Series 2019-K103, Class XAM, IO (d).......................... 1.01% 11/25/29 4,402,342
104,363,203 Series 2019-K734, Class X1, IO (d)........................... 0.79% 02/25/26 3,339,831
68,018,000 Series 2019-K734, Class XAM, IO (d).......................... 0.56% 02/25/26 1,654,157
44,967,560 Series 2019-K735, Class X1, IO (d)........................... 1.10% 05/25/26 2,200,447
116,253,719 Series 2019-K736, Class X1, IO (d)........................... 1.44% 07/25/26 7,559,386
73,982,368 Series 2020-K104, Class X1, IO (d)........................... 1.13% 01/25/30 6,540,840
76,025,590 Series 2020-K737, Class X1, IO (f)........................... 0.64% 10/25/26 2,696,620
FREMF Mortgage Trust
8,877,000 Series 2011-K10, Class B (d) (h)............................. 4.78% 11/25/49 8,932,694
7,590,000 Series 2011-K14, Class B (d) (h)............................. 5.35% 02/25/47 7,684,426
3,000,000 Series 2011-K15, Class B (d) (h)............................. 5.13% 08/25/44 3,038,574
11,771,000 Series 2014-K715, Class B (d) (h)............................ 4.11% 02/25/46 11,859,999
2,260,829 Series 2015-K721, Class B (d) (h)............................ 3.68% 11/25/47 2,298,763
Government National Mortgage Association
3,274,149 Series 2011-31, Class Z (f).................................. 3.85% 09/16/52 3,723,343
17,745,327 Series 2012-120, Class Z (f)................................. 2.59% 01/16/55 18,492,695
12,500,699 Series 2012-125, Class Z (f)................................. 2.44% 05/16/53 12,570,517
583,516 Series 2013-32, Class A...................................... 1.90% 06/16/36 585,819
532,000 Series 2013-57, Class D (f).................................. 2.35% 06/16/46 549,808
100,000 Series 2013-74, Class AG (d)................................. 2.80% 12/16/53 106,838
21,231 Series 2013-194, Class AE (f)................................ 2.75% 11/16/44 22,079
23,000,000 Series 2014-153, Class D (f)................................. 3.00% 04/16/56 25,072,383
15,137,559 Series 2015-30, Class DZ..................................... 2.95% 05/16/55 16,118,321
55,144,373 Series 2015-30, Class IO, IO (f)............................. 0.91% 07/16/56 2,912,500
20,689,044 Series 2015-70, Class IO, IO (f)............................. 0.99% 12/16/49 1,087,269
50,903,715 Series 2015-107, Class IO, IO (f)............................ 0.81% 03/16/57 2,065,423
5,592,963 Series 2015-125, Class VA (f)................................ 2.70% 05/16/35 5,904,996
45,716,281 Series 2016-2, Class IO, IO (f).............................. 0.85% 04/16/57 2,564,377
31,834,178 Series 2016-11, Class IO, IO (f)............................. 0.89% 01/16/56 1,815,640
23,550,011 Series 2016-26, Class IO, IO (f)............................. 0.93% 02/16/58 1,328,979
88,666,539 Series 2016-28, Class IO, IO (f)............................. 0.90% 12/16/57 5,120,475
102,475,047 Series 2016-34, Class IO, IO (f)............................. 0.97% 01/16/58 6,938,042
63,420,465 Series 2016-35, Class IO, IO (f)............................. 0.86% 03/16/58 3,789,075
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 39,026,653 Series 2016-36, Class IO, IO (f)............................. 0.87% 08/16/57 $ 2,366,963
54,822,231 Series 2016-50, Class IO, IO (f)............................. 0.98% 08/16/57 3,262,668
35,057,951 Series 2016-52, Class IO, IO (f)............................. 0.91% 03/16/58 2,071,276
110,995,424 Series 2016-64, Class IO, IO (f)............................. 0.96% 12/16/57 6,746,990
4,528,586 Series 2016-110, Class VA.................................... 2.10% 01/16/38 4,633,775
37,658,241 Series 2016-113, Class IO, IO (f)............................ 1.15% 02/16/58 2,914,307
21,891,071 Series 2016-127, Class IO, IO (f)............................ 0.95% 05/16/58 1,380,580
224,039,776 Series 2016-131, Class IO, IO (f)............................ 0.97% 08/16/58 15,534,089
142,239,276 Series 2016-133, Class IO, IO (f)............................ 1.01% 12/16/57 9,273,759
105,421,995 Series 2016-143, Class IO, IO................................ 0.96% 10/16/56 7,584,311
40,594,088 Series 2016-152, Class IO, IO (d)............................ 0.88% 08/15/58 2,589,651
70,591,618 Series 2016-158, Class IO, IO (f)............................ 0.90% 06/16/58 4,289,831
149,730,232 Series 2016-166, Class IO, IO (f)............................ 1.04% 04/16/58 10,729,099
95,493,702 Series 2017-7, Class IO, IO (f).............................. 0.96% 12/16/58 6,336,284
3,893,942 Series 2017-35, Class Z (f).................................. 2.50% 05/16/59 3,976,427
7,390,000 Series 2017-90, Class B...................................... 2.75% 12/16/57 7,865,978
132,528,907 Series 2017-126, Class IO, IO (d) (f)........................ 0.79% 08/16/59 8,802,106
25,811,129 Series 2018-2, Class IO, IO (f).............................. 0.75% 12/16/59 1,553,288
16,283,441 Series 2018-123, Class Z..................................... 2.50% 06/16/60 16,059,754
8,893,664 Series 2018-150, Class Z..................................... 3.20% 02/16/60 9,847,503
12,433,549 Series 2018-170, Class Z..................................... 2.50% 11/16/60 12,851,317
17,206,299 Series 2019-7, Class Z....................................... 2.50% 01/16/61 17,499,629
1,755,685 Series 2019-104, Class Z..................................... 2.80% 05/16/61 1,905,968
2,278,525 Series 2019-113, Class Z..................................... 3.00% 06/16/61 2,422,073
1,503,979 Series 2019-122, Class Z..................................... 3.00% 07/16/61 1,622,713
4,556,387 Series 2019-139, Class Z (f)................................. 2.90% 11/16/61 4,766,623
5,037,594 Series 2020-12, Class Z (f).................................. 3.00% 11/16/61 5,640,678
----------------
449,303,007
----------------
PASS-THROUGH SECURITIES -- 54.1%
Federal Home Loan Mortgage Corporation
3,298,095 Pool 760043, 5 Yr. Constant Maturity Treasury Rate +
1.39% (a)................................................. 2.98% 12/01/48 3,411,460
9,445,252 Pool 840359, 12 Mo. LIBOR + 1.63% (a)........................ 3.97% 06/01/46 9,791,502
144,844 Pool A19763.................................................. 5.00% 04/01/34 164,537
60,903 Pool A47333.................................................. 5.00% 10/01/35 68,737
580,461 Pool A47828.................................................. 3.50% 08/01/35 618,908
359,086 Pool A47829.................................................. 4.00% 08/01/35 387,605
310,828 Pool A47937.................................................. 5.50% 08/01/35 352,510
126,539 Pool A48972.................................................. 5.50% 05/01/36 144,371
90,599 Pool A54675.................................................. 5.50% 01/01/36 103,732
244,081 Pool A65324.................................................. 5.50% 09/01/37 273,356
70,979 Pool A86143.................................................. 5.00% 05/01/39 80,796
26,633 Pool A90319.................................................. 5.00% 12/01/39 30,495
402,976 Pool A92197.................................................. 5.00% 05/01/40 461,455
11,059 Pool A93093.................................................. 4.50% 07/01/40 12,291
16,108 Pool A93891.................................................. 4.00% 09/01/40 18,055
22,601 Pool A94729.................................................. 4.00% 11/01/40 25,332
82,410 Pool A94843.................................................. 4.00% 11/01/40 92,367
323,301 Pool A95441.................................................. 4.00% 12/01/40 359,130
31,687 Pool A95653.................................................. 4.00% 12/01/40 35,516
</TABLE>
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 54,315 Pool A95728.................................................. 4.00% 12/01/40 $ 60,878
71,666 Pool A96380.................................................. 4.00% 01/01/41 78,689
206,717 Pool A97294.................................................. 4.00% 02/01/41 226,098
974,758 Pool B70791.................................................. 4.00% 06/01/39 1,085,235
5,396 Pool C01310.................................................. 6.50% 03/01/32 6,166
17,108 Pool C01574.................................................. 5.00% 06/01/33 19,546
19,823 Pool C03458.................................................. 5.00% 02/01/40 22,688
66,546 Pool C03949.................................................. 3.50% 05/01/42 72,540
165,929 Pool C04269.................................................. 3.00% 10/01/42 177,859
301,069 Pool C91167.................................................. 5.00% 04/01/28 327,134
223,740 Pool C91353.................................................. 3.50% 01/01/31 236,535
481,302 Pool C91366.................................................. 4.50% 04/01/31 527,019
36,793 Pool C91482.................................................. 3.50% 07/01/32 39,600
33,730 Pool E02883.................................................. 4.00% 04/01/26 35,767
25,831 Pool G01443.................................................. 6.50% 08/01/32 29,414
65,405 Pool G01737.................................................. 5.00% 12/01/34 74,770
36,015 Pool G01840.................................................. 5.00% 07/01/35 41,166
405,834 Pool G02017.................................................. 5.00% 12/01/35 464,472
80,251 Pool G03072.................................................. 5.00% 11/01/36 91,700
390,031 Pool G04593.................................................. 5.50% 01/01/37 446,309
38,923 Pool G04632.................................................. 5.00% 11/01/36 44,490
184,604 Pool G04814.................................................. 5.50% 10/01/38 211,099
41,171 Pool G04913.................................................. 5.00% 03/01/38 47,099
41,935 Pool G05173.................................................. 4.50% 11/01/31 45,648
546,118 Pool G05275.................................................. 5.50% 02/01/39 623,553
118,139 Pool G05449.................................................. 4.50% 05/01/39 131,287
460,663 Pool G05792.................................................. 4.50% 02/01/40 512,274
366,168 Pool G05927.................................................. 4.50% 07/01/40 409,613
29,795 Pool G06252.................................................. 4.00% 02/01/41 32,699
579,376 Pool G06359.................................................. 4.00% 02/01/41 635,988
90,327 Pool G06501.................................................. 4.00% 04/01/41 99,126
315,363 Pool G06583.................................................. 5.00% 06/01/41 363,498
160,146 Pool G06687.................................................. 5.00% 07/01/41 183,405
90,435 Pool G06739.................................................. 4.50% 09/01/41 100,626
481,868 Pool G07025.................................................. 5.00% 02/01/42 550,859
680,561 Pool G07100.................................................. 5.50% 07/01/40 777,396
16,721 Pool G07219.................................................. 5.00% 10/01/41 19,116
92,124 Pool G07266.................................................. 4.00% 12/01/42 100,945
580,179 Pool G07329.................................................. 4.00% 01/01/43 635,737
619,609 Pool G07683.................................................. 4.00% 03/01/44 678,913
633,031 Pool G07806.................................................. 5.00% 06/01/41 721,868
3,321 Pool G08113.................................................. 6.50% 02/01/36 3,809
3,566,396 Pool G08854.................................................. 5.00% 12/01/48 3,878,867
98 Pool G11713.................................................. 5.50% 06/01/20 98
2,558 Pool G11769.................................................. 5.00% 10/01/20 2,687
1,729 Pool G11833.................................................. 5.00% 11/01/20 1,817
862 Pool G11880.................................................. 5.00% 12/01/20 906
49,350 Pool G12312.................................................. 6.00% 09/01/21 50,503
38,383 Pool G12797.................................................. 6.50% 02/01/22 39,133
70,325 Pool G12959.................................................. 6.50% 10/01/22 73,509
3,167 Pool G12978.................................................. 5.50% 12/01/22 3,299
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 137 Pool G13044.................................................. 4.50% 06/01/21 $ 145
581 Pool G13581.................................................. 5.50% 11/01/21 584
42,711 Pool G13623.................................................. 4.50% 08/01/24 45,764
50,753 Pool G13625.................................................. 5.50% 01/01/24 53,345
87,090 Pool G13733.................................................. 5.00% 11/01/24 92,639
79,834 Pool G14088.................................................. 4.00% 02/01/26 84,526
127,667 Pool G14106.................................................. 6.00% 10/01/24 133,781
35,345 Pool G14167.................................................. 5.50% 07/01/23 37,049
80,057 Pool G14233.................................................. 6.00% 01/01/24 82,212
824,438 Pool G14348.................................................. 4.00% 10/01/26 872,757
35,532 Pool G14376.................................................. 4.00% 09/01/25 37,576
45,476 Pool G14676.................................................. 4.50% 09/01/26 48,692
12 Pool G14791.................................................. 6.00% 05/01/21 12
252,951 Pool G14995.................................................. 5.50% 12/01/24 263,411
67,667 Pool G15019.................................................. 4.50% 07/01/26 71,468
43,071 Pool G15039.................................................. 4.50% 09/01/26 46,126
43,002 Pool G15725.................................................. 4.50% 09/01/26 45,926
6,737 Pool G15821.................................................. 5.00% 07/01/25 7,079
195,200 Pool G15949.................................................. 4.00% 01/01/29 206,600
148,515 Pool G15957.................................................. 5.50% 12/01/24 152,969
8,551 Pool G18100.................................................. 5.00% 02/01/21 8,985
306,983 Pool G18264.................................................. 5.00% 07/01/23 322,623
233,657 Pool G18287.................................................. 5.50% 12/01/23 246,190
87,922 Pool G18306.................................................. 4.50% 04/01/24 94,108
15,480 Pool G60020.................................................. 4.50% 12/01/43 17,231
715,779 Pool G60114.................................................. 5.50% 06/01/41 818,806
1,175,168 Pool G60168.................................................. 4.50% 07/01/45 1,290,510
411,766 Pool G60194.................................................. 3.50% 08/01/45 449,591
386,697 Pool G60737.................................................. 4.50% 08/01/42 430,154
1,109,578 Pool G60762.................................................. 5.00% 07/01/41 1,267,075
415,440 Pool G60808.................................................. 3.00% 10/01/46 442,444
6,207,232 Pool G60921.................................................. 4.50% 02/01/47 6,744,712
17,260,883 Pool G60940.................................................. 4.00% 09/01/46 19,308,450
6,703,763 Pool G61160.................................................. 4.50% 11/01/45 7,426,000
14,444 Pool H09034.................................................. 5.50% 05/01/37 16,206
2,504 Pool J03523.................................................. 5.00% 09/01/21 2,631
35,846 Pool J05364.................................................. 6.00% 08/01/22 37,091
197,991 Pool J09465.................................................. 4.00% 04/01/24 209,334
84,764 Pool J09504.................................................. 4.00% 04/01/24 89,620
28,772 Pool J09798.................................................. 4.00% 05/01/24 30,420
57,218 Pool J10623.................................................. 4.00% 09/01/24 60,502
687,155 Pool J10827.................................................. 4.50% 10/01/24 735,265
235,115 Pool N70075.................................................. 5.00% 01/01/35 259,439
426,437 Pool N70081.................................................. 5.50% 07/01/38 484,679
63,336 Pool O20138.................................................. 5.00% 11/01/30 69,401
1,034,396 Pool Q00841.................................................. 4.50% 05/01/41 1,149,128
113,692 Pool Q03139.................................................. 4.00% 09/01/41 126,024
43,245 Pool Q04031.................................................. 4.00% 10/01/41 48,967
33,707 Pool Q04905.................................................. 4.00% 12/01/41 38,167
56,679 Pool Q05035.................................................. 4.00% 12/01/41 62,229
58,830 Pool Q05173.................................................. 4.00% 12/01/41 66,580
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 44,023 Pool Q05181.................................................. 4.00% 12/01/41 $ 49,847
31,937 Pool Q05445.................................................. 4.00% 01/01/42 36,162
118,711 Pool Q07189.................................................. 4.00% 04/01/42 130,083
41,125 Pool Q07479.................................................. 3.50% 04/01/42 44,570
141,457 Pool Q11791.................................................. 3.50% 10/01/42 153,313
87,731 Pool Q11836.................................................. 3.50% 10/01/42 96,173
633,855 Pool Q14034.................................................. 3.50% 12/01/42 703,780
2,549,040 Pool Q43309.................................................. 4.00% 09/01/46 2,886,061
5,839,559 Pool Q45763.................................................. 4.00% 01/01/47 6,615,028
4,137,746 Pool Q50564.................................................. 4.50% 09/01/47 4,467,136
12,015,694 Pool Q53219.................................................. 4.50% 12/01/47 13,551,846
7,572,197 Pool Q53875.................................................. 4.00% 01/01/48 8,405,549
971,895 Pool Q54651.................................................. 4.50% 03/01/48 1,107,165
1,517,972 Pool Q55037.................................................. 4.50% 04/01/48 1,724,617
15,433,326 Pool Q55152.................................................. 4.50% 04/01/48 17,077,191
5,881,921 Pool Q55606.................................................. 4.00% 04/01/48 6,515,636
4,536,984 Pool Q56260.................................................. 5.00% 05/01/48 5,159,221
6,332,264 Pool Q58363.................................................. 5.00% 09/01/48 6,891,371
6,096,191 Pool Q58483.................................................. 4.50% 09/01/48 6,594,015
4,788,340 Pool Q61217.................................................. 4.00% 01/01/49 5,207,654
19,209,025 Pool Q63173.................................................. 4.00% 04/01/49 20,793,920
4,058,805 Pool QA0162.................................................. 4.50% 06/01/49 4,378,372
14,880,787 Pool QA2693.................................................. 4.00% 09/01/49 16,839,068
7,394,484 Pool QA3965.................................................. 4.00% 10/01/49 8,122,233
9,983,515 Pool QA4774.................................................. 4.00% 11/01/49 10,914,145
19,264,974 Pool QA5778.................................................. 3.50% 01/01/50 20,598,772
19,506,733 Pool QA7078.................................................. 3.50% 01/01/50 20,877,704
160,485 Pool QA8786.................................................. 2.00% 04/01/50 163,648
29,757,286 Pool RA1624.................................................. 4.00% 08/01/49 32,596,387
1,839,515 Pool RA2375.................................................. 2.00% 03/01/50 1,875,773
35,866,911 Pool RA2415.................................................. 3.00% 04/01/50 37,949,502
786,608 Pool RC1325.................................................. 2.00% 04/01/35 812,286
914,909 Pool SB8039.................................................. 2.00% 04/01/35 945,159
30,000,000 Pool SB8044.................................................. 2.00% 05/01/35 30,991,900
574,461 Pool U50165.................................................. 4.00% 05/01/32 618,696
3,006,917 Pool U59020.................................................. 4.00% 06/01/35 3,239,073
2,573,228 Pool U64762.................................................. 4.50% 10/01/45 2,846,803
10,655,683 Pool U69020.................................................. 5.00% 07/01/44 11,846,872
12,510,872 Pool U69040.................................................. 4.00% 05/01/45 13,723,459
6,440,963 Pool U69041.................................................. 5.00% 11/01/43 7,155,787
28,313,581 Pool U69055.................................................. 4.50% 10/01/47 31,317,683
15,369,618 Pool U69060.................................................. 4.50% 06/01/47 16,999,171
4,060,153 Pool U79023.................................................. 3.50% 10/01/28 4,304,477
204,233 Pool U80068.................................................. 3.50% 10/01/32 220,450
116,327 Pool U80212.................................................. 3.50% 02/01/33 125,565
149,352 Pool U90245.................................................. 3.50% 10/01/42 159,753
64,593 Pool U90291.................................................. 4.00% 10/01/42 70,848
691,929 Pool U90316.................................................. 4.00% 10/01/42 759,247
661,514 Pool U90490.................................................. 4.00% 06/01/42 725,913
1,825,517 Pool U90690.................................................. 3.50% 06/01/42 1,953,614
21,194 Pool U90932.................................................. 3.00% 02/01/43 22,737
</TABLE>
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 196,077 Pool U90975.................................................. 4.00% 06/01/42 $ 215,146
499,507 Pool U91254.................................................. 4.00% 04/01/43 548,526
1,726,662 Pool U91619.................................................. 4.00% 06/01/43 1,893,888
54,951 Pool U92272.................................................. 4.50% 12/01/43 61,295
718,367 Pool U92432.................................................. 4.00% 02/01/44 788,745
47,690 Pool U95137.................................................. 4.00% 08/01/43 52,353
182,542 Pool U99045.................................................. 3.50% 03/01/43 195,302
218,079 Pool U99084.................................................. 4.50% 02/01/44 243,229
106,947 Pool U99091.................................................. 4.50% 03/01/44 119,242
290,202 Pool U99096.................................................. 4.50% 05/01/44 323,541
3,277,660 Pool U99134.................................................. 4.00% 01/01/46 3,596,251
7,852,698 Pool U99184.................................................. 4.00% 08/01/43 8,615,900
743,317 Pool V80910.................................................. 4.00% 12/01/43 817,827
15,870,781 Pool ZM4944.................................................. 4.00% 11/01/47 17,742,500
2,170,040 Pool ZS2492.................................................. 6.50% 04/01/35 2,599,809
15,851,178 Pool ZS7732.................................................. 2.00% 01/01/27 16,473,169
Federal National Mortgage Association
72,386 Pool 190371.................................................. 6.50% 07/01/36 85,945
27,664 Pool 254636.................................................. 5.00% 02/01/33 31,443
41,572 Pool 255190.................................................. 5.50% 05/01/34 47,575
28,640 Pool 255984.................................................. 4.50% 11/01/25 30,885
215,373 Pool 256181.................................................. 5.50% 03/01/36 242,987
591,815 Pool 256576.................................................. 5.50% 01/01/37 678,610
26,920 Pool 256808.................................................. 5.50% 07/01/37 29,674
102,164 Pool 256936.................................................. 6.00% 10/01/37 114,882
82,290 Pool 545759.................................................. 6.50% 07/01/32 93,845
18,667 Pool 555851.................................................. 6.50% 01/01/33 21,456
352,082 Pool 683246.................................................. 5.50% 02/01/33 405,090
253,204 Pool 725014.................................................. 5.50% 12/01/33 289,928
398,274 Pool 734922.................................................. 4.50% 09/01/33 440,478
553,744 Pool 735415.................................................. 6.50% 12/01/32 643,464
5,152 Pool 745875.................................................. 6.50% 09/01/36 6,055
49,374 Pool 747097.................................................. 6.00% 10/01/29 54,031
509,268 Pool 788149.................................................. 5.50% 05/01/33 572,025
282,809 Pool 812741.................................................. 5.50% 02/01/35 314,134
447,276 Pool 827948.................................................. 5.50% 05/01/35 500,236
410,978 Pool 850000.................................................. 5.50% 01/01/36 470,964
69,477 Pool 871039.................................................. 5.50% 02/01/37 77,433
1,753,307 Pool 879015.................................................. 4.00% 10/01/35 1,894,246
187,185 Pool 888001.................................................. 5.50% 10/01/36 216,233
152,685 Pool 888163.................................................. 7.00% 12/01/33 185,802
26,263 Pool 888435.................................................. 5.50% 06/01/22 27,141
518,202 Pool 889610.................................................. 5.50% 06/01/38 592,530
386,086 Pool 889834.................................................. 5.00% 12/01/35 441,557
17,628 Pool 890149.................................................. 6.50% 10/01/38 20,890
44,185 Pool 890231.................................................. 5.00% 07/01/25 46,492
63,355 Pool 890314.................................................. 5.50% 12/01/22 65,465
17,683 Pool 890378.................................................. 6.00% 05/01/24 18,668
1,216,839 Pool 890556.................................................. 4.50% 10/01/43 1,387,175
394,193 Pool 890561.................................................. 4.50% 01/01/27 417,574
1,093,165 Pool 890736.................................................. 5.00% 07/01/30 1,197,149
</TABLE>
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 219,642 Pool 905917.................................................. 5.50% 01/01/37 $ 253,426
125,362 Pool 922386.................................................. 5.50% 01/01/37 137,852
16,059 Pool 930562.................................................. 5.00% 02/01/39 18,373
172,402 Pool 931808.................................................. 5.50% 08/01/39 197,312
195,872 Pool 953115.................................................. 5.50% 11/01/38 215,302
111,386 Pool 962556.................................................. 5.00% 04/01/23 117,060
48,289 Pool 973561.................................................. 5.00% 03/01/23 50,741
69,071 Pool 976871.................................................. 6.50% 08/01/36 79,876
65,885 Pool 995002.................................................. 5.00% 07/01/37 75,163
20,900 Pool 995097.................................................. 6.50% 10/01/37 24,768
129,284 Pool 995149.................................................. 6.50% 10/01/38 151,631
51,819 Pool 995228.................................................. 6.50% 11/01/38 61,406
157,408 Pool 995252.................................................. 5.00% 12/01/23 165,368
60,348 Pool 995259.................................................. 6.50% 11/01/23 64,167
173,961 Pool AA0916.................................................. 5.00% 08/01/37 198,773
133,614 Pool AA3303.................................................. 5.50% 06/01/38 154,798
709,015 Pool AB0460.................................................. 5.50% 02/01/37 820,449
284,607 Pool AB0731.................................................. 4.00% 06/01/39 307,656
3,314 Pool AB1576.................................................. 4.00% 10/01/20 3,503
79,218 Pool AB1953.................................................. 4.00% 12/01/40 88,008
63,219 Pool AB2092.................................................. 4.00% 01/01/41 70,020
46,074 Pool AB2133.................................................. 4.00% 01/01/26 48,769
188,377 Pool AB2265.................................................. 4.00% 02/01/41 211,063
29,814 Pool AB2467.................................................. 4.50% 03/01/41 33,364
1,167,154 Pool AB2506.................................................. 5.00% 03/01/41 1,321,859
1,829,370 Pool AB2959.................................................. 4.50% 07/01/40 2,025,899
135,327 Pool AB5174.................................................. 3.50% 05/01/42 147,470
146,000 Pool AB5919.................................................. 3.00% 08/01/42 157,668
96,201 Pool AB6632.................................................. 3.50% 10/01/42 103,948
296,688 Pool AB6671.................................................. 3.00% 10/01/42 319,487
355,317 Pool AB7765.................................................. 3.00% 02/01/43 382,648
245,766 Pool AB7859.................................................. 3.50% 02/01/43 267,846
1,627,355 Pool AB8289.................................................. 4.50% 04/01/42 1,815,542
564,056 Pool AB8676.................................................. 3.50% 05/01/42 611,844
114,030 Pool AB9382.................................................. 4.00% 05/01/43 126,893
974,980 Pool AB9551.................................................. 3.00% 06/01/43 1,049,986
377,684 Pool AB9615.................................................. 4.00% 06/01/33 409,251
71,870 Pool AB9959.................................................. 4.00% 07/01/43 79,692
52,088 Pool AC1232.................................................. 5.00% 07/01/24 54,945
106,580 Pool AC3236.................................................. 5.00% 09/01/39 121,941
304,808 Pool AC3267.................................................. 5.50% 09/01/39 349,046
295,502 Pool AD0889.................................................. 6.00% 09/01/24 309,853
659,292 Pool AD4317.................................................. 4.00% 04/01/40 722,246
22,013 Pool AD5222.................................................. 4.50% 05/01/30 24,043
124,960 Pool AD5583.................................................. 5.00% 04/01/40 137,761
166,969 Pool AD6369.................................................. 4.50% 05/01/40 185,751
82,806 Pool AD6938.................................................. 4.50% 06/01/40 92,618
132,598 Pool AD7110.................................................. 5.00% 07/01/40 144,313
92,613 Pool AD7137.................................................. 5.50% 07/01/40 107,948
34,672 Pool AD8526.................................................. 4.50% 08/01/40 38,569
324,734 Pool AE0137.................................................. 4.50% 03/01/36 356,413
</TABLE>
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 30,853 Pool AE0383.................................................. 4.50% 09/01/25 $ 33,051
127,860 Pool AE4476.................................................. 4.00% 03/01/41 140,025
173,898 Pool AE7005.................................................. 4.00% 10/01/40 190,477
4,983,069 Pool AE7733.................................................. 5.00% 11/01/40 5,741,132
40,609 Pool AE9284.................................................. 4.00% 11/01/40 44,490
621,125 Pool AE9959.................................................. 5.00% 03/01/41 706,134
25,762 Pool AH0057.................................................. 4.50% 02/01/41 28,314
457,841 Pool AH0943.................................................. 4.00% 12/01/40 506,909
682,465 Pool AH0979.................................................. 3.50% 01/01/41 721,455
348,238 Pool AH1089.................................................. 4.00% 11/01/40 381,532
143,393 Pool AH1141.................................................. 4.50% 12/01/40 159,513
164,100 Pool AH4404.................................................. 4.00% 01/01/41 179,806
111,525 Pool AH7204.................................................. 4.00% 03/01/41 122,117
51,186 Pool AI1190.................................................. 4.50% 04/01/41 56,997
70,700 Pool AI1969.................................................. 4.50% 05/01/41 78,639
435,258 Pool AI4268.................................................. 5.00% 06/01/41 498,285
11,350,005 Pool AI5614.................................................. 5.00% 07/01/41 12,809,035
268,888 Pool AI6093.................................................. 4.50% 06/01/31 294,706
67,182 Pool AI6503.................................................. 5.00% 11/01/39 73,077
36,697 Pool AI6581.................................................. 4.50% 07/01/41 40,807
29,284 Pool AI7800.................................................. 4.50% 07/01/41 32,609
182,262 Pool AI8779.................................................. 4.00% 11/01/41 199,726
388,471 Pool AI9114.................................................. 4.00% 06/01/42 426,492
2,033,845 Pool AI9124.................................................. 4.00% 08/01/42 2,232,898
1,186,235 Pool AI9158.................................................. 6.50% 01/01/41 1,504,090
2,132,783 Pool AJ2311.................................................. 5.00% 10/01/41 2,374,484
26,078 Pool AJ4756.................................................. 4.00% 10/01/41 29,481
39,306 Pool AJ5424.................................................. 4.00% 11/01/41 44,435
22,705 Pool AJ5736.................................................. 4.00% 12/01/41 25,667
28,327 Pool AJ6061.................................................. 4.00% 12/01/41 32,064
31,071 Pool AJ7538.................................................. 4.00% 01/01/42 35,204
37,738 Pool AJ8104.................................................. 4.00% 12/01/41 42,541
15,117 Pool AJ8203.................................................. 4.50% 01/01/42 16,833
29,390 Pool AJ8341.................................................. 4.00% 12/01/41 33,276
25,642 Pool AJ8369.................................................. 4.00% 01/01/42 28,988
43,167 Pool AJ8436.................................................. 4.00% 12/01/41 48,849
24,577 Pool AJ9162.................................................. 4.00% 01/01/42 27,770
1,016,201 Pool AJ9332.................................................. 4.00% 01/01/42 1,125,541
46,104 Pool AK0543.................................................. 4.00% 01/01/42 52,212
1,432,386 Pool AK0765.................................................. 4.00% 03/01/42 1,570,974
34,038 Pool AK1827.................................................. 4.00% 01/01/42 38,499
229,202 Pool AK4520.................................................. 4.00% 03/01/42 251,070
191,839 Pool AK5555.................................................. 4.00% 04/01/42 210,143
19,140 Pool AL0147.................................................. 4.00% 04/01/41 21,446
132,419 Pool AL0212.................................................. 5.50% 02/01/38 151,613
313,661 Pool AL0241.................................................. 4.00% 04/01/41 343,698
40,808 Pool AL0399.................................................. 6.00% 08/01/24 42,543
19,494 Pool AL0446.................................................. 6.00% 05/01/24 20,334
46,603 Pool AL0815.................................................. 4.00% 09/01/41 52,685
18,655 Pool AL1195.................................................. 6.00% 09/01/23 19,580
587,602 Pool AL1850.................................................. 5.50% 07/01/40 671,568
</TABLE>
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 43,133 Pool AL1948.................................................. 4.00% 01/01/42 $ 47,782
42,544 Pool AL1953.................................................. 4.50% 01/01/27 45,124
107,796 Pool AL2142.................................................. 6.50% 09/01/38 127,815
579,829 Pool AL2551.................................................. 3.50% 10/01/42 631,862
144,439 Pool AL2589.................................................. 5.50% 05/01/25 149,805
102,680 Pool AL2892.................................................. 3.50% 12/01/42 112,115
747,124 Pool AL3093.................................................. 3.50% 02/01/43 818,835
27,587 Pool AL3154.................................................. 3.00% 02/01/43 29,794
2,123,130 Pool AL4703.................................................. 3.50% 12/01/28 2,221,080
8,735,946 Pool AL4741.................................................. 4.50% 01/01/44 9,736,007
29,012 Pool AL4962.................................................. 6.00% 05/01/24 30,694
168,044 Pool AL5616.................................................. 5.50% 09/01/41 192,232
934,153 Pool AL5760.................................................. 4.00% 09/01/43 1,035,543
687,002 Pool AL5890.................................................. 4.50% 03/01/43 771,244
566,965 Pool AL6031.................................................. 4.00% 10/01/44 630,878
32,338 Pool AL6057.................................................. 6.00% 08/01/24 32,829
78,954 Pool AL6449.................................................. 4.50% 01/01/27 84,468
3,523,160 Pool AL6513.................................................. 5.00% 07/01/44 3,924,250
279,288 Pool AL6948.................................................. 5.00% 09/01/25 293,396
136,476 Pool AL7046.................................................. 3.50% 06/01/45 148,678
6,152,465 Pool AL7162, 12 Mo. LIBOR + 1.73% (a)........................ 4.24% 09/01/42 6,404,640
380,669 Pool AL7231.................................................. 3.50% 08/01/45 414,703
665,131 Pool AL7449.................................................. 8.50% 12/01/37 825,746
854,527 Pool AL7637.................................................. 5.00% 01/01/42 941,751
2,547,886 Pool AL7905.................................................. 4.50% 03/01/34 2,799,674
152,355 Pool AL8139.................................................. 4.00% 02/01/32 163,306
11,389,828 Pool AL8263.................................................. 4.50% 02/01/44 12,694,556
93,570 Pool AL8353.................................................. 3.50% 08/01/44 101,935
9,075,309 Pool AL8640, 12 Mo. LIBOR + 1.80% (a)........................ 3.89% 12/01/41 9,472,682
5,292,316 Pool AL8652.................................................. 5.00% 07/01/44 6,047,837
592,652 Pool AL9143.................................................. 3.50% 09/01/36 637,579
188,855 Pool AL9226.................................................. 5.50% 12/01/41 219,143
1,893,489 Pool AL9777.................................................. 4.50% 01/01/47 2,071,770
5,596,357 Pool AO3529.................................................. 4.00% 06/01/42 6,124,699
2,196,381 Pool AO5527.................................................. 4.00% 07/01/42 2,410,225
1,643,225 Pool AO8106.................................................. 4.00% 08/01/42 1,803,431
635,089 Pool AO8167.................................................. 4.00% 09/01/42 696,636
203,565 Pool AP1197.................................................. 3.50% 09/01/42 221,705
1,316,045 Pool AP2109.................................................. 4.00% 08/01/32 1,424,932
115,374 Pool AP5113.................................................. 4.00% 09/01/42 127,934
361,249 Pool AP7963.................................................. 4.00% 09/01/42 405,604
2,732,194 Pool AQ0411.................................................. 3.50% 10/01/42 2,983,223
1,100,437 Pool AQ0535.................................................. 3.00% 11/01/42 1,183,301
779,819 Pool AQ1534.................................................. 3.50% 10/01/32 841,322
1,019,928 Pool AQ1584.................................................. 4.00% 11/01/42 1,155,905
709,892 Pool AQ1607.................................................. 3.50% 11/01/32 766,037
522,631 Pool AQ3310.................................................. 4.00% 11/01/42 573,298
1,853,333 Pool AQ4086.................................................. 4.00% 06/01/43 2,033,727
77,818 Pool AQ9715.................................................. 3.00% 01/01/43 83,468
501,265 Pool AQ9999.................................................. 3.00% 02/01/43 537,638
2,430,003 Pool AR7582.................................................. 3.50% 03/01/33 2,622,377
</TABLE>
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 345,555 Pool AR7961.................................................. 3.50% 03/01/33 $ 372,813
4,350,419 Pool AS1719.................................................. 5.00% 02/01/44 5,003,162
608,341 Pool AS5236.................................................. 4.00% 05/01/45 659,760
1,035,521 Pool AS5515.................................................. 3.50% 06/01/30 1,096,878
320,656 Pool AS5635.................................................. 3.00% 08/01/45 348,662
1,131,780 Pool AS7211.................................................. 3.00% 04/01/46 1,214,241
1,815,608 Pool AS7537.................................................. 3.00% 07/01/46 1,974,352
7,519,401 Pool AS8548.................................................. 3.50% 12/01/46 8,043,455
1,170,568 Pool AS9244.................................................. 4.50% 08/01/39 1,304,737
629,675 Pool AS9990.................................................. 4.50% 07/01/47 680,047
250,136 Pool AS9994.................................................. 4.50% 04/01/47 273,386
144,397 Pool AT0332.................................................. 3.00% 04/01/43 152,563
726,094 Pool AT1747.................................................. 3.00% 04/01/43 784,186
695,809 Pool AT3892.................................................. 3.00% 06/01/43 746,459
381,816 Pool AT4180.................................................. 3.50% 05/01/33 411,937
141,681 Pool AT5915.................................................. 4.00% 06/01/43 155,514
770,590 Pool AT6303.................................................. 4.00% 06/01/43 873,273
49,382 Pool AT6306.................................................. 4.00% 06/01/43 55,443
155,073 Pool AU5787.................................................. 4.50% 09/01/43 175,325
782,965 Pool AU6278.................................................. 5.00% 11/01/43 869,892
198,317 Pool AY0013.................................................. 4.50% 01/01/45 220,444
806,563 Pool BA4113.................................................. 3.00% 04/01/46 864,212
1,554,281 Pool BD4509, 12 Mo. LIBOR + 1.69% (a)........................ 2.91% 01/01/44 1,604,687
2,502,965 Pool BD4533, 12 Mo. LIBOR + 1.66% (a)........................ 4.02% 09/01/44 2,588,826
429,194 Pool BD8660, 1 Yr. Constant Maturity Treasury Rate +
1.67% (a)................................................. 2.97% 12/01/45 432,147
16,754,787 Pool BE2973.................................................. 4.00% 01/01/47 18,862,927
768,742 Pool BE3631.................................................. 4.50% 05/01/47 837,426
3,223,362 Pool BH2633.................................................. 5.00% 08/01/47 3,591,480
42,698 Pool BH9428.................................................. 4.50% 09/01/47 46,409
17,307,436 Pool BJ1637.................................................. 3.50% 11/01/47 18,885,374
246,012 Pool BJ6232.................................................. 5.00% 04/01/48 268,028
22,578 Pool BJ6234.................................................. 5.00% 05/01/48 24,607
1,246,004 Pool BJ9100.................................................. 4.50% 02/01/48 1,418,892
1,023,206 Pool BJ9111.................................................. 4.50% 03/01/48 1,165,202
1,766,119 Pool BJ9124.................................................. 4.50% 04/01/48 2,011,177
29,169,308 Pool BK4769.................................................. 5.00% 08/01/48 31,825,721
800,640 Pool BK4851.................................................. 5.00% 05/01/48 872,361
28,944 Pool BK7173.................................................. 5.00% 06/01/48 31,478
1,286,499 Pool BK7797.................................................. 5.00% 07/01/48 1,399,539
7,554,830 Pool BK8883.................................................. 5.00% 09/01/48 8,478,700
5,333,235 Pool BK9563.................................................. 4.50% 12/01/48 5,814,137
8,393,210 Pool BK9599.................................................. 5.00% 08/01/48 9,135,770
523,965 Pool BM1880.................................................. 4.00% 02/01/45 580,604
1,371,186 Pool BM3013, 12 Mo. LIBOR + 1.54% (a)........................ 4.13% 07/01/44 1,412,567
18,278,055 Pool BM3076.................................................. 4.50% 07/01/47 20,213,651
8,872,639 Pool BM3625.................................................. 3.00% 03/01/48 9,535,376
20,734,718 Pool BM3980, 12 Mo. LIBOR + 1.78% (a)........................ 4.17% 02/01/43 21,641,999
19,326,434 Pool BM4122.................................................. 7.47% 01/01/40 23,647,684
8,018,151 Pool BM4561.................................................. 5.00% 09/01/48 8,993,942
</TABLE>
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 10,245,361 Pool BM4785.................................................. 4.50% 10/01/38 $ 11,390,013
26,292,928 Pool BM5039.................................................. 4.50% 12/01/48 28,740,324
20,110,865 Pool BM5130.................................................. 4.50% 08/01/47 22,284,833
73,423,734 Pool BM5508.................................................. 5.00% 02/01/49 82,359,148
22,790,209 Pool BM5667.................................................. 4.00% 12/01/48 24,661,575
8,202,387 Pool BM5671.................................................. 4.50% 01/01/49 9,207,887
18,229,169 Pool BM6018.................................................. 5.00% 05/01/49 19,347,406
2,390,045 Pool BN0948.................................................. 4.50% 11/01/48 2,579,696
952,906 Pool BN1027.................................................. 5.50% 03/01/49 1,089,244
12,901,922 Pool BN1345.................................................. 4.00% 09/01/48 13,818,771
34,485,854 Pool BN3925.................................................. 4.50% 01/01/49 38,715,139
4,555,795 Pool BN4059.................................................. 4.00% 12/01/48 4,850,274
9,574,619 Pool BN4328.................................................. 5.00% 01/01/49 10,629,886
4,302,683 Pool BN5323.................................................. 3.50% 03/01/49 4,551,914
18,930,402 Pool BN6078.................................................. 4.00% 06/01/49 20,175,879
11,432,949 Pool BN8210.................................................. 4.50% 07/01/49 12,662,600
9,489,707 Pool BO1420.................................................. 3.50% 09/01/49 10,030,715
20,123,592 Pool BO2179.................................................. 4.00% 09/01/49 22,771,620
21,912,586 Pool BO2653.................................................. 3.50% 07/01/49 23,299,923
8,763,894 Pool BO3030.................................................. 4.00% 10/01/49 9,626,406
6,251,697 Pool BO5425.................................................. 4.00% 10/01/49 6,866,968
14,792,122 Pool BO5426.................................................. 4.00% 10/01/49 16,170,998
12,460,597 Pool BO5430.................................................. 4.00% 10/01/49 13,401,325
14,116,884 Pool BP1950.................................................. 3.00% 04/01/50 15,360,018
6,635,447 Pool CA0843.................................................. 3.00% 12/01/47 7,164,396
15,382,337 Pool CA1576.................................................. 5.00% 01/01/48 16,761,715
16,975,279 Pool CA1902.................................................. 4.50% 06/01/48 18,553,950
9,225,256 Pool CA1917.................................................. 5.00% 06/01/48 10,426,014
2,961,850 Pool CA2520.................................................. 4.00% 10/01/33 3,167,577
6,852,821 Pool CA2947.................................................. 4.00% 12/01/48 7,514,360
33,734,206 Pool CA4175.................................................. 4.00% 09/01/49 38,173,514
25,628,516 Pool FM0050.................................................. 5.50% 11/01/49 28,469,717
68,583,792 Pool FM0085.................................................. 4.00% 03/01/50 77,434,267
112,049,101 Pool FM1194.................................................. 4.50% 05/01/39 124,552,445
3,587,339 Pool FM1284.................................................. 3.50% 02/01/46 3,882,143
3,449,594 Pool FM1285.................................................. 4.00% 10/01/43 3,787,400
7,892,508 Pool FM1286.................................................. 4.50% 06/01/46 8,705,421
3,123,464 Pool FM1287.................................................. 5.00% 11/01/44 3,472,708
87,909,642 Pool FM1725.................................................. 2.50% 11/01/47 92,222,207
19,055,171 Pool FM2001.................................................. 5.00% 09/01/49 20,925,291
28,454,112 Pool FM2329.................................................. 5.00% 12/01/49 31,960,060
24,913,656 Pool FM2397.................................................. 4.50% 01/01/50 27,529,033
8,438,871 Pool FM2450.................................................. 3.50% 12/01/39 9,176,209
127,664,107 Pool FM2500.................................................. 2.50% 03/01/35 135,305,679
6,615,372 Pool FM2853.................................................. 5.00% 03/01/41 7,355,057
174,468 Pool MA0096.................................................. 4.50% 06/01/29 188,646
3,623 Pool MA0293.................................................. 4.50% 01/01/30 3,957
59,092 Pool MA0295.................................................. 5.00% 01/01/30 64,769
55,065 Pool MA0353.................................................. 4.50% 03/01/30 60,148
1,507,422 Pool MA0443.................................................. 5.00% 05/01/30 1,652,895
53,753 Pool MA0444.................................................. 5.00% 06/01/40 60,003
</TABLE>
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 402,359 Pool MA0575.................................................. 4.50% 11/01/30 $ 440,872
294,856 Pool MA0633.................................................. 5.00% 01/01/41 329,894
6,766 Pool MA0777.................................................. 5.00% 06/01/31 7,420
526,154 Pool MA1125.................................................. 4.00% 07/01/42 576,472
1,772,646 Pool MA1217.................................................. 4.00% 10/01/42 1,943,359
51,677 Pool MA1222.................................................. 4.00% 10/01/32 55,964
92,460 Pool MA1228.................................................. 3.00% 09/01/42 99,152
616,953 Pool MA1510.................................................. 4.00% 07/01/43 676,742
193,004 Pool MA1591.................................................. 4.50% 09/01/43 215,220
19,361,463 Pool MA1629.................................................. 4.50% 10/01/43 21,580,601
521,560 Pool MA1664.................................................. 4.50% 11/01/43 581,051
498,624 Pool MA1711.................................................. 4.50% 12/01/43 555,946
818,450 Pool MA1866.................................................. 4.50% 04/01/44 912,528
684,638 Pool MA1900.................................................. 4.50% 04/01/44 763,258
791,108 Pool MA2024.................................................. 4.00% 07/01/29 841,826
1,194,492 Pool MA2099.................................................. 3.50% 11/01/29 1,266,019
518,907 Pool MA2454.................................................. 3.50% 09/01/30 550,093
10,302 Pool MA2509.................................................. 3.00% 01/01/46 10,736
2,096,072 Pool MA2695.................................................. 4.00% 07/01/46 2,299,923
2,450,071 Pool MA2916.................................................. 4.00% 02/01/47 2,686,014
578,152 Pool MA3101.................................................. 4.50% 08/01/47 629,253
182,178 Pool MA3123.................................................. 5.00% 08/01/47 198,425
781,511 Pool MA3205.................................................. 5.00% 10/01/47 851,417
447,297 Pool MA3994.................................................. 2.00% 02/01/30 462,041
51,000,000 Pool MA4012.................................................. 2.00% 05/01/35 52,686,206
48,000,000 Pool MA4018.................................................. 2.00% 05/01/50 48,945,817
30,000,000 Pool TBA (i)................................................. 2.00% 06/15/34 30,911,719
200,000,000 Pool TBA (i)................................................. 2.50% 06/11/45 207,996,554
234,000,000 Pool TBA (i)................................................. 2.00% 06/15/49 238,200,656
50,000,000 Pool TBA (i)................................................. 2.50% 07/01/49 51,884,941
Government National Mortgage Association
96,244 Pool 3149.................................................... 6.00% 10/20/31 107,901
61,113 Pool 3172.................................................... 6.00% 12/20/31 70,033
66,546 Pool 3227.................................................... 6.00% 04/20/32 74,441
464,478 Pool 3345.................................................... 5.00% 02/20/33 522,832
156,673 Pool 3389.................................................... 5.00% 05/20/33 175,689
26,802 Pool 3390.................................................... 5.50% 05/20/33 30,403
748,935 Pool 3428.................................................... 5.00% 08/20/33 840,954
64,920 Pool 3442.................................................... 5.00% 09/20/33 73,053
26,613 Pool 3459.................................................... 5.50% 10/20/33 30,178
13,505 Pool 3474.................................................... 6.00% 11/20/33 15,466
90,098 Pool 3487.................................................... 5.00% 12/20/33 101,180
465,629 Pool 3529.................................................... 5.00% 03/20/34 523,831
69,238 Pool 3555.................................................... 5.00% 05/20/34 77,931
104,100 Pool 3596.................................................... 5.50% 08/20/34 118,080
90,727 Pool 3786.................................................... 5.50% 11/20/35 102,596
63,505 Pool 3807.................................................... 5.50% 01/20/36 71,703
459,232 Pool 4029.................................................... 6.50% 09/20/37 552,866
309,607 Pool 4251.................................................... 5.50% 10/20/23 328,016
168,861 Pool 455986.................................................. 5.25% 07/15/25 186,629
176,136 Pool 487108.................................................. 6.00% 04/15/29 200,379
</TABLE>
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 64,397 Pool 553144.................................................. 5.50% 04/15/33 $ 72,767
15,087 Pool 589331.................................................. 6.00% 10/15/22 15,956
183,578 Pool 604338.................................................. 5.00% 05/15/33 205,856
168,154 Pool 604897.................................................. 5.00% 12/15/33 188,617
180,175 Pool 605389.................................................. 5.00% 04/15/34 202,061
399,284 Pool 615403.................................................. 4.50% 08/15/33 446,659
16,261 Pool 627123.................................................. 5.50% 03/15/34 18,614
110,860 Pool 638704.................................................. 5.50% 11/15/36 123,599
208,028 Pool 653143.................................................. 4.90% 04/15/36 230,240
265,666 Pool 658324.................................................. 5.50% 03/15/37 292,680
253,668 Pool 677190.................................................. 5.00% 06/15/38 285,688
27,366 Pool 687833.................................................. 6.00% 08/15/38 31,250
54,781 Pool 706840.................................................. 4.50% 05/15/40 63,276
203,650 Pool 706855.................................................. 4.50% 09/15/40 235,081
365,935 Pool 711483.................................................. 4.00% 01/15/40 406,238
153,037 Pool 711543.................................................. 4.00% 11/15/40 172,018
1,049,086 Pool 711563.................................................. 4.50% 03/15/41 1,210,957
8,987,753 Pool 720225.................................................. 4.50% 07/15/39 10,106,717
511,334 Pool 723216.................................................. 4.50% 08/15/40 571,436
114,440 Pool 723248.................................................. 5.00% 10/15/39 130,962
398,740 Pool 724230.................................................. 5.00% 08/15/39 448,841
117,244 Pool 724267.................................................. 5.00% 09/15/39 132,051
330,291 Pool 724340.................................................. 4.50% 09/15/39 367,286
134,607 Pool 725272.................................................. 4.50% 11/15/39 147,240
79,445 Pool 726394.................................................. 4.50% 10/15/39 89,330
53,904 Pool 728921.................................................. 4.50% 12/15/24 56,868
315,952 Pool 733595.................................................. 4.50% 04/15/40 355,308
159,357 Pool 733733.................................................. 5.00% 06/15/40 179,119
962,813 Pool 736317.................................................. 4.25% 06/20/36 1,042,646
162,711 Pool 736617.................................................. 4.00% 12/15/35 174,667
1,476,417 Pool 737673.................................................. 4.50% 11/15/40 1,647,687
300,389 Pool 737996.................................................. 4.00% 02/15/41 329,462
306,366 Pool 739341.................................................. 3.50% 10/15/41 338,779
255,185 Pool 743673.................................................. 4.50% 07/15/40 289,477
464,203 Pool 745478.................................................. 5.00% 08/20/40 511,631
858,467 Pool 748939.................................................. 4.00% 09/20/40 945,052
134,303 Pool 754384.................................................. 4.50% 03/20/42 145,375
639,162 Pool 762905.................................................. 4.50% 04/15/41 713,880
1,983,201 Pool 769102.................................................. 4.50% 07/20/41 2,250,915
579,666 Pool 781623.................................................. 5.00% 06/15/33 650,082
76,981 Pool 781697.................................................. 6.00% 11/15/33 88,066
477,343 Pool 781824.................................................. 5.50% 11/15/34 538,226
16,652 Pool 781862.................................................. 5.50% 01/15/35 18,819
70,993 Pool 782070.................................................. 7.00% 06/15/32 80,800
85,194 Pool 782133.................................................. 6.00% 01/15/22 87,402
167,892 Pool 782259.................................................. 5.00% 02/15/36 188,279
89,971 Pool 782810.................................................. 4.50% 11/15/39 99,423
1,506,525 Pool 783009.................................................. 6.10% 12/20/33 1,706,802
144,878 Pool 783091.................................................. 5.50% 06/15/40 163,460
62,119 Pool 783220.................................................. 5.50% 09/15/24 65,654
237,466 Pool 783375.................................................. 5.00% 08/15/41 267,203
</TABLE>
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 16,380,625 Pool 783590.................................................. 4.50% 06/20/41 $ 18,049,496
358,361 Pool 783760.................................................. 5.00% 02/15/42 403,736
5,818,869 Pool 784063.................................................. 5.00% 09/20/45 6,406,934
275,627 Pool 784343.................................................. 5.00% 02/15/41 310,162
4,260,639 Pool 784573.................................................. 5.00% 12/15/43 4,795,801
5,238,452 Pool 784752.................................................. 4.00% 03/15/45 5,747,955
15,117,180 Pool 784758.................................................. 5.50% 05/20/49 16,866,567
4,848,839 Pool AC0197.................................................. 4.00% 12/20/42 5,255,450
535,630 Pool AD0026.................................................. 3.50% 06/20/33 575,894
127,901 Pool AD0856.................................................. 3.75% 08/20/33 137,422
65,613 Pool AG8899.................................................. 4.00% 12/20/43 70,615
1,538,484 Pool AI6317.................................................. 4.50% 06/20/44 1,662,901
714,745 Pool AK2389.................................................. 4.50% 11/20/44 782,494
540,391 Pool AN4469.................................................. 5.00% 12/15/40 602,278
507,052 Pool AR8421.................................................. 5.00% 10/20/41 549,371
1,708,925 Pool BB1216.................................................. 4.50% 06/20/47 1,915,781
729,814 Pool BB4731.................................................. 4.00% 07/20/47 785,292
706,800 Pool BB4757.................................................. 4.00% 08/20/47 760,078
614,874 Pool BB4769.................................................. 4.00% 08/20/47 663,772
906,063 Pool BD0483.................................................. 4.50% 11/20/47 1,007,990
750,374 Pool BF0415.................................................. 5.00% 06/20/35 816,428
1,604,037 Pool BF2472.................................................. 5.50% 04/20/48 1,780,450
865,180 Pool BF2604.................................................. 5.50% 05/20/48 966,691
956,552 Pool BG1872.................................................. 5.50% 04/20/48 1,089,060
1,547,038 Pool BG1886.................................................. 5.50% 05/20/48 1,763,006
1,458,066 Pool BG1888.................................................. 5.50% 05/20/48 1,611,292
971,654 Pool BG5094.................................................. 5.50% 08/20/48 1,107,458
771,192 Pool BH7648.................................................. 5.50% 08/20/48 850,821
1,066,851 Pool BI2592.................................................. 5.50% 09/20/48 1,183,198
1,420,991 Pool BJ9554.................................................. 5.50% 01/20/49 1,548,891
976,691 Pool BK0831.................................................. 5.50% 12/20/48 1,112,575
314,443 Pool BK4821.................................................. 5.50% 12/20/48 346,711
1,249,829 Pool BK5396.................................................. 5.50% 12/20/48 1,399,800
726,533 Pool BK7681.................................................. 5.50% 12/20/48 802,693
386,554 Pool BL1291.................................................. 5.50% 01/20/49 418,520
936,074 Pool BL4638.................................................. 5.50% 04/20/49 1,032,523
528,346 Pool BL6909.................................................. 5.00% 03/20/49 581,758
594,869 Pool BL6923.................................................. 6.00% 03/20/49 652,289
1,176,378 Pool BL7446.................................................. 5.50% 03/20/49 1,313,991
1,120,165 Pool BL7950.................................................. 5.50% 05/20/49 1,244,804
981,928 Pool BL9104.................................................. 5.50% 05/20/49 1,089,927
813,852 Pool BL9105.................................................. 5.50% 05/20/49 892,560
3,379,435 Pool BM5456.................................................. 5.50% 07/20/49 3,778,041
2,776,058 Pool BM5457.................................................. 5.50% 07/20/49 3,062,067
1,094,537 Pool BM9249.................................................. 5.50% 05/20/49 1,204,446
1,038,255 Pool BM9832.................................................. 5.50% 06/20/49 1,144,377
1,056,534 Pool BN1982.................................................. 5.50% 05/20/49 1,164,793
897,187 Pool BN1985.................................................. 5.50% 05/20/49 1,017,033
1,006,538 Pool BN1986.................................................. 5.50% 05/20/49 1,117,576
1,095,686 Pool BN1987.................................................. 5.50% 05/20/49 1,201,885
1,915,023 Pool BN1989.................................................. 5.50% 05/20/49 2,133,769
</TABLE>
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 1,772,434 Pool BN3607.................................................. 5.50% 05/20/49 $ 1,992,796
1,906,940 Pool BN3608.................................................. 5.50% 05/20/49 2,105,958
1,456,400 Pool BN8877.................................................. 5.50% 07/20/49 1,639,788
2,604,024 Pool BN9929.................................................. 5.50% 08/20/49 2,857,825
1,088,847 Pool BO2380.................................................. 5.50% 07/20/49 1,207,983
1,163,504 Pool BO5553.................................................. 5.50% 08/20/49 1,282,385
1,899,685 Pool BO5554.................................................. 5.50% 08/20/49 2,123,106
2,363,175 Pool BO5555.................................................. 5.50% 08/20/49 2,636,506
1,556,262 Pool BO6139.................................................. 5.50% 07/20/49 1,708,324
2,405,287 Pool BO8096.................................................. 5.50% 08/20/49 2,689,611
2,535,479 Pool BO8097.................................................. 5.50% 08/20/49 2,833,488
268,978 Pool MA1017.................................................. 6.00% 05/20/43 308,124
170,635 Pool MA1162.................................................. 6.00% 07/20/43 195,423
282,894 Pool MA2077.................................................. 5.50% 07/20/44 316,451
48,783 Pool MA2215.................................................. 3.50% 09/20/44 51,072
167,529 Pool MA2683.................................................. 6.00% 03/20/45 190,031
178,443 Pool MA2759.................................................. 6.00% 01/20/45 204,291
481,208 Pool MA2829.................................................. 5.00% 05/20/45 538,765
70,644 Pool MA2897.................................................. 6.00% 03/20/45 80,891
403,075 Pool MA2966.................................................. 6.00% 09/20/39 452,633
333,430 Pool MA3249.................................................. 6.00% 04/20/40 381,783
64,087 Pool MA3380.................................................. 5.50% 01/20/46 71,878
656,731 Pool MA3459.................................................. 6.00% 08/20/39 751,995
428,465 Pool MA3525.................................................. 5.50% 03/20/46 481,533
414,584 Pool MA3941.................................................. 5.50% 09/20/46 466,821
776,572 Pool MA4076.................................................. 7.00% 01/20/39 923,550
8,292,325 Pool MA5714.................................................. 6.00% 01/20/49 9,083,582
----------------
2,844,422,799
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 4,807,558,256
(Cost $ 4,679,832,701) ----------------
MORTGAGE-BACKED SECURITIES -- 4.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.7%
Alternative Loan Trust
57,333 Series 2003-J3, Class 2A1.................................... 6.25% 12/25/33 57,670
American Home Mortgage Investment Trust
2,627 Series 2004-3, Class 6A1..................................... 5.32% 10/25/34 2,615
Banc of America Funding Corp.
13,103 Series 2008-R2, Class 1A2 (h)................................ 6.00% 09/25/37 13,129
Banc of America Funding Trust
1,857 Series 2005-2, Class 2A4..................................... 5.75% 04/25/35 1,982
Banc of America Mortgage Trust
407,614 Series 2005-A, Class 2A2 (d)................................. 3.68% 02/25/35 380,306
BCAP LLC Trust
19,915 Series 2009-RR5, Class 8A1 (h)............................... 5.50% 11/26/34 20,660
Chase Home Lending Mortgage Trust
1,485,753 Series 2019-1, Class B1 (d) (h).............................. 3.96% 03/25/50 1,378,957
CHL Mortgage Pass-Through Trust
50,000 Series 2004-8, Class 1A7..................................... 5.75% 07/25/34 52,164
30,798 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 31,357
</TABLE>
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
CIM Trust
$ 4,635,038 Series 2017-7, Class A (h)................................... 3.00% 04/25/57 $ 4,600,011
17,924,288 Series 2019-INV1, Class A11 (h).............................. 4.00% 02/25/49 18,348,631
Citigroup Global Markets Mortgage Securities VII, Inc.
254 Series 2003-UP2, Class PO1, PO............................... (c) 12/25/18 231
Citigroup Mortgage Loan Trust
8,136 Series 2003-1, Class WA2..................................... 6.50% 06/25/31 8,113
COLT Mortgage Loan Trust
1,145,727 Series 2018-3, Class A1 (h).................................. 3.69% 10/26/48 1,158,066
Credit Suisse First Boston Mortgage Securities Corp.
4,479 Series 2003-11, Class 1A39................................... 5.25% 06/25/33 4,422
20,095 Series 2003-AR18, Class 2A3 (d).............................. 3.69% 07/25/33 19,049
4,144 Series 2004-AR8, Class 2A1 (d)............................... 3.99% 09/25/34 4,123
72,213 Series 2005-5, Class 3A2, 1 Mo. LIBOR + 0.30% (a)............ 0.79% 07/25/35 67,917
2,467 Series 2005-7, Class 1A5..................................... 5.15% 08/25/35 2,478
Credit Suisse Mortgage Capital Certificates
46,020 Series 2009-12R, Class 6A1 (h)............................... 6.00% 05/27/37 46,196
CSFB Mortgage-Backed Trust
496 Series 2004-7, Class 6A1..................................... 5.25% 10/25/19 505
CSMC
1,951,618 Series 2017-HL1, Class A3 (h)................................ 3.50% 06/25/47 1,983,738
3,556,547 Series 2017-HL2, Class A3 (h)................................ 3.50% 10/25/47 3,599,684
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust
2,869 Series 2005-3, Class 1A1 (d)................................. 4.27% 06/25/20 2,819
EverBank Mortgage Loan Trust
4,364,041 Series 2018-1, Class B1 (d) (h).............................. 3.64% 02/25/48 4,241,129
Flagstar Mortgage Trust
2,875,029 Series 2018-2, Class A4 (h).................................. 3.50% 04/25/48 2,996,072
2,603,119 Series 2018-4, Class B1 (d) (h).............................. 4.32% 07/25/48 2,630,012
Galton Funding Mortgage Trust
4,290,206 Series 2018-1, Class A43 (h)................................. 3.50% 11/25/57 4,315,177
6,434,443 Series 2018-2, Class A41 (h)................................. 4.50% 10/25/58 6,573,681
GMACM Mortgage Loan Trust
892 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 903
GS Mortgage-Backed Securities Corp. Trust
9,084,528 Series 2019-PJ3, Class A1 (h)................................ 3.50% 03/25/50 9,285,649
GSR Mortgage Loan Trust
27,625 Series 2004-8F, Class 2A3.................................... 6.00% 09/25/34 27,836
234,938 Series 2004-12, Class 3A6 (d)................................ 4.11% 12/25/34 223,008
Impac CMB Trust
16,148 Series 2003-4, Class 1A1, 1 Mo. LIBOR + 0.64% (a)............ 1.13% 10/25/33 16,114
427,464 Series 2004-6, Class M3, 1 Mo. LIBOR + 1.05% (a)............. 1.54% 10/25/34 417,462
JP Morgan Resecuritization Trust
74,724 Series 2009-7, Class 11A1 (d) (h)............................ 3.86% 09/27/36 74,319
304,308 Series 2009-7, Class 17A1 (d) (h)............................ 5.50% 07/27/37 302,508
JPMorgan Mortgage Trust
10,393 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 9,984
69,782 Series 2014-IVR3, Class 2A1 (d) (h).......................... 3.00% 09/25/44 70,747
7,467,636 Series 2014-IVR6, Class B1 (d) (h)........................... 2.85% 07/25/44 7,433,707
7,908,237 Series 2015-1, Class B2 (d) (h).............................. 2.97% 12/25/44 7,518,530
1,691,799 Series 2015-3, Class A5 (h).................................. 3.50% 05/25/45 1,701,205
1,189,904 Series 2016-1, Class A5 (h).................................. 3.50% 05/25/46 1,199,038
</TABLE>
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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)
$ 1,198,171 Series 2016-3, Class 1A3 (h)................................. 3.50% 10/25/46 $ 1,215,489
14,584,953 Series 2019-1, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.44% 05/25/49 14,283,766
4,157,203 Series 2019-2, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.44% 08/25/49 4,167,110
8,244,771 Series 2019-3, Class A11, 1 Mo. LIBOR + 0.95% (a) (h)........ 1.44% 09/25/49 8,043,351
6,187,395 Series 2019-5, Class A11, 1 Mo. LIBOR + 0.90% (a) (h)........ 1.39% 11/25/49 6,051,298
9,768,764 Series 2019-INV1, Class A11, 1 Mo. LIBOR +
0.95% (a) (h)............................................. 1.44% 10/25/49 9,657,927
MASTR Alternative Loan Trust
4,993 Series 2004-13, Class 8A1.................................... 5.50% 01/25/25 4,956
MASTR Asset Securitization Trust
164,189 Series 2003-11, Class 7A5.................................... 5.25% 12/25/33 167,651
226,784 Series 2003-12, Class 1A1.................................... 5.25% 12/25/24 225,441
33,598 Series 2003-12, Class 1A2.................................... 5.25% 12/25/24 32,766
9,885 Series 2004-1, Class 30PO, PO................................ (c) 02/25/34 8,059
10,156 Series 2004-3, Class 1A3..................................... 5.25% 03/25/24 10,250
MASTR Seasoned Securitization Trust
60,447 Series 2005-1, Class 3A1 (d)................................. 4.19% 10/25/32 56,699
2,423 Series 2005-2, Class 3A1..................................... 6.00% 11/25/17 2,427
MetLife Securitization Trust
5,502,214 Series 2018-1A, Class A (h).................................. 3.75% 03/25/57 5,705,742
Morgan Stanley Mortgage Loan Trust
2,627,469 Series 2005-6AR, Class 1M1, 1 Mo. LIBOR + 0.46% (a).......... 0.95% 11/25/35 2,616,716
New Residential Mortgage Loan Trust
712,326 Series 2014-2A, Class A3 (h)................................. 3.75% 05/25/54 731,641
7,115,945 Series 2015-2A, Class B1 (h)................................. 4.50% 08/25/55 7,300,382
8,745,936 Series 2016-1A, Class A1 (h)................................. 3.75% 03/25/56 8,964,745
1,954,871 Series 2017-5A, Class A1, 1 Mo. LIBOR + 1.50% (a) (h)........ 1.99% 06/25/57 1,916,618
Nomura Asset Acceptance Corp. Alternative Loan Trust
4,055 Series 2004-AP3, Class A6.................................... 5.29% 10/25/34 4,025
4,353 Series 2005-WF1, Class 2A5, steps up to 5.66% after
Redemption Date (g)....................................... 5.16% 03/25/35 4,545
Oaks Mortgage Trust
9,446,559 Series 2015-2, Class A8 (h).................................. 3.50% 10/25/45 9,477,186
OBX Trust
7,298,401 Series 2018-EXP1, Class 1A3 (h).............................. 4.00% 04/25/48 7,528,727
2,102,845 Series 2018-EXP2, Class 1A1 (h).............................. 4.00% 07/25/58 2,132,316
Prime Mortgage Trust
25,705 Series 2004-2, Class A2...................................... 4.75% 11/25/19 27,192
50,275 Series 2004-2, Class A6...................................... 5.00% 11/25/19 53,145
Provident Funding Mortgage Trust
470,391 Series 2019-1, Class A3 (h).................................. 3.00% 12/25/49 479,418
7,611,031 Series 2019-1, Class A5 (h).................................. 3.00% 12/25/49 7,694,326
2,017,373 Series 2020-1, Class A3 (h).................................. 3.00% 02/25/50 2,067,504
9,551,337 Series 2020-1, Class A5 (h).................................. 3.00% 02/25/50 9,760,265
RBSSP Resecuritization Trust
106,743 Series 2009-6, Class 9A4, 1 Mo. LIBOR + 0.45% (a) (h)........ 1.40% 11/26/36 105,081
Residential Accredit Loans, Inc.
3,397 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 3,456
Residential Asset Securitization Trust
103 Series 2004-A3, Class A4..................................... 5.25% 06/25/34 103
</TABLE>
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (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
$ 201,014 Series 2000-4, Class A, 1 Mo. LIBOR + 0.72% (a).............. 1.64% 11/22/24 $ 199,813
1,642,382 Series 2017-3, Class A4 (h).................................. 3.50% 04/25/47 1,677,936
2,372,584 Series 2018-CH2, Class A12 (h)............................... 4.00% 06/25/48 2,417,058
2,295,430 Series 2018-CH3, Class A10 (h)............................... 4.50% 08/25/48 2,320,290
324,727 Series 2018-CH3, Class A11 (h)............................... 4.00% 08/25/48 326,607
1,277,131 Series 2018-CH4, Class A10 (h)............................... 4.50% 10/25/48 1,287,836
9,026,383 Series 2020-1, Class A4 (h).................................. 3.50% 02/25/50 9,137,155
2,780,936 Series 2020-1, Class A19 (h)................................. 3.50% 02/25/50 2,803,025
Shellpoint Co-Originator Trust
1,012,366 Series 2016-1, Class 1A10 (h)................................ 3.50% 11/25/46 1,039,207
1,404,300 Series 2017-1, Class A4 (h).................................. 3.50% 04/25/47 1,440,947
Structured Asset Securities Corp.
2,217 Series 2004-4XS, Class A3A (j)............................... 5.15% 02/25/34 2,333
Structured Asset Securities Corp. Mortgage Loan Trust
16,484 Series 2002-9, Class A2, 1 Mo. LIBOR + 0.60% (a)............. 1.09% 10/25/27 16,339
Structured Asset Securities Corp. Mortgage Pass-Through
Certificates
18,798 Series 2004-11XS, Class 1A6 (j).............................. 5.18% 06/25/34 18,932
WaMu Mortgage Pass-Through Certificates Trust
26,341 Series 2003-S3, Class 3A1.................................... 5.50% 05/25/33 27,959
10,639 Series 2004-RS1, Class A11................................... 5.50% 11/25/33 11,065
Wells Fargo Mortgage Backed Securities Trust
3,119 Series 2004-K, Class 2A12 (d)................................ 4.98% 07/25/34 3,114
9,572,207 Series 2019-1, Class A1 (h).................................. 4.00% 11/25/48 9,828,855
4,795,847 Series 2019-1, Class A7 (h).................................. 4.00% 11/25/48 4,831,138
1,711,780 Series 2019-3, Class A1 (h).................................. 3.50% 07/25/49 1,765,079
WinWater Mortgage Loan Trust
48,662 Series 2014-1, Class A4 (h).................................. 3.50% 06/20/44 48,822
1,248,003 Series 2015-2, Class A5 (h).................................. 3.00% 02/20/45 1,248,880
4,017,706 Series 2015-3, Class A17 (h)................................. 2.50% 03/20/45 4,024,334
5,274,453 Series 2016-1, Class 1A18 (h)................................ 3.50% 01/20/46 5,291,558
4,860,562 Series 2016-1, Class B1 (d) (h).............................. 3.84% 01/20/46 4,868,258
----------------
245,958,767
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.1%
BAMLL Re-REMIC Trust
2,852,000 Series 2016-FR13, Class A (d) (h)............................ 1.60% 08/27/45 2,491,719
Sutherland Commercial Mortgage Trust
9,520 Series 2019-SBC8, Class A (h)................................ 2.86% 04/25/41 9,614
Wells Fargo Re-REMIC Trust
6,000,000 Series 2013-FRR1, Class AK16, PO (h)......................... (c) 12/27/43 5,456,416
----------------
7,957,749
----------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................ 253,916,516
(Cost $ 255,205,701) ----------------
ASSET-BACKED SECURITIES -- 1.4%
Aegis Asset Backed Securities Trust
1,235,122 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.44% (a)............. 0.93% 06/25/35 1,211,908
CIT Home Equity Loan Trust
928 Series 2003-1, Class A6 (j).................................. 4.56% 10/20/32 927
</TABLE>
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
Citicorp Residential Mortgage Trust
$ 25,489 Series 2007-2, Class A6 (j).................................. 5.02% 06/25/37 $ 25,665
Citigroup Global Markets Mortgage Securities VII, Inc.
1,864 Series 1998-AQ1, Class A6.................................... 6.63% 06/25/28 1,870
Countrywide Asset-Backed Certificates
5,482,793 Series 2005-9, Class M1, 1 Mo. LIBOR + 0.52% (a)............. 1.01% 01/25/36 5,459,109
Credit-Based Asset Servicing & Securitization LLC
5,045,345 Series 2007-MX1, Class A3, steps up to 6.33% after
Redemption Date (g) (h)................................... 5.83% 12/25/36 5,101,807
FBR Securitization Trust
2,529,419 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.75% (a)............. 1.24% 09/25/35 2,482,886
FCI Funding LLC
28,299,422 Series 2019-1A, Class A (h).................................. 3.63% 02/18/31 28,398,232
Fieldstone Mortgage Investment Trust
943,448 Series 2005-3, Class 2A2, 1 Mo. LIBOR + 0.52% (a)............ 1.01% 02/25/36 930,653
First Alliance Mortgage Loan Trust
27,411 Series 1999-1, Class A1...................................... 7.18% 06/20/30 27,203
Foursight Capital Automobile Receivables Trust
13,000,000 Series 2020-1, Class A3 (h).................................. 2.05% 10/15/24 12,923,427
Fremont Home Loan Trust
1,132,153 Series 2005-1, Class M4, 1 Mo. LIBOR + 1.02% (a)............. 1.51% 06/25/35 1,131,087
GMACM Home Equity Loan Trust
69,041 Series 2000-HE2, Class A1, 1 Mo. LIBOR + 0.44% (a)........... 2.84% 06/25/30 54,890
119,419 Series 2004-HE1, Class A3, 1 Mo. LIBOR + 0.50% (a)........... 0.99% 06/25/34 116,499
Morgan Stanley Dean Witter Capital I, Inc. Trust
5,331 Series 2003-NC2, Class M2, 1 Mo. LIBOR + 3.00% (a)........... 3.49% 02/25/33 5,125
New Century Home Equity Loan Trust
15,882 Series 2003-5, Class AI7..................................... 5.05% 11/25/33 16,088
Park Place Securities, Inc. Asset-Backed Pass-Through
Certificates
2,837,741 Series 2004-WCW2, Class M2, 1 Mo. LIBOR + 0.98% (a).......... 1.46% 10/25/34 2,816,015
Saxon Asset Securities Trust
3,783 Series 2004-2, Class MV3, 1 Mo. LIBOR + 1.91% (a)............ 2.39% 08/25/35 3,086
Towd Point Mortgage Trust
2,090,000 Series 2015-1, Class A2 (h).................................. 3.25% 10/25/53 2,105,364
1,333,671 Series 2015-2, Class 1A12 (h)................................ 2.75% 11/25/60 1,340,241
441,832 Series 2015-3, Class A4B (h)................................. 3.50% 03/25/54 449,284
1,377,947 Series 2015-4, Class A1B (h)................................. 2.75% 04/25/55 1,385,440
1,500,000 Series 2015-4, Class A2A (h)................................. 3.50% 04/25/55 1,514,013
1,247,810 Series 2015-5, Class A1B (h)................................. 2.75% 05/25/55 1,249,657
425,000 Series 2015-5, Class A2 (h).................................. 3.50% 05/25/55 435,526
1,406,144 Series 2016-1, Class A1B (h)................................. 2.75% 02/25/55 1,413,653
----------------
TOTAL ASSET-BACKED SECURITIES............................................................... 70,599,655
(Cost $70,782,925) ----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 0.0%
CAPITAL MARKETS -- 0.0%
11,750 First Trust Long Duration Opportunities ETF (k)............................................. 348,975
1,700 iShares 3-7 Year Treasury Bond ETF.......................................................... 226,678
----------------
TOTAL EXCHANGE-TRADED FUNDS................................................................. 575,653
(Cost $519,027) ----------------
</TABLE>
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT BONDS AND NOTES -- 0.0%
$ 200,000 U.S. Treasury Note.............................................. 1.63% 06/30/20 $ 200,506
----------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 200,506
(Cost $199,393) ----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
MONEY MARKET FUNDS -- 12.2%
640,913,946 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.07% (l).......................................................... 640,913,946
(Cost $640,913,946) ----------------
TOTAL INVESTMENTS -- 109.8%................................................................. 5,773,764,532
(Cost $5,647,453,693) (m) ----------------
</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 -- (10.3)%
Federal National Mortgage Association
$ (81,000,000) Pool TBA (i)................................................. 4.50% 05/15/39 (87,340,781)
(22,000,000) Pool TBA (i)................................................. 5.00% 05/15/41 (23,914,759)
(35,000,000) Pool TBA (i)................................................. 2.00% 05/15/50 (35,698,632)
(91,000,000) Pool TBA..................................................... 2.50% 05/15/50 (94,792,851)
(65,000,000) Pool TBA..................................................... 3.00% 05/15/50 (68,623,242)
(205,000,000) Pool TBA (i)................................................. 4.00% 06/15/50 (218,541,010)
Government National Mortgage Association
(10,000,000) Pool TBA (i)................................................. 4.00% 05/20/44 (10,639,053)
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT.......................... (539,550,328)
(Proceeds $538,916,836) ----------------
NET OTHER ASSETS AND LIABILITIES -- 0.5%.................................................... 24,040,327
----------------
NET ASSETS -- 100.0%........................................................................ $ 5,258,254,531
================
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2020 (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. Treasury Ultra Bond Futures Long 40 Jun-2020 $ 8,991,250 $ (11,050)
U.S. 5-Year Treasury Notes Short 4,231 Jun-2020 (530,924,391) (2,335,726)
U.S. 10-Year Treasury Notes Short 2,210 Jun-2020 (307,328,125) (12,211,321)
U.S. 10-Year Ultra Treasury Notes Short 830 Jun-2020 (130,335,937) (8,287,963)
U.S. Treasury Long Bond Futures Short 1,147 Jun-2020 (207,642,844) (16,483,566)
--------------- ----------------
$(1,167,240,047) $ (39,329,626)
=============== ================
</TABLE>
-----------------------------
(a) Floating or variable rate security.
(b) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors L.P.,
the Fund's advisor (the "Advisor").
(c) Zero coupon security.
(d) Collateral Strip Rate bond. Coupon is based on the weighted net interest
rate of the investment's underlying collateral. The interest rate resets
periodically.
(e) Inverse floating rate security.
Page 42 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
(f) 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.
(g) Step-up security. A security where the coupon increases or steps up at a
predetermined date.
(h) 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 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, 2020,
securities noted as such amounted to $339,219,572 or 6.5% of net assets.
(i) All or a 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).
(j) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(k) Investment in an affiliated fund.
(l) Rate shown reflects yield as of April 30, 2020.
(m) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $166,315,382 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $79,967,661. The net unrealized appreciation
was $86,347,721. The amounts presented are inclusive of investments sold
short and 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
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,
2020 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
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 4,807,558,256 $ -- $ 4,807,558,256 $ --
Mortgage-Backed Securities............................ 253,916,516 -- 253,916,516 --
Asset-Backed Securities............................... 70,599,655 -- 70,599,655 --
Exchange-Traded Funds*................................ 575,653 575,653 -- --
U.S. Government Bonds and Notes....................... 200,506 -- 200,506 --
Money Market Funds.................................... 640,913,946 640,913,946 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... $ 5,773,764,532 $ 641,489,599 $ 5,132,274,933 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Government Agency Mortgage-Backed
Securities Sold Short.............................. $ (539,550,328) $ -- $ (539,550,328) $ --
Futures Contracts**................................... (39,329,626) (39,329,626) -- --
--------------- --------------- --------------- ---------------
Total................................................. $ (578,879,954) $ (39,329,626) $ (539,550,328) $ --
=============== =============== =============== ===============
</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 43
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated...................................... $5,773,415,557
Investments, at value - Affiliated........................................ 348,975
--------------
Total investments, at value............................................... 5,773,764,532
Cash...................................................................... 5,850,000
Cash segregated as collateral for open futures contracts.................. 18,982,915
Receivables:
Investment securities sold............................................. 1,788,113,959
Capital shares sold.................................................... 33,516,578
Interest............................................................... 17,444,959
Dividends.............................................................. 113,010
--------------
Total Assets........................................................... 7,637,785,953
--------------
LIABILITIES:
Investments sold short, at value (proceeds $538,916,836).................. 539,550,328
Payables:
Investment securities purchased........................................ 1,837,055,735
Investment advisory fees............................................... 2,739,642
Variation margin....................................................... 185,717
--------------
Total Liabilities...................................................... 2,379,531,422
--------------
NET ASSETS................................................................ $5,258,254,531
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $5,265,201,550
Par value................................................................. 1,020,000
Accumulated distributable earnings (loss)................................. (7,967,019)
--------------
NET ASSETS................................................................ $5,258,254,531
==============
NET ASSET VALUE, per share................................................ $ 51.55
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................. 102,000,002
==============
Investments, at cost - Unaffiliated....................................... $5,647,148,500
==============
Investments, at cost - Affiliated......................................... $ 305,193
==============
Total investments, at cost................................................ $5,647,453,693
==============
</TABLE>
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 58,670,355
Dividends - Unaffiliated.................................................. 1,774,118
Dividends - Affiliated.................................................... 9,227
--------------
Total investment income................................................ 60,453,700
--------------
EXPENSES:
Investment advisory fees.................................................. 14,482,314
--------------
Total expenses......................................................... 14,482,314
--------------
NET INVESTMENT INCOME (LOSS).............................................. 45,971,386
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................. (23,129,315)
Investments - Affiliated............................................... --
Investments sold short................................................. (5,511,016)
Futures contracts...................................................... (27,847,460)
Purchased options contracts............................................ (350,534)
Written options contracts.............................................. 1,597,523
--------------
Net realized gain (loss).................................................. (55,240,802)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................. 65,932,286
Investments - Affiliated............................................... 22,677
Investments sold short................................................. (338,935)
Futures contracts...................................................... (41,832,067)
Purchased options contracts............................................ (29,558)
Written options contracts.............................................. --
--------------
Net change in unrealized appreciation (depreciation)...................... 23,754,403
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (31,486,399)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 14,484,987
==============
</TABLE>
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2020 ENDED
(UNAUDITED) 10/31/2019
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 45,971,386 $ 65,051,358
Net realized gain (loss).................................................. (55,240,802) (28,220,321)
Net change in unrealized appreciation (depreciation)...................... 23,754,403 87,648,689
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 14,484,987 124,479,726
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (52,065,001) (67,215,845)
Return of capital......................................................... -- (4,340,158)
-------------- --------------
Total distributions to shareholders....................................... (52,065,001) (71,556,003)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 1,609,091,961 1,983,467,078
Cost of shares redeemed................................................... (78,726,418) --
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................... 1,530,365,543 1,983,467,078
-------------- --------------
Total increase (decrease) in net assets................................... 1,492,785,529 2,036,390,801
NET ASSETS:
Beginning of period....................................................... 3,765,469,002 1,729,078,201
-------------- --------------
End of period............................................................. $5,258,254,531 $3,765,469,002
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 72,600,002 34,050,002
Shares sold............................................................... 30,950,000 38,550,000
Shares redeemed........................................................... (1,550,000) --
-------------- --------------
Shares outstanding, end of period......................................... 102,000,002 72,600,002
============== ==============
</TABLE>
Page 46 See Notes to Financial Statements
<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
4/30/2020 --------------------------------------------------------- ENDED
(UNAUDITED) 2019 2018 2017 2016 10/31/2015 (a)
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 51.87 $ 50.78 $ 51.76 $ 52.54 $ 50.32 $ 50.00
---------- ---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.56 1.24 1.17 1.13 1.31 1.23 (b)
Net realized and unrealized gain (loss).. (0.28) 1.21 (0.74) (0.50) 2.41 0.55
---------- ---------- ---------- ---------- ---------- --------
Total from investment operations.... 0.28 2.45 0.43 0.63 3.72 1.78
---------- ---------- ---------- ---------- ---------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.60) (1.23) (1.13) (1.14) (1.50) (1.46)
Net realized gain........................ -- (0.05) (0.28) (0.02) -- --
Return of capital........................ -- (0.08) -- (0.25) -- --
---------- ---------- ---------- ---------- ---------- --------
Total distributions...................... (0.60) (1.36) (1.41) (1.41) (1.50) (1.46)
---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period........... $ 51.55 $ 51.87 $ 50.78 $ 51.76 $ 52.54 $ 50.32
========== ========== ========== ========== ========== ========
TOTAL RETURN (c)......................... 0.56% 4.88% 0.84% 1.22% 7.49% 3.62%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $5,258,255 $3,765,469 $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% 0.65%(e)
Ratio of net investment income (loss) to
average net assets.................... 2.06% (e) 2.41% 2.32% 2.20% 2.06% 2.55%(e)
Portfolio turnover rate (f).............. 238% (g) 373% (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 141%
for the six months ended April 30, 2020, and 246%, 117% and 97% for the
years ended October 31, 2019, 2018 and 2017, respectively.
See Notes to Financial Statements Page 47
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (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 60% 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, including
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. 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 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 48
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (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
Page 49
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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 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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
Page 50
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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, 2020, the Fund had no when-issued or
delayed-delivery securities. At April 30, 2020, the Fund held $833,851,405 of
forward purchase commitments.
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 or gain exposure to 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
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 may also invest up to 20% of its net
assets in over-the-counter derivatives. 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
Page 51
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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.
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
Page 52
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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.
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, 2020 and for the six months
then ended are as follows:
<TABLE>
<CAPTION>
CHANGES IN
UNREALIZED REALIZED
SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND
SECURITY NAME 4/30/2020 10/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2020 INCOME
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust Long Duration
Opportunities ETF 11,750 $ 326,298 $ -- $ -- $ 22,677 $ -- $ 348,975 $ 9,227
=================================================================================
</TABLE>
K. DIVIDENDS AND DISTRIBUTION 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 gains earned by the Fund, if any, are distributed
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,
2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 69,256,766
Capital gains................................... 1,877,704
Return of capital............................... 4,340,158
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (30,998,224)
Net unrealized appreciation (depreciation)...... 60,611,219
Page 53
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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 2016,
2017, 2018, and 2019 remain open to federal and state audit. As of April 30,
2020, 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, 2019, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $30,998,224.
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, 2019, the Fund had no
net late year ordinary or capital 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 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. ASU 2017-08 was adopted for
these financial statements and did not have 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.
Page 54
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (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,
a defined-outcome 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, 2020, were $7,207,770,555 and $432,144,522,
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, 2020, were
$5,438,743,356 and $638,716,310, respectively. The cost of purchases to cover
investments sold short and the proceeds of investments sold short were
$5,665,319,219 and $5,856,517,266, respectively.
For the six months ended April 30, 2020, 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, 2020, 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* $ -- futures contracts* $39,329,626
</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, 2020, 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 $ (27,847,460)
Purchased options contracts (350,534)
Written options contracts 1,597,523
Net change in unrealized appreciation (depreciation) on:
Futures contracts (41,832,067)
Purchased options contracts (29,558)
Written options contracts --
</TABLE>
For the six months ended April 30, 2020, the notional value of futures contracts
opened and closed were $3,604,247,990 and $2,845,460,908, respectively.
Page 55
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
During the six months ended April 30, 2020, the premiums for purchased options
contracts opened were $441,961 and the premiums for purchased options contracts
closed, exercised and expired were $480,840.
During the six months ended April 30, 2020, the premiums for written options
contracts opened were $3,010,388 and the premiums for written options contracts
closed, exercised and expired were $3,010,388.
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 increase or decrease with changes
in the Fund's portfolio. 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 increase or decrease with changes in the Fund's
portfolio. 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, 2021.
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 LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (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)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2020 (UNAUDITED)
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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First Trust Exchange-Traded Fund IV
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
For the Six Months Ended
April 30, 2020
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2020
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 LLC (“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’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on the Fund’s web page 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 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, 2020
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, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states were set to open some “nonessential” businesses by early May. As of May 20, 2020, I am pleased to report that all 50 states and U.S. territories have eased some restrictions on businesses and social activity. Keep in mind, however, that the plan does entail governors phasing in the opening of businesses in the coming weeks or potentially months, so I see this news as essentially marking the beginning of the rebuilding process for the U.S. economy. We all need to be aware as well of the possibility of an uptick or even surge in the coronavirus (“COVID-19”) infections as more people venture out of their homes. Prior to the last couple of weeks or so, the stay-at-home mandate severely restricted the movements of close to 315 million Americans, according to The Washington Post. To put this further into perspective, because so many stores have been closed and so many people have been hunkering down at home, retail-store traffic in the U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the state of the U.S. economy, which is expected to go from bad to downright terrible between the first quarter and second quarter of the year, and the performance of the stock market, which has been much better than expected. While the data and commentary in this report are technically supposed to run through April 30, 2020, I feel compelled to offer insight that is as up to date as possible. The 2020 peak in the stock market, as measured by the S&P 500® Index (the “Index”), occurred on February 19. That day also marked the all-time high for the Index. From February 19, 2020, through March 23, 2020, the Index declined by 33.92% on a price-only basis (no dividends included), according to Bloomberg. We should note that the Index slid into bear market territory on March 12, 2020. A bear market is defined by a 20% or greater decline in price from its most recent peak. That took just 16 trading days, the quickest plunge into a bear market ever. From March 23, 2020 through May 20, 2020, the Index staged an impressive rebound, posting a price-only gain of 32.82%, according to Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time high set on February 19, 2020. But the game, as they say, is not over. Even though stocks have rebounded significantly from their March lows, 68% of the money managers that participated in the most recent Bank of America global fund manager survey believe that stocks are still in a bear market, according to MarketWatch. What are they likely concerned about? In addition to a dismal economic outlook for the near-term, research from Bespoke Investment Group, an independent research firm, indicates that there have been 25 bear markets since 1928 and 60% of the time the Index declined a second time during the bear market and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office announced on May 19, 2020, that it sees real U.S. gross domestic product (“GDP”) declining by an annualized 38% in the second quarter of 2020, reportedly in line with Wall Street economists, according to CNBC. Some estimates are more dire. The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These numbers are so large in scope they are mind-boggling. The Bureau of Economic Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we may continue to have a disconnect between the economy and the markets. Let us hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect lives and prevent our health care system from being overwhelmed by COVID-19 patients. Our economic woes, in other words, are man-made. The remedies to this pandemic will also likely be man-made. They could come in the form of therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Fund Performance Overview (Unaudited)
First Trust 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 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
4/30/20 | 1 Year Ended
4/30/20 | Inception (11/3/15)
to 4/30/20 | Inception (11/3/15)
to 4/30/20 |
| Fund Performance | | | | |
| NAV | 1.96% | 4.09% | 7.64% | 39.18% |
| Market Price | 2.70% | 4.45% | 7.74% | 39.73% |
| Index Performance | | | | |
| ICE BofA All US Convertible Index | 1.44% | 4.38% | 8.30% | 43.02% |
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 | 37.3% |
| Health Care | 20.8 |
| Consumer Discretionary | 11.8 |
| Communication Services | 9.0 |
| Financials | 6.4 |
| Utilities | 5.9 |
| Industrials | 5.3 |
| Real Estate | 1.8 |
| Materials | 1.1 |
| Energy | 0.6 |
| Total | 100.0% |
| Top Ten Holdings | % of Total
Investments |
| Wells Fargo & Co., Series L | 2.9% |
| Bank of America Corp., Series L | 2.5 |
| Tesla, Inc., 5/15/24 | 2.3 |
| DexCom, Inc., 12/01/23 | 2.2 |
| Broadcom, Inc., Series A, 9/30/22 | 2.1 |
| Akamai Technologies, Inc., 5/01/25 | 1.9 |
| Tesla, Inc., 3/15/22 | 1.9 |
| Microchip Technology, Inc., 2/15/27 | 1.7 |
| Lumentum Holdings, Inc., 12/15/26 | 1.6 |
| Coupa Software, Inc., 6/15/25 | 1.5 |
| Total | 20.6% |
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, 2020
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, 2020. 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 – 10/31/19 | 61 | 5 | 0 | 0 |
| 11/1/19 – 4/30/20 | 41 | 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 – 10/31/19 | 173 | 10 | 1 | 1 |
| 11/1/19 – 4/30/20 | 49 | 17 | 4 | 9 |
Portfolio Management
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2020 (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 LLC
SSI Investment Management LLC (“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
Stephen R. Wachtel – Portfolio Manager of SSI
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Understanding Your Fund Expenses
April 30, 2020 (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, 2020.
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, 2019 | Ending
Account Value
April 30, 2020 | 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 | $1,019.60 | 0.96% | $4.82 |
| Hypothetical (5% return before expenses) | $1,000.00 | $1,020.09 | 0.96% | $4.82 |
| (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, 2019 through April 30, 2020), multiplied by 182/366 (to reflect the six-month period). |
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments
April 30, 2020 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS – 78.0% |
| | | Airlines – 1.0% | | | | | | |
| $595,000 | | Copa Holdings S.A. (a)
| | 4.50% | | 04/15/25 | | $605,682 |
| 850,000 | | Southwest Airlines Co.
| | 1.25% | | 05/01/25 | | 942,363 |
| | | | | 1,548,045 |
| | | Automobiles – 5.0% | | | | | | |
| 300,000 | | Tesla, Inc.
| | 1.25% | | 03/01/21 | | 662,967 |
| 1,330,000 | | Tesla, Inc.
| | 2.00% | | 05/15/24 | | 3,450,751 |
| 1,185,000 | | Tesla, Inc.
| | 2.38% | | 03/15/22 | | 2,905,917 |
| 760,000 | | Winnebago Industries, Inc. (a)
| | 1.50% | | 04/01/25 | | 720,556 |
| | | | | 7,740,191 |
| | | Biotechnology – 5.9% | | | | | | |
| 1,325,000 | | BioMarin Pharmaceutical, Inc.
| | 0.60% | | 08/01/24 | | 1,424,204 |
| 715,000 | | Bridgebio Pharma, Inc. (a)
| | 2.50% | | 03/15/27 | | 698,466 |
| 1,475,000 | | Exact Sciences Corp.
| | 0.38% | | 03/15/27 | | 1,439,033 |
| 700,000 | | Halozyme Therapeutics, Inc. (a)
| | 1.25% | | 12/01/24 | | 804,746 |
| 590,000 | | Insmed, Inc.
| | 1.75% | | 01/15/25 | | 556,812 |
| 878,000 | | Intercept Pharmaceuticals, Inc.
| | 2.00% | | 05/15/26 | | 902,163 |
| 750,000 | | Ionis Pharmaceuticals, Inc. (a)
| | 0.13% | | 12/15/24 | | 720,184 |
| 420,000 | | Neurocrine Biosciences, Inc.
| | 2.25% | | 05/15/24 | | 590,580 |
| 1,050,000 | | PTC Therapeutics, Inc. (a)
| | 1.50% | | 09/15/26 | | 1,270,420 |
| 436,000 | | Sarepta Therapeutics, Inc.
| | 1.50% | | 11/15/24 | | 769,976 |
| | | | | 9,176,584 |
| | | Communications Equipment – 2.3% | | | | | | |
| 2,250,000 | | Lumentum Holdings, Inc., Series QIB (a)
| | 0.50% | | 12/15/26 | | 2,386,936 |
| 1,050,000 | | Viavi Solutions, Inc.
| | 1.00% | | 03/01/24 | | 1,181,906 |
| | | | | 3,568,842 |
| | | Diversified Consumer Services – 0.9% | | | | | | |
| 1,275,000 | | Chegg, Inc.
| | 0.13% | | 03/15/25 | | 1,344,038 |
| | | Diversified Financial Services – 0.5% | | | | | | |
| 900,000 | | AXA S.A. (a)
| | 7.25% | | 05/15/21 | | 792,562 |
| | | Diversified Telecommunication Services – 0.2% | | | | | | |
| 7,300 | | CenterPoint Energy, Inc.
| | 4.57% | | 09/15/29 | | 386,024 |
| | | Electronic Equipment, Instruments & Components – 1.9% | | | | | | |
| 725,000 | | II-VI, Inc.
| | 0.25% | | 09/01/22 | | 717,569 |
| 830,000 | | Insight Enterprises, Inc. (a)
| | 0.75% | | 02/15/25 | | 835,104 |
| 650,000 | | OSI Systems, Inc.
| | 1.25% | | 09/01/22 | | 626,057 |
| 775,000 | | Vishay Intertechnology, Inc.
| | 2.25% | | 06/15/25 | | 716,167 |
| | | | | 2,894,897 |
| | | Entertainment – 2.6% | | | | | | |
| 575,000 | | Liberty Media Corp. - Liberty Formula One
| | 1.00% | | 01/30/23 | | 611,706 |
| 875,000 | | Live Nation Entertainment, Inc.
| | 2.50% | | 03/15/23 | | 837,900 |
| 1,050,000 | | Sea Ltd. (a)
| | 1.00% | | 12/01/24 | | 1,354,791 |
| 1,075,000 | | Zynga, Inc. (a)
| | 0.25% | | 06/01/24 | | 1,199,297 |
| | | | | 4,003,694 |
| | | Equity Real Estate Investment Trusts – 0.5% | | | | | | |
| 605,000 | | IH Merger Sub LLC
| | 3.50% | | 01/15/22 | | 701,044 |
| | | Health Care Equipment & Supplies – 5.9% | | | | | | |
| 885,000 | | CONMED Corp.
| | 2.63% | | 02/01/24 | | 939,759 |
Page 6
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2020 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Health Care Equipment & Supplies (Continued) | | | | | | |
| $1,600,000 | | DexCom, Inc.
| | 0.75% | | 12/01/23 | | $3,374,274 |
| 325,000 | | Insulet Corp.
| | 1.38% | | 11/15/24 | | 707,744 |
| 1,975,000 | | Insulet Corp. (a)
| | 0.38% | | 09/01/26 | | 2,225,578 |
| 1,040,000 | | Integra LifeSciences Holdings Corp. (a)
| | 0.50% | | 08/15/25 | | 982,050 |
| 1,022,000 | | NuVasive, Inc. (a)
| | 0.38% | | 03/15/25 | | 944,737 |
| | | | | 9,174,142 |
| | | Health Care Providers & Services – 0.6% | | | | | | |
| 230,000 | | Anthem, Inc.
| | 2.75% | | 10/15/42 | | 900,588 |
| | | Health Care Technology – 0.9% | | | | | | |
| 465,000 | | Teladoc Health, Inc.
| | 1.38% | | 05/15/25 | | 1,438,271 |
| | | Hotels, Restaurants & Leisure – 0.8% | | | | | | |
| 755,000 | | Carnival Corp. (a)
| | 5.75% | | 04/01/23 | | 1,274,870 |
| | | Interactive Media & Services – 4.1% | | | | | | |
| 1,990,000 | | IAC FinanceCo 2, Inc. (a)
| | 0.88% | | 06/15/26 | | 2,043,481 |
| 410,000 | | IAC FinanceCo., Inc. (a)
| | 0.88% | | 10/01/22 | | 632,938 |
| 1,180,000 | | Snap, Inc. (a)
| | 0.75% | | 08/01/26 | | 1,225,123 |
| 1,200,000 | | Twitter, Inc.
| | 0.25% | | 06/15/24 | | 1,121,743 |
| 1,155,000 | | Zillow Group, Inc. (a)
| | 0.75% | | 09/01/24 | | 1,353,544 |
| | | | | 6,376,829 |
| | | Internet & Direct Marketing Retail – 3.2% | | | | | | |
| 860,000 | | Booking Holdings, Inc.
| | 0.35% | | 06/15/20 | | 981,109 |
| 1,330,000 | | Booking Holdings, Inc. (a)
| | 0.75% | | 05/01/25 | | 1,507,290 |
| 505,000 | | Etsy, Inc. (a)
| | 0.13% | | 10/01/26 | | 514,205 |
| 285,000 | | Pinduoduo, Inc. (a)
| | (b) | | 10/01/24 | | 361,555 |
| 1,310,000 | | Wayfair, Inc.
| | 1.13% | | 11/01/24 | | 1,613,756 |
| | | | | 4,977,915 |
| | | IT Services – 6.4% | | | | | | |
| 2,445,000 | | Akamai Technologies, Inc.
| | 0.13% | | 05/01/25 | | 2,913,748 |
| 650,000 | | KBR Inc.
| | 2.50% | | 11/01/23 | | 689,406 |
| 1,135,000 | | MongoDB, Inc. (a)
| | 0.25% | | 01/15/26 | | 1,190,818 |
| 1,715,000 | | Okta, Inc. (a)
| | 0.13% | | 09/01/25 | | 1,819,264 |
| 280,000 | | Perficient, Inc.
| | 2.38% | | 09/15/23 | | 313,425 |
| 680,000 | | Sabre GLBL, Inc. (a)
| | 4.00% | | 04/15/25 | | 809,447 |
| 1,375,000 | | Square, Inc.
| | 0.50% | | 05/15/23 | | 1,548,594 |
| 340,000 | | Twilio, Inc.
| | 0.25% | | 06/01/23 | | 565,776 |
| | | | | 9,850,478 |
| | | Life Sciences Tools & Services – 1.8% | | | | | | |
| 720,000 | | Illumina, Inc.
| | (b) | | 08/15/23 | | 742,926 |
| 665,000 | | Illumina, Inc.
| | 0.50% | | 06/15/21 | | 894,668 |
| 925,000 | | Repligen Corp.
| | 0.38% | | 07/15/24 | | 1,103,687 |
| | | | | 2,741,281 |
| | | Machinery – 0.7% | | | | | | |
| 1,060,000 | | Meritor, Inc.
| | 3.25% | | 10/15/37 | | 1,020,250 |
| | | Media – 3.5% | | | | | | |
| 2,425,000 | | DISH Network Corp.
| | 3.38% | | 08/15/26 | | 1,971,768 |
| 1,275,000 | | GCI Liberty, Inc. (a)
| | 1.75% | | 09/30/46 | | 1,763,554 |
| 710,000 | | Liberty Media Corp. (a)
| | 2.75% | | 12/01/49 | | 665,240 |
See Notes to Financial Statements
Page 7
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2020 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Media (Continued) | | | | | | |
| $900,000 | | Liberty Media Corp.
| | 1.38% | | 10/15/23 | | $942,764 |
| | | | | 5,343,326 |
| | | Metals & Mining – 0.6% | | | | | | |
| 780,000 | | SSR Mining, Inc.
| | 2.50% | | 04/01/39 | | 955,500 |
| | | Oil, Gas & Consumable Fuels – 0.6% | | | | | | |
| 1,000,000 | | TOTAL S.A., Series FP (c)
| | 0.50% | | 12/02/22 | | 968,705 |
| | | Pharmaceuticals – 0.7% | | | | | | |
| 850,000 | | Horizon Pharma Investment Ltd.
| | 2.50% | | 03/15/22 | | 1,120,406 |
| | | Professional Services – 0.9% | | | | | | |
| 1,050,000 | | FTI Consulting, Inc.
| | 2.00% | | 08/15/23 | | 1,455,664 |
| | | Semiconductors & Semiconductor Equipment – 9.0% | | | | | | |
| 235,000 | | Advanced Micro Devices, Inc.
| | 2.13% | | 09/01/26 | | 1,540,374 |
| 660,000 | | Cree, Inc. (a)
| | 1.75% | | 05/01/26 | | 755,293 |
| 1,700,000 | | Inphi Corp. (a)
| | 0.75% | | 04/15/25 | | 1,797,546 |
| 970,000 | | Microchip Technology, Inc.
| | 1.63% | | 02/15/25 | | 1,772,250 |
| 2,090,000 | | Microchip Technology, Inc.
| | 1.63% | | 02/15/27 | | 2,617,056 |
| 205,000 | | Micron Technology, Inc., Series D
| | 3.13% | | 05/01/32 | | 985,758 |
| 95,000 | | Novellus Systems, Inc.
| | 2.63% | | 05/15/41 | | 759,043 |
| 1,005,000 | | ON Semiconductor Corp.
| | 1.63% | | 10/15/23 | | 1,097,717 |
| 275,000 | | Silicon Laboratories, Inc.
| | 1.38% | | 03/01/22 | | 331,147 |
| 1,035,000 | | Synaptics, Inc.
| | 0.50% | | 06/15/22 | | 1,134,901 |
| 530,000 | | Teradyne, Inc.
| | 1.25% | | 12/15/23 | | 1,082,008 |
| | | | | 13,873,093 |
| | | Software – 15.2% | | | | | | |
| 710,000 | | Alteryx, Inc. (a)
| | 0.50% | | 08/01/24 | | 678,741 |
| 760,000 | | Atlassian, Inc.
| | 0.63% | | 05/01/23 | | 1,477,181 |
| 740,000 | | Blackline, Inc. (a)
| | 0.13% | | 08/01/24 | | 788,467 |
| 1,805,000 | | Coupa Software, Inc. (a)
| | 0.13% | | 06/15/25 | | 2,304,162 |
| 850,000 | | DocuSign, Inc.
| | 0.50% | | 09/15/23 | | 1,328,635 |
| 1,050,000 | | Envestnet, Inc.
| | 1.75% | | 06/01/23 | | 1,172,063 |
| 1,000,000 | | Everbridge, Inc. (a)
| | 0.13% | | 12/15/24 | | 1,183,845 |
| 1,145,000 | | j2 Global, Inc. (a)
| | 1.75% | | 11/01/26 | | 1,076,959 |
| 1,100,000 | | Nuance Communications, Inc.
| | 1.25% | | 04/01/25 | | 1,331,000 |
| 1,525,000 | | Palo Alto Networks, Inc.
| | 0.75% | | 07/01/23 | | 1,566,175 |
| 1,000,000 | | Pegasystems, Inc. (a)
| | 0.75% | | 03/01/25 | | 971,789 |
| 825,000 | | Proofpoint, Inc. (a)
| | 0.25% | | 08/15/24 | | 858,389 |
| 840,000 | | Q2 Holdings, Inc. (a)
| | 0.75% | | 06/01/26 | | 904,964 |
| 372,000 | | RingCentral, Inc.
| | (b) | | 03/15/23 | | 1,024,678 |
| 615,000 | | ServiceNow, Inc.
| | (b) | | 06/01/22 | | 1,615,235 |
| 685,000 | | Slack Technologies, Inc. (a)
| | 0.50% | | 04/15/25 | | 762,286 |
| 1,900,000 | | Splunk, Inc.
| | 0.50% | | 09/15/23 | | 2,189,744 |
| 1,240,000 | | Workday, Inc.
| | 0.25% | | 10/01/22 | | 1,523,073 |
| 570,000 | | Zendesk, Inc.
| | 0.25% | | 03/15/23 | | 772,396 |
| | | | | 23,529,782 |
| | | Specialty Retail – 1.7% | | | | | | |
| 565,000 | | Burlington Stores, Inc. (a)
| | 2.25% | | 04/15/25 | | 601,553 |
| 795,000 | | Dick’s Sporting Goods, Inc. (a)
| | 3.25% | | 04/15/25 | | 851,082 |
| 1,230,000 | | RH
| | (b) | | 06/15/23 | | 1,201,556 |
| | | | | 2,654,191 |
Page 8
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2020 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Trading Companies & Distributors – 0.6% | | | | | | |
| $900,000 | | Kaman Corp.
| | 3.25% | | 05/01/24 | | $860,013 |
| | | Total Convertible Corporate Bonds
| | 120,671,225 |
| | | (Cost $102,656,886) | | | | | | |
| Shares | | Description | | Stated
Rate | | Stated
Maturity (d) | | Value |
| CONVERTIBLE PREFERRED SECURITIES – 20.4% |
| | | Banks – 5.3% | | | | | | |
| 2,775 | | Bank of America Corp., Series L
| | 7.25% | | (e) | | 3,836,160 |
| 3,110 | | Wells Fargo & Co., Series L
| | 7.50% | | (e) | | 4,350,392 |
| | | | | 8,186,552 |
| | | Chemicals – 0.4% | | | | | | |
| 14,500 | | International Flavors & Fragrances, Inc.
| | 6.00% | | 09/15/21 | | 689,475 |
| | | Electric Utilities – 3.3% | | | | | | |
| 13,725 | | American Electric Power Co., Inc.
| | 6.13% | | 03/15/22 | | 697,230 |
| 28,000 | | NextEra Energy, Inc.
| | 4.87% | | 09/01/22 | | 1,342,320 |
| 39,000 | | NextEra Energy, Inc.
| | 5.28% | | 03/01/23 | | 1,684,410 |
| 28,875 | | Southern Co. (The)
| | 6.75% | | 08/01/22 | | 1,366,943 |
| | | | | 5,090,903 |
| | | Equity Real Estate Investment Trusts – 1.8% | | | | | | |
| 1,485 | | Crown Castle International Corp., Series A
| | 6.88% | | 08/01/20 | | 2,068,605 |
| 4,625 | | QTS Realty Trust, Inc., Series B
| | 6.50% | | (e) | | 649,998 |
| | | | | 2,718,603 |
| | | Health Care Equipment & Supplies – 1.4% | | | | | | |
| 1,825 | | Danaher Corp., Series A
| | 4.75% | | 04/15/22 | | 2,170,144 |
| | | Health Care Technology – 0.4% | | | | | | |
| 13,778 | | Change Healthcare, Inc.
| | 6.00% | | 06/30/22 | | 637,370 |
| | | Life Sciences Tools & Services – 0.9% | | | | | | |
| 25,605 | | Avantor, Inc., Series A
| | 6.25% | | 05/15/22 | | 1,474,336 |
| | | Machinery – 2.1% | | | | | | |
| 5,415 | | Colfax Corp.
| | 5.75% | | 01/15/22 | | 616,768 |
| 1,300 | | Fortive Corp., Series A
| | 5.00% | | 07/01/21 | | 1,078,714 |
| 19,425 | | Stanley Black & Decker, Inc.
| | 5.25% | | 11/15/22 | | 1,544,482 |
| | | | | 3,239,964 |
| | | Multi-Utilities – 1.8% | | | | | | |
| 10,600 | | Dominion Energy, Inc, Series A
| | 7.25% | | 06/01/22 | | 1,041,238 |
| 17,000 | | Sempra Energy, Series A
| | 6.00% | | 01/15/21 | | 1,739,270 |
| | | | | 2,780,508 |
| | | Pharmaceuticals – 0.5% | | | | | | |
| 16,240 | | Elanco Animal Health, Inc.
| | 5.00% | | 02/01/23 | | 747,040 |
| | | Semiconductors & Semiconductor Equipment – 2.0% | | | | | | |
| 3,110 | | Broadcom, Inc., Series A
| | 8.00% | | 09/30/22 | | 3,164,238 |
See Notes to Financial Statements
Page 9
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2020 (Unaudited)
| Shares | | Description | | Stated
Rate | | Stated
Maturity (d) | | Value |
| CONVERTIBLE PREFERRED SECURITIES (Continued) |
| | | Water Utilities – 0.5% | | | | | | |
| 12,515 | | Essential Utilities, Inc.
| | 6.00% | | 04/30/22 | | $714,607 |
| | | Total Convertible Preferred Securities
| | 31,613,740 |
| | | (Cost $30,883,876) | | | | | | |
| | | Total Investments – 98.4%
| | 152,284,965 |
| | | (Cost $133,540,762) (f) | | | | | | |
| | Net Other Assets and Liabilities – 1.6%
| | 2,403,405 |
| | Net Assets – 100.0%
| | $154,688,370 |
|
| (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 (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund’s advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2020, securities noted as such amounted to $44,237,514 or 28.6% of net assets. |
| (b) | Zero coupon security. |
| (c) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| (d) | Stated maturity represents the mandatory conversion date. |
| (e) | Perpetual maturity. |
| (f) | Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of April 30, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $21,736,734 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,992,531. The net unrealized appreciation was $18,744,203. |
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of April 30, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | Total
Value at
4/30/2020 | Level 1
Quoted
Prices | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Convertible Corporate Bonds*
| $ 120,671,225 | $ — | $ 120,671,225 | $ — |
Convertible Preferred Securities*
| 31,613,740 | 31,613,740 | — | — |
Total Investments
| $ 152,284,965 | $ 31,613,740 | $ 120,671,225 | $— |
| * | 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, 2020 (Unaudited)
| ASSETS: | |
Investments, at value
(Cost $133,540,762)
| $ 152,284,965 |
Cash
| 2,574,504 |
| Receivables: | |
Investment securities sold
| 1,777,782 |
Interest
| 277,734 |
Dividends
| 98,834 |
Total Assets
| 157,013,819 |
| LIABILITIES: | |
| Payables: | |
Investment securities purchased
| 2,211,761 |
Investment advisory fees
| 113,688 |
Total Liabilities
| 2,325,449 |
NET ASSETS
| $154,688,370 |
| NET ASSETS consist of: | |
Paid-in capital
| $ 148,175,641 |
Par value
| 48,500 |
Accumulated distributable earnings (loss)
| 6,464,229 |
NET ASSETS
| $154,688,370 |
NET ASSET VALUE, per share
| $31.89 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)
| 4,850,002 |
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, 2020 (Unaudited)
| INVESTMENT INCOME: | |
Dividends
| $ 1,172,885 |
Interest
| (425,610) |
Other
| 19,047 |
Total investment income
| 766,322 |
| EXPENSES: | |
Investment advisory fees
| 958,159 |
Excise tax expense
| 6,159 |
Total expenses
| 964,318 |
NET INVESTMENT INCOME (LOSS)
| (197,996) |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on investments
| (6,346,482) |
Net change in unrealized appreciation (depreciation) on investments
| 222,470 |
NET REALIZED AND UNREALIZED GAIN (LOSS)
| (6,124,012) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
| $(6,322,008) |
Page 12
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statements of Changes in Net Assets
| | Six Months
Ended
4/30/2020
(Unaudited) | | Year
Ended
10/31/2019 |
| OPERATIONS: | | | |
Net investment income (loss)
| $ (197,996) | | $ (1,161,320) |
Net realized gain (loss)
| (6,346,482) | | 4,565,461 |
Net change in unrealized appreciation (depreciation)
| 222,470 | | 14,922,374 |
Net increase (decrease) in net assets resulting from operations
| (6,322,008) | | 18,326,515 |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | |
Investment operations
| (1,814,156) | | (2,995,341) |
| SHAREHOLDER TRANSACTIONS: | | | |
Proceeds from shares sold
| 34,006,357 | | 29,071,259 |
Cost of shares redeemed
| (65,339,654) | | (52,711,960) |
Net increase (decrease) in net assets resulting from shareholder transactions
| (31,333,297) | | (23,640,701) |
Total increase (decrease) in net assets
| (39,469,461) | | (8,309,527) |
| NET ASSETS: | | | |
Beginning of period
| 194,157,831 | | 202,467,358 |
End of period
| $154,688,370 | | $194,157,831 |
| CHANGES IN SHARES OUTSTANDING: | | | |
Shares outstanding, beginning of period
| 6,150,002 | | 7,050,002 |
Shares sold
| 1,000,000 | | 950,000 |
Shares redeemed
| (2,300,000) | | (1,850,000) |
Shares outstanding, end of period
| 4,850,002 | | 6,150,002 |
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
4/30/2020
(Unaudited) | | Year Ended October 31, | | Period
Ended
10/31/2016 (a) |
| 2019 | | 2018 | | 2017 |
Net asset value, beginning of period
| $ 31.57 | | $ 28.72 | | $ 29.01 | | $ 25.21 | | $ 25.00 |
| Income from investment operations: | | | | | | | | | |
Net investment income (loss)
| (0.24) | | (0.24) | | (0.09) | | (0.14) | | (0.24) |
Net realized and unrealized gain (loss)
| 0.85 | | 3.58 | | 0.52 | | 4.45 | | 0.90 |
Total from investment operations
| 0.61 | | 3.34 | | 0.43 | | 4.31 | | 0.66 |
| Distributions paid to shareholders from: | | | | | | | | | |
Net investment income
| (0.29) | | (0.49) | | (0.67) | | (0.51) | | (0.45) |
Net realized gain
| — | | — | | (0.05) | | — | | — |
Total distributions
| (0.29) | | (0.49) | | (0.72) | | (0.51) | | (0.45) |
Net asset value, end of period
| $31.89 | | $31.57 | | $28.72 | | $29.01 | | $25.21 |
Total return (b)
| 1.96% | | 11.72% | | 1.46% | | 17.29% | | 2.68% |
| Ratios to average net assets/supplemental data: | | | | | | | | | |
Net assets, end of period (in 000’s)
| $ 154,688 | | $ 194,158 | | $ 202,467 | | $ 58,016 | | $ 7,564 |
Ratio of total expenses to average net assets
| 0.96% (c) (d) | | 0.95% | | 0.95% | | 0.95% | | 0.95% (c) |
Ratio of net investment income (loss) to average net assets
| (0.20)% (c) | | (0.63)% | | (2.16)% | | (1.86)% | | (2.34)% (c) |
Portfolio turnover rate (e)
| 41% | | 64% | | 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) | Includes excise tax. If this excise tax was not included, the expense ratio would have been 0.95%. |
| (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 14
See Notes to Financial Statements
Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (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 nine 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 of 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 Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The Fund’s investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent 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, 2020 (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, 2020 (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, 2020, 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 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 by the Fund during the fiscal year ended October 31, 2019, was as follows:
| Distributions paid from: | |
Ordinary income
| $2,995,341 |
Capital gains
| — |
Return of capital
| — |
As of October 31, 2019, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income
| $362,764 |
Accumulated capital and other gain (loss)
| (1,000,008) |
Net unrealized appreciation (depreciation)
| 15,237,637 |
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (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, 2019, the Fund had $1,000,008 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, 2019, 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, 2018, and 2019 remain open to federal and state audit. As of April 30, 2020, 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).
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 LLC (“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 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. 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.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (Unaudited)
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, 2020, were $79,839,666 and $110,911,606, respectively.
For the six months ended April 30, 2020, 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 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/or the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in the Fund’s portfolio. 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 BBH, 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 may increase or decrease with changes in the Fund’s portfolio. 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.
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, 2021.
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 SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (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 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
Additional Information (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (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.
LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom’s Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The COVID-19 pandemic may last for an extended period of time and will continue to impact the economy for the foreseeable future.
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;
Additional Information (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2020 (Unaudited)
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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INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
SSI Investment Management LLC
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
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Long Duration Opportunities ETF (LGOV)
----------------------------
Semi-Annual Report
For the Six Months
Ended
April 30, 2020
----------------------------
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2020
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
Statements of Changes in Net Assets.......................................... 12
Financial Highlights......................................................... 13
Notes to Financial Statements................................................ 14
Additional Information....................................................... 23
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 objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money 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, 2020
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 for the six months ended April 30, 2020.
Just one month ago, I noted in a letter to shareholders that a handful of states
were set to open some "nonessential" businesses by early May. As of May 20,
2020, I am pleased to report that all 50 states and U.S. territories have eased
some restrictions on businesses and social activity. Keep in mind, however, that
the plan does entail governors phasing in the opening of businesses in the
coming weeks or potentially months, so I see this news as essentially marking
the beginning of the rebuilding process for the U.S. economy. We all need to be
aware as well of the possibility of an uptick or even surge in the coronavirus
("COVID-19") infections as more people venture out of their homes. Prior to the
last couple of weeks or so, the stay-at-home mandate severely restricted the
movements of close to 315 million Americans, according to The Washington Post.
To put this further into perspective, because so many stores have been closed
and so many people have been hunkering down at home, retail-store traffic in the
U.S. plunged 91.2% year-over-year for the week ended May 16, 2020, according to
Bloomberg. Truly amazing!
In this COVID-19 pandemic, there appears to be a notable disconnect between the
state of the U.S. economy, which is expected to go from bad to downright
terrible between the first quarter and second quarter of the year, and the
performance of the stock market, which has been much better than expected. While
the data and commentary in this report are technically supposed to run through
April 30, 2020, I feel compelled to offer insight that is as up to date as
possible. The 2020 peak in the stock market, as measured by the S&P 500(R) Index
(the "Index"), occurred on February 19. That day also marked the all-time high
for the Index. From February 19, 2020, through March 23, 2020, the Index
declined by 33.92% on a price-only basis (no dividends included), according to
Bloomberg. We should note that the Index slid into bear market territory on
March 12, 2020. A bear market is defined by a 20% or greater decline in price
from its most recent peak. That took just 16 trading days, the quickest plunge
into a bear market ever. From March 23, 2020 through May 20, 2020, the Index
staged an impressive rebound, posting a price-only gain of 32.82%, according to
Bloomberg. As of May 20, 2020, the Index stood just 12.24% below its all-time
high set on February 19, 2020. But the game, as they say, is not over. Even
though stocks have rebounded significantly from their March lows, 68% of the
money managers that participated in the most recent Bank of America global fund
manager survey believe that stocks are still in a bear market, according to
MarketWatch. What are they likely concerned about? In addition to a dismal
economic outlook for the near-term, research from Bespoke Investment Group, an
independent research firm, indicates that there have been 25 bear markets since
1928 and 60% of the time the Index declined a second time during the bear market
and went on to establish a new low for the period.
With respect to the state of the economy, the Congressional Budget Office
announced on May 19, 2020, that it sees real U.S. gross domestic product ("GDP")
declining by an annualized 38% in the second quarter of 2020, reportedly in line
with Wall Street economists, according to CNBC. Some estimates are more dire.
The GDP estimate from the Atlanta Federal Reserve calls for a 42% plunge. These
numbers are so large in scope they are mind-boggling. The Bureau of Economic
Analysis is scheduled to release its GDP report on July 30, 2020. Until then, we
may continue to have a disconnect between the economy and the markets. Let us
hope it is as positive as the one we are currently enjoying.
The U.S. government shut down huge chunks of our economy in order to protect
lives and prevent our health care system from being overwhelmed by COVID-19
patients. Our economic woes, in other words, are man-made. The remedies to this
pandemic will also likely be man-made. They could come in the form of
therapeutics and/or a vaccine. Perhaps more than one vaccine. At this stage of
the pandemic fight, we have one message for investors: Stay the course!
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/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
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (1/22/19) Inception (1/22/19)
4/30/20 4/30/20 to 4/30/20 to 4/30/20
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 9.01% 19.29% 18.75% 24.36%
Market Price 8.83% 17.91% 17.63% 22.87%
INDEX PERFORMANCE
ICE BofA 5+ Year US Treasury Index 13.41% 24.98% 21.78% 28.39%
------------------------------------------------------------------------------------------------------------------------------------
</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 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 77.14%
U.S. Government Bonds and Notes 21.60
Exchange-Traded Funds 1.26
-------
Total 100.00%
=======
---------------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
---------------------------------------------------------------
Government and Agency 98.57%
Cash 1.43
-------
Total 100.00%
=======
---------------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(1)
---------------------------------------------------------------
U.S. Treasury Bond 2.25%, 08/15/46 21.60%
Federal National Mortgage Association,
Pool TBA, 2.00%, 06/15/49 9.03
Federal Home Loan Mortgage Corporation,
Pool U99176, 4.00%, 12/01/47 6.64
Federal Home Loan Mortgage Corporation,
Series 2013-4239, Class OU, PO, 07/15/43 5.77
Federal National Mortgage Association,
Series 2005-74, Class NZ, 6.00%, 09/25/35 4.94
Federal National Mortgage Association,
Series 2012-93, Class LY, 2.50%, 09/25/42 4.10
Federal National Mortgage Association,
Series 2018-9, Class PL, 3.50%, 02/25/48 4.00
Government National Mortgage Association,
Series 2018-125, Class KZ, 3.50%, 09/20/48 3.90
Government National Mortgage Association,
Series 2018-112, Class CG, 3.50%, 08/20/48 3.83
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2019-K093, Class
XAM, IO, 1.33%, 05/25/29 3.81
-------
Total 67.62%
=======
---------------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
---------------------------------------------------------------
April 30, 2020 9.14 Years
High - December 31, 2019 12.47 Years
Low - April 30, 2020 9.14 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)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JANUARY 22, 2019 - APRIL 30, 2020
First Trust Long Duration ICE BofA 5+ Year
Opportunities ETF US Treasury Index
<S> <C> <C>
1/22/19 $10,000 $10,000
4/30/19 10,425 10,273
10/31/10 11,408 11,321
4/30/20 12,436 12,839
</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, 2020
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, 2020. 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 AT/ABOVE NAV
----------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00%
1/23/19 - 10/31/19 130 2 0 0
11/1/19 - 4/30/20 44 6 2 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 - 10/31/19 63 1 1 0
11/1/19 - 4/30/20 31 11 15 15
</TABLE>
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2020 (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 AND SENIOR PORTFOLIO MANAGER, FIRST
TRUST SECURITIZED PRODUCTS GROUP
JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST TRUST
SECURITIZED PRODUCTS GROUP
Page 5
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2020 (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 (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, 2020.
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, 2019 APRIL 30, 2020 PERIOD (a) PERIOD (a) (b)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
Actual $1,000.00 $1,090.10 0.74% $3.85
Hypothetical (5% return before expenses) $1,000.00 $1,021.18 0.74% $3.72
</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,
2020 through April 30, 2020), multiplied by 182/366 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 73.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 49.1%
Federal Home Loan Mortgage Corporation
$ 245,784 Series 2003-2649, Class IM, IO............................... 7.00% 07/15/33 $ 63,304
264,000 Series 2010-3653, Class UJ................................... 5.00% 04/15/40 348,666
690,965 Series 2013-4239, Class OU, PO............................... (a) 07/15/43 649,759
137,194 Series 2013-4255, Class SN,
1 Mo. LIBOR (x) -2.67 + 12.27% (b)........................ 9.56% 05/15/35 198,359
Federal National Mortgage Association
172,211 Series 2005-69, Class JI, IO................................. 6.00% 08/25/35 41,976
390,949 Series 2005-74, Class NZ..................................... 6.00% 09/25/35 556,437
1,213,196 Series 2005-113, Class AI, IO,
1 Mo. LIBOR (x) -1 + 7.23% (b)............................ 6.74% 01/25/36 283,451
150,540 Series 2008-94, Class JS, 1 Mo. LIBOR (x) -6 + 30.00% (b).... 27.08% 04/25/36 296,625
433,000 Series 2012-93, Class LY..................................... 2.50% 09/25/42 461,767
173,000 Series 2013-3, Class BC...................................... 2.50% 12/25/42 178,026
200,000 Series 2015-34, Class OK, PO................................. (a) 03/25/44 195,094
298,685 Series 2016-23, Class PL..................................... 3.00% 11/25/45 331,838
395,045 Series 2018-9, Class PL...................................... 3.50% 02/25/48 451,132
162,443 Series 2018-94, Class KZ..................................... 4.50% 01/25/49 222,737
85,999 Series 2018-94, Class LZ..................................... 4.50% 01/25/49 117,411
Government National Mortgage Association
263,305 Series 2009-32, Class ZA..................................... 5.50% 05/20/39 340,291
752,916 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 148,232
80,941 Series 2016-63, Class NZ..................................... 3.00% 05/20/46 81,609
403,000 Series 2018-112, Class CG.................................... 3.50% 08/20/48 431,476
415,888 Series 2018-125, Class KZ.................................... 3.50% 09/20/48 439,614
----------------
5,837,804
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 7.1%
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates
7,899,632 Series 2014-K036, Class X1, IO (c)........................... 0.87% 10/25/23 177,674
4,645,000 Series 2019-K093, Class XAM, IO (c).......................... 1.33% 05/25/29 429,059
1,697,391 Series 2019-K095, Class X1, IO (c)........................... 1.08% 06/25/29 121,611
1,200,000 Series 2019-K095, Class XAM, IO (c).......................... 1.37% 06/25/29 117,855
----------------
846,199
----------------
PASS-THROUGH SECURITIES -- 16.9%
Federal Home Loan Mortgage Corporation
681,328 Pool U99176.................................................. 4.00% 12/01/47 747,751
Federal National Mortgage Association
1,000,000 Pool TBA (d)................................................. 2.00% 06/15/49 1,017,952
Government National Mortgage Association
222,099 Pool 770005.................................................. 4.00% 11/15/33 241,858
----------------
2,007,561
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 8,691,564
(Cost $7,617,819) ----------------
U.S. GOVERNMENT BONDS AND NOTES -- 20.5%
2,000,000 U.S. Treasury Bond.............................................. 2.25% 08/15/46 2,434,375
----------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 2,434,375
(Cost $1,956,240) ----------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 1.2%
CAPITAL MARKETS -- 1.2%
850 iShares 20+ Year Treasury Bond ETF.......................................................... $ 141,729
----------------
TOTAL EXCHANGE-TRADED FUNDS................................................................. 141,729
(Cost $115,923) ----------------
MONEY MARKET FUNDS -- 12.4%
1,478,854 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.07% (e).......................................................... 1,478,854
(Cost $1,478,854) ----------------
TOTAL INVESTMENTS -- 107.2%................................................................. 12,746,522
(Cost $11,168,836) (f) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
PUT OPTIONS PURCHASED -- 0.0%
1 U.S. Treasury Long Bond Futures Put............... $ 181,031 $ 178.00 May-2020 672
(Cost $1,583) ----------------
CALL OPTIONS WRITTEN -- (0.4)%
(1) U.S. 10-Year Treasury Futures Call................ (139,063) 134.00 May-2020 (5,078)
(1) U.S. Treasury Long Bond Futures Call.............. (181,031) 164.00 May-2020 (17,078)
(2) U.S. Treasury Long Bond Futures Call.............. (362,063) 167.00 May-2020 (28,188)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (50,344)
(Premiums received $5,561) ----------------
PUT OPTIONS WRITTEN -- (0.0)%
(1) U.S. 10-Year Treasury Futures Put................. (139,063) 129.50 May-2020 (15)
(Premiums received $323) ----------------
NET OTHER ASSETS AND LIABILITIES -- (6.8)%.................................................. (803,081)
----------------
NET ASSETS -- 100.0%........................................................................ $ 11,893,754
================
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2020 (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. 5-Year Treasury Notes Short 6 Jun-2020 $ (752,906) $ 22
U.S. 10-Year Ultra Treasury Notes Short 1 Jun-2020 (157,031) (348)
U.S. Treasury Long Bond Futures Short 3 Jun-2020 (543,094) (32,105)
-------------- ----------------
$ (1,453,031) $ (32,431)
============== ================
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2020 (UNAUDITED)
-----------------------------
(a) Zero coupon security.
(b) Inverse floating rate 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, 2020.
(f) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2020, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $1,587,495 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $87,626. The net unrealized appreciation was
$1,499,869. 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
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2020 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
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 8,691,564 $ -- $ 8,691,564 $ --
U.S. Government Bonds and Notes....................... 2,434,375 -- 2,434,375 --
Exchange-Traded Funds*................................ 141,729 141,729 -- --
Money Market Funds.................................... 1,478,854 1,478,854 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... 12,746,522 1,620,583 11,125,939 --
Put Options Purchased................................. 672 672 -- --
Futures Contracts**................................... 22 22 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 12,747,216 $ 1,621,277 $ 11,125,939 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2020 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (50,344) $ (50,344) $ -- $ --
Put Options Written................................... (15) (15) -- --
Futures Contracts**................................... (32,453) (32,453) -- --
--------------- --------------- --------------- ---------------
Total................................................. $ (82,812) $ (82,812) $ -- $ --
=============== =============== =============== ===============
</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, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 12,746,522
Options contracts purchased, at value ................................. 672
Cash segregated as collateral for open futures contracts............... 161,910
Receivables:
Investment securities sold.......................................... 1,017,385
Interest............................................................ 42,721
Variation margin.................................................... 944
Dividends........................................................... 264
--------------
Total Assets........................................................ 13,970,418
--------------
LIABILITIES:
Options contracts written, at value.................................... 50,359
Payables:
Investment securities purchased..................................... 2,019,972
Investment advisory fees............................................ 6,333
--------------
Total Liabilities................................................... 2,076,664
--------------
NET ASSETS............................................................. $ 11,893,754
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 10,000,344
Par value.............................................................. 4,000
Accumulated distributable earnings (loss).............................. 1,889,410
--------------
NET ASSETS............................................................. $ 11,893,754
==============
NET ASSET VALUE, per share............................................. $ 29.73
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 400,002
==============
Investments, at cost................................................... $ 11,168,836
==============
Premiums paid on options contracts purchased........................... $ 1,583
==============
Premiums received on options contracts written......................... $ 5,884
==============
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2020 (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST:
<S> <C>
Interest............................................................... $ 170,229
Dividends.............................................................. 11,105
--------------
Total investment income............................................. 181,334
--------------
EXPENSES:
Investment advisory fees............................................... 36,488
Excise tax............................................................. 4,897
--------------
Total expenses...................................................... 41,385
--------------
NET INVESTMENT INCOME (LOSS)........................................... 139,949
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... 279,984
Futures contracts................................................... 54,437
Purchased options contracts......................................... 2,714
Written options contracts........................................... 15,963
--------------
Net realized gain (loss)............................................... 353,098
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 602,998
Futures contracts................................................... (42,134)
Purchased options contracts......................................... (911)
Written options contracts........................................... (44,475)
--------------
Net change in unrealized appreciation (depreciation)................... 515,478
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 868,576
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 1,008,525
==============
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2020 ENDED
(UNAUDITED) 10/31/2019 (a)
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 139,949 $ 218,064
Net realized gain (loss)............................................... 353,098 188,680
Net change in unrealized appreciation (depreciation)................... 515,478 984,391
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 1,008,525 1,391,135
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (314,122) (183,881)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 1,369,242 11,437,545
Cost of shares redeemed................................................ (1,384,695) (1,429,995)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ (15,453) 10,007,550
-------------- --------------
Total increase (decrease) in net assets................................ 678,950 11,214,804
NET ASSETS:
Beginning of period.................................................... 11,214,804 --
-------------- --------------
End of period.......................................................... $ 11,893,754 $ 11,214,804
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 400,002 --
Shares sold............................................................ 50,000 450,002
Shares redeemed........................................................ (50,000) (50,000)
-------------- --------------
Shares outstanding, end of period...................................... 400,002 400,002
============== ==============
</TABLE>
(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.
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
4/30/2020 ENDED
(UNAUDITED) 10/31/2019 (a)
-------------- --------------
<S> <C> <C>
Net asset value, beginning of period $ 28.04 $ 25.00
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.35 0.55
Net realized and unrealized gain (loss) 2.13 2.95
---------- ----------
Total from investment operations 2.48 3.50
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.79) (0.46)
---------- ----------
Net asset value, end of period $ 29.73 $ 28.04
========== ==========
TOTAL RETURN (b) 9.01% 14.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 11,894 $ 11,215
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (c) 0.74% (d) (e) 0.65% (d)
Ratio of net investment income (loss)
to average net assets 2.49% (d) 2.64% (d)
Portfolio turnover rate (f) 79% (g) 152% (g)
</TABLE>
(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) Includes excise tax. If this excise tax expense was not included, the
expense ratio would have been 0.65%.
(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 76%
and 104% for the periods ended April 30, 2020 and October 31, 2019,
respectively.
See Notes to Financial Statements Page 13
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (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 Fannie Mae and Freddie Mac). 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 Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. Domestic debt securities 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, 2020 (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, 2020 (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, 2020, 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.
In July 2017, the Financial Conduct Authority ("FCA") announced that it will no
longer persuade or compel banks to submit rates for the calculations of the
London Interbank Offered Rates ("LIBOR") after 2021. Further, the FCA has
subsequently stated, as recently as March 2020, that the central assumption
continues to be that firms should not rely on LIBOR being published after the
end of 2021.
In the United States, the Alternative Reference Rates Committee (the "ARRC"), a
group of market participants convened by the Board of Governors of the Federal
Reserve System and the Federal Reserve Bank of New York in cooperation with
other federal and state government agencies, has since 2014 undertaken efforts
to identify U.S. dollar reference interest rates as alternatives to LIBOR and to
facilitate the mitigation of LIBOR-related risks. In June 2017, the ARRC
identified the Secured Overnight Financing Rate ("SOFR"), a broad measure of the
cost of cash overnight borrowing collateralized by U.S. Treasury securities, as
the preferred alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New
York began daily publishing of SOFR in April 2018.
At this time, it is not possible to predict the full impact of the elimination
of LIBOR and the establishment of an alternative reference rate on the Fund or
its investments.
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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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, 2020, the Fund had no when-issued,
delayed-delivery securities. At April 30, 2020, the Fund held $1,017,952 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
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
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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.
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 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, 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 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.
Page 18
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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 period ended October
31, 2019 was as follows:
Distributions paid from:
Ordinary income................................. $ 183,881
Capital gains................................... --
Return of capital............................... --
As of October 31, 2019, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 240,987
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... 954,020
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. The taxable year ending 2019
remains open to federal and state audit. As of April 30, 2020, 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, 2019, 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 period ended October 31, 2019, the Fund had
no net late year ordinary or capital losses.
K. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), brokerage commissions and other
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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,
a defined-outcome 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,
2020, were $9,123,919 and $156,582, 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, 2020, were
$7,772,426 and $41,606, respectively.
For the six months ended April 30, 2020, 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, 2020, 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* $ 22 on futures contracts* $ 32,453
Options Interest Options contracts Options contracts
rate risk purchased, at value 672 written, at value 50,359
</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.
Page 20
<PAGE>
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2020, 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 $ 54,437
Purchased options contracts 2,714
Written options contracts 15,963
Net change in unrealized appreciation (depreciation) on:
Futures contracts (42,134)
Purchased options contracts (911)
Written options contracts (44,475)
</TABLE>
For the six months ended April 30, 2020, the notional value of futures contracts
opened and closed were $759,844 and $3,683,944, respectively.
During the six months ended April 30, 2020, the premiums for purchased options
contracts opened were $39,839 and the premiums for purchased options contracts
closed, exercised and expired were $38,256.
During the six months ended April 30, 2020, the premiums for written options
contracts opened were $38,251 and the premiums for written options contracts
closed, exercised and expired were $32,367.
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 increase or decrease with changes
in the Fund's portfolio. 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 increase or decrease with changes in the Fund's
portfolio. 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, 2021.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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 22
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (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 23
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (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.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's
Financial Conduct Authority announced that LIBOR will cease to be available for
use after 2021. The unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in costs incurred
in connection with closing out positions and entering into new trades. Any
potential effects of the transition away from LIBOR on the fund or on certain
instruments in which the fund invests can be difficult to ascertain, and they
may vary depending on a variety of factors. Any such effects of the transition
away from LIBOR, as well as other unforeseen effects, could result in losses to
the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are
subject to market fluctuations caused by factors such as general economic
conditions, political events, regulatory or market developments, changes in
interest rates and perceived trends in securities prices. Shares of a fund could
decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or
global events such as war, acts of terrorism, spread of infectious diseases or
other public health issues, recessions, or other events could have a significant
negative impact on a fund and its investments. Such events may affect certain
geographic regions, countries, sectors and industries more significantly than
others. The outbreak of the respiratory disease designated as COVID-19 in
December 2019 has caused significant volatility and declines in global financial
markets, which have caused losses for investors. The COVID-19 pandemic may last
for an extended period of time and will continue to impact the economy for the
foreseeable future.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2020 (UNAUDITED)
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>
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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)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(a)(4) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | | First Trust 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.
