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, 2021
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, 2021
Energy Income Partners, LLC
---------------------------
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND IV
SEMI-ANNUAL REPORT
APRIL 30, 2021
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, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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 or 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>
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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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 24.39% 23.45% 5.23% 6.01% 29.01% 67.77%
Market Price 24.51% 23.56% 5.22% 6.02% 28.95% 67.81%
INDEX PERFORMANCE
Blended Benchmark(1) 35.22% 35.00% 6.15% 6.10% 34.79% 68.93%
S&P 500(R) Index 28.85% 45.98% 17.42% 15.88% 123.20% 269.10%
------------------------------------------------------------------------------------------------------------------------------------
</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 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 42.5%
Natural Gas Transmission 24.8
Petroleum Product Transmission 20.8
Crude Oil Transmission 5.8
Propane 1.5
Marine 0.4
Other 4.2
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
Magellan Midstream Partners, L.P. 7.4%
NextEra Energy Partners, L.P. 7.0
Enterprise Products Partners, L.P. 6.9
TC Energy Corp. 6.1
Public Service Enterprise Group, Inc. 4.5
Sempra Energy 4.1
NextEra Energy, Inc. 3.8
ONEOK, Inc. 3.5
Williams (The) Cos., Inc. 3.5
IDACORP, Inc. 3.2
-------
Total 50.0%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 20, 2012 - APRIL 30, 2021
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
10/31/20 13,487 12,493 28,645
4/30/21 16,776 16,893 36,909
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
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
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (8/19/19) Inception (8/19/19)
4/30/21 4/30/21 to 4/30/21 to 4/30/21
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 11.62% 23.81% 12.18% 21.55%
Market Price 12.09% 24.53% 12.45% 22.06%
INDEX PERFORMANCE
PHLX Utility Sector Index 8.41% 21.82% 9.57% 16.77%
S&P 500(R) Index 28.85% 45.98% 25.69% 47.36%
------------------------------------------------------------------------------------------------------------------------------------
</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 74.4%
Natural Gas Transmission 16.1
Petroleum Product Transmission 2.0
Other 7.5
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
NextEra Energy Partners, L.P. 9.8%
NextEra Energy, Inc. 7.5
Xcel Energy, Inc. 5.5
Sempra Energy 5.5
Alliant Energy Corp. 4.9
Public Service Enterprise Group, Inc. 4.2
CMS Energy Corp. 4.1
American Water Works Co., Inc. 4.1
WEC Energy Group, Inc. 3.9
Iberdrola S.A., ADR 3.4
-------
Total 52.9%
=======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 19, 2019 - APRIL 30, 2021
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 9,818 9,586 10,095
10/31/20 10,890 10,771 11,436
4/31/21 12,155 11,677 14,736
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of each Fund did
not trade in the secondary market until after 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, 2021 (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"), located in Westport, CT, was founded in
2003 to provide professional asset management services in publicly traded
energy-related infrastructure companies with above average dividend payout
ratios operating pipelines and related storage and handling facilities, electric
power transmission and distribution as well as long contracted or regulated
power generation from renewables and other sources. The corporate structure of
the portfolio companies include C-corporations, partnerships and energy
infrastructure real estate investment trusts. EIP mainly focuses on investments
in assets that receive steady fee-based or regulated income from their corporate
and individual customers. EIP manages or supervises approximately $4.3 billion
of assets as of April 30, 2021. 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 and a sleeve of a series of variable insurance
trust. EIP is a registered investment advisor with the Securities and Exchange
Commission.
PORTFOLIO MANAGEMENT TEAM
JAMES J. MURCHIE, CO-FOUNDER, CHIEF EXECUTIVE OFFICER, CO-PORTFOLIO MANAGER AND
PRINCIPAL OF ENERGY INCOME PARTNERS, LLC
EVA PAO, CO-FOUNDER, CO-PORTFOLIO MANAGER AND PRINCIPAL OF ENERGY INCOME
PARTNERS, LLC
JOHN K. 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 Funds.
Page 7
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FIRST TRUST EXCHANGE-TRADED FUND IV
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD PERIOD (a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST NORTH AMERICAN ENERGY
INFRASTRUCTURE FUND (EMLP)
Actual $1,000.00 $1,243.90 0.95% $5.29
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
Actual $1,000.00 $1,116.20 0.95% $4.98
Hypothetical (5% return before expenses) $1,000.00 $1,020.08 0.95% $4.76
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 8
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 68.5%
CONSTRUCTION & ENGINEERING
-- 2.8%
562,691 Quanta Services, Inc. $ 54,378,458
--------------
ELECTRIC UTILITIES -- 16.6%
863,668 Alliant Energy Corp. 48,512,232
327,410 American Electric Power Co.,
Inc. 29,044,541
47,275 Duke Energy Corp. 4,760,120
35,981 Emera, Inc. (CAD) 1,635,487
910,264 Enel S.p.A., ADR 9,002,511
69,975 Eversource Energy 6,033,244
417,841 Exelon Corp. 18,777,774
43,034 Fortis, Inc. (CAD) 1,919,663
171,849 Iberdrola S.A., ADR 9,341,712
597,698 IDACORP, Inc. 61,252,091
952,985 NextEra Energy, Inc. 73,865,867
36,138 Orsted A/S, ADR 1,758,656
63,810 PPL Corp. 1,858,785
294,775 Southern (The) Co. 19,505,262
553,929 Xcel Energy, Inc. 39,495,138
--------------
326,763,083
--------------
GAS UTILITIES -- 10.1%
2,939,241 AltaGas Ltd. (CAD) 54,927,686
501,367 Atmos Energy Corp. 51,936,607
10,369 Chesapeake Utilities Corp. 1,228,934
741,435 New Jersey Resources Corp. 31,103,198
374,780 ONE Gas, Inc. 30,158,547
683,236 UGI Corp. 29,864,246
--------------
199,219,218
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 0.7%
353,870 AES (The) Corp. 9,844,663
176,472 Clearway Energy, Inc., Class A 4,690,626
--------------
14,535,289
--------------
MULTI-UTILITIES -- 16.5%
554,698 ATCO Ltd., Class I (CAD) 19,039,750
41,825 Black Hills Corp. 2,885,088
68,750 Canadian Utilities Ltd., Class A
(CAD) 1,964,925
2,450,323 CenterPoint Energy, Inc. 60,008,410
456,332 CMS Energy Corp. 29,383,217
368,784 Dominion Energy, Inc. 29,465,842
14,883 DTE Energy Co. 2,083,918
1,369,229 Public Service Enterprise Group,
Inc. 86,480,504
583,717 Sempra Energy 80,301,948
151,549 WEC Energy Group, Inc. 14,726,016
--------------
326,339,618
--------------
OIL, GAS & CONSUMABLE FUELS
-- 21.3%
596,160 Cheniere Energy, Inc. (a) 46,214,323
1,281,913 Enbridge, Inc. 49,443,385
475,101 Equitrans Midstream Corp. 3,876,824
SHARES DESCRIPTION VALUE
------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
(CONTINUED)
1,435,263 Keyera Corp. (CAD) $ 32,823,694
1,961,835 Kinder Morgan, Inc. 33,449,287
1,307,927 ONEOK, Inc. 68,456,899
2,381,521 TC Energy Corp. 117,813,844
2,782,365 Williams (The) Cos., Inc. 67,778,411
--------------
419,856,667
--------------
WATER UTILITIES -- 0.5%
66,127 American Water Works Co., Inc. 10,315,151
--------------
TOTAL COMMON STOCKS
-- 68.5% 1,351,407,484
(Cost $1,103,879,368) --------------
MASTER LIMITED PARTNERSHIPS
-- 29.9%
CHEMICALS -- 0.9%
608,647 Westlake Chemical Partners, L.P. 16,354,345
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 6.9%
1,832,431 NextEra Energy Partners,
L.P. (b) 136,607,731
--------------
OIL, GAS & CONSUMABLE FUELS
-- 22.1%
661,812 Cheniere Energy Partners, L.P. 27,855,667
3,629,553 Energy Transfer, L.P. 31,250,451
5,858,813 Enterprise Products Partners,
L.P. 134,811,287
1,442,971 Holly Energy Partners, L.P. 29,537,616
3,067,028 Magellan Midstream
Partners, L.P. 143,444,899
5,444,178 Plains GP Holdings, L.P.,
Class A (b) 51,066,390
750,988 Shell Midstream Partners, L.P. 11,587,745
444,573 Teekay LNG Partners, L.P. (b) 6,624,138
--------------
436,178,193
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 29.9% 589,140,269
(Cost $490,011,224) --------------
MONEY MARKET FUNDS -- 1.3%
26,298,907 Morgan Stanley Institutional
Liquidity Funds - Treasury
Portfolio - Institutional
Class - 0.01% (c) 26,298,907
(Cost $26,298,907) --------------
TOTAL INVESTMENTS -- 99.7% 1,966,846,660
(Cost $1,620,189,499) (d)
NET OTHER ASSETS AND
LIABILITIES -- 0.3% 5,122,510
--------------
NET ASSETS -- 100.0% $1,971,969,170
==============
(a) Non-income producing security.
(b) This security is taxed as a "C" corporation for federal income tax
purposes.
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST NORTH AMERICAN ENERGY INFRASTRUCTURE FUND (EMLP)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
(c) Rate shown reflects yield as of April 30, 2021.
(d) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $358,837,602 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $12,180,441. The net unrealized appreciation
was $346,657,161.
ADR - American Depositary Receipt
Currency Abbreviations:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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* $1,351,407,484 $ -- $ --
Master Limited
Partnerships* 589,140,269 -- --
Money Market
Funds 26,298,907 -- --
------------------------------------------
Total Investments $1,966,846,660 $ -- $ --
==========================================
* 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, 2021 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------------------------------------------------------
COMMON STOCKS -- 83.5%
CONSTRUCTION & ENGINEERING
-- 2.0%
2,482 Quanta Services, Inc. $ 239,860
--------------
ELECTRIC UTILITIES -- 34.8%
10,032 Alliant Energy Corp. 563,498
3,218 American Electric Power Co.,
Inc. 285,469
278 Edison International 16,527
1,249 Emera, Inc. (CAD) 56,772
26,571 Enel S.p.A., ADR 262,787
1,352 Eversource Energy 116,569
3,978 Fortis, Inc. (CAD) 177,451
2,429 Hydro One Ltd. (CAD) (a) (b) 58,238
7,172 Iberdrola S.A., ADR 389,870
3,357 IDACORP, Inc. 344,025
10,958 NextEra Energy, Inc. 849,355
832 Orsted AS (DKK) (a) (b) 121,355
8,792 PPL Corp. 256,111
8,790 Xcel Energy, Inc. 626,727
--------------
4,124,754
--------------
GAS UTILITIES -- 9.8%
14,302 AltaGas Ltd. (CAD) 267,271
2,871 Atmos Energy Corp. 297,407
1,090 Chesapeake Utilities Corp. 129,187
5,283 New Jersey Resources Corp. 221,622
3,061 ONE Gas, Inc. 246,319
--------------
1,161,806
--------------
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY PRODUCERS -- 7.0%
4,000 AES (The) Corp. 111,280
1,118 Brookfield Renewable Corp.,
Class A (CAD) 46,343
3,737 Clearway Energy, Inc., Class A 99,329
16,333 EDP Renovaveis S.A. (EUR) 389,194
1,142 Encavis AG (EUR) 21,981
4,758 Northland Power, Inc. (CAD) 163,897
--------------
832,024
--------------
MORTGAGE REAL ESTATE INVESTMENT
TRUSTS -- 0.9%
1,892 Hannon Armstrong Sustainable
Infrastructure Capital, Inc. 99,141
--------------
MULTI-UTILITIES -- 20.0%
7,280 CMS Energy Corp. 468,759
3,048 Dominion Energy, Inc. 243,535
350 DTE Energy Co. 49,007
1,050 National Grid PLC, ADR 66,129
7,568 Public Service Enterprise Group,
Inc. 477,995
4,528 Sempra Energy 622,917
4,539 WEC Energy Group, Inc. 441,055
--------------
2,369,397
--------------
SHARES DESCRIPTION VALUE
------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS
-- 4.7%
3,073 Cheniere Energy, Inc. (c) $ 238,219
13,122 Williams (The) Cos., Inc. 319,652
--------------
557,871
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 0.4%
361 Enphase Energy, Inc. (c) 50,269
--------------
WATER UTILITIES -- 3.9%
2,988 American Water Works Co., Inc. 466,098
--------------
TOTAL COMMON STOCKS -- 83.5% 9,901,220
(Cost $9,212,185) --------------
MASTER LIMITED PARTNERSHIPS
-- 12.6%
INDEPENDENT POWER AND RENEWABLE
ELECTRICITY
PRODUCERS -- 10.7%
3,779 Brookfield Renewable Partners,
L.P. (CAD) 148,590
14,981 NextEra Energy Partners,
L.P. (d) 1,116,833
--------------
1,265,423
--------------
OIL, GAS & CONSUMABLE FUELS
-- 1.9%
5,353 Cheniere Energy Partners, L.P. 225,308
--------------
TOTAL MASTER LIMITED
PARTNERSHIPS -- 12.6% 1,490,731
(Cost $1,383,790) --------------
MONEY MARKET FUNDS -- 3.9%
469,580 Morgan Stanley Institutional
Liquidity Funds Treasury
Portfolio - Institutional
Class - 0.01% (e) 469,580
(Cost $469,580) --------------
TOTAL INVESTMENTS -- 100.0% 11,861,531
(Cost $11,065,555) (f)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (1,631)
--------------
NET ASSETS -- 100.0% $ 11,859,900
==============
(a) 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.
(b) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(c) Non-income producing security.
(d) This security is taxed as a "C" corporation for federal income tax
purposes.
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
(e) Rate shown reflects yield as of April 30, 2021.
(f) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $827,235 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $31,259. The net unrealized appreciation was
$795,976.
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,
2021 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* $ 9,901,220 $ -- $ --
Master Limited
Partnerships* 1,490,731 -- --
Money Market
Funds 469,580 -- --
------------------------------------------
Total Investments $ 11,861,531 $ -- $ --
==========================================
* 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, 2021 (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.................................................. $ 1,966,846,660 $ 11,861,531
Cash................................................................... 2,163,422 --
Receivables:
Dividends........................................................... 6,611,332 6,552
Reclaims............................................................ 2,660 127
----------------- -----------------
Total Assets........................................................ 1,975,624,074 11,868,210
----------------- -----------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 2,163,422 --
Investment advisory fees............................................ 1,491,482 8,310
----------------- -----------------
Total Liabilities................................................... 3,654,904 8,310
----------------- -----------------
NET ASSETS............................................................. $ 1,971,969,170 $ 11,859,900
================= =================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 2,107,939,643 $ 11,085,507
Par value.............................................................. 822,050 5,000
Accumulated distributable earnings (loss).............................. (136,792,523) 769,393
----------------- -----------------
NET ASSETS............................................................. $ 1,971,969,170 $ 11,859,900
================= =================
NET ASSET VALUE, per share............................................. $ 23.99 $ 23.72
================= =================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 82,205,000 500,002
================= =================
Investments, at cost................................................... $ 1,620,189,499 $ 11,065,555
================= =================
</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, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
FIRST TRUST NORTH FIRST TRUST
AMERICAN ENERGY EIP CARBON
INFRASTRUCTURE FUND IMPACT ETF
(EMLP) (ECLN)
--------------------- ---------------------
INVESTMENT INCOME:
<S> <C> <C>
Dividends.............................................................. $ 29,237,995 $ 67,343
Foreign withholding tax................................................ (1,144,530) (2,145)
----------------- -----------------
Total investment income............................................. 28,093,465 65,198
----------------- -----------------
EXPENSES:
Investment advisory fees............................................... 8,472,976 27,053
----------------- -----------------
Total expenses...................................................... 8,472,976 27,053
----------------- -----------------
NET INVESTMENT INCOME (LOSS)........................................... 19,620,489 38,145
----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (36,166,669) (13,184)
In-kind redemptions................................................. 26,725,319 --
Foreign currency transactions....................................... (146,589) (262)
----------------- -----------------
Net realized gain (loss)............................................... (9,587,939) (13,446)
----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 381,526,264 646,344
Foreign currency translation........................................ 8,873 12
----------------- -----------------
Net change in unrealized appreciation (depreciation)................... 381,535,137 646,356
----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 371,947,198 632,910
----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 391,567,687 $ 671,055
================= =================
</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 YEAR
4/30/2021 ENDED 4/30/2021 ENDED
(UNAUDITED) 10/31/2020 (UNAUDITED) 10/31/2020
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)............................ $ 19,620,489 $ 24,398,545 $ 38,145 $ 29,664
Net realized gain (loss)................................ (9,587,939) (175,456,336) (13,446) (8,200)
Net change in unrealized appreciation (depreciation).... 381,535,137 (338,518,753) 646,356 92,447
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from operations...................................... 391,567,687 (489,576,544) 671,055 113,911
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... (36,266,511) (68,217,610) (43,160) (32,791)
Return of capital....................................... -- (31,788,050) -- (11,860)
--------------- --------------- --------------- ---------------
Total distributions to shareholders..................... (36,266,511) (100,005,660) (43,160) (44,651)
--------------- --------------- --------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 48,634,001 234,222,012 9,092,402 --
Cost of shares redeemed................................. (119,862,649) (522,103,189) -- --
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions........................ (71,228,648) (287,881,177) 9,092,402 --
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets................. 284,072,528 (877,463,381) 9,720,297 69,260
NET ASSETS:
Beginning of period..................................... 1,687,896,642 2,565,360,023 2,139,603 2,070,343
--------------- --------------- --------------- ---------------
End of period........................................... $ 1,971,969,170 $ 1,687,896,642 $ 11,859,900 $ 2,139,603
=============== =============== =============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 85,755,000 103,305,000 100,002 100,002
Shares sold............................................. 2,150,000 9,650,000 400,000 --
Shares redeemed......................................... (5,700,000) (27,200,000) -- --
--------------- --------------- --------------- ---------------
Shares outstanding, end of period....................... 82,205,000 85,755,000 500,002 100,002
=============== =============== =============== ===============
</TABLE>
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,
4/30/2021 --------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.68 $ 24.83 $ 22.64 $ 24.55 $ 24.76 $ 23.03
----------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.24 0.20 0.36 0.35 0.44 0.30
Net realized and unrealized gain (loss) 4.51 (4.33) 2.81 (1.33) 0.32 2.37
----------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.75 (4.13) 3.17 (0.98) 0.76 2.67
----------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.44) (0.70) (0.29) (0.45) (0.48) (0.30)
Return of capital -- (0.32) (0.69) (0.48) (0.49) (0.64)
----------- ---------- ---------- ---------- ---------- ----------
Total distributions (0.44) (1.02) (0.98) (0.93) (0.97) (0.94)
----------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.99 $ 19.68 $ 24.83 $ 22.64 $ 24.55 $ 24.76
=========== ========== ========== ========== ========== ==========
TOTAL RETURN (a) 24.39% (16.69)% 14.22% (4.03)% 3.06% 12.01%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,971,969 $1,687,897 $2,565,360 $2,117,805 $1,910,977 $1,379,029
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 2.20%(b) 1.13% 1.52% 1.40% 1.59% 1.44%
Portfolio turnover rate (c) 31% 46% 33% 35% 24% 40%
</TABLE>
<TABLE>
<CAPTION>
FIRST TRUST EIP CARBON IMPACT ETF (ECLN)
SIX MONTHS
ENDED YEAR PERIOD
4/30/2021 ENDED ENDED
(UNAUDITED) 10/31/2020 10/31/2019 (d)
----------- ---------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 21.40 $ 20.70 $ 20.09
----------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.15 0.30 0.05
Net realized and unrealized gain (loss) 2.33 0.85 0.56
----------- ---------- ----------
Total from investment operations 2.48 1.15 0.61
----------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.16) (0.33) --
Return of capital -- (0.12) --
----------- ---------- ----------
Total from investment operations (0.16) (0.45) --
----------- ---------- ----------
Net asset value, end of period $ 23.72 $ 21.40 $ 20.70
=========== ========== ==========
TOTAL RETURN (a) 11.62% 5.69% 3.04%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 11,860 $ 2,140 $ 2,070
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 0.95%(b) 0.95% 0.95% (b)
Ratio of net investment income (loss) to
average net assets 1.34%(b) 1.45% 1.18% (b)
Portfolio turnover rate (c) 27% 23% 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, 2021 (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 ten funds that are offering shares. This report
covers the two funds (each a "Fund" and collectively, the "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 - (ticker
"EMLP")
First Trust EIP Carbon Impact ETF - (ticker "ECLN")
Each Fund represents a separate series of shares of beneficial interest in the
Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on
a continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
Each Fund is an actively managed exchange-traded fund. 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
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"),
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (UNAUDITED)
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 trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
Shares of open-end funds are valued 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.
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.
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (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, 2021, 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, 2021 (UNAUDITED)
The tax character of distributions paid by each Fund during the fiscal year
ended October 31, 2020 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 $ 68,217,610 $ -- $ 31,788,050
First Trust EIP Carbon Impact ETF 32,791 -- 11,860
</TABLE>
As of October 31, 2020, 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 $ -- $(445,337,693) $ (46,756,006)
First Trust EIP Carbon Impact ETF -- (7,613) 149,111
</TABLE>
E. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, each Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of each Fund's taxable income
exceeds the distributions from such taxable income for the calendar year.
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, 2020, EMLP
and ECLN had non-expiring capital loss carryforwards available for federal
income tax purposes of $445,337,693 and $7,613, respectively.
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
2017, 2018, 2019, and 2020 remain open to federal and state audit. For ECLN, the
taxable years ended 2019 and 2020 remain open to federal and state audit. As of
April 30, 2021, 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.
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, 2020, the Funds had
no net late year ordinary capital losses.
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
fund fees and expenses, if any, brokerage commissions and other expenses
connected with the execution of portfolio transactions, distribution and
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (UNAUDITED)
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, 2021, 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 $ 549,758,928 $ 553,220,294
First Trust EIP Carbon Impact ETF 1,716,724 1,568,124
</TABLE>
For the six months ended April 30, 2021, 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 $ 47,995,461 $ 117,513,165
First Trust EIP Carbon Impact ETF 8,722,223 --
</TABLE>
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold a Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (UNAUDITED)
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
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, 2022.
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, 2021 (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.
Page 23
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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
Page 24
<PAGE>
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND IV
APRIL 30, 2021 (UNAUDITED)
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; 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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Funds and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the funds without significant dilution of
remaining investors' interests in the funds. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because each Fund primarily
holds assets that are highly liquid investments, the Funds have not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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, 2021
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 19
Statement of Operations...................................................... 20
Statements of Changes in Net Assets.......................................... 21
Financial Highlights......................................................... 22
Notes to Financial Statements................................................ 23
Additional Information....................................................... 30
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund IV (the "Trust") described in
this report (First Trust Senior Loan Fund; hereinafter referred to as the
"Fund") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund'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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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 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 "LL
100") is a market value-weighted index designed to measure the performance of
the largest segment of the U.S. syndicated leveraged loan market. The LL 100
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 "MI
100") selects the 100 most liquid Senior Loans in the market. The Fund does not
seek to track either the LL 100 or MI 100, 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 LL 100 and/or MI 100 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. and non 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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 5.80% 11.68% 3.81% 3.31% 20.57% 29.78%
Market Price 6.27% 12.45% 3.85% 3.34% 20.82% 30.10%
INDEX PERFORMANCE
S&P/LSTA Leveraged Loan Index(1) 6.00% 16.10% 4.98% 3.97% 27.52% 36.53%
Markit iBoxx USD Liquid Leveraged Loan
Index 5.00% 11.37% 3.39% 2.71% 18.15% 23.87%
S&P/LSTA U.S. Leveraged Loan 100 Index 5.32% 12.13% 4.62% 3.53% 25.35% 31.95%
------------------------------------------------------------------------------------------------------------------------------------
</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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after 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) Prior to March 1, 2021, the Fund's primary benchmark was the S&P/LSTA U.S.
Leveraged Loan 100 Index ("LL 100"). Effective March 1, 2021, the Fund
selected the S&P/LSTA Leveraged Loan Index ("LLI") because LLI is more
representative of the Fund's portfolio. The Fund will continue to maintain
LL 100 and the Markit iBoxx USD Liquid Leveraged Loan Index ("MI 100") as
secondary benchmarks.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
INDUSTRY CLASSIFICATION SECURITIES(1)
-------------------------------------------------------
Software 23.3%
Health Care Providers & Services 17.3
Pharmaceuticals 9.4
Health Care Technology 7.9
Hotels, Restaurants & Leisure 7.6
Insurance 6.1
Media 3.9
Containers & Packaging 3.2
Diversified Telecommunication Services 3.1
Commercial Services & Supplies 3.1
Diversified Consumer Services 1.9
Machinery 1.9
Specialty Retail 1.7
Professional Services 1.5
Electric Utilities 1.4
Entertainment 1.3
Aerospace & Defense 1.2
Diversified Financial Services 0.8
Auto Components 0.5
Electrical Equipment 0.4
Construction & Engineering 0.4
Food Products 0.4
Communications Equipment 0.4
Airlines 0.3
Household Durables 0.3
Oil, Gas & Consumable Fuels 0.2
Chemicals 0.2
Building Products 0.1
Wireless Telecommunication Services 0.1
Textiles, Apparel & Luxury Goods 0.1
Real Estate Management & Development 0.0*
Trading Companies & Distributors 0.0*
Life Sciences Tools & Services 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 93.7%
Corporate Bonds and Notes 5.6
Foreign Corporate Bonds and Notes 0.5
Common Stocks 0.2
Warrants 0.0*
Rights 0.0*
-------
Total 100.0%
=======
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
CREDIT QUALITY (S&P RATINGS)(2) DEBT SECURITIES(1)
-------------------------------------------------------
BBB- 0.1%
BB 2.0
BB- 7.4
B+ 23.2
B 40.5
B- 20.2
CCC+ 2.1
CCC 2.5
D 1.7
NR 0.3
-------
Total 100.0%
=======
-------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
TOP 10 ISSUERS SECURITIES(1)
-------------------------------------------------------
Multiplan, Inc. (MPH) 2.4%
HUB International Ltd. 2.4
Change Healthcare Holdings LLC 2.2
IRB Holding Corp. (Arby's/Inspire
Brands) 2.2
Internet Brands, Inc. (WebMD/MH Sub I
LLC) 2.2
SolarWinds Holdings, Inc. 2.1
Alliant Holdings I LLC 2.1
McAfee LLC 2.1
Endo LLC 2.0
Dun & Bradstreet Corp. 2.0
-------
Total 21.7%
=======
(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
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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, 2021
First Trust Senior S&P/LSTA Leveraged Markit iBoxx USD Liquid S&P/LSTA U.S. Leveraged
Loan Fund Loan Index Leveraged Loan Index Loan 100 Index
<S> <C> <C> <C> <C>
5/1/13 $10,000 $10,000 $10,000 $10,000
10/31/13 10,092 10,150 10,103 10,122
4/30/14 10,274 10,382 10,323 10,338
10/31/14 10,385 10,492 10,389 10,434
4/30/15 10,637 10,730 10,594 10,589
10/31/15 10,567 10,540 10,280 10,268
4/30/16 10,763 10,707 10,484 10,527
10/31/16 11,034 11,230 10,826 10,968
4/30/17 11,247 11,568 11,026 11,260
10/31/17 11,414 11,799 11,161 11,452
4/30/18 11,592 12,080 11,404 11,706
10/31/18 11,760 12,334 11,602 11,929
4/30/19 12,044 12,592 11,877 12,262
10/31/19 12,156 12,663 11,905 12,339
4/30/20 11,619 11,759 11,122 11,765
10/31/20 12,266 12,880 11,798 12,527
4/30/21 12,978 13,653 12,387 13,195
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
(1) Prior to March 1, 2021, the Fund's primary benchmark was the S&P/LSTA U.S.
Leveraged Loan 100 Index ("LL 100"). Effective March 1, 2021, the Fund
selected the S&P/LSTA Leveraged Loan Index ("LLI") because LLI is more
representative of the Fund's portfolio. The Fund will continue to maintain
LL 100 and the Markit iBoxx USD Liquid Leveraged Loan Index ("MI 100") as
secondary benchmarks.
Page 4
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PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (UNAUDITED)
ADVISOR
The First Trust Advisors L.P. ("First Trust") Leveraged Finance Investment Team
is comprised of 16 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, 2021, the First
Trust Leveraged Finance Investment Team managed or supervised approximately
$6.56 billion in senior secured bank loans and high-yield bonds. These assets
are managed across various strategies, including three 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 AND PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD (a) PERIOD (a) (b)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST SENIOR LOAN FUND (FTSL)
Actual $1,000.00 $1,058.00 0.85% $4.34
Hypothetical (5% return before expenses) $1,000.00 $1,020.58 0.85% $4.26
</TABLE>
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 90.8%
AEROSPACE & DEFENSE -- 1.2%
$ 2,624,808 BBA Aviation (Signature Aviation US Holdings, Inc.), Term
Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor..................... 3.25% 04/21/28 $ 2,610,870
2,700,715 Peraton Corp., Delayed Funding Term Loan, 1 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 02/28/28 2,697,339
1,534,579 Peraton Corp., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75%
Floor........................................................ 4.50% 02/28/28 1,532,660
2,686,553 Spirit Aerosystems, Inc., Term Loan B, 1 Mo. LIBOR + 5.25%,
0.75% Floor.................................................. 6.00% 01/30/25 2,706,702
2,863,750 Transdigm, Inc., Tranche E Refinancing Term Loan, 1 Mo.
LIBOR + 2.25%, 0.00% Floor................................... 2.36% 05/30/25 2,826,865
11,333,321 Transdigm, Inc., Tranche G Refinancing Term Loan, 1 Mo.
LIBOR + 2.25%, 0.00% Floor................................... 2.36% 08/22/24 11,194,941
---------------
23,569,377
---------------
AIRLINES -- 0.3%
5,723,987 American Airlines, Inc. (AAdvantage Loyalty IP Ltd.), Initial
Term Loan, 3 Mo. LIBOR + 4.75%, 0.75% Floor.................. 5.50% 03/24/28 5,881,397
---------------
APPAREL, ACCESSORIES & LUXURY GOODS -- 0.1%
1,379,846 Careismatic Brands/New Trojan, Inc. (fka Strategic Partners),
Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor................ 3.75% 01/31/28 1,374,671
---------------
APPLICATION SOFTWARE -- 17.8%
10,435,809 CCC Information Services, Inc. (Cypress), Term Loan B, 1 Mo.
LIBOR + 3.00%, 1.00% Floor................................... 4.00% 04/26/24 10,436,748
16,969,044 Epicor Software Corp., New Term Loan B, 1 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 07/30/27 16,934,258
16,332,964 Flexera Software LLC, 2020 Term Loan B, 3 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 01/26/28 16,356,320
11,514,100 Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo.
LIBOR + 4.00%, 0.75% Floor................................... 4.75% 10/01/27 11,514,101
29,970,142 Greeneden U.S. Holdings II LLC (Genesys Telecommunications
Lboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR +
4.00%, 0.75% Floor........................................... 4.75% 12/01/27 30,015,098
2,113,807 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR
+ 6.25%, 0.75% Floor......................................... 7.00% 07/10/25 2,126,131
31,188,851 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.75% Floor.................................................. 4.25% 07/01/24 31,198,520
7,970,929 Imprivata, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.50%
Floor........................................................ 4.25% 11/30/27 7,958,733
5,655,254 Inmar Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00%
Floor........................................................ 5.00% 05/01/24 5,598,701
17,339,878 Internet Brands, Inc. (WebMD/MH Sub I LLC), 2020 June New
Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 4.75% 09/15/24 17,318,203
20,730,477 Internet Brands, Inc. (WebMD/MH Sub I LLC), Initial Term
Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor....................... 3.61% 09/13/24 20,526,074
3,935,420 Internet Brands, Inc. (WebMD/MH Sub I LLC), Term Loan
(Second Lien), 1 Mo. LIBOR + 6.25%, 0.00% Floor.............. 6.36% 02/15/29 3,969,855
20,259,397 LogMeIn, Inc. (Logan), Term Loan B, 1 Mo. LIBOR + 4.75%,
0.00% Floor.................................................. 4.86% 08/31/27 20,215,029
40,959,234 McAfee LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00%
Floor........................................................ 3.86% 09/30/24 40,928,515
64,504 Micro Focus International (MA Financeco LLC), Miami Escrow
Term Loan B3, 1 Mo. LIBOR + 2.75%, 0.00% Floor............... 2.86% 06/21/24 63,638
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
APPLICATION SOFTWARE (CONTINUED)
$ 435,496 Micro Focus International (MA Financeco LLC), Seattle Spinco
Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor................ 2.86% 06/21/24 $ 429,642
4,282,096 Micro Focus International (MA Financeco LLC), Term Loan B4,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 06/05/25 4,296,355
2,995,013 N-Able, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50%
Floor........................................................ 3.50% 04/16/28 2,987,525
23,361,443 RealPage, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50%
Floor........................................................ 3.75% 03/31/28 23,241,833
41,997,342 SolarWinds Holdings, Inc., Initial Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 02/05/24 41,347,223
38,027,133 Solera Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 2.86% 03/03/23 37,799,731
773,526 TIBCO Software, Inc., Term Loan B-3, 1 Mo. LIBOR + 3.75%,
0.00% Floor.................................................. 3.87% 06/30/26 767,477
690,341 Ultimate Kronos Group (UKG, Inc.), New Term Loan, 3 Mo.
LIBOR + 3.25%, 0.75% Floor................................... 4.00% 05/03/26 690,555
8,394,867 Veeam Software Holdings Ltd. (VS Buyer LLC), Term Loan B,
1 Mo. LIBOR + 3.00%, 0.00% Floor............................. 3.11% 02/28/27 8,321,412
---------------
355,041,677
---------------
AUTO PARTS & EQUIPMENT -- 0.5%
5,547,874 Clarios Global L.P. (Power Solutions), Term Loan B, 1 Mo.
LIBOR + 3.25%, 0.00% Floor................................... 3.36% 04/30/26 5,486,848
3,956,874 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.50% 06/30/24 3,016,918
2,066,807 Truck Hero, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75%
Floor........................................................ 4.50% 01/31/28 2,061,413
---------------
10,565,179
---------------
BROADCASTING -- 2.1%
1,396,500 E.W. Scripps Co., Incremental Term Loan, 1 Mo. LIBOR +
3.00%, 0.75% Floor........................................... 3.75% 12/31/27 1,393,232
21,708,835 iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo.
LIBOR + 4.00%, 0.75% Floor................................... 4.75% 05/01/26 21,708,835
15,033,490 iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.11% 04/29/26 14,836,251
734,432 Univision Communications, Inc., 2017 Replacement Repriced
Term Loan C-5 (First Lien), 1 Mo. LIBOR + 2.75%, 1.00%
Floor........................................................ 3.75% 03/15/24 731,780
2,727,621 Univision Communications, Inc., Extended Term Loan B, 1 Mo.
LIBOR + 3.75%, 1.00% Floor................................... 4.75% 03/24/26 2,729,803
---------------
41,399,901
---------------
BUILDING PRODUCTS -- 0.1%
357,784 Hillman (The) Group, Inc., Delayed Draw Term Loan, 1 Mo.
LIBOR + 2.75%, 0.50% Floor................................... 3.25% 02/24/28 355,637
1,762,086 Hillman (The) Group, Inc., Term Loan B1, 1 Mo. LIBOR +
2.75%, 0.50% Floor........................................... 3.25% 02/24/28 1,751,514
---------------
2,107,151
---------------
CASINOS & GAMING -- 4.4%
5,160,743 Bally's Corp. (fka Twin River), Term Loan B, 3 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.95% 05/10/26 5,109,135
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 2,371,490 Boyd Gaming Corp., Term Loan B, 1 Wk. LIBOR + 2.25%,
0.00% Floor.................................................. 2.34% 09/15/23 $ 2,366,297
30,057,348 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 12/22/24 29,707,781
1,304,192 Caesars Resort Collection LLC, Term Loan B-1, 1 Mo. LIBOR
+ 4.50%, 0.00% Floor......................................... 4.61% 06/30/25 1,307,179
11,233,606 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 3.00% 04/18/24 11,098,803
29,930,536 Golden Nugget, Inc., Term Loan B, 2 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.25% 10/04/23 29,540,241
8,154,631 Scientific Games International, Inc., Term Loan B5, 1 Mo.
LIBOR + 2.75%, 0.00% Floor................................... 2.86% 08/14/24 8,030,762
993,863 Stars Group Holdings B.V. (Amaya), Term Loan B, 3 Mo.
LIBOR + 3.50%, 0.00% Floor................................... 3.70% 07/10/25 995,791
---------------
88,155,989
---------------
COMMUNICATIONS EQUIPMENT -- 0.4%
7,198,264 Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00%
Floor........................................................ 3.36% 04/06/26 7,139,814
---------------
CONSTRUCTION & ENGINEERING -- 0.4%
686,940 Pike Corp., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00%
Floor........................................................ 3.12% 01/20/28 683,628
7,424,402 Westinghouse Electric (Brookfield WEC Holdings, Inc.), Term
Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor..................... 3.25% 08/01/25 7,335,310
---------------
8,018,938
---------------
DIVERSIFIED CHEMICALS -- 0.1%
2,762,889 Ineos US Petrochem LLC (Ineos Quattro), Term Loan B, 3 Mo.
LIBOR + 2.75%, 0.50% Floor................................... 3.25% 01/31/26 2,749,074
---------------
ELECTRIC UTILITIES -- 1.3%
26,759,001 PG&E Corp., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50%
Floor........................................................ 3.50% 06/23/25 26,642,064
---------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 0.4%
8,554,196 Array Technologies, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.50% Floor.................................................. 3.75% 10/14/27 8,527,506
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 1.0%
14,349,299 Packers Holdings LLC (PSSI), Term Loan B, 3 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 03/15/28 14,190,883
5,023,041 TruGreen L.P., Second Refinancing Term Loan B, 1 Mo. LIBOR
+ 4.00%, 0.75% Floor......................................... 4.75% 11/02/27 5,016,762
---------------
19,207,645
---------------
HEALTH CARE DISTRIBUTORS -- 0.8%
8,933,316 Radiology Partners, Inc., Term Loan B, 1 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 4.36% 07/09/25 8,892,848
7,659,420 Radiology Partners, Inc., Term Loan B, 1 Yr. LIBOR + 4.25%,
0.00% Floor.................................................. 4.54% 07/09/25 7,624,723
---------------
16,517,571
---------------
HEALTH CARE FACILITIES -- 0.0%
662,255 Select Medical Corp., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.00% Floor.................................................. 2.37% 03/06/25 654,394
---------------
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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 -- 12.8%
$ 2,044,736 AccentCare (Pluto Acquisition I, Inc.), Incremental Term Loan,
1 Mo. LIBOR + 5.00%, 0.50% Floor............................. 5.50% 06/20/26 $ 2,052,404
1,000,000 AccentCare (Pluto Acquisition I, Inc.), Term Loan B, 1 Mo.
LIBOR + 4.50%, 0.00% Floor................................... 4.61% 06/20/26 1,000,000
13,542,012 ADMI Corp. (Aspen Dental), Term Loan B2, 1 Mo. LIBOR +
2.75%, 0.50% Floor........................................... 3.25% 12/23/27 13,420,676
5,984,506 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings,
Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor......... 4.50% 04/21/24 5,886,540
31,695,053 Athenahealth, Inc. (VVC Holding Corp.), Term Loan B-1, 3 Mo.
LIBOR + 4.25%, 0.00% Floor................................... 4.45% 02/11/26 31,774,290
9,319,778 Aveanna Healthcare LLC, Term Loan B, 3 Mo. LIBOR + 4.25%,
1.00% Floor.................................................. 5.25% 03/16/24 9,287,718
9,234,541 Brightspring Health (Phoenix Guarantor, Inc.), New Incremental
Term Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor.................. 3.61% 03/05/26 9,146,813
32,686,184 CHG Healthcare Services, Inc., Term Loan, 3 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.00% 06/07/23 32,578,973
4,614,111 Civitas Solutions (National Mentor Holdings, Inc.), Term Loan B,
1 Mo. LIBOR + 3.75%, 0.75% Floor............................. 4.50% 03/31/28 4,606,405
4,146,859 Civitas Solutions (National Mentor Holdings, Inc.), Term Loan B,
3 Mo. LIBOR + 3.75%, 0.75% Floor............................. 4.50% 03/31/28 4,139,934
292,032 Civitas Solutions (National Mentor Holdings, Inc.), Term Loan C,
3 Mo. LIBOR + 3.75%, 0.75% Floor............................. 4.50% 03/31/28 291,545
5,633,011 DuPage Medical Group (Midwest Physician Admin. Services
LLC), Incremental Term Loan B, 3 Mo. LIBOR + 3.25%,
0.75% Floor.................................................. 4.00% 03/15/28 5,609,521
23,436,866 Envision Healthcare Corp., Initial Term Loan, 1 Mo. LIBOR +
3.75%, 0.00% Floor........................................... 3.86% 10/10/25 19,602,829
21,031,407 Exam Works (Gold Merger Co., Inc.), Term Loan B-1, 3 Mo.
LIBOR + 3.25%, 1.00% Floor................................... 4.25% 07/27/23 21,008,903
3,740,335 Global Medical Response, Inc. (fka Air Medical), 2018 New
Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor.................. 5.25% 03/14/25 3,737,006
12,993,717 Global Medical Response, Inc. (fka Air Medical), 2020
Refinancing Term Loan, 3 Mo. LIBOR + 4.75%, 1.00%
Floor........................................................ 5.75% 10/15/25 13,006,711
4,486,391 Help at Home (HAH Group Holding Co. LLC), Initial Term
Loan B, 3 Mo. LIBOR + 5.00%, 1.00% Floor..................... 6.00% 10/29/27 4,491,999
10,410,172 Packaging Coordinators, Inc. (PCI Pharma), Term Loan B, 3 Mo.
LIBOR + 3.75%, 0.75% Floor................................... 4.50% 11/30/27 10,403,718
5,990,355 Radnet Management, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%,
0.75% Floor.................................................. 4.00% 04/16/28 5,957,887
1,352,171 SCP Health (Onex TSG Intermediate Corp.), Term Loan B,
3 Mo. LIBOR + 4.75%, 0.75% Floor............................. 5.50% 02/28/28 1,336,959
16,043,597 Surgery Centers Holdings, Inc., 2021 Term Loan B, 1 Mo. LIBOR
+ 3.75%, 0.75% Floor......................................... 4.50% 08/31/26 15,975,893
3,750,369 Surgery Centers Holdings, Inc., Term Loan B, 1 Mo. LIBOR +
3.25%, 1.00% Floor........................................... 4.25% 08/31/24 3,734,543
9,471,136 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00%
Floor........................................................ 3.75% 02/06/24 8,804,936
7,793,496 U.S. Anesthesia Partners Intermediate Holdings, Inc., Term
Loan B, 6 Mo. LIBOR + 3.00%, 1.00% Floor..................... 4.00% 06/23/24 7,670,125
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 18,488,516 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%,
0.00% Floor.................................................. 5.13% 06/28/26 $ 18,066,793
718,513 US Radiology Specialists, Inc., Term Loan B, 3 Mo. LIBOR +
5.50%, 0.75% Floor........................................... 6.25% 12/31/27 720,697
---------------
254,313,818
---------------
HEALTH CARE TECHNOLOGY -- 7.2%
985,003 Change Healthcare Holdings LLC, Closing Date Term Loan,
1 Mo. LIBOR + 2.50%, 1.00% Floor............................. 3.50% 03/01/24 983,437
33,423,606 Change Healthcare Holdings LLC, Closing Date Term Loan,
3 Mo. LIBOR + 2.50%, 1.00% Floor............................. 3.50% 03/01/24 33,370,463
6,799,728 Ciox Health (Healthport/CT Technologies Intermediate Holdings,
Inc.), Initial Term Loan, 1 Mo. LIBOR + 5.00%, 1.00%
Floor........................................................ 6.00% 12/31/25 6,808,227
10,319,708 Ensemble RCM, LLC (Ensemble Health), Term Loan B, 3 Mo.
LIBOR + 3.75%, 0.00% Floor................................... 3.94% 08/01/26 10,288,336
2,584,099 eResearch Technology, Inc. (ERT), Incremental Term Loan B,
1 Mo. LIBOR + 4.50%, 1.00% Floor............................. 5.50% 02/04/27 2,588,415
3,391,634 Inovalon Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 2.88% 04/02/25 3,362,670
9,955,146 Mediware (Wellsky/Project Ruby Ultimate Parent Corp.), Term
Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor..................... 4.00% 03/15/28 9,880,482
2,000,000 Press Ganey (Azalea TopCo, Inc.), 2020 Incremental Term Loan,
1 Mo. LIBOR + 4.00%, 0.75% Floor............................. 4.75% 07/25/26 1,995,840
8,172,310 Press Ganey (Azalea TopCo, Inc.), Term Loan B, 3 Mo. LIBOR
+ 3.50%, 0.00% Floor......................................... 3.71% 07/25/26 8,092,630
31,328,396 Verscend Technologies, Inc. (Cotiviti), New Term Loan B, 1 Mo.
LIBOR + 4.00%, 0.00% Floor................................... 4.11% 08/27/25 31,298,947
35,654,200 Zelis Payments Buyer, Inc., Term Loan B, 1 Mo. LIBOR +
3.50%, 0.00% Floor........................................... 3.62% 09/30/26 35,431,361
---------------
144,100,808
---------------
HOMEFURNISHING RETAIL -- 0.2%
4,194,339 Rent-A-Center, Inc., Term Loan B, 1 Mo. LIBOR + 4.00%,
0.75% Floor.................................................. 4.75% 02/15/28 4,218,792
---------------
HOUSEHOLD APPLIANCES -- 0.2%
3,784,755 Traeger Grills (TGP Holdings III LLC), 2018 Refinancing Term
Loan, 3 Mo. LIBOR + 4.00%, 1.00% Floor....................... 5.00% 09/25/24 3,778,851
997,500 Weber-Stephen Products LLC, Term Loan B, 1 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 10/31/27 996,562
---------------
4,775,413
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.3%
6,673,936 Alight, Inc. (fka Tempo Acq.), Non Extended Term Loan, 1 Mo.
LIBOR + 2.75%, 0.00% Floor................................... 2.86% 05/01/24 6,660,588
---------------
INDUSTRIAL MACHINERY -- 1.8%
23,228,636 Gates Global LLC, Term Loan B-3, 1 Mo. LIBOR + 2.75%,
0.75% Floor.................................................. 3.50% 03/31/27 23,128,289
2,659,122 Thyssenkrupp Elevator (Vertical U.S. Newco, Inc.), Term
Loan B, 3 Mo. LIBOR + 4.25%, 0.00% Floor..................... 4.48% 07/31/27 2,662,446
10,409,212 Thyssenkrupp Elevator (Vertical U.S. Newco, Inc.), Term
Loan B, 6 Mo. LIBOR + 4.25%, 0.00% Floor..................... 4.48% 07/31/27 10,422,223
---------------
36,212,958
---------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INSURANCE BROKERS -- 5.6%
$ 1,636,996 Alliant Holdings I LLC, 2019 New Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.36% 05/10/25 $ 1,614,651
32,868,892 Alliant Holdings I LLC, Initial Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.36% 05/09/25 32,435,680
577,047 AmWINS Group, Inc., Term Loan B, 1 Mo. LIBOR + 2.25%,
0.75% Floor.................................................. 3.00% 02/28/28 570,630
20,369,285 AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.61% 02/12/27 20,159,277
7,415,713 BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.36% 01/27/27 7,340,740
3,542,114 Cross Financial Corp., Term Loan B, 1 Mo. LIBOR + 4.00%,
0.75% Floor.................................................. 4.75% 09/15/27 3,546,541
78,641 HUB International Ltd., Initial Term Loan B, 2 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.15% 04/25/25 77,553
30,512,857 HUB International Ltd., Initial Term Loan B, 3 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.18% 04/25/25 30,090,559
15,013,026 HUB International Ltd., New Term Loan B-3, 3 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 04/25/25 14,989,606
---------------
110,825,237
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 2.4%
2,361,093 Frontier Communications Corp., Delayed Draw Term Loan,
1 Mo. LIBOR + 3.75%, 0.75% Floor............................. 4.50% 10/08/27 2,351,248
18,722,756 Frontier Communications Corp., Term Loan B, 1 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 10/08/27 18,644,682
11,756,484 Numericable (Altice France S.A. or SFR), Term Loan B-11,
3 Mo. LIBOR + 2.75%, 0.00% Floor............................. 2.94% 07/31/25 11,501,721
1,969,388 Numericable (Altice France S.A. or SFR), Term Loan B-12,
3 Mo. LIBOR + 3.69%, 0.00% Floor............................. 3.87% 01/31/26 1,951,663
9,112,233 Numericable (Altice France S.A. or SFR), Term Loan B-13,
3 Mo. LIBOR + 4.00%, 0.00% Floor............................. 4.20% 08/14/26 9,076,422
3,590,479 Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo.
LIBOR + 3.00%, 0.00% Floor................................... 3.11% 03/09/27 3,552,168
---------------
47,077,904
---------------
MANAGED HEALTH CARE -- 2.3%
46,786,642 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 3.75% 06/07/23 46,523,701
---------------
METAL & GLASS CONTAINERS -- 0.6%
7,538,539 Altium Packaging (FKA Consolidated Container), Term
Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor..................... 3.25% 02/15/28 7,455,313
3,675,397 PODS LLC, Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75%
Floor........................................................ 3.75% 03/26/28 3,657,682
---------------
11,112,995
---------------
MOVIES & ENTERTAINMENT -- 1.3%
3,121,680 Cineworld Group PLC (Crown), Priority Term Loan B-1, Fixed
Rate at 15.25% (c)........................................... 15.25% 05/23/24 3,911,028
22,798,416 Cineworld Group PLC (Crown), Term Loan B, 3 Mo. LIBOR +
2.50%, 1.00% Floor........................................... 3.50% 02/28/25 19,527,299
1,892,437 PUG LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.61% 02/12/27 1,833,298
---------------
25,271,625
---------------
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
OFFICE SERVICES & SUPPLIES -- 1.9%
$ 38,473,607 Dun & Bradstreet Corp., Refinancing Term Loan, 1 Mo. LIBOR
+ 3.25%, 0.00% Floor......................................... 3.36% 02/08/26 $ 38,245,074
---------------
OTHER DIVERSIFIED FINANCIAL SERVICES -- 0.7%
14,767,472 AlixPartners, LLP, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.50%
Floor........................................................ 3.25% 01/31/28 14,695,998
---------------
PACKAGED FOODS & MEATS -- 0.4%
4,157,033 BellRing Brands LLC, New Term Loan B, 1 Mo. LIBOR +
4.00%, 0.75% Floor........................................... 4.75% 10/21/24 4,183,015
1,938,353 Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B,
1 Mo. LIBOR + 3.75%, 1.00% Floor............................. 4.75% 07/07/24 1,941,745
1,733,775 Weight Watchers International, Inc., Term Loan B, 1 Mo. LIBOR
+ 3.50%, 0.50% Floor......................................... 4.00% 04/01/28 1,732,475
---------------
7,857,235
---------------
PAPER PACKAGING -- 2.4%
33,957,206 Graham Packaging Company, L.P., Term Loan B, 1 Mo. LIBOR
+ 3.00%, 0.75% Floor......................................... 3.75% 08/04/27 33,849,222
14,931,455 Pactiv LLC/Evergreen Packaging LLC (fka Reynolds Group
Holdings), Tranche B-1 U.S. Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 02/05/23 14,892,036
---------------
48,741,258
---------------
PHARMACEUTICALS -- 7.9%
2,928,475 Akorn, Inc., Exit Take Back Term Loan, 3 Mo. LIBOR + 7.50%,
1.00% Floor (d).............................................. 8.50% 09/30/25 2,996,210
26,751,510 Bausch Health Cos., Inc. (Valeant), Term Loan B, 1 Mo. LIBOR
+ 3.00%, 0.00% Floor......................................... 3.11% 06/01/25 26,699,612
37,321,408 Endo LLC, 2021 Term Loan B, 1 Mo. LIBOR + 4.25%, 0.75%
Floor........................................................ 5.00% 03/11/28 36,295,069
11,999,450 Jazz Pharmaceuticals, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.50% Floor.................................................. 4.00% 04/22/28 12,024,409
28,832,589 Mallinckrodt International Finance S.A., 2017 Term Loan B,
6 Mo. LIBOR + 5.25%, 0.75% Floor (e)......................... 6.00% 09/24/24 27,985,776
5,578,049 Mallinckrodt International Finance S.A., 2018 Incremental Term
Loan, 6 Mo. LIBOR + 5.50%, 0.75% Floor (e)................... 6.25% 02/24/25 5,415,672
14,900,063 Nestle Skin Health (Sunshine Lux VII SARL/Galderma), 2021
Term Loan B-3, 3 Mo. LIBOR + 3.75%, 0.75% Floor.............. 4.50% 10/02/26 14,893,060
32,153,071 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 09/27/24 31,845,045
---------------
158,154,853
---------------
PUBLISHING -- 0.1%
1,737,289 Meredith Corp., Tranche B-3 Term Loan, 3 Mo. LIBOR + 4.25%,
1.00% Floor.................................................. 5.25% 01/31/25 1,762,619
---------------
RESEARCH & CONSULTING SERVICES -- 1.2%
10,042,888 Clarivate Analytics PLC (Camelot), Amendment No. 2 Incremental
Term Loan, 1 Mo. LIBOR + 3.00%, 1.00% Floor.................. 4.00% 10/31/26 10,042,888
3,734,451 Corelogic, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50%
Floor........................................................ 4.00% 04/14/28 3,712,268
8,855,207 Nielsen Consumer, Inc. (Indy US Holdco LLC), Term Loan B-1,
1 Mo. LIBOR + 4.00%, 0.00% Floor............................. 4.11% 03/05/28 8,834,929
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
RESEARCH & CONSULTING SERVICES (CONTINUED)
$ 454,502 Nielsen Finance LLC (VNU, Inc.), Term Loan B5, 1 Mo.
LIBOR + 3.75%, 1.00% Floor................................... 4.75% 06/30/25 $ 455,034
---------------
23,045,119
---------------
RESTAURANTS -- 2.5%
8,837,500 IRB Holding Corp. (Arby's/Inspire Brands), Fourth Amendment
Incremental Term Loan B, 3 Mo. LIBOR + 3.25%, 1.00%
Floor........................................................ 4.25% 12/31/27 8,812,667
33,682,250 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B,
3 Mo. LIBOR + 2.75%, 1.00% Floor............................. 3.75% 02/05/25 33,412,119
3,865,317 Portillo's Holdings LLC, Term Loan B-3, 3 Mo. LIBOR +
5.50%, 1.00% Floor........................................... 6.50% 08/30/24 3,850,822
4,579,879 Zaxby's Operating Co., L.P., Term Loan (First Lien), 1 Mo.
LIBOR + 3.75%, 0.75% Floor................................... 4.50% 12/30/27 4,579,879
---------------
50,655,487
---------------
SECURITY & ALARM SERVICES -- 0.1%
2,230,679 Garda World Security Corporation, Term Loan B, 1 Mo. LIBOR
+ 4.25%, 0.00% Floor......................................... 4.36% 10/30/26 2,231,616
---------------
SPECIALIZED CONSUMER SERVICES -- 1.8%
9,500,172 Asurion LLC, New B-8 Term Loan, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.36% 12/23/26 9,430,441
5,880,834 Asurion LLC, Term Loan B-3 (Second Lien), 1 Mo. LIBOR +
5.25%, 0.00% Floor........................................... 5.36% 02/05/28 5,961,695
16,822,275 Asurion LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%, 0.00%
Floor........................................................ 3.11% 11/03/23 16,776,687
4,453,233 Asurion LLC, Term Loan B7, 1 Mo. LIBOR + 3.00%, 0.00%
Floor........................................................ 3.11% 11/03/24 4,425,400
---------------
36,594,223
---------------
SPECIALTY STORES -- 1.4%
4,614,096 Bass Pro Group LLC (Great Outdoors Group LLC), Term
Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor..................... 5.00% 03/15/28 4,629,968
13,035,991 Petco Animal Supplies, Inc., Initial Term Loan B, 3 Mo. LIBOR
+ 3.25%, 0.75% Floor......................................... 4.00% 03/03/28 12,952,691
10,187,077 Petsmart, Inc., Initial Term Loan B, 3 Mo. LIBOR + 3.75%,
0.75% Floor.................................................. 4.50% 02/15/28 10,207,451
---------------
27,790,110
---------------
SYSTEMS SOFTWARE -- 4.8%
33,188,731 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR +
3.00%, 0.50% Floor........................................... 3.50% 09/19/24 33,043,697
73,949 Applied Systems, Inc., Term Loan (First Lien), Prime Rate +
2.00%, 0.50% Floor........................................... 5.25% 09/19/24 73,626
2,292,052 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR
+ 5.50%, 0.75% Floor......................................... 6.25% 09/19/25 2,305,415
34,365,651 BMC Software Finance, Inc. (Boxer Parent), Term Loan B, 1 Mo.
LIBOR + 3.75%, 0.00% Floor................................... 3.86% 10/02/25 34,167,361
4,972,852 Bomgar Corp. (Brave Parent Holdings, Inc.), Term Loan B, 1 Mo.
LIBOR + 4.00%, 0.00% Floor................................... 4.11% 04/19/25 4,965,094
4,184,051 Idera, Inc., Initial Term Loan, 3 Mo. LIBOR + 3.75%, 0.75%
Floor........................................................ 4.50% 02/15/28 4,148,319
3,898,747 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 3,828,101
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (a) MATURITY (b) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SYSTEMS SOFTWARE (CONTINUED)
$ 3,038,586 Riverbed Technology, Inc., New Term Loan B, 3 Mo. LIBOR +
6.00%, 1.00% Floor........................................... 7.00% 12/30/25 $ 2,874,412
10,482,309 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.68% 03/05/27 10,375,075
992,405 SUSE (Marcel Lux IV S.A.R.L.), Facility Term Loan B1 USD,
1 Mo. LIBOR + 3.25%, 0.00% Floor............................. 3.36% 03/15/26 981,240
---------------
96,762,340
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 1,815,182,119
(Cost $1,821,227,385) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 5.5%
ALTERNATIVE CARRIERS -- 0.2%
2,760,000 Cogent Communications Group, Inc. (f)........................... 3.50% 05/01/26 2,760,000
---------------
BROADCASTING -- 1.5%
8,109,000 Cumulus Media New Holdings, Inc. (f)............................ 6.75% 07/01/26 8,368,853
8,201,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (f)....... 5.38% 08/15/26 5,996,981
2,848,000 E.W. Scripps (The) Co. (f)...................................... 5.13% 05/15/25 2,930,051
2,148,000 Gray Television, Inc. (f)....................................... 5.88% 07/15/26 2,232,577
1,673,000 Sinclair Television Group, Inc. (f)............................. 4.13% 12/01/30 1,633,283
9,010,000 Univision Communications, Inc. (f).............................. 5.13% 02/15/25 9,174,027
---------------
30,335,772
---------------
CABLE & SATELLITE -- 0.1%
1,621,000 CSC Holdings LLC (f)............................................ 5.50% 05/15/26 1,669,630
---------------
CASINOS & GAMING -- 0.4%
7,968,000 Caesars Entertainment, Inc. (f)................................. 6.25% 07/01/25 8,481,538
---------------
COAL & CONSUMABLE FUELS -- 0.2%
2,114,000 Peabody Energy Corp. (f) (g).................................... 8.50% 12/31/24 1,014,720
2,947,000 Peabody Energy Corp. (f)........................................ 6.38% 03/31/25 1,267,829
2,384,000 PIC AU Holdings LLC / PIC AU Holdings Corp. (f)................. 10.00% 12/31/24 2,193,280
---------------
4,475,829
---------------
HEALTH CARE FACILITIES -- 1.3%
2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,185,816
10,530,000 Tenet Healthcare Corp. (f)...................................... 4.63% 09/01/24 10,859,063
845,000 Tenet Healthcare Corp........................................... 5.13% 05/01/25 856,196
8,764,000 Tenet Healthcare Corp. (f)...................................... 4.88% 01/01/26 9,116,839
3,008,000 Tenet Healthcare Corp. (f)...................................... 5.13% 11/01/27 3,158,550
---------------
26,176,464
---------------
HEALTH CARE SERVICES -- 0.1%
869,000 Global Medical Response, Inc. (f)............................... 6.50% 10/01/25 890,725
---------------
HEALTH CARE TECHNOLOGY -- 0.5%
8,996,000 Change Healthcare Holdings LLC / Change Healthcare Finance,
Inc. (f)..................................................... 5.75% 03/01/25 9,153,430
---------------
INSURANCE BROKERS -- 0.4%
7,000,000 Alliant Holdings Intermediate LLC / Alliant Holdings
Co-Issuer (f)................................................ 4.25% 10/15/27 7,061,390
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
INSURANCE BROKERS (CONTINUED)
$ 893,000 HUB International Ltd. (f)...................................... 7.00% 05/01/26 $ 926,407
---------------
7,987,797
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 0.5%
1,430,000 Frontier Communications Corp. (f)............................... 5.88% 10/15/27 1,521,162
2,619,000 Frontier Communications Corp. (f)............................... 5.00% 05/01/28 2,679,172
6,354,000 Zayo Group Holdings, Inc. (f)................................... 4.00% 03/01/27 6,318,163
---------------
10,518,497
---------------
PAPER PACKAGING -- 0.1%
2,533,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu (f)................................. 4.00% 10/15/27 2,507,746
---------------
PHARMACEUTICALS -- 0.1%
1,604,000 Organon Finance 1 LLC (f)....................................... 4.13% 04/30/28 1,645,287
---------------
REAL ESTATE SERVICES -- 0.0%
250,000 KB Home......................................................... 7.00% 12/15/21 255,469
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.0%
250,000 United Rentals North America, Inc............................... 5.88% 09/15/26 261,250
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.1%
2,000,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,019,400
---------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 109,138,834
(Cost $107,820,823) ---------------
FOREIGN CORPORATE BONDS AND NOTES -- 0.4%
DIVERSIFIED CHEMICALS -- 0.0%
357,000 INEOS Quattro Finance 2 PLC (f)................................. 3.38% 01/15/26 356,596
---------------
PHARMACEUTICALS -- 0.4%
4,366,000 Bausch Health Cos., Inc. (f).................................... 6.13% 04/15/25 4,469,693
2,939,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (f).............. 9.50% 07/31/27 3,119,014
214,000 Jazz Securities DAC (f)......................................... 4.38% 01/15/29 219,082
250,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB
LLC (e) (f) (h).............................................. 5.63% 10/15/23 167,500
---------------
7,975,289
---------------
REAL ESTATE SERVICES -- 0.0%
250,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (f)........................................ 5.88% 04/15/23 269,349
---------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 8,601,234
(Cost $8,793,452) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS -- 0.2%
PHARMACEUTICALS -- 0.2%
249,316 Akorn, Inc. (i) (j).......................................................................... 3,895,563
(Cost $2,858,880) ---------------
WARRANTS -- 0.0%
MOVIES & ENTERTAINMENT -- 0.0%
972,355 Cineworld Group PLC, expiring 11/23/25 (i) (k)............................................... 805,719
(Cost $0) ---------------
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
4,887 Vista Energy Corp., no expiration date (i) (k)............................................... $ 5,415
---------------
LIFE SCIENCES TOOLS & SERVICES -- 0.0%
1 New Millennium Holdco, Inc., Corporate Claim Trust, no expiration date (i) (k) (l) (m)....... 0
1 New Millennium Holdco, Inc., Corporate Claim Trust, no expiration date (i) (k) (l) (m)....... 0
---------------
0
---------------
TOTAL RIGHTS................................................................................. 5,415
(Cost $8,491) ---------------
MONEY MARKET FUNDS -- 14.2%
283,046,740 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class -
0.01% (n)................................................................................. 283,046,740
(Cost $283,046,740) ---------------
TOTAL INVESTMENTS -- 111.1%.................................................................. 2,220,675,624
(Cost $2,223,755,771) (o)
NET OTHER ASSETS AND LIABILITIES -- (11.1)%.................................................. (222,424,615)
---------------
NET ASSETS -- 100.0%......................................................................... $ 1,998,251,009
===============
</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) The issuer will pay interest on the loans in cash and in Payment-In-Kind
("PIK") interest. Interest paid in cash will accrue at the rate of 7.00%
per annum ("Cash Interest Rate") and PIK interest will accrue on the loan
at the rate of 8.25% per annum. For the six months ended April 30, 2021,
the Fund received a portion of the interest in cash and PIK interest with
a principal value of $300,347 for Cineworld Group PLC.
(d) The issuer may pay interest on the loans (1) entirely in cash or (2) in
the event that both the PIK Toggle Condition has been satisfied and the
issuer elects to exercise the PIK interest, 2.50% payable in cash and
7.00% payable as PIK interest. For the six months ended April 30, 2021,
this security paid all of its interest in cash.
(e) The issuer has filed for protection in bankruptcy court.
(f) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended (the "1933 Act"), and may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be liquid by First Trust Advisors L.P.,
(the "Advisor"). Although market instability can result in periods of
increased overall market illiquidity, liquidity for each security is
determined based on security specific factors and assumptions, which
require subjective judgment. At April 30, 2021, securities noted as such
amounted to $112,161,937 or 5.6% of net assets.
(g) The issuer will pay interest on the bonds in cash and in PIK interest.
Interest paid in cash will accrue at the rate of 6.00% per annum ("Cash
Interest Rate") and PIK interest will accrue on the bond at the rate of
2.50% per annum. The first interest payment is scheduled for June 30,
2021.
(h) This issuer is in default and interest is not being accrued by the Fund
nor paid by the issuer.
(i) Non-income producing security.
(j) Security received in a transaction exempt from registration under the 1933
Act. The security may be resold pursuant to an exemption from registration
under the 1933 Act, typically to qualified institutional buyers. Pursuant
to procedures adopted by the Trust's Board of Trustees, this security has
been determined to be illiquid by the Advisor. Although market instability
can result in periods of increased overall market illiquidity, liquidity
for the security is determined based on security-specific factors and
assumptions, which require subjective judgment. At April 30, 2021,
securities noted as such amounted to $3,895,563 or 0.2% of net assets.
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
(k) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(l) This security's value was determined using significant unobservable inputs
(see Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(m) 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, 2021, securities noted as such are valued at $0 or
0.0% of net assets.
(n) Rate shown reflects yield as of April 30, 2021.
(o) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $12,610,280 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $15,690,427. The net unrealized depreciation
was $3,080,147.
LIBOR - London Interbank Offered Rates
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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
4/30/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Senior Floating-Rate Loan Interests*.............. $1,815,182,119 $ -- $1,815,182,119 $ --
Corporate Bonds and Notes*........................ 109,138,834 -- 109,138,834 --
Foreign Corporate Bonds and Notes*................ 8,601,234 -- 8,601,234 --
Common Stocks*.................................... 3,895,563 -- 3,895,563 --
Warrants*......................................... 805,719 -- 805,719 --
Rights
Electric Utilities............................. 5,415 -- 5,415 --
Life Science Tools & Services.................. --** -- -- --**
Money Market Funds................................ 283,046,740 283,046,740 -- --
-------------- -------------- -------------- --------------
Total Investments................................. $2,220,675,624 $ 283,046,740 $1,937,628,884 $ --**
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
** Investment is valued at $0.
Level 3 Rights are fair valued by the Advisor's Pricing Committee and are
footnoted in the Portfolio of Investments. These values are based on
unobservable and non-quantitative inputs.
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $2,220,675,624
Cash...................................................................... 1,912,299
Receivables:
Investment securities sold............................................. 33,841,234
Capital shares sold.................................................... 14,325,906
Interest............................................................... 3,940,195
Dividends.............................................................. 27,779
Unrealized appreciation on unfunded loan commitments...................... 7,893
--------------
Total Assets........................................................... 2,274,730,930
--------------
LIABILITIES:
Payables:
Investment securities purchased........................................ 275,171,103
Investment advisory fees............................................... 1,308,818
--------------
Total Liabilities...................................................... 276,479,921
--------------
NET ASSETS................................................................ $1,998,251,009
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $2,075,074,614
Par value................................................................. 418,500
Accumulated distributable earnings (loss)................................. (77,242,105)
--------------
NET ASSETS................................................................ $1,998,251,009
==============
NET ASSET VALUE, per share................................................ $ 47.75
==============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 41,850,002
==============
Investments, at cost...................................................... $2,223,755,771
==============
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 30,934,163
Dividends................................................................. 33,812
--------------
Total investment income................................................ 30,967,975
--------------
EXPENSES:
Investment advisory fees.................................................. 6,332,267
--------------
Total expenses......................................................... 6,332,267
--------------
NET INVESTMENT INCOME (LOSS).............................................. 24,635,708
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments................................... (224,899)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................ 50,250,181
Unfunded loan commitments.............................................. 8,929
--------------
Net change in unrealized appreciation (depreciation)...................... 50,259,110
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 50,034,211
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 74,669,919
==============
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
4/30/2021 YEAR ENDED
(UNAUDITED) 10/31/2020
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 24,635,708 $ 53,316,540
Net realized gain (loss).................................................. (224,899) (47,713,489)
Net change in unrealized appreciation (depreciation)...................... 50,259,110 (24,620,680)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 74,669,919 (19,017,629)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (23,910,261) (53,352,275)
Return of capital......................................................... -- (984,628)
-------------- --------------
Total distributions to shareholders....................................... (23,910,261) (54,336,903)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 682,239,226 198,707,465
Cost of shares redeemed................................................... (11,712,176) (451,536,565)
-------------- --------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... 670,527,050 (252,829,100)
-------------- --------------
Total increase (decrease) in net assets................................... 721,286,708 (326,183,632)
NET ASSETS:
Beginning of period....................................................... 1,276,964,301 1,603,147,933
-------------- --------------
End of period............................................................. $1,998,251,009 $1,276,964,301
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 27,850,002 34,000,002
Shares sold............................................................... 14,250,000 4,200,000
Shares redeemed........................................................... (250,000) (10,350,000)
-------------- --------------
Shares outstanding, end of period......................................... 41,850,002 27,850,002
============== ==============
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST SENIOR LOAN FUND (FTSL)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
4/30/2021 ------------------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 45.85 $ 47.15 $ 47.75 $ 48.26 $ 48.32 $ 48.07
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.77 1.67 2.13 1.87 1.68 1.80
Net realized and unrealized gain (loss)... 1.88 (1.27) (0.57) (0.43) (0.04) 0.27
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations......... 2.65 0.40 1.56 1.44 1.64 2.07
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income..................... (0.75) (1.67) (2.15) (1.92) (1.70) (1.82)
Return of capital......................... -- (0.03) (0.01) (0.03) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.75) (1.70) (2.16) (1.95) (1.70) (1.82)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 47.75 $ 45.85 $ 47.15 $ 47.75 $ 48.26 $ 48.32
========== ========== ========== ========== ========== ==========
TOTAL RETURN (a).......................... 5.80% 0.90% 3.37% 3.03% 3.43% 4.43%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $1,998,251 $1,276,964 $1,603,148 $1,883,903 $1,341,599 $ 594,277
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..................... 3.31% (c) 3.63% 4.50% 3.94% 3.53% 3.84%
Portfolio turnover rate (d)............... 54% 76% 44% 88% 110% 67%
</TABLE>
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The returns presented do not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(b) The Fund indirectly bears its proportionate share of fees and expenses
incurred by the underlying funds in which the Fund invests. This ratio
does not include these indirect fees and expenses.
(c) Annualized
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 22 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (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 ten funds that are offering shares. This report
covers the First Trust Senior Loan Fund (the "Fund"), a diversified series of
the Trust, which trades under the ticker "FTSL" on The Nasdaq Stock Market LLC
("Nasdaq"). The Fund represents a separate series of shares of beneficial
interest in the Trust. Unlike conventional mutual funds, the Fund issues and
redeems shares on a continuous basis, at net asset value ("NAV"), only in large
blocks of shares known as "Creation Units."
The Fund'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 "LL 100") is a market value-weighted index
designed to measure the performance of the largest segment of the U.S.
syndicated leveraged loan market. The LL 100 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 "MI 100") selects the 100 most liquid
Senior Loans in the market. The Fund does not seek to track either the LL 100 or
MI 100, 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 LL 100 and/or MI 100 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 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:
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 23
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
Senior Loans in which the Fund invests are not listed on any securities
exchange or board of trade. Senior Loans are typically bought and sold by
institutional investors in individually negotiated private transactions
that function in many respects like an over-the-counter secondary market,
although typically no formal market-makers exist. This market, while
having grown substantially since its inception, generally has fewer trades
and less liquidity than the secondary market for other types of
securities. Some Senior Loans have few or no trades, or trade
infrequently, and information regarding a specific Senior Loan may not be
widely available or may be incomplete. Accordingly, determinations of the
market value of Senior Loans may be based on infrequent and dated
information. Because there is less reliable, objective data available,
elements of judgment may play a greater role in valuation of Senior Loans
than for other types of securities. Typically, Senior Loans are valued
using information provided by a third-party pricing service. The
third-party pricing service primarily uses over-the-counter pricing from
dealer runs and broker quotes from indicative sheets to value the Senior
Loans.
Corporate bonds, corporate notes and other debt securities are fair valued
on the basis of valuations provided by dealers who make markets in such
securities or by a third-party pricing service approved by the Trust's
Board of Trustees, which may use the following valuation inputs when
available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Exchange-traded funds and other equity securities listed on any national
or foreign exchange (excluding Nasdaq and the London Stock Exchange
Alternative Investment Market ("AIM")) are valued at the last sale price
on the exchange on which they are principally traded or, for Nasdaq and
AIM securities, the official closing price. Securities traded on more than
one securities exchange are valued at the last sale price or official
closing price, as applicable, at the close of the securities exchange
representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
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
Page 24
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
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, 2021, 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.
The United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Page 25
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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 (other
than unfunded loan commitments discussed below) as of April 30, 2021.
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. Unfunded loan commitments are marked-to-market daily, and
any unrealized appreciation (depreciation) is included in the Statement of
Assets and Liabilities and Statement of Operations. In connection with these
commitments, the Fund earns a commitment fee typically set as a percentage of
the commitment amount. As of April 30, 2021, the Fund had the following unfunded
loan commitments:
<TABLE>
<CAPTION>
UNREALIZED
PRINCIPAL COMMITMENT APPRECIATION
BORROWER VALUE AMOUNT VALUE (DEPRECIATION)
------------------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Civitas Solutions (National Mentor Holdings, Inc.), Term Loan $ 963,707 $ 960,561 $ 962,097 $ 1,536
Help at Home (HAH Group Holding Company, LLC), Term Loan 566,243 560,595 566,952 6,357
-------------- -------------- -------------- --------------
$ 1,529,950 $ 1,521,156 $ 1,529,049 $ 7,893
============== ============== ============== ==============
</TABLE>
D. 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.
Page 26
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
The tax character of distributions paid during the fiscal year ended October 31,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 53,352,275
Capital gains................................... --
Return of capital............................... 984,628
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (73,961,664)
Net unrealized appreciation (depreciation)...... (54,040,099)
E. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2017,
2018, 2019, and 2020 remain open to federal and state audit. As of April 30,
2021, 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, 2020, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $73,961,664.
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, 2020, the Fund had no
net late year ordinary or capital losses.
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 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 0.85% 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (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 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, 2021, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $1,443,030,692 and $789,207,184, respectively.
For the six months ended April 30, 2021, 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 $330 million Credit Agreement with The
Bank of Nova Scotia ("Scotia") as administrative agent for a group of lenders.
Prior to March 3, 2021, the commitment amount was $410 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, 2021.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
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, 2022.
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 SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (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 SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SENIOR LOAN FUND (FTSL)
APRIL 30, 2021 (UNAUDITED)
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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, including the Fund, monitors
the funds' holdings of assets classified as illiquid investments to seek to
ensure they do not exceed 15% of a fund's net assets and establishes policies
and procedures regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund, including the Fund, that is required under the
Program to have one, and any material changes to the Program.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Tactical High
Yield ETF (HYLS)
Semi-Annual Report
For the Six Months Ended
April 30, 2021
<PAGE>
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TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 25
Statement of Operations...................................................... 26
Statements of Changes in Net Assets.......................................... 27
Statement of Cash Flows...................................................... 28
Financial Highlights......................................................... 29
Notes to Financial Statements................................................ 30
Additional Information....................................................... 37
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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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 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 no more than
15% 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 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 invest in listed and
over-the-counter derivatives to the extent permitted by the Nasdaq Stock Market
LLC. 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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 6.18% 14.93% 5.79% 5.31% 32.53% 52.67%
Market Price 5.98% 14.05% 5.80% 5.32% 32.55% 52.72%
INDEX PERFORMANCE
ICE BofA US High Yield
Constrained Index 8.13% 20.01% 7.32% 5.74% 42.34% 57.84%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after 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)
-----------------------------------------------------------
Software 14.9%
Health Care Providers & Services 14.5
Media 12.3
Pharmaceuticals 10.2
Hotels, Restaurants & Leisure 8.1
Insurance 7.2
Diversified Telecommunication Services 4.2
Health Care Technology 3.9
Containers & Packaging 2.6
Specialty Retail 2.0
Entertainment 1.7
Building Products 1.6
Diversified Consumer Services 1.5
Electric Utilities 1.4
Professional Services 1.4
Automobiles 1.1
Machinery 1.0
Communications Equipment 1.0
Technology Hardware, Storage &
Peripherals 1.0
Commercial Services & Supplies 0.9
Real Estate Management & Development 0.9
Aerospace & Defense 0.9
Food Products 0.9
Food & Staples Retailing 0.6
Construction & Engineering 0.5
IT Services 0.5
Diversified Financial Services 0.4
Airlines 0.3
Independent Power and Renewable
Electricity Producers 0.3
Industrial Conglomerates 0.3
Trading Companies & Distributors 0.2
Wireless Telecommunication Services 0.2
Construction Materials 0.2
Life Sciences Tools & Services 0.1
Semiconductors & Semiconductor
Equipment 0.1
Internet & Direct Marketing Retail 0.1
Household Durables 0.1
Consumer Finance 0.1
Oil, Gas & Consumable Fuels 0.1
Metals & Mining 0.1
Road & Rail 0.1
Auto Components 0.1
Chemicals 0.1
Electronic Equipment, Instruments &
Components 0.1
Household Products 0.1
Health Care Equipment & Supplies 0.1
Interactive Media & Services 0.0*
Electrical Equipment 0.0*
Personal Products 0.0*
Capital Markets 0.0*
-------
Total 100.0%
=======
* Amount is less than 0.1%.
-----------------------------------------------------------
% OF TOTAL LONG-TERM
ASSET CLASSIFICATION INVESTMENTS(1)
-----------------------------------------------------------
Corporate Bonds 55.6%
Senior Floating-Rate Loan Interests 34.5
Foreign Corporate Bonds 9.7
Common Stock 0.2
Warrants 0.0*
Rights 0.0*
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF SENIOR LOANS AND
CREDIT QUALITY (S&P RATINGS)(2) OTHER DEBT SECURITIES(1)
-----------------------------------------------------------
BBB 0.4%
BBB- 0.7
BB+ 3.4
BB 6.8
BB- 7.3
B+ 16.8
B 25.0
B- 16.8
CCC+ 16.7
CCC 2.9
CCC- 0.4
D 2.4
NR 0.4
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL LONG-TERM
TOP 10 ISSUERS INVESTMENTS(1)
-----------------------------------------------------------
Bausch Health Cos., Inc. (Valeant) 3.2%
Mallinckrodt International Finance S.A. 2.4
Alliant Holdings I LLC 2.3
Internet Brands, Inc. (Web MD/MH
Sub I LLC) 2.2
HUB International Ltd. 2.2
Endo LLC 2.1
iHeartCommunications, Inc. 2.0
Verscend Technologies, Inc. (Cotiviti) 2.0
athenahealth, Inc. (VVC Holding Corp.) 1.7
Golden Nugget, Inc. 1.6
-------
Total 21.7%
=======
(1) Percentages are based on the long positions only. Money market funds and
short positions are excluded.
(2) The ratings are by Standard & Poor's Rating Group, a division of the
McGraw-Hill Companies, Inc. A credit rating is an assessment provided by a
nationally recognized statistical rating organization (NRSRO) of the
creditworthiness of an issuer with respect to debt obligations except for
those debt obligations that are only privately rated. Ratings are measured
on a scale that generally ranges from AAA (highest) to D (lowest).
Investment grade is defined as those issuers that have a long-term credit
rating of BBB- or higher. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
FEBRUARY 25, 2013 - APRIL 30, 2021
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
10/31/20 14,378 14,597
4/20/21 15,267 15,784
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (UNAUDITED)
ADVISOR
The First Trust Advisors L.P. ("First Trust") Leveraged Finance Team is
comprised of 16 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, 2021, the First
Trust Leveraged Finance Team managed or supervised approximately $6.56 billion
in senior secured bank loans and high-yield bonds. These assets are managed
across various strategies, including three 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 AND PORTFOLIO MANAGER
Page 5
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD SIX-MONTH PERIOD (a)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
Actual $1,000.00 $1,061.80 1.08% $5.52
Hypothetical (5% return before expenses) $1,000.00 $1,019.44 1.08% $5.41
</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,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 63.9%
AEROSPACE & DEFENSE -- 0.7%
$ 342,000 Booz Allen Hamilton, Inc. (a)................................... 3.88% 09/01/28 $ 341,940
7,802,000 Science Applications International Corp. (a).................... 4.88% 04/01/28 8,069,413
1,333,000 Spirit AeroSystems, Inc. (a).................................... 5.50% 01/15/25 1,411,314
3,000,000 Spirit AeroSystems, Inc. (a).................................... 7.50% 04/15/25 3,215,205
1,500,000 TransDigm, Inc. (a)............................................. 8.00% 12/15/25 1,631,310
1,000,000 TransDigm, Inc. (a)............................................. 6.25% 03/15/26 1,060,000
---------------
15,729,182
---------------
AGRICULTURAL PRODUCTS -- 0.0%
500,000 Lamb Weston Holdings, Inc. (a).................................. 4.88% 05/15/28 551,875
---------------
AIRLINES -- 0.3%
5,469,000 Mileage Plus Holdings LLC / Mileage Plus Intellectual Property
Assets Ltd. (a).............................................. 6.50% 06/20/27 5,997,032
---------------
ALTERNATIVE CARRIERS -- 0.4%
777,000 Level 3 Financing, Inc.......................................... 5.38% 05/01/25 793,123
2,000,000 Level 3 Financing, Inc.......................................... 5.25% 03/15/26 2,064,430
3,000,000 Level 3 Financing, Inc. (a)..................................... 4.63% 09/15/27 3,099,870
2,000,000 Level 3 Financing, Inc. (a)..................................... 4.25% 07/01/28 2,017,720
2,000,000 Level 3 Financing, Inc. (a)..................................... 3.63% 01/15/29 1,940,000
---------------
9,915,143
---------------
APPAREL RETAIL -- 0.6%
3,040,000 Burlington Coat Factory Warehouse Corp. (a)..................... 6.25% 04/15/25 3,233,800
10,080,000 Nordstrom, Inc.................................................. 4.00% 03/15/27 10,445,390
---------------
13,679,190
---------------
APPLICATION SOFTWARE -- 1.9%
1,276,000 BY Crown Parent LLC / BY Bond Finance, Inc. (a)................. 4.25% 01/31/26 1,338,530
440,000 Expedia Group, Inc. (a)......................................... 6.25% 05/01/25 511,903
6,486,000 Go Daddy Operating Co. LLC / GD Finance Co., Inc. (a)........... 5.25% 12/01/27 6,794,085
6,000,000 J2 Global, Inc. (a) (b)......................................... 4.63% 10/15/30 6,149,760
4,411,000 LogMeIn, Inc. (a)............................................... 5.50% 09/01/27 4,603,452
5,685,000 Open Text Holdings, Inc. (a).................................... 4.13% 02/15/30 5,756,005
17,177,000 Solera LLC / Solera Finance, Inc. (a) (b)....................... 10.50% 03/01/24 17,724,603
---------------
42,878,338
---------------
AUTOMOBILE MANUFACTURERS -- 1.3%
6,000,000 Ford Motor Co................................................... 8.50% 04/21/23 6,727,500
7,411,000 Ford Motor Co................................................... 9.00% 04/22/25 9,061,133
7,957,000 Ford Motor Co. (b).............................................. 9.63% 04/22/30 11,169,679
2,000,000 Ford Motor Credit Co. LLC....................................... 3.66% 09/08/24 2,086,270
500,000 Ford Motor Credit Co. LLC....................................... 5.13% 06/16/25 546,825
667,000 Penske Automotive Group, Inc.................................... 3.50% 09/01/25 684,509
---------------
30,275,916
---------------
AUTOMOTIVE RETAIL -- 0.6%
167,000 Group 1 Automotive, Inc. (a).................................... 4.00% 08/15/28 167,000
4,926,000 IAA, Inc. (a)................................................... 5.50% 06/15/27 5,184,615
7,350,000 KAR Auction Services, Inc. (a).................................. 5.13% 06/01/25 7,461,646
1,351,000 Lithia Motors, Inc. (a)......................................... 4.38% 01/15/31 1,424,758
---------------
14,238,019
---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
BROADCASTING -- 10.3%
$ 15,031,000 Cumulus Media New Holdings, Inc. (a) (b)...................... 6.75% 07/01/26 $ 15,512,668
5,719,000 Diamond Sports Group LLC / Diamond Sports Finance Co. (a)..... 5.38% 08/15/26 4,182,019
18,673,000 Diamond Sports Group LLC / Diamond Sports Finance
Co. (a) (b)................................................ 6.63% 08/15/27 10,159,606
10,289,000 EW Scripps (The) Co. (a) (b).................................. 5.13% 05/15/25 10,585,426
28,294,000 Gray Television, Inc. (a) (b)................................. 5.88% 07/15/26 29,408,076
11,199,000 Gray Television, Inc. (a)..................................... 7.00% 05/15/27 12,246,162
24,649,000 iHeartCommunications, Inc. (b)................................ 8.38% 05/01/27 26,479,188
11,475,000 iHeartCommunications, Inc. (a) (b)............................ 5.25% 08/15/27 11,902,788
16,568,000 Nexstar Broadcasting, Inc. (a) (b)............................ 5.63% 07/15/27 17,526,045
12,396,000 Nexstar Broadcasting, Inc. (a) (b)............................ 4.75% 11/01/28 12,643,920
1,389,000 Scripps Escrow II, Inc. (a)................................... 3.88% 01/15/29 1,380,478
8,355,000 Scripps Escrow, Inc. (a) (b).................................. 5.88% 07/15/27 8,803,538
12,504,000 Sinclair Television Group, Inc. (a) (b)....................... 5.88% 03/15/26 12,908,004
7,394,000 Sinclair Television Group, Inc. (a)........................... 5.13% 02/15/27 7,329,339
5,000,000 Sinclair Television Group, Inc. (a)........................... 5.50% 03/01/30 4,980,900
3,125,000 Sinclair Television Group, Inc. (a)........................... 4.13% 12/01/30 3,050,813
3,000,000 Sirius XM Radio, Inc. (a)..................................... 4.63% 07/15/24 3,082,500
2,000,000 Sirius XM Radio, Inc. (a)..................................... 4.13% 07/01/30 2,002,500
337,000 TEGNA, Inc. (a)............................................... 4.75% 03/15/26 358,821
8,700,000 TEGNA, Inc.................................................... 4.63% 03/15/28 8,896,098
11,500,000 TEGNA, Inc. (b)............................................... 5.00% 09/15/29 11,957,988
9,310,000 Univision Communications, Inc. (a)............................ 5.13% 02/15/25 9,479,489
4,500,000 Univision Communications, Inc. (a)............................ 9.50% 05/01/25 5,023,125
6,972,000 Univision Communications, Inc. (a)............................ 6.63% 06/01/27 7,564,620
---------------
237,464,111
---------------
BUILDING PRODUCTS -- 0.3%
2,000,000 American Builders & Contractors Supply Co., Inc. (a).......... 5.88% 05/15/26 2,066,100
1,000,000 American Builders & Contractors Supply Co., Inc. (a).......... 4.00% 01/15/28 1,018,750
500,000 American Builders & Contractors Supply Co., Inc. (a).......... 3.88% 11/15/29 501,875
100,000 Beacon Roofing Supply, Inc. (a)............................... 4.13% 05/15/29 99,875
1,392,000 Standard Industries, Inc. (a)................................. 5.00% 02/15/27 1,438,980
350,000 Standard Industries, Inc. (a)................................. 4.38% 07/15/30 351,312
1,000,000 Standard Industries, Inc. (a)................................. 3.38% 01/15/31 936,075
1,000,000 TopBuild Corp. (a)............................................ 3.63% 03/15/29 991,255
---------------
7,404,222
---------------
CABLE & SATELLITE -- 2.7%
4,934,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a) (b)......... 5.75% 02/15/26 5,113,647
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 5.50% 05/01/26 2,066,500
2,828,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 5.13% 05/01/27 2,963,855
4,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 5.00% 02/01/28 4,185,000
500,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 5.38% 06/01/29 543,505
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 4.75% 03/01/30 2,090,000
2,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 4.25% 02/01/31 2,000,000
1,000,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)............. 4.50% 05/01/32 1,011,250
9,183,000 CSC Holdings LLC (a) (b)...................................... 5.50% 05/15/26 9,458,490
819,000 CSC Holdings LLC (a).......................................... 5.50% 04/15/27 860,056
1,800,000 CSC Holdings LLC (a).......................................... 5.38% 02/01/28 1,896,552
5,800,000 CSC Holdings LLC (a).......................................... 7.50% 04/01/28 6,401,576
15,200,000 CSC Holdings LLC (a) (b)...................................... 5.75% 01/15/30 16,178,500
4,167,000 CSC Holdings LLC (a).......................................... 4.63% 12/01/30 4,078,451
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
CABLE & SATELLITE (CONTINUED)
$ 2,000,000 CSC Holdings LLC (a).......................................... 4.50% 11/15/31 $ 2,005,000
1,000,000 CSC Holdings LLC (a).......................................... 5.00% 11/15/31 1,004,375
---------------
61,856,757
---------------
CASINOS & GAMING -- 4.2%
890,000 Boyd Gaming Corp. (a)......................................... 8.63% 06/01/25 987,339
4,718,000 Boyd Gaming Corp.............................................. 6.38% 04/01/26 4,877,232
3,850,000 Boyd Gaming Corp.............................................. 6.00% 08/15/26 3,999,187
500,000 Boyd Gaming Corp.............................................. 4.75% 12/01/27 513,272
15,340,000 Caesars Entertainment, Inc. (a) (b)........................... 6.25% 07/01/25 16,328,663
19,296,000 Caesars Entertainment, Inc. (a) (b)........................... 8.13% 07/01/27 21,466,125
4,229,000 Caesars Resort Collection LLC / CRC Finco, Inc. (a)........... 5.75% 07/01/25 4,459,523
12,500,000 Caesars Resort Collection LLC / CRC Finco, Inc. (a) (b)....... 5.25% 10/15/25 12,617,344
7,333,000 Golden Nugget, Inc. (a)....................................... 6.75% 10/15/24 7,433,829
100,000 MGM Growth Properties Operating Partnership LP / MGP
Finance Co. Issuer, Inc. (a)............................... 3.88% 02/15/29 101,372
8,350,000 MGM Resorts International (b)................................. 7.75% 03/15/22 8,792,174
5,100,000 MGM Resorts International (b)................................. 6.00% 03/15/23 5,465,339
1,000,000 MGM Resorts International..................................... 5.75% 06/15/25 1,102,500
1,250,000 Scientific Games International, Inc. (a)...................... 8.63% 07/01/25 1,368,706
2,848,000 Station Casinos LLC (a)....................................... 5.00% 10/01/25 2,892,500
3,616,000 Station Casinos LLC (a)....................................... 4.50% 02/15/28 3,636,766
---------------
96,041,871
---------------
COAL & CONSUMABLE FUELS -- 0.0%
208,000 Peabody Energy Corp. (a) (c).................................... 8.50% 12/31/24 99,840
967,000 Peabody Energy Corp. (a)........................................ 6.38% 03/31/25 416,013
235,000 PIC AU Holdings LLC / PIC AU Holdings Corp. (a)................. 10.00% 12/31/24 216,200
---------------
732,053
---------------
COMMUNICATIONS EQUIPMENT -- 1.2%
22,655,000 CommScope Technologies LLC (a) (b).............................. 6.00% 06/15/25 23,079,781
3,679,000 CommScope Technologies LLC (a).................................. 5.00% 03/15/27 3,649,338
---------------
26,729,119
---------------
CONSTRUCTION & ENGINEERING -- 0.6%
1,500,000 Arcosa, Inc. (a)................................................ 4.38% 04/15/29 1,535,940
11,381,000 Pike Corp. (a).................................................. 5.50% 09/01/28 11,757,768
---------------
13,293,708
---------------
CONSTRUCTION MACHINERY & HEAVY TRUCKS -- 0.3%
5,565,000 Clark Equipment Co. (a)......................................... 5.88% 06/01/25 5,923,247
---------------
CONSTRUCTION MATERIALS -- 0.2%
176,000 GYP Holdings III Corp. (a)...................................... 4.63% 05/01/29 176,477
3,623,000 Summit Materials LLC / Summit Materials Finance Corp. (a)....... 5.25% 01/15/29 3,817,736
---------------
3,994,213
---------------
CONSUMER FINANCE -- 0.2%
486,000 Black Knight InfoServ LLC (a)................................... 3.63% 09/01/28 479,381
3,000,000 FirstCash, Inc. (a)............................................. 4.63% 09/01/28 3,086,565
---------------
3,565,946
---------------
DIVERSIFIED METALS & MINING -- 0.1%
2,500,000 Freeport-McMoRan, Inc........................................... 5.00% 09/01/27 2,655,950
---------------
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
ELECTRIC UTILITIES -- 1.3%
$ 6,883,000 PG&E Corp....................................................... 5.00% 07/01/28 $ 7,218,546
12,250,000 PG&E Corp. (b).................................................. 5.25% 07/01/30 13,092,188
5,000,000 Vistra Operations Co. LLC (a)................................... 5.63% 02/15/27 5,212,250
3,189,000 Vistra Operations Co. LLC (a)................................... 5.00% 07/31/27 3,307,886
---------------
28,830,870
---------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0%
667,000 Sensata Technologies, Inc. (a).................................. 3.75% 02/15/31 663,191
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 0.0%
500,000 Stericycle, Inc. (a)............................................ 3.88% 01/15/29 499,953
---------------
FERTILIZERS & AGRICULTURAL CHEMICALS -- 0.1%
250,000 Scotts Miracle-Gro (The) Co..................................... 4.50% 10/15/29 262,336
1,000,000 Scotts Miracle-Gro (The) Co. (a)................................ 4.00% 04/01/31 991,250
---------------
1,253,586
---------------
FINANCIAL EXCHANGES & DATA -- 0.0%
750,000 MSCI, Inc. (a).................................................. 4.00% 11/15/29 784,714
---------------
FOOD DISTRIBUTORS -- 0.2%
3,488,000 US Foods, Inc. (a).............................................. 6.25% 04/15/25 3,709,295
1,397,000 US Foods, Inc. (a).............................................. 4.75% 02/15/29 1,410,970
---------------
5,120,265
---------------
FOOD RETAIL -- 0.5%
1,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (a)........................................... 7.50% 03/15/26 1,101,875
3,700,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (a)........................................... 4.63% 01/15/27 3,852,625
3,000,000 Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP /
Albertsons LLC (a)........................................... 5.88% 02/15/28 3,198,975
2,210,000 Safeway, Inc.................................................... 7.25% 02/01/31 2,571,468
---------------
10,724,943
---------------
HEALTH CARE DISTRIBUTORS -- 0.2%
3,000,000 AdaptHealth LLC (a)............................................. 4.63% 08/01/29 2,989,665
691,000 RP Escrow Issuer LLC (a)........................................ 5.25% 12/15/25 721,349
---------------
3,711,014
---------------
HEALTH CARE EQUIPMENT -- 0.0%
250,000 Hill-Rom Holdings, Inc. (a)..................................... 4.38% 09/15/27 259,520
300,000 Teleflex, Inc. (a).............................................. 4.25% 06/01/28 310,422
---------------
569,942
---------------
HEALTH CARE FACILITIES -- 3.5%
1,000,000 Acadia Healthcare Co., Inc. (a)................................. 5.50% 07/01/28 1,057,570
788,000 Acadia Healthcare Co., Inc. (a)................................. 5.00% 04/15/29 816,841
725,000 Encompass Health Corp........................................... 5.13% 03/15/23 728,549
2,284,000 Encompass Health Corp........................................... 5.75% 09/15/25 2,366,795
1,300,000 Encompass Health Corp........................................... 4.50% 02/01/28 1,350,355
6,080,000 Encompass Health Corp........................................... 4.75% 02/01/30 6,391,600
500,000 Encompass Health Corp........................................... 4.63% 04/01/31 530,637
2,000,000 HCA, Inc........................................................ 5.88% 05/01/23 2,185,816
6,530,000 HCA, Inc........................................................ 5.88% 02/15/26 7,509,500
16,229,000 Select Medical Corp. (a) (b).................................... 6.25% 08/15/26 17,263,842
1,168,000 Tenet Healthcare Corp. (a)...................................... 4.63% 09/01/24 1,204,500
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
HEALTH CARE FACILITIES (CONTINUED)
$ 1,500,000 Tenet Healthcare Corp. (a)...................................... 7.50% 04/01/25 $ 1,618,125
4,379,000 Tenet Healthcare Corp........................................... 5.13% 05/01/25 4,437,022
7,492,000 Tenet Healthcare Corp. (a)...................................... 4.88% 01/01/26 7,793,628
6,281,000 Tenet Healthcare Corp. (a)...................................... 5.13% 11/01/27 6,595,364
2,327,000 Tenet Healthcare Corp. (a)...................................... 4.63% 06/15/28 2,407,261
14,114,000 Tenet Healthcare Corp. (a) (b).................................. 6.13% 10/01/28 14,911,441
2,250,000 Universal Health Services, Inc. (a)............................. 5.00% 06/01/26 2,305,271
---------------
81,474,117
---------------
HEALTH CARE SERVICES -- 3.5%
16,943,000 DaVita, Inc. (a)................................................ 4.63% 06/01/30 17,175,966
250,000 DaVita, Inc. (a)................................................ 3.75% 02/15/31 237,814
18,992,000 Global Medical Response, Inc. (a) (b)........................... 6.50% 10/01/25 19,466,800
14,426,000 MEDNAX, Inc. (a)................................................ 6.25% 01/15/27 15,309,593
1,951,000 ModivCare, Inc. (a)............................................. 5.88% 11/15/25 2,077,561
100,000 Service Corp. International..................................... 3.38% 08/15/30 96,967
11,462,000 US Renal Care, Inc. (a) (b)..................................... 10.63% 07/15/27 12,142,556
11,867,000 Vizient, Inc. (a) (b)........................................... 6.25% 05/15/27 12,612,248
---------------
79,119,505
---------------
HEALTH CARE SUPPLIES -- 0.0%
770,000 Owens & Minor, Inc. (a)......................................... 4.50% 03/31/29 778,817
---------------
HEALTH CARE TECHNOLOGY -- 2.4%
31,493,000 Change Healthcare Holdings LLC / Change Healthcare Finance,
Inc. (a) (b)................................................. 5.75% 03/01/25 32,044,127
22,267,000 Verscend Escrow Corp. (a) (b)................................... 9.75% 08/15/26 23,742,411
---------------
55,786,538
---------------
HOMEFURNISHING RETAIL -- 0.3%
6,635,000 Rent-A-Center, Inc. (a)......................................... 6.38% 02/15/29 7,203,951
---------------
HOTELS, RESORTS & CRUISE LINES -- 0.3%
706,000 Boyne USA, Inc. (a)............................................. 4.75% 05/15/29 726,298
1,100,000 Hilton Domestic Operating Co., Inc. (a)......................... 5.38% 05/01/25 1,159,840
2,113,000 Midwest Gaming Borrower LLC / Midwest Gaming Finance
Corp. (a).................................................... 4.88% 05/01/29 2,121,790
1,100,000 Vail Resorts, Inc. (a).......................................... 6.25% 05/15/25 1,168,750
711,000 Wyndham Hotels & Resorts, Inc. (a).............................. 4.38% 08/15/28 734,783
---------------
5,911,461
---------------
HOUSEHOLD PRODUCTS -- 0.1%
200,000 Central Garden & Pet Co......................................... 4.13% 10/15/30 206,544
1,350,000 Energizer Holdings, Inc. (a).................................... 4.38% 03/31/29 1,341,643
---------------
1,548,187
---------------
HUMAN RESOURCE & EMPLOYMENT SERVICES -- 0.6%
3,000,000 Tempo Acquisition LLC / Tempo Acquisition Finance
Corp. (a).................................................... 5.75% 06/01/25 3,183,750
11,478,000 Tempo Acquisition LLC / Tempo Acquisition Finance
Corp. (a) (b)................................................ 6.75% 06/01/25 11,704,231
---------------
14,887,981
---------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS -- 0.4%
7,250,000 Calpine Corp. (a)............................................... 5.13% 03/15/28 7,377,636
667,000 Calpine Corp. (a)............................................... 4.63% 02/01/29 658,516
167,000 Calpine Corp. (a)............................................... 5.00% 02/01/31 164,713
---------------
8,200,865
---------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
INDUSTRIAL CONGLOMERATES -- 0.3%
$ 2,500,000 Hillenbrand, Inc................................................ 5.75% 06/15/25 $ 2,681,250
4,225,000 RBS Global, Inc. / Rexnord LLC (a).............................. 4.88% 12/15/25 4,329,738
1,000,000 TriMas Corp. (a)................................................ 4.13% 04/15/29 998,745
---------------
8,009,733
---------------
INDUSTRIAL MACHINERY -- 0.4%
4,855,000 Gates Global LLC / Gates Corp. (a).............................. 6.25% 01/15/26 5,091,098
4,667,000 Vertical US Newco, Inc. (a)..................................... 5.25% 07/15/27 4,891,623
---------------
9,982,721
---------------
INSURANCE BROKERS -- 5.8%
33,234,000 Alliant Holdings Intermediate LLC / Alliant Holdings
Co-Issuer (a) (b)............................................ 6.75% 10/15/27 34,795,998
35,235,000 AmWINS Group, Inc. (a) (b)...................................... 7.75% 07/01/26 37,518,580
6,188,000 AssuredPartners, Inc. (a)....................................... 7.00% 08/15/25 6,330,324
22,089,000 AssuredPartners, Inc. (a) (b)................................... 5.63% 01/15/29 22,419,893
5,115,000 Broadstreet Partners, Inc. (a).................................. 5.88% 04/15/29 5,199,142
27,438,000 HUB International Ltd. (a) (b).................................. 7.00% 05/01/26 28,464,456
---------------
134,728,393
---------------
INTEGRATED OIL & GAS -- 0.0%
250,000 Occidental Petroleum Corp....................................... 5.50% 12/01/25 269,062
500,000 Occidental Petroleum Corp....................................... 6.13% 01/01/31 556,875
---------------
825,937
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 2.7%
1,930,000 Frontier Communications Corp. (a)............................... 5.88% 10/15/27 2,053,037
4,890,000 Frontier Communications Corp. (a)............................... 5.00% 05/01/28 5,002,348
19,717,000 Frontier Communications Corp. (a) (b)........................... 6.75% 05/01/29 20,865,910
5,320,000 Lumen Technologies, Inc......................................... 5.80% 03/15/22 5,494,230
2,500,000 Zayo Group Holdings, Inc. (a)................................... 4.00% 03/01/27 2,485,900
25,627,000 Zayo Group Holdings, Inc. (a) (b)............................... 6.13% 03/01/28 26,487,042
---------------
62,388,467
---------------
INTERACTIVE HOME ENTERTAINMENT -- 0.2%
4,101,000 Playtika Holding Corp. (a)...................................... 4.25% 03/15/29 4,080,495
---------------
INTERACTIVE MEDIA & SERVICES -- 0.1%
684,000 ANGI Group LLC (a).............................................. 3.88% 08/15/28 681,271
500,000 Match Group Holdings II LLC (a)................................. 4.63% 06/01/28 516,895
---------------
1,198,166
---------------
INTERNET & DIRECT MARKETING RETAIL -- 0.2%
3,564,000 Cars.Com, Inc. (a).............................................. 6.38% 11/01/28 3,728,372
---------------
IT CONSULTING & OTHER SERVICES -- 0.5%
6,261,000 CDK Global, Inc................................................. 4.88% 06/01/27 6,628,771
4,448,000 CDK Global, Inc. (a)............................................ 5.25% 05/15/29 4,776,040
250,000 Gartner, Inc. (a)............................................... 4.50% 07/01/28 263,125
250,000 Gartner, Inc. (a)............................................... 3.75% 10/01/30 251,679
---------------
11,919,615
---------------
LEISURE FACILITIES -- 0.5%
250,000 Cedar Fair LP................................................... 5.25% 07/15/29 257,500
1,850,000 Cedar Fair LP / Canada's Wonderland Co. / Magnum
Management Corp. / Millennium Op............................. 5.38% 04/15/27 1,907,581
6,209,000 Six Flags Entertainment Corp. (a) (b)........................... 4.88% 07/31/24 6,264,540
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
LEISURE FACILITIES (CONTINUED)
$ 1,000,000 Six Flags Entertainment Corp. (a)............................... 5.50% 04/15/27 $ 1,035,300
1,000,000 Six Flags Theme Parks, Inc. (a)................................. 7.00% 07/01/25 1,082,860
---------------
10,547,781
---------------
MANAGED HEALTH CARE -- 1.4%
1,000,000 Centene Corp. (a)............................................... 5.38% 08/15/26 1,050,250
1,500,000 Centene Corp.................................................... 4.25% 12/15/27 1,574,062
1,000,000 Molina Healthcare, Inc. (a)..................................... 4.38% 06/15/28 1,028,750
100,000 Molina Healthcare, Inc. (a)..................................... 3.88% 11/15/30 103,125
30,072,000 MPH Acquisition Holdings LLC (a) (b)............................ 5.75% 11/01/28 29,660,916
---------------
33,417,103
---------------
METAL & GLASS CONTAINERS -- 0.9%
1,000,000 Ball Corp....................................................... 2.88% 08/15/30 967,060
6,500,000 Berry Global, Inc. (a).......................................... 4.50% 02/15/26 6,668,610
2,000,000 Owens-Brockway Glass Container, Inc. (a)........................ 5.88% 08/15/23 2,167,500
6,550,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.38% 08/15/25 7,282,781
684,000 Owens-Brockway Glass Container, Inc. (a)........................ 6.63% 05/13/27 740,256
2,200,000 Silgan Holdings, Inc............................................ 4.13% 02/01/28 2,279,233
---------------
20,105,440
---------------
MOVIES & ENTERTAINMENT -- 0.9%
7,000,000 Live Nation Entertainment, Inc. (a)............................. 4.88% 11/01/24 7,141,750
5,494,000 Live Nation Entertainment, Inc. (a)............................. 5.63% 03/15/26 5,722,001
523,000 Live Nation Entertainment, Inc. (a)............................. 6.50% 05/15/27 578,569
5,895,000 Live Nation Entertainment, Inc. (a)............................. 4.75% 10/15/27 5,955,764
1,000,000 WMG Acquisition Corp. (a)....................................... 3.00% 02/15/31 941,055
---------------
20,339,139
---------------
OIL & GAS EXPLORATION & PRODUCTION -- 0.0%
175,000 Chesapeake Energy Corp. (a)..................................... 5.50% 02/01/26 184,844
100,000 Chesapeake Energy Corp. (a)..................................... 5.88% 02/01/29 107,875
---------------
292,719
---------------
OIL & GAS REFINING & MARKETING -- 0.1%
415,000 Murphy Oil USA, Inc............................................. 5.63% 05/01/27 438,784
1,000,000 Targa Resources Partners LP / Targa Resources Partners Finance
Corp. (a).................................................... 4.00% 01/15/32 984,790
---------------
1,423,574
---------------
PACKAGED FOODS & MEATS -- 0.9%
2,190,000 B&G Foods, Inc.................................................. 5.25% 04/01/25 2,256,992
750,000 Performance Food Group, Inc. (a)................................ 5.50% 10/15/27 791,753
5,990,000 Post Holdings, Inc. (a)......................................... 5.75% 03/01/27 6,282,013
4,434,000 Post Holdings, Inc. (a)......................................... 5.63% 01/15/28 4,677,870
1,000,000 Post Holdings, Inc. (a)......................................... 5.50% 12/15/29 1,077,800
4,000,000 Post Holdings, Inc. (a)......................................... 4.63% 04/15/30 4,046,600
2,104,000 Post Holdings, Inc. (a)......................................... 4.50% 09/15/31 2,091,481
702,000 WW International, Inc. (a)...................................... 4.50% 04/15/29 693,330
---------------
21,917,839
---------------
PAPER PACKAGING -- 1.3%
20,451,000 Graham Packaging Co., Inc. (a) (b).............................. 7.13% 08/15/28 21,972,043
2,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/15/28 1,994,590
1,000,000 Graphic Packaging International LLC (a)......................... 3.50% 03/01/29 989,375
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
PAPER PACKAGING (CONTINUED)
$ 4,023,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC /
Reynolds Group Issuer Lu (a)................................. 4.00% 10/15/27 $ 3,982,891
376,000 Sealed Air Corp. (a)............................................ 5.50% 09/15/25 416,655
1,000,000 Sealed Air Corp. (a)............................................ 4.00% 12/01/27 1,050,000
---------------
30,405,554
---------------
PERSONAL PRODUCTS -- 0.0%
250,000 Prestige Brands, Inc. (a)....................................... 5.13% 01/15/28 262,344
750,000 Prestige Brands, Inc. (a)....................................... 3.75% 04/01/31 720,911
---------------
983,255
---------------
PHARMACEUTICALS -- 1.7%
792,000 Bausch Health Americas, Inc. (a)................................ 9.25% 04/01/26 878,629
1,242,000 Bausch Health Americas, Inc. (a)................................ 8.50% 01/31/27 1,384,830
500,000 Catalent Pharma Solutions, Inc. (a)............................. 5.00% 07/15/27 523,970
250,000 Catalent Pharma Solutions, Inc. (a)............................. 3.13% 02/15/29 242,197
750,000 Charles River Laboratories International, Inc. (a).............. 4.25% 05/01/28 781,930
1,000,000 Charles River Laboratories International, Inc. (a).............. 3.75% 03/15/29 1,018,750
1,000,000 Charles River Laboratories International, Inc. (a).............. 4.00% 03/15/31 1,032,650
1,333,000 Emergent BioSolutions, Inc. (a)................................. 3.88% 08/15/28 1,254,760
14,914,000 Horizon Therapeutics USA, Inc. (a) (b).......................... 5.50% 08/01/27 15,976,622
800,000 IQVIA, Inc. (a)................................................. 5.00% 10/15/26 828,094
1,278,000 IQVIA, Inc. (a)................................................. 5.00% 05/15/27 1,338,705
1,000,000 Jaguar Holding Co. II / PPD Development LP (a).................. 5.00% 06/15/28 1,091,750
2,016,000 Organon Finance 1 LLC (a)....................................... 5.13% 04/30/31 2,094,322
10,000,000 Par Pharmaceutical, Inc. (a) (b)................................ 7.50% 04/01/27 10,537,500
---------------
38,984,709
---------------
PUBLISHING -- 0.1%
1,111,000 Meredith Corp. (a).............................................. 6.50% 07/01/25 1,189,464
---------------
REAL ESTATE OPERATING COMPANIES -- 0.1%
2,785,000 Lennar Corp. (b)................................................ 5.25% 06/01/26 3,220,017
---------------
REAL ESTATE SERVICES -- 0.6%
3,310,000 KB Home (b)..................................................... 7.00% 12/15/21 3,382,406
500,000 MDC Holdings, Inc............................................... 3.85% 01/15/30 535,625
1,060,000 PulteGroup, Inc................................................. 5.50% 03/01/26 1,246,221
290,000 Tri Pointe Group, Inc........................................... 5.25% 06/01/27 312,782
500,000 Tri Pointe Group, Inc........................................... 5.70% 06/15/28 556,565
7,545,000 Tri Pointe Group, Inc. / Tri Pointe Homes, Inc. (b)............. 5.88% 06/15/24 8,411,732
---------------
14,445,331
---------------
RESEARCH & CONSULTING SERVICES -- 0.4%
1,409,000 Celestial-Saturn Merger Sub, Inc. (a)........................... 4.50% 05/01/28 1,408,690
4,254,000 Nielsen Finance LLC / Nielsen Finance Co. (a)................... 5.63% 10/01/28 4,541,145
2,666,000 Nielsen Finance LLC / Nielsen Finance Co. (a)................... 5.88% 10/01/30 2,922,603
---------------
8,872,438
---------------
RESTAURANTS -- 1.0%
661,000 Brinker International, Inc. (a)................................. 5.00% 10/01/24 693,009
8,483,000 IRB Holding Corp. (a)........................................... 7.00% 06/15/25 9,140,433
11,749,000 IRB Holding Corp. (a) (b)....................................... 6.75% 02/15/26 12,186,650
---------------
22,020,092
---------------
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
SECURITY & ALARM SERVICES -- 0.1%
$ 1,200,000 Brink's (The) Co. (a)........................................... 5.50% 07/15/25 $ 1,268,250
2,061,000 Brink's (The) Co. (a)........................................... 4.63% 10/15/27 2,152,457
---------------
3,420,707
---------------
SEMICONDUCTORS -- 0.2%
1,000,000 Microchip Technology, Inc. (a).................................. 4.25% 09/01/25 1,050,254
1,550,000 Qorvo, Inc...................................................... 4.38% 10/15/29 1,687,159
1,000,000 Qorvo, Inc. (a)................................................. 3.38% 04/01/31 1,014,925
---------------
3,752,338
---------------
SPECIALIZED CONSUMER SERVICES -- 0.3%
4,000,000 Aramark Services, Inc. (a)...................................... 6.38% 05/01/25 4,260,000
2,000,000 Aramark Services, Inc........................................... 4.75% 06/01/26 2,052,360
481,000 Aramark Services, Inc. (a)...................................... 5.00% 02/01/28 503,556
100,000 Carriage Services, Inc. (a)..................................... 4.25% 05/15/29 99,875
---------------
6,915,791
---------------
SPECIALTY CHEMICALS -- 0.2%
3,726,000 Avantor Funding, Inc. (a)....................................... 4.63% 07/15/28 3,907,642
500,000 Axalta Coating Systems LLC (a).................................. 3.38% 02/15/29 486,508
250,000 HB Fuller Co.................................................... 4.25% 10/15/28 254,896
---------------
4,649,046
---------------
SPECIALTY STORES -- 0.0%
350,000 PetSmart, Inc. / PetSmart Finance Corp. (a)..................... 4.75% 02/15/28 360,540
350,000 PetSmart, Inc. / PetSmart Finance Corp. (a)..................... 7.75% 02/15/29 379,957
---------------
740,497
---------------
STEEL-- 0.0%
350,000 United States Steel Corp........................................ 6.88% 03/01/29 365,820
---------------
SYSTEMS SOFTWARE -- 1.9%
5,000,000 Banff Merger Sub, Inc. (a)...................................... 9.75% 09/01/26 5,325,000
7,074,000 Boxer Parent Co., Inc. (a)...................................... 9.13% 03/01/26 7,483,549
2,500,000 Crowdstrike Holdings, Inc....................................... 3.00% 02/15/29 2,481,250
250,000 PTC, Inc. (a)................................................... 3.63% 02/15/25 256,956
3,075,000 PTC, Inc. (a)................................................... 4.00% 02/15/28 3,164,083
24,100,000 SS&C Technologies, Inc. (a) (b)................................. 5.50% 09/30/27 25,633,363
---------------
44,344,201
---------------
TECHNOLOGY DISTRIBUTORS -- 0.1%
1,000,000 CDW LLC / CDW Finance Corp...................................... 4.25% 04/01/28 1,044,185
750,000 CDW LLC / CDW Finance Corp...................................... 3.25% 02/15/29 744,375
---------------
1,788,560
---------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.1%
22,225,000 Dell International LLC / EMC Corp. (a) (b)...................... 7.13% 06/15/24 22,857,857
1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.10% 07/15/27 1,225,158
1,000,000 Dell International LLC / EMC Corp. (a).......................... 6.20% 07/15/30 1,257,128
667,000 Xerox Holdings Corp. (a)........................................ 5.00% 08/15/25 701,184
---------------
26,041,327
---------------
TRADING COMPANIES & DISTRIBUTORS -- 0.3%
940,000 Ashtead Capital, Inc. (a)....................................... 4.13% 08/15/25 968,200
2,000,000 Ashtead Capital, Inc. (a)....................................... 5.25% 08/01/26 2,100,000
750,000 Ashtead Capital, Inc. (a)....................................... 4.00% 05/01/28 788,437
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (CONTINUED)
TRADING COMPANIES & DISTRIBUTORS (CONTINUED)
$ 2,276,000 United Rentals North America, Inc............................... 5.88% 09/15/26 $ 2,378,420
257,000 United Rentals North America, Inc............................... 5.50% 05/15/27 274,348
---------------
6,509,405
---------------
TRUCKING -- 0.1%
2,350,000 XPO Logistics, Inc. (a)......................................... 6.25% 05/01/25 2,520,375
---------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.2%
1,219,000 SBA Communications Corp. (b).................................... 4.88% 09/01/24 1,249,475
500,000 SBA Communications Corp......................................... 3.88% 02/15/27 512,187
2,329,000 T-Mobile USA, Inc............................................... 6.00% 03/01/23 2,351,591
1,180,000 T-Mobile USA, Inc............................................... 5.13% 04/15/25 1,203,972
416,000 T-Mobile USA, Inc............................................... 4.50% 02/01/26 427,170
---------------
5,744,395
---------------
TOTAL CORPORATE BONDS........................................................................ 1,471,814,608
(Cost $1,425,115,194) ---------------
FOREIGN CORPORATE BONDS -- 11.1%
AIRLINES -- 0.1%
1,402,000 American Airlines, Inc./AAdvantage Loyalty IP Ltd. (a).......... 5.50% 04/20/26 1,473,852
701,000 American Airlines, Inc./AAdvantage Loyalty IP Ltd. (a).......... 5.75% 04/20/29 751,998
---------------
2,225,850
---------------
APPLICATION SOFTWARE -- 0.2%
2,958,000 Open Text Corp. (a)............................................. 5.88% 06/01/26 3,054,135
2,336,000 Open Text Corp. (a)............................................. 3.88% 02/15/28 2,368,190
---------------
5,422,325
---------------
BUILDING PRODUCTS -- 1.5%
15,634,000 Cemex SAB de C.V. (a) (b)....................................... 7.38% 06/05/27 17,753,658
4,700,000 Cemex SAB de C.V. (a)........................................... 5.45% 11/19/29 5,161,375
2,000,000 Cemex SAB de C.V. (a)........................................... 5.20% 09/17/30 2,179,010
7,513,000 Masonite International Corp. (a)................................ 5.75% 09/15/26 7,821,484
1,000,000 Masonite International Corp. (a)................................ 5.38% 02/01/28 1,061,265
---------------
33,976,792
---------------
CABLE & SATELLITE -- 0.2%
250,000 Virgin Media Finance PLC (a).................................... 5.00% 07/15/30 249,582
3,073,000 Virgin Media Secured Finance PLC (a)............................ 5.50% 08/15/26 3,195,920
2,000,000 Virgin Media Secured Finance PLC (a)............................ 5.50% 05/15/29 2,141,001
---------------
5,586,503
---------------
CASINOS & GAMING -- 0.2%
3,000,000 International Game Technology PLC (a)........................... 4.13% 04/15/26 3,094,980
500,000 International Game Technology PLC (a)........................... 5.25% 01/15/29 530,813
---------------
3,625,793
---------------
DIVERSIFIED CHEMICALS -- 0.0%
643,000 INEOS Quattro Finance 2 PLC (a)................................. 3.38% 01/15/26 642,273
---------------
DIVERSIFIED SUPPORT SERVICES -- 0.0%
950,000 Ritchie Bros Auctioneers, Inc. (a).............................. 5.38% 01/15/25 979,331
---------------
ELECTRICAL COMPONENTS & EQUIPMENT -- 0.0%
500,000 Sensata Technologies BV (a)..................................... 4.00% 04/15/29 503,725
---------------
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS (CONTINUED)
ENVIRONMENTAL & FACILITIES SERVICES -- 0.2%
$ 1,027,000 GFL Environmental, Inc. (a)..................................... 3.75% 08/01/25 $ 1,046,934
500,000 GFL Environmental, Inc. (a)..................................... 5.13% 12/15/26 524,375
3,000,000 GFL Environmental, Inc. (a)..................................... 4.00% 08/01/28 2,874,750
---------------
4,446,059
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 0.4%
7,693,000 Altice France S.A. (a).......................................... 7.38% 05/01/26 7,985,719
500,000 Altice France S.A. (a).......................................... 5.13% 07/15/29 501,305
---------------
8,487,024
---------------
METAL & GLASS CONTAINERS -- 0.0%
200,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA,
Inc. (a)..................................................... 4.13% 08/15/26 206,000
---------------
OTHER DIVERSIFIED FINANCIAL SERVICES -- 0.5%
1,867,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 4.50% 09/15/23 2,010,671
6,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 6.50% 07/15/25 7,061,714
1,500,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust....... 3.88% 01/23/28 1,588,732
---------------
10,661,117
---------------
PHARMACEUTICALS -- 7.1%
60,319,000 Bausch Health Cos., Inc. (a) (b)................................ 6.13% 04/15/25 61,751,576
4,349,000 Bausch Health Cos., Inc. (a).................................... 5.00% 01/30/28 4,419,476
1,384,000 Bausch Health Cos., Inc. (a).................................... 5.00% 02/15/29 1,387,861
3,818,000 Bausch Health Cos., Inc. (a).................................... 6.25% 02/15/29 4,042,365
3,000,000 Bausch Health Cos., Inc. (a).................................... 7.25% 05/30/29 3,328,125
5,000,000 Bausch Health Cos., Inc. (a).................................... 5.25% 01/30/30 5,034,400
1,730,000 Bausch Health Cos., Inc. (a).................................... 5.25% 02/15/31 1,735,190
169,000 Cheplapharm Arzneimittel GmbH (a)............................... 5.50% 01/15/28 175,971
16,083,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (a) (b).......... 9.50% 07/31/27 17,068,084
16,658,000 Endo Dac / Endo Finance LLC / Endo Finco, Inc. (a) (b).......... 6.00% 06/30/28 12,682,652
10,000,000 Endo Luxembourg Finance Co. I S.A.R.L / Endo U.S., Inc. (a)..... 6.13% 04/01/29 9,912,500
286,000 Jazz Securities DAC (a)......................................... 4.38% 01/15/29 292,792
1,000,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB
LLC (a) (d) (e).............................................. 5.63% 10/15/23 670,000
1,750,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB
LLC (a) (d) (e).............................................. 5.50% 04/15/25 1,172,500
22,400,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB
LLC (a) (e).................................................. 10.00% 04/15/25 22,736,000
15,776,000 Mallinckrodt International Finance S.A. / Mallinckrodt CB
LLC (a) (e).................................................. 10.00% 04/15/25 17,590,240
---------------
163,999,732
---------------
REAL ESTATE SERVICES -- 0.3%
5,346,000 Taylor Morrison Communities, Inc. / Taylor Morrison
Holdings II, Inc. (a)........................................ 5.88% 04/15/23 5,759,754
---------------
RESEARCH & CONSULTING SERVICES -- 0.2%
3,774,000 Camelot Finance S.A. (a)........................................ 4.50% 11/01/26 3,910,808
---------------
RESTAURANTS -- 0.2%
5,214,000 1011778 BC ULC / New Red Finance, Inc. (a)...................... 4.00% 10/15/30 5,090,454
---------------
SPECIALTY CHEMICALS -- 0.0%
1,000,000 Axalta Coating Systems LLC / Axalta Coating Systems Dutch
Holding B B.V. (a)........................................... 4.75% 06/15/27 1,048,750
---------------
TOTAL FOREIGN CORPORATE BONDS................................................................ 256,572,290
(Cost $247,390,851) ---------------
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS -- 39.7%
AEROSPACE & DEFENSE -- 0.3%
$ 4,501,192 Peraton Corp., Delayed Funding Term Loan, 1 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 02/28/28 $ 4,495,566
2,557,631 Peraton Corp., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75%
Floor........................................................ 4.50% 02/28/28 2,554,434
---------------
7,050,000
---------------
APPLICATION SOFTWARE -- 11.1%
3,279,466 Epicor Software Corp., New Term Loan B, 1 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 07/30/27 3,272,743
3,000,000 Epicor Software Corp., Term Loan (Second Lien), 1 Mo. LIBOR
+ 7.75%, 1.00% Floor......................................... 8.75% 07/30/28 3,075,000
5,637,241 Flexera Software LLC, 2020 Term Loan B, 3 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 01/26/28 5,645,302
21,666,222 Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo.
LIBOR + 4.00%, 0.75% Floor................................... 4.75% 10/01/27 21,666,221
24,378,362 Greeneden U.S. Holdings II LLC (Genesys Telecommunications
Laboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR +
4.00%, 0.75% Floor........................................... 4.75% 12/01/27 24,414,930
14,236,506 Hyland Software, Inc., Term Loan (Second Lien), 1 Mo. LIBOR
+ 6.25%, 0.75% Floor......................................... 7.00% 07/10/25 14,319,505
23,335,414 Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%,
0.75% Floor.................................................. 4.25% 07/01/24 23,342,648
8,618,795 Inmar, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00%
Floor........................................................ 5.00% 05/01/24 8,532,608
25,809,595 Internet Brands, Inc. (WebMD/MH Sub I LLC), 2020 June New
Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor.................. 4.75% 09/15/24 25,777,333
18,059,929 Internet Brands, Inc. (WebMD/MH Sub I LLC), Initial Term
Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor....................... 3.61% 09/13/24 17,881,858
14,021,355 Internet Brands, Inc. (Web MD/MH Sub I LLC), Term Loan
(Second Lien), 1 Mo. LIBOR + 6.25%, 0.00% Floor.............. 6.36% 02/15/29 14,144,042
24,090,181 LogMeIn, Inc. (Logan), Term Loan B, 1 Mo. LIBOR + 4.75%,
0.00% Floor.................................................. 4.86% 08/31/27 24,037,423
8,521,991 McAfee LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00%
Floor........................................................ 3.86% 09/30/24 8,515,600
5,527,090 Micro Focus International (MA Financeco LLC), Term Loan B4,
3 Mo. LIBOR + 4.25%, 1.00% Floor............................. 5.25% 06/05/25 5,545,495
8,526,781 RealPage, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50%
Floor........................................................ 3.75% 03/31/28 8,483,124
36,972,476 SolarWinds Holdings, Inc., Initial Term Loan, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 02/05/24 36,400,142
10,155,842 Solera Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%,
0.00% Floor.................................................. 2.86% 03/03/23 10,095,110
---------------
255,149,084
---------------
AUTO PARTS & EQUIPMENT -- 0.1%
3,206,309 Lumileds (Bright Bidco B.V.), Term Loan B, 3 Mo. LIBOR +
3.50%, 1.00% Floor........................................... 4.50% 06/30/24 2,444,650
---------------
BROADCASTING -- 0.7%
14,821,717 iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo.
LIBOR + 4.00%, 0.75% Floor................................... 4.75% 05/01/26 14,821,717
---------------
CASINOS & GAMING -- 2.7%
19,579,762 Caesars Resort Collection LLC, Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 12/22/24 19,352,049
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
CASINOS & GAMING (CONTINUED)
$ 870,625 Caesars Resort Collection LLC, Term Loan B-1, 1 Mo. LIBOR +
4.50%, 0.00% Floor........................................... 4.61% 06/30/25 $ 872,619
1,395,200 CityCenter Holdings LLC, Term Loan B, 1 Mo. LIBOR +
2.25%, 0.75% Floor........................................... 3.00% 04/18/24 1,378,457
35,120,533 Golden Nugget, Inc., Term Loan B, 2 Mo. LIBOR + 2.50%,
0.75% Floor.................................................. 3.25% 10/04/23 34,662,561
6,284,828 Scientific Games International, Inc., Term Loan B5, 1 Mo.
LIBOR + 2.75%, 0.00% Floor................................... 2.86% 08/14/24 6,189,362
---------------
62,455,048
---------------
ELECTRIC UTILITIES -- 0.3%
7,535,274 PG&E Corp., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50%
Floor........................................................ 3.50% 06/23/25 7,502,345
---------------
ENVIRONMENTAL & FACILITIES SERVICES -- 0.6%
14,373,473 Packers Holdings LLC (PSSI), Term Loan B, 3 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 03/15/28 14,214,790
---------------
HEALTH CARE DISTRIBUTORS -- 0.3%
4,249,050 Radiology Partners, Inc., Term Loan B, 1 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 4.36% 07/09/25 4,229,802
3,643,134 Radiology Partners, Inc., Term Loan B, 12 Mo. LIBOR + 4.25%,
0.00% Floor.................................................. 4.54% 07/09/25 3,626,631
---------------
7,856,433
---------------
HEALTH CARE SERVICES -- 7.7%
3,783,740 AccentCare (Pluto Acquisition I, Inc.), Incremental Term Loan,
1 Mo. LIBOR + 5.00%, 0.50% Floor............................. 5.50% 06/20/26 3,797,930
7,861,166 ADMI Corp. (Aspen Dental), Term Loan B2, 1 Mo. LIBOR +
2.75%, 0.50% Floor........................................... 3.25% 12/23/27 7,790,730
2,110,578 Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.),
Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor................ 4.50% 04/21/24 2,076,028
43,921,447 athenahealth, Inc. (VVC Holding Corp.), Term Loan B-1, 3 Mo.
LIBOR + 4.25%, 0.00% Floor................................... 4.45% 02/11/26 44,031,251
23,609,679 CHG Healthcare Services, Inc., Term Loan, 3 Mo. LIBOR +
3.00%, 1.00% Floor........................................... 4.00% 06/07/23 23,532,239
2,600,401 Civitas Solutions (National Mentor Holdings, Inc.), Term
Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor..................... 4.50% 03/31/28 2,596,058
2,337,069 Civitas Solutions (National Mentor Holdings, Inc.), Term
Loan B, 3 Mo. LIBOR + 3.75%, 0.75% Floor..................... 4.50% 03/31/28 2,333,166
164,582 Civitas Solutions (National Mentor Holdings, Inc.), Term
Loan C, 3 Mo. LIBOR + 3.75%, 0.75% Floor..................... 4.50% 03/31/28 164,308
8,245,497 DuPage Medical Group (Midwest Physician Admin. Services
LLC), Incremental Term Loan B, 3 Mo. LIBOR + 3.25%,
0.75% Floor.................................................. 4.00% 03/15/28 8,211,113
12,661,559 Envision Healthcare Corp., Initial Term Loan, 1 Mo. LIBOR +
3.75%, 0.00% Floor........................................... 3.86% 10/10/25 10,590,254
237,028 Exam Works (Gold Merger Co., Inc.), Term Loan B-1, 3 Mo.
LIBOR + 3.25%, 1.00% Floor................................... 4.25% 07/27/23 236,775
4,528,305 Global Medical Response, Inc. (fka Air Medical), 2020
Refinancing Term Loan, 3 Mo. LIBOR + 4.75%, 1.00%
Floor........................................................ 5.75% 10/15/25 4,532,833
203,206 Help at Home (HAH Group Holding Co. LLC), Delayed Draw
Term Loan.................................................... 5.00% 10/29/27 203,460
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE SERVICES (CONTINUED)
$ 7,358,127 Help at Home (HAH Group Holding Co. LLC), Initial Term
Loan B, 3 Mo. LIBOR + 5.00%, 1.00% Floor..................... 6.00% 10/29/27 $ 7,367,325
10,000,000 Packaging Coordinators, Inc. (PCI Pharma), Term Loan B, 3 Mo.
LIBOR + 3.75%, 0.75% Floor................................... 4.50% 11/30/27 9,993,800
2,173,324 SCP Health (Onex TSG Intermediate Corp.), Term Loan B, 3 Mo.
LIBOR + 4.75%, 0.75% Floor................................... 5.50% 02/28/28 2,148,874
19,810,430 Surgery Centers Holdings, Inc., 2021 Term Loan B, 1 Mo.
LIBOR + 3.25%, 0.75% Floor................................... 4.25% 08/31/26 19,726,830
2,459,688 Surgery Centers Holdings, Inc., 2021 Term Loan B, 1 Mo.
LIBOR + 8.00%, 0.75% Floor................................... 9.00% 08/31/26 2,449,308
10,159,343 Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00%
Floor........................................................ 3.75% 02/06/24 9,444,735
14,815,727 U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%,
0.00% Floor.................................................. 5.13% 06/28/26 14,477,780
1,344,638 US Radiology Specialists, Inc., Term Loan B, 3 Mo. LIBOR +
5.50%, 0.75% Floor........................................... 6.25% 12/31/27 1,348,726
---------------
177,053,523
---------------
HEALTH CARE TECHNOLOGY -- 2.0%
2,788,243 Ciox Health (Healthport/CT Technologies Intermediate Holdings,
Inc.), Initial Term Loan, 1 Mo. LIBOR + 5.00%, 1.00%
Floor........................................................ 6.00% 12/31/25 2,791,729
11,962,909 Ensemble RCM LLC (Ensemble Health), Term Loan B, 3 Mo.
LIBOR + 3.75%, 0.00% Floor................................... 3.94% 08/01/26 11,926,541
897,114 eResearch Technology, Inc. (ERT), Incremental Term Loan B,
1 Mo. LIBOR + 4.50%, 1.00% Floor............................. 5.50% 02/04/27 898,612
2,168,301 Mediware (Wellsky/Project Ruby Ultimate Parent Corp.), Term
Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor..................... 4.00% 03/15/28 2,152,038
1,350,085 Press Ganey (Azalea TopCo, Inc.), Incremental Term Loan,
1 Mo. LIBOR + 3.75%, 0.75% Floor............................. 4.50% 07/25/26 1,347,277
28,394,784 Verscend Technologies, Inc. (Cotiviti), New Term Loan B, 1 Mo.
LIBOR + 4.00%, 0.00% Floor................................... 4.11% 08/27/25 28,368,093
---------------
47,484,290
---------------
HOUSEHOLD APPLIANCES -- 0.2%
3,576,539 Traeger Grills (TGP Holdings III LLC), 2018 Refinancing Term
Loan, 3 Mo. LIBOR + 4.00%, 1.00% Floor....................... 5.00% 09/25/24 3,570,960
---------------
INDUSTRIAL MACHINERY -- 0.5%
5,705,880 Gates Global LLC, Term Loan B-3, 1 Mo. LIBOR + 2.75%,
0.75% Floor.................................................. 3.50% 03/31/27 5,681,230
5,272,471 Thyssenkrupp Elevator (Vertical U.S. Newco, Inc.), Term
Loan B, 6 Mo. LIBOR + 4.25%, 0.00% Floor..................... 4.48% 07/31/27 5,279,062
---------------
10,960,292
---------------
INSURANCE BROKERS -- 2.4%
8,814,842 Alliant Holdings I LLC, 2019 New Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.36% 05/10/25 8,694,520
18,411,251 Alliant Holdings I LLC, Initial Term Loan, 1 Mo. LIBOR +
3.25%, 0.00% Floor........................................... 3.36% 05/09/25 18,168,590
50,608 HUB International Ltd., Initial Term Loan B, 2 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.15% 04/25/25 49,907
19,635,736 HUB International Ltd., Initial Term Loan B, 3 Mo. LIBOR +
3.00%, 0.00% Floor........................................... 3.18% 04/25/25 19,363,978
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INSURANCE BROKERS (CONTINUED)
$ 9,312,596 HUB International Ltd., New Term Loan B-3, 3 Mo. LIBOR +
3.25%, 0.75% Floor........................................... 4.00% 04/25/25 $ 9,298,068
---------------
55,575,063
---------------
INTEGRATED TELECOMMUNICATION SERVICES -- 1.3%
8,511,005 Frontier Communications Corp., Term Loan B, 1 Mo. LIBOR +
3.75%, 0.75% Floor........................................... 4.50% 10/08/27 8,475,514
1,464,613 Numericable (Altice France S.A. or SFR), Term Loan B-11,
3 Mo. LIBOR + 2.75%, 0.00% Floor............................. 2.94% 07/31/25 1,432,875
1,979,487 Numericable (Altice France S.A. or SFR), Term Loan B-12,
3 Mo. LIBOR + 3.69%, 0.00% Floor............................. 3.87% 01/31/26 1,961,672
17,829,135 Numericable (Altice France S.A. or SFR), Term Loan B-13,
3 Mo. LIBOR + 4.00%, 0.00% Floor............................. 4.20% 08/14/26 17,759,066
---------------
29,629,127
---------------
MANAGED HEALTH CARE -- 0.4%
9,998,527 Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%,
1.00% Floor.................................................. 3.75% 06/07/23 9,942,335
---------------
MOVIES & ENTERTAINMENT -- 0.9%
2,660,334 Cineworld Group PLC (Crown), Priority Term Loan B-1, Fixed
Rate at 15.25% (h)........................................... 15.25% 05/23/24 3,333,026
19,430,004 Cineworld Group PLC (Crown), Term Loan B, 3 Mo. LIBOR +
2.50%, 1.00% Floor........................................... 3.50% 02/28/25 16,642,187
673,660 PUG LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%,
0.00% Floor.................................................. 3.61% 02/12/27 652,608
---------------
20,627,821
---------------
PAPER PACKAGING -- 0.8%
19,472,466 Graham Packaging Co., L.P., Term Loan B , 1 Mo. LIBOR +
3.00%, 0.75% Floor........................................... 3.75% 08/04/27 19,410,544
---------------
PHARMACEUTICALS -- 2.3%
3,053,454 Akorn, Inc., Exit Take Back Term Loan, 3 Mo. LIBOR + 7.50%,
1.00% Floor (i).............................................. 8.50% 09/30/25 3,124,081
5,600,000 Endo LLC, 2021 Term Loan B, 1 Mo. LIBOR + 5.00%, 0.75%
Floor........................................................ 5.75% 03/11/28 5,446,000
20,436,045 Mallinckrodt International Finance S.A., 2017 Term Loan B,
6 Mo. LIBOR + 5.25%, 0.75% Floor (e)......................... 6.00% 09/24/24 19,835,838
1,187,587 Mallinckrodt International Finance S.A., 2018 Incremental Term
Loan, 6 Mo. LIBOR + 5.50%, 0.75% Floor (e)................... 6.25% 02/24/25 1,153,017
13,392,526 Nestle Skin Health (Sunshine Lux VII SARL/Galderma), 2021
Term Loan B-3, 3 Mo. LIBOR + 3.75%, 0.75% Floor.............. 4.50% 10/02/26 13,386,231
10,238,110 Parexel International Corp., Term Loan B, 1 Mo. LIBOR +
2.75%, 0.00% Floor........................................... 2.86% 09/27/24 10,140,029
---------------
53,085,196
---------------
PUBLISHING -- 0.2%
3,442,590 Meredith Corp., Tranche B-3 Term Loan, 3 Mo. LIBOR +
4.25%, 1.00% Floor........................................... 5.25% 01/31/25 3,492,783
---------------
RESEARCH & CONSULTING SERVICES -- 0.4%
8,468,206 Nielsen Consumer, Inc. (Indy U.S. Holdco LLC), Term Loan B-1,
1 Mo. LIBOR + 4.00%, 0.00% Floor............................. 4.11% 03/05/28 8,448,814
---------------
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED
VALUE DESCRIPTION RATE (f) MATURITY (g) VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
RESTAURANTS -- 0.4%
$ 5,969,231 IRB Holding Corp. (Arby's/Inspire Brands), Term Loan B, 3 Mo.
LIBOR + 2.75%, 1.00% Floor................................... 2.95% 02/05/25 $ 5,921,357
1,911,772 Portillo's Holdings LLC, Term Loan B-3, 3 Mo. LIBOR + 5.50%,
1.00% Floor.................................................. 6.50% 08/30/24 1,904,603
345,517 Zaxby's Operating Co. L.P., Lien Term Loan (Second Lien),
1 Mo. LIBOR + 6.50%, 0.75% Floor............................. 7.25% 12/09/28 349,549
---------------
8,175,509
---------------
SPECIALIZED CONSUMER SERVICES -- 1.4%
4,624,312 Asurion LLC, New B-8 Term Loan, 1 Mo. LIBOR + 3.25%,
0.00% Floor.................................................. 3.36% 12/23/26 4,590,369
27,128,771 Asurion LLC, Term Loan B-3 (Second Lien), 1 Mo. LIBOR +
5.25%, 0.00% Floor........................................... 5.36% 02/05/28 27,501,792
---------------
32,092,161
---------------
SPECIALTY STORES -- 0.7%
7,391,401 Bass Pro Group LLC (Great Outdoors Group LLC), Term
Loan B, 1 Mo. LIBOR + 4.25%, 0.75% Floor..................... 5.00% 03/15/28 7,416,827
6,525,569 Petco Animal Supplies, Inc., Initial Term Loan B, 3 Mo. LIBOR
+ 3.25%, 0.75% Floor......................................... 4.00% 03/03/28 6,483,870
2,170,813 Petsmart, Inc., Initial Term Loan B, 3 Mo. LIBOR + 3.75%,
0.75% Floor.................................................. 4.50% 02/15/28 2,175,155
---------------
16,075,852
---------------
SYSTEMS SOFTWARE -- 2.0%
11,956,547 Applied Systems, Inc., Term Loan (First Lien), 3 Mo. LIBOR +
3.00%, 0.50% Floor........................................... 3.50% 09/19/24 11,904,297
26,641 Applied Systems, Inc., Term Loan (First Lien), Prime Rate +
2.00%, 0.50% Floor........................................... 5.25% 09/19/24 26,524
1,238,882 Applied Systems, Inc., Term Loan (Second Lien), 3 Mo. LIBOR
+ 5.50%, 0.75% Floor......................................... 6.25% 09/19/25 1,246,105
18,239,788 BMC Software Finance, Inc. (Boxer Parent), Term Loan B,
1 Mo. LIBOR + 3.75%, 0.00% Floor............................. 3.86% 10/02/25 18,134,544
5,327,416 Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term
Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor..................... 4.50% 06/13/24 5,230,883
5,124,724 Riverbed Technology, Inc., New Term Loan B, 3 Mo. LIBOR +
6.00%, 1.00% Floor........................................... 7.00% 12/30/25 4,847,835
4,087,913 Sophos Group PLC (Surf), Term Loan B, 3 Mo. LIBOR +
3.50%, 0.00% Floor........................................... 3.68% 03/05/27 4,046,094
1,529,657 SUSE (Marcel Lux IV S.A.R.L.), Facility B1 USD, 1 Mo.
LIBOR + 3.25%, 0.00% Floor................................... 3.36% 03/15/26 1,512,448
---------------
46,948,730
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 914,067,067
(Cost $907,870,826) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS -- 0.2%
PHARMACEUTICALS -- 0.2%
259,956 Akorn, Inc. (j) (k).......................................................................... 4,061,813
(Cost $2,979,179) ---------------
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
WARRANTS -- 0.0%
MOVIES & ENTERTAINMENT -- 0.0%
828,940 Cineworld Group PLC, expiring 11/23/25 (j) (l)............................................... $ 686,881
(Cost $0) ---------------
RIGHTS -- 0.0%
ELECTRIC UTILITIES -- 0.0%
1,629 Vistra Energy Corp., no expiration date (j) (l).............................................. 1,805
(Cost $2,831) ---------------
MONEY MARKET FUNDS -- 0.3%
7,222,706 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.01% (m)........................................................... 7,222,706
(Cost $7,222,706) ---------------
TOTAL INVESTMENTS -- 115.2%.................................................................. 2,654,427,170
(Cost $2,590,581,587) (n) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS SOLD SHORT -- (15.6)%
$ (125,000,000) U.S. Treasury Bill.............................................. (o) 05/06/21 (125,000,000)
(125,000,000) U.S. Treasury Bill.............................................. (o) 05/25/21 (125,000,000)
(10,000,000) U.S. Treasury Bill.............................................. (o) 05/27/21 (10,000,000)
(15,000,000) U.S. Treasury Bill.............................................. (o) 06/01/21 (14,999,939)
(85,000,000) U.S. Treasury Bill.............................................. (o) 06/15/21 (84,999,746)
---------------
TOTAL U.S. TREASURY BILLS SOLD SHORT......................................................... (359,999,685)
(Proceeds $359,997,301) ---------------
NET OTHER ASSETS AND LIABILITIES -- 0.4%..................................................... 9,506,114
---------------
NET ASSETS -- 100.0%......................................................................... $ 2,303,933,599
===============
</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 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.
("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, 2021, securities noted as
such amounted to $1,490,455,715 or 64.7% of net assets.
(b) This security or a portion of this security is segregated as collateral
for investments sold short.
(c) The issuer will pay interest on the bonds in cash and in Payment-In-Kind
("PIK") interest. Interest paid in cash will accrue at the rate of 6.50%
per annum ("Cash Interest Rate") and PIK interest will accrue on the bond
at the rate of 2.00% per annum. The first interest payment is scheduled
for June 30, 2021.
(d) This issuer is in default and interest is not being accrued by the Fund
nor paid by the issuer.
(e) The issuer has filed for protection in bankruptcy court.
(f) 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.
(g) 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.
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
(h) The issuer may pay interest on the loans in cash and in PIK interest.
Interest paid in cash will accrue at the rate of 7.00% per annum ("Cash
Interest Rate") and PIK interest will accrue on the loan at the rate of
8.25% per annum. For the six months ended April 30, 2021, the Fund
received a portion of the interest in cash and PIK interest with a
principal value of $255,960 for Cineworld Group PLC.
(i) The issuer may pay interest on the loans (1) entirely in cash or (2) in
the event that both the PIK Toggle Condition has been satisfied and the
issuer elects to exercise the PIK interest, 2.50% payable in cash and
7.00% payable as PIK interest. For the six months ended April 30, 2021,
this security paid all of its interest in cash.
(j) Non-income producing security.
(k) Security received in a transaction exempt from registration under the 1933
Act. The security may be resold pursuant to an exemption from registration
under the 1933 Act, typically to qualified institutional buyers. Pursuant
to procedures adopted by the Trust's Board of Trustees, this security has
been determined to be illiquid by the Advisor. Although market instability
can result in periods of increased overall market illiquidity, liquidity
for the security is determined based on security-specific factors and
assumptions, which require subjective judgment. At April 30, 2021,
securities noted as such amounted to $4,061,813 or 0.2% of net assets.
(l) Pursuant to procedures adopted by the Trust's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(m) Rate shown reflects yield as of April 30, 2021.
(n) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $77,806,826 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $13,963,627. The net unrealized appreciation
was $63,843,199. The unrealized amounts presented are inclusive of
investments sold short.
(o) Zero coupon security.
LIBOR - London Interbank Offered Rates
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Corporate Bonds*.................................. $ 1,471,814,608 $ -- $ 1,471,814,608 $ --
Foreign Corporate Bonds*.......................... 256,572,290 -- 256,572,290 --
Senior Floating-Rate Loan Interests*.............. 914,067,067 -- 914,067,067 --
Common Stocks*.................................... 4,061,813 -- 4,061,813 --
Warrants*......................................... 686,881 -- 686,881 --
Rights*........................................... 1,805 -- 1,805 --
Money Market Funds................................ 7,222,706 7,222,706 -- --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 2,654,427,170 $ 7,222,706 $ 2,647,204,464 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Treasury Bills Sold Short.................... $ (359,999,685) $ -- $ (359,999,685) $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $ 2,654,427,170
Cash...................................................................... 48,770
Restricted Cash........................................................... 7,629,147
Receivables:
Interest............................................................... 27,352,138
Investment securities sold............................................. 25,696,084
Dividends.............................................................. 52
Unrealized Appreciation on unfunded loan commitments...................... 12,450
---------------
Total Assets........................................................... 2,715,165,811
---------------
LIABILITIES:
Investments sold short, at value (proceeds $359,997,301).................. 359,999,685
Payables:
Investment securities purchased........................................ 49,024,020
Investment advisory fees............................................... 1,788,823
Margin interest expense................................................ 139,855
Other liabilities......................................................... 279,829
---------------
Total Liabilities...................................................... 411,232,212
---------------
NET ASSETS................................................................ $ 2,303,933,599
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 2,289,138,017
Par value................................................................. 474,500
Accumulated distributable earnings (loss)................................. 14,321,082
---------------
NET ASSETS................................................................ $ 2,303,933,599
===============
NET ASSET VALUE, per share................................................ $ 48.55
===============
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)................................. 47,450,002
===============
Investments, at cost...................................................... $ 2,590,581,587
===============
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 69,439,833
Dividends................................................................. 338
---------------
Total investment income................................................ 69,440,171
---------------
EXPENSES:
Investment advisory fees.................................................. 10,410,739
Margin interest expense................................................... 1,372,333
---------------
Total expenses......................................................... 11,783,072
---------------
NET INVESTMENT INCOME (LOSS).............................................. 57,657,099
---------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................................ 9,063,688
Investments sold short................................................. (4,053)
---------------
Net realized gain (loss).................................................. 9,059,635
---------------
Net change in unrealized appreciation (depreciation) on:
Investments............................................................ 61,299,092
Investments sold short................................................. 36,808
Unfunded loan commitments.............................................. 14,264
---------------
Net change in unrealized appreciation (depreciation)...................... 61,350,164
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... 70,409,799
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 128,066,898
===============
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 57,657,099 $ 82,468,841
Net realized gain (loss).................................................. 9,059,635 (26,246,928)
Net change in unrealized appreciation (depreciation)...................... 61,350,164 546,279
--------------- ---------------
Net increase (decrease) in net assets resulting from operations........... 128,066,898 56,768,192
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (61,322,203) (84,896,005)
--------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 341,108,709 971,116,727
Cost of shares redeemed................................................... (78,045,546) (400,951,154)
--------------- ---------------
Net increase (decrease) in net assets resulting
from shareholder transactions.......................................... 263,063,163 570,165,573
--------------- ---------------
Total increase (decrease) in net assets................................... 329,807,858 542,037,760
NET ASSETS:
Beginning of period....................................................... 1,974,125,741 1,432,087,981
--------------- ---------------
End of period............................................................. $ 2,303,933,599 $ 1,974,125,741
=============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 42,000,002 29,800,002
Shares sold............................................................... 7,050,000 21,100,000
Shares redeemed........................................................... (1,600,000) (8,900,000)
--------------- ---------------
Shares outstanding, end of period......................................... 47,450,002 42,000,002
=============== ===============
</TABLE>
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net increase (decrease) in net assets resulting from operations........... $ 128,066,898
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash used in operating activities:
Purchases of investments............................................ (1,462,176,445)
Borrowed investments sold short..................................... 999,922,550
Cost to cover short positions....................................... (984,998,263)
Sales, maturities and paydowns of investments....................... 1,159,948,567
Net amortization/accretion of premiums/discounts on investments..... (928,779)
Net realized gain/loss on investments............................... (9,063,688)
Net realized gain/loss on investments sold short.................... 4,053
Net change in unrealized appreciation/depreciation on investments
and unfunded loan commitments.................................... (61,313,356)
Net change in unrealized appreciation/depreciation on investments
sold short....................................................... (36,808)
CHANGES IN ASSETS AND LIABILITIES
Increase in interest receivable..................................... (3,261,261)
Decrease in dividends receivable.................................... 33
Increase in margin interest expense payable......................... 27,232
Increase in investment advisory fees payable........................ 146,805
Increase in other liabilities....................................... 279,829
---------------
CASH USED IN OPERATING ACTIVITIES......................................... $ (233,382,633)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold........................................... 341,143,961
Cost of shares redeemed............................................. (101,547,192)
Distributions to shareholders from investment operations............ (61,322,203)
---------------
CASH PROVIDED BY FINANCING ACTIVITIES..................................... 178,274,566
---------------
Increase in cash and restricted cash...................................... (55,108,067)
Cash and restricted cash at beginning of period........................... 62,785,984
---------------
CASH AND RESTRICTED CASH AT END OF PERIOD................................. $ 7,677,917
===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.................................. $ 1,345,101
===============
CASH AND RESTRICTED CASH RECONCILIATION:
Cash................................................................ $ 48,770
Restricted Cash..................................................... 7,629,147
---------------
CASH AND RESTRICTED CASH AT END OF PERIOD:................................ $ 7,677,917
===============
</TABLE>
Page 28 See Notes to Financial Statements
<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,
4/30/2021 ------------------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 47.00 $ 48.06 $ 47.02 $ 48.95 $ 48.31 $ 48.69
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 1.26 2.33 2.49 2.52 2.56 2.41
Net realized and unrealized gain (loss) 1.63 (1.00) 1.13 (1.76) 0.66 (0.14)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.89 1.33 3.62 0.76 3.22 2.27
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (1.34) (2.39) (2.56) (2.69) (2.58) (2.48)
Return of capital -- -- (0.02) (0.00) (a) -- (0.17)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions (1.34) (2.39) (2.58) (2.69) (2.58) (2.65)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 48.55 $ 47.00 $ 48.06 $ 47.02 $ 48.95 $ 48.31
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) 6.18% 2.92% 7.90% 1.60% 6.79% 4.89%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,303,934 $1,974,126 $1,432,088 $1,253,035 $1,250,565 $1,077,297
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets 1.08% (c) 1.01% 1.23% 1.16% 1.10% 1.11%
Ratio of total expenses to average net
assets excluding interest expense 0.95% (c) 0.95% 0.95% 0.95% 0.95% 0.95%
Ratio of net investment income (loss) to
average net assets 5.26% (c) 5.02% 5.22% 5.26% 5.25% 5.04%
Portfolio turnover rate (d) 32% 68% 50% 52% 75% 45%
</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.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 29
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NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (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 ten 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"). The Fund represents a separate series of beneficial
interest in the Trust. Unlike conventional mutual funds, the Fund issues and
redeems shares on a continuous basis, at net asset value ("NAV"), only in large
blocks of shares known as "Creation Units."
The primary investment objective of the Fund is to provide 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.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Page 30
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (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.
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;
13) borrower's/issuer's ability to access additional liquidity
through public and/or private markets; and
14) other relevant factors.
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 31
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (UNAUDITED)
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, 2021, 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.
The United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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 (other than
unfunded loan commitments discussed below) as of April 30, 2021.
C. SHORT SALES
Short sales are utilized for investment and risk management purposes and are
transactions in which securities or other instruments (such as options,
forwards, futures or other derivative contracts) are sold that are not currently
owned in the Fund's portfolio. When the Fund engages in a short sale, the Fund
must borrow the security sold short and deliver the security to the
counterparty. Short selling allows the Fund to profit from a decline in a market
price to the extent such decline exceeds the transaction costs and the
Page 32
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (UNAUDITED)
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, 2021, the Fund had $7,629,147 in
restricted cash associated with investments sold short and $359,999,685 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, 2021, the Fund had
a debit margin balance of $352,369,853 with an interest rate of 0.80%. For the
six months ended April 30, 2021, the Fund had margin interest expense of
$1,372,333, as shown on the Statement of Operations. For the six months ended
April 30, 2021, the average margin balance and interest rates were $291,136,198
and 0.82%, 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. Unfunded loan commitments are marked-to-market daily, and
any unrealized appreciation (depreciation) is included in the Statement of
Assets and Liabilities and Statement of Operations. In connection with these
commitments, the Fund earns a commitment fee typically set as a percentage of
the commitment amount. As of April 30, 2021, the Fund had the following unfunded
loan commitments:
<TABLE>
<CAPTION>
UNREALIZED
PRINCIPAL COMMITMENT APPRECIATION
BORROWER VALUE AMOUNT VALUE (DEPRECIATION)
------------------------------------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Civitas Solutions (National Mentor Holdings, Inc.), Term Loan $ 543,122 $ 540,821 $ 542,215 $ 1,394
Help at Home (HAH Group Holding Company, LLC), Term Loan 725,490 715,340 726,396 11,056
-------------- -------------- --------------
Total $ 1,256,161 $ 1,268,611 $ 12,450
============== ============== ==============
</TABLE>
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.
Page 33
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (UNAUDITED)
The tax character of distributions paid during the fiscal year ended October 31,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 84,896,005
Capital gains................................... --
Return of capital............................... --
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 1,007,704
Accumulated capital and other gain (loss)....... (52,774,075)
Net unrealized appreciation (depreciation)...... (657,242)
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 2017,
2018, 2019, and 2020 remain open to federal and state audit. As of April 30,
2021, 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, 2020, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $52,774,075.
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, 2020, 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.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, brokerage
commissions and other expenses connected with the execution of portfolio
transactions, 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.
Page 34
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (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 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, 2021, the cost of purchases and proceeds from
sales of investments, excluding short-term investments, investments sold short
and in-kind transactions, were $1,081,450,032 and $799,103,263, respectively.
The cost of purchases to cover short sales and the proceeds of short sales were
$984,998,263 and $999,922,550, respectively.
For the six months ended April 30, 2021, 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 0.25% 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 have access to the Line of Credit. Prior to January 29, 2021, the
commitment fee was 0.15%. 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, 2021.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the authorized
participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Page 35
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (UNAUDITED)
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
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, 2022.
8. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there
were no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (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 37
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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
Page 38
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TACTICAL HIGH YIELD ETF (HYLS)
APRIL 30, 2021 (UNAUDITED)
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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that the Fund previously adopted a
highly liquidity investment minimum, but because the Fund now primarily holds
assets that are highly liquid investments, the Liquidity Committee determined in
March 2021 to remove the highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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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, 2021
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 25
Statement of Operations...................................................... 26
Statements of Changes in Net Assets.......................................... 27
Financial Highlights......................................................... 28
Notes to Financial Statements................................................ 29
Additional Information....................................................... 35
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, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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 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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 0.19% 1.41% 1.64% 1.33% 8.46% 9.32%
Market Price 0.15% 1.46% 1.64% 1.33% 8.48% 9.30%
INDEX PERFORMANCE
ICE BofA 0-1 Year U.S. Treasury Index 0.09% 0.16% 1.36% 1.08% 7.01% 7.49%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the period since inception are calculated from the inception
date of the Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the period indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the period
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after 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 38.4%
Commercial Paper 34.4
Foreign Corporate Bonds and Notes 10.9
Asset-Backed Securities 8.0
Mortgage-Backed Securities 4.7
U.S. Government Agency Mortgage-
Backed Securities 2.3
U.S. Government Notes 0.8
Certificate of Deposit 0.3
Cash 0.2
-------
Total 100.0%
=======
--------------------------------------------------------
% OF TOTAL
CREDIT QUALITY(1) INVESTMENTS & CASH
--------------------------------------------------------
Government and Agency 3.1%
AAA 5.8
AA+ 1.0
AA 0.5
AA- 2.2
A+ 4.1
A 5.7
A- 7.4
BBB+ 14.2
BBB 10.4
BBB- 3.7
BB+ 0.4
BB 0.1
Not Rated 41.3
Cash 0.1
-------
Total 100.0%
=======
--------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
--------------------------------------------------------
U.S. Treasury Note, 1.50%, 11/30/2021 0.9%
Jabil, Inc. 0.8
Oracle Corp. 0.6
Intercontinental Exchange, Inc., 3 Mo.
LIBOR + 0.65% 0.6
FMC Corp. 0.6
Canadian Natural Resources Ltd. 0.6
Morgan Stanley, Global Medium-Term
Note, SOFR + 0.70% 0.6
Maxim Integrated Products, Inc. 0.6
Enbridge Energy Partners, L.P. 0.5
BPCE S.A., Medium-Term Note, 3 Mo.
LIBOR + 0.88% 0.5
-------
Total 6.3%
=======
-----------------------------
(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, 2021
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
10/31/20 10,912 10,739
4/30/21 10,932 10,749
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (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 R. 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, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD (a) PERIOD (b)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
Actual $1,000.00 $1,001.90 0.25% $1.24
Hypothetical (5% return before expenses) $1,000.00 $1,023.55 0.25% $1.25
</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,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES -- 38.8%
AEROSPACE/DEFENSE -- 0.5%
$ 2,722,000 Boeing (The) Co................................................. 2.35% 10/30/21 $ 2,745,224
2,919,000 Boeing (The) Co................................................. 2.13% 03/01/22 2,946,947
19,500,000 Boeing (The) Co................................................. 2.70% 05/01/22 19,929,909
----------------
25,622,080
----------------
AGRICULTURE -- 0.9%
12,648,000 Altria Group, Inc............................................... 4.75% 05/05/21 12,649,500
15,000,000 Altria Group, Inc............................................... 2.85% 08/09/22 15,466,209
12,452,000 BAT Capital Corp., 3 Mo. LIBOR + 0.88% (a)...................... 1.07% 08/15/22 12,536,634
----------------
40,652,343
----------------
AUTO MANUFACTURERS -- 5.1%
20,000,000 American Honda Finance Corp., Medium-Term Note,
3 Mo. LIBOR + 0.37% (a)...................................... 0.57% 05/10/23 20,073,007
4,400,000 BMW US Capital LLC, 3 Mo. LIBOR + 0.50% (a) (b)................. 0.70% 08/13/21 4,406,321
565,000 BMW US Capital LLC (b).......................................... 1.85% 09/15/21 567,712
5,250,000 BMW US Capital LLC, SOFR + 0.53% (a) (b)........................ 0.54% 04/01/24 5,281,062
5,280,000 Daimler Finance North America LLC (b)........................... 3.35% 05/04/21 5,280,000
5,000,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.67% (a) (b)................................................ 0.87% 11/05/21 5,014,548
8,599,000 Daimler Finance North America LLC (b)........................... 3.75% 11/05/21 8,746,856
5,934,000 Daimler Finance North America LLC (b)........................... 2.85% 01/06/22 6,034,184
9,180,000 Daimler Finance North America LLC, 3 Mo. LIBOR +
0.90% (a) (b)................................................ 1.09% 02/15/22 9,236,636
14,347,000 General Motors Financial Co., Inc............................... 3.20% 07/06/21 14,383,126
6,763,000 General Motors Financial Co., Inc............................... 4.38% 09/25/21 6,867,828
8,000,000 General Motors Financial Co., Inc., 3 Mo. LIBOR +
1.10% (a).................................................... 1.29% 11/06/21 8,032,911
9,037,000 General Motors Financial Co., Inc............................... 4.20% 11/06/21 9,211,596
11,016,000 General Motors Financial Co., Inc............................... 3.70% 05/09/23 11,603,036
15,000,000 General Motors Financial Co., Inc., SOFR + 0.76% (a)............ 0.77% 03/08/24 15,061,340
14,108,000 Hyundai Capital America (b)..................................... 3.95% 02/01/22 14,466,978
3,470,000 Hyundai Capital America (b)..................................... 3.10% 04/05/22 3,549,295
6,885,000 Hyundai Capital America (b)..................................... 2.38% 02/10/23 7,070,738
6,330,000 Nissan Motor Acceptance Corp. (b)............................... 1.90% 09/14/21 6,358,943
5,750,000 Nissan Motor Acceptance Corp. (b)............................... 2.80% 01/13/22 5,832,580
3,000,000 Nissan Motor Acceptance Corp., 3 Mo. LIBOR +
0.64% (a) (b)................................................ 0.83% 03/08/24 3,003,039
15,000,000 Toyota Motor Credit Corp., Medium-Term Note, 3 Mo.
LIBOR + 0.29% (a)............................................ 0.49% 10/07/21 15,016,881
9,677,000 Toyota Motor Credit Corp., Medium-Term Note..................... 1.80% 10/07/21 9,741,752
10,000,000 Toyota Motor Credit Corp., Medium-Term Note..................... 1.15% 05/26/22 10,100,331
11,300,000 Volkswagen Group of America Finance LLC, 3 Mo.
LIBOR + 0.86% (a) (b)........................................ 1.05% 09/24/21 11,335,876
12,028,000 Volkswagen Group of America Finance LLC (b)..................... 2.50% 09/24/21 12,133,191
3,242,000 Volkswagen Group of America Finance LLC (b)..................... 4.00% 11/12/21 3,304,610
7,759,000 Volkswagen Group of America Finance LLC (b)..................... 2.90% 05/13/22 7,955,818
1,296,000 Volkswagen Group of America Finance LLC (b)..................... 2.70% 09/26/22 1,336,364
----------------
241,006,559
----------------
BANKS -- 7.7%
3,000,000 Bank of America Corp., SOFR + 0.69% (a)......................... 0.70% 04/22/25 3,009,689
20,696,000 Bank of America Corp., Global Medium-Term Note (c).............. 2.82% 07/21/23 21,286,747
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 18,560,000 Bank of America Corp., Medium-Term Note, 3 Mo. LIBOR
+ 0.65% (a).................................................. 0.85% 06/25/22 $ 18,576,664
1,000,000 Bank of America Corp., Medium-Term Note, 3 Mo. LIBOR
+ 0.79% (a).................................................. 0.98% 03/05/24 1,008,988
5,385,000 Capital One N.A., 3 Mo. LIBOR + 0.82% (a)....................... 1.01% 08/08/22 5,425,505
15,000,000 Citibank N.A., 3 Mo. LIBOR + 0.60% (a).......................... 0.78% 05/20/22 15,074,783
1,000,000 Citigroup, Inc., 3 Mo. LIBOR + 1.19% (a)........................ 1.37% 08/02/21 1,002,849
2,099,000 Citigroup, Inc., 3 Mo. LIBOR + 1.07% (a)........................ 1.25% 12/08/21 2,110,281
9,959,000 Citigroup, Inc., 3 Mo. LIBOR + 0.96% (a)........................ 1.14% 04/25/22 10,035,485
5,000,000 Citigroup, Inc., SOFR + 0.87% (a)............................... 0.88% 11/04/22 5,018,171
12,384,000 Citigroup, Inc. (c)............................................. 2.31% 11/04/22 12,499,364
5,500,000 Citigroup, Inc. (c)............................................. 2.88% 07/24/23 5,663,450
10,000,000 Citigroup, Inc., SOFR + 0.67% (a)............................... 0.68% 05/01/25 10,014,876
3,502,000 Citizens Financial Group, Inc................................... 2.38% 07/28/21 3,513,292
22,073,000 Discover Bank................................................... 3.20% 08/09/21 22,193,455
5,000,000 Fifth Third Bancorp............................................. 2.60% 06/15/22 5,120,149
7,725,000 Fifth Third Bank/Cincinnati OH, 3 Mo. LIBOR +
0.44% (a).................................................... 0.62% 07/26/21 7,730,054
11,769,000 Goldman Sachs Group, (The), Inc. (c)............................ 2.88% 10/31/22 11,905,832
15,000,000 Goldman Sachs Group, (The), Inc................................. 0.48% 01/27/23 15,009,779
15,355,000 Goldman Sachs Group, (The), Inc. (c)............................ 2.91% 07/24/23 15,809,900
15,000,000 Goldman Sachs Group, (The), Inc., SOFR + 0.43% (a).............. 0.44% 03/08/23 14,997,165
15,970,000 JPMorgan Chase & Co. (c)........................................ 3.51% 06/18/22 16,034,757
12,322,000 JPMorgan Chase & Co............................................. 2.97% 01/15/23 12,551,254
6,935,000 JPMorgan Chase & Co. (c)........................................ 2.78% 04/25/23 7,100,620
12,000,000 JPMorgan Chase & Co., SOFR + 0.58% (a).......................... 0.59% 03/16/24 12,048,349
7,378,000 Morgan Stanley.................................................. 2.75% 05/19/22 7,569,031
8,930,000 Morgan Stanley (c).............................................. 0.73% 04/05/24 8,953,001
28,938,000 Morgan Stanley, Global Medium-Term Note, SOFR +
0.70% (a).................................................... 0.71% 01/20/23 29,016,935
10,000,000 Truist Bank, 3 Mo. LIBOR + 0.59% (a)............................ 0.78% 05/17/22 10,051,082
3,000,000 Truist Bank, SOFR + 0.73% (a)................................... 0.74% 03/09/23 3,027,301
12,137,000 Truist Financial Corp., Medium-Term Note........................ 3.05% 06/20/22 12,494,115
12,857,000 Wells Fargo & Co................................................ 3.07% 01/24/23 13,111,995
10,030,000 Wells Fargo & Co., Medium-Term Note............................. 3.50% 03/08/22 10,304,928
10,646,000 Wells Fargo Bank N.A. (c)....................................... 2.08% 09/09/22 10,713,107
----------------
359,982,953
----------------
BEVERAGES -- 0.4%
20,254,000 Keurig Dr Pepper, Inc........................................... 3.55% 05/25/21 20,293,457
----------------
BIOTECHNOLOGY -- 0.6%
5,000,000 Gilead Sciences, Inc., 3 Mo. LIBOR + 0.15% (a).................. 0.33% 09/17/21 5,001,541
7,789,000 Gilead Sciences, Inc., 3 Mo. LIBOR + 0.52% (a).................. 0.71% 09/29/23 7,797,545
15,000,000 Gilead Sciences, Inc............................................ 0.75% 09/29/23 15,025,491
----------------
27,824,577
----------------
COMMERCIAL SERVICES -- 0.4%
976,000 Equifax, Inc.................................................... 2.30% 06/01/21 976,000
15,624,000 Equifax, Inc.................................................... 3.60% 08/15/21 15,769,176
----------------
16,745,176
----------------
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
COMPUTERS -- 0.1%
$ 3,000,000 Apple, Inc...................................................... 1.55% 08/04/21 $ 3,007,250
3,000,000 Hewlett Packard Enterprise Co., 3 Mo. LIBOR +
0.72% (a).................................................... 0.91% 10/05/21 3,000,561
----------------
6,007,811
----------------
DIVERSIFIED FINANCIAL SERVICES -- 2.3%
3,235,000 AIG Global Funding (b).......................................... 3.35% 06/25/21 3,249,409
977,000 Air Lease Corp.................................................. 3.75% 02/01/22 995,077
11,000,000 American Express Co., 3 Mo. LIBOR + 0.60% (a)................... 0.80% 11/05/21 11,024,821
14,495,000 American Express Co., 3 Mo. LIBOR + 0.62% (a)................... 0.80% 05/20/22 14,566,637
7,499,000 Aviation Capital Group LLC, 3 Mo. LIBOR +
0.95% (a) (b)................................................ 1.14% 06/01/21 7,499,177
10,505,000 Charles Schwab (The) Corp., 3 Mo. LIBOR +
0.32% (a).................................................... 0.50% 05/21/21 10,505,543
15,512,000 Discover Financial Services..................................... 5.20% 04/27/22 16,223,481
2,500,000 Intercontinental Exchange, Inc.................................. 2.35% 09/15/22 2,566,598
30,000,000 Intercontinental Exchange, Inc., 3 Mo. LIBOR +
0.65% (a).................................................... 0.83% 06/15/23 30,055,050
10,000,000 Nasdaq, Inc..................................................... 0.45% 12/21/22 10,004,285
----------------
106,690,078
----------------
ELECTRIC -- 3.5%
10,410,000 Alabama Power Co., Series 17A................................... 2.45% 03/30/22 10,600,346
15,118,000 American Electric Power Co., Inc., Series I..................... 3.65% 12/01/21 15,413,386
5,804,000 American Transmission Systems, Inc. (b)......................... 5.25% 01/15/22 5,985,123
11,000,000 Consolidated Edison Co. of New York Inc., Series C,
3 Mo. LIBOR + 0.40% (a)...................................... 0.60% 06/25/21 11,006,441
12,620,000 Consolidated Edison, Inc........................................ 2.00% 05/15/21 12,626,206
9,529,000 Dominion Energy, Inc., Series B................................. 2.75% 01/15/22 9,670,771
2,816,000 Dominion Energy, Inc., Series C................................. 2.00% 08/15/21 2,824,466
7,000,000 Dominion Energy, Inc., Series D, 3 Mo. LIBOR +
0.53% (a).................................................... 0.71% 09/15/23 7,006,867
10,523,000 DTE Energy Co., Series B........................................ 2.60% 06/15/22 10,762,447
5,000,000 Duke Energy Corp., 3 Mo. LIBOR + 0.50% (a) (b).................. 0.70% 05/14/21 5,000,741
3,170,000 Duke Energy Corp................................................ 3.55% 09/15/21 3,181,973
5,900,000 Duke Energy Corp., 3 Mo. LIBOR + 0.65% (a)...................... 0.83% 03/11/22 5,925,081
3,155,000 Duke Energy Florida LLC, Series A, 3 Mo. LIBOR +
0.25% (a).................................................... 0.44% 11/26/21 3,157,575
6,345,000 Exelon Generation Co. LLC....................................... 3.40% 03/15/22 6,490,317
1,200,000 NextEra Energy Capital Holdings, Inc............................ 2.90% 04/01/22 1,228,723
7,425,000 NextEra Energy Capital Holdings, Inc............................ 2.40% 09/01/21 7,477,837
2,046,000 NextEra Energy Capital Holdings, Inc., SOFR +
0.54% (a).................................................... 0.55% 03/01/23 2,052,634
13,000,000 Pacific Gas and Electric Co., 3 Mo. LIBOR + 1.38% (a)........... 1.57% 11/15/21 13,043,940
2,357,000 Public Service Enterprise Group, Inc............................ 2.00% 11/15/21 2,375,000
12,514,000 Southern (The) Co............................................... 2.35% 07/01/21 12,534,398
15,000,000 Southern California Edison Co., SOFR + 0.64% (a)................ 0.65% 04/03/23 15,030,292
----------------
163,394,564
----------------
FOOD -- 0.2%
5,500,000 General Mills, Inc.............................................. 3.15% 12/15/21 5,556,186
4,323,000 Sysco Corp...................................................... 2.50% 07/15/21 4,333,138
----------------
9,889,324
----------------
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
GAS -- 0.9%
$ 10,000,000 CenterPoint Energy Resources Corp., 3 Mo. LIBOR +
0.50% (a).................................................... 0.68% 03/02/23 $ 10,002,725
7,000,000 CenterPoint Energy Resources Corp............................... 0.70% 03/02/23 7,004,728
18,010,000 Eastern Energy Gas Holdings LLC, Series A, 3 Mo.
LIBOR + 0.60% (a)............................................ 0.78% 06/15/21 18,021,224
5,000,000 Southern California Gas Co., 3 Mo. LIBOR +
0.35% (a).................................................... 0.53% 09/14/23 5,000,643
----------------
40,029,320
----------------
HEALTH CARE PRODUCTS -- 0.4%
2,523,000 Boston Scientific Corp.......................................... 3.38% 05/15/22 2,597,819
16,226,000 Zimmer Biomet Holdings, Inc..................................... 3.15% 04/01/22 16,558,937
----------------
19,156,756
----------------
HEALTH CARE SERVICES -- 0.3%
6,100,000 Anthem, Inc..................................................... 3.70% 08/15/21 6,106,388
6,247,000 Anthem, Inc..................................................... 3.13% 05/15/22 6,429,231
----------------
12,535,619
----------------
INSURANCE -- 2.1%
13,125,000 Athene Global Funding, 3 Mo. LIBOR + 1.23% (a) (b).............. 1.42% 07/01/22 13,274,229
5,246,000 Athene Global Funding (b)....................................... 3.00% 07/01/22 5,399,900
3,000,000 Brighthouse Financial Global Funding, SOFR +
0.76% (a) (b)................................................ 0.77% 04/12/24 3,014,725
11,510,000 Jackson National Life Global Funding, 3 Mo. LIBOR +
0.48% (a) (b)................................................ 0.66% 06/11/21 11,515,214
25,000,000 MET Tower Global Funding, SOFR + 0.55% (a) (b).................. 0.56% 01/17/23 25,132,562
2,000,000 Metropolitan Life Global Funding I, SOFR +
0.57% (a) (b)................................................ 0.58% 01/13/23 2,011,483
25,000,000 New York Life Global Funding, 3 Mo. LIBOR +
0.28% (a) (b)................................................ 0.47% 01/10/23 25,096,298
12,000,000 Principal Life Global Funding II, SOFR + 0.45% (a) (b).......... 0.46% 04/12/24 12,011,737
----------------
97,456,148
----------------
INTERNET -- 0.1%
6,633,000 TD Ameritrade Holding Corp., 3 Mo. LIBOR +
0.43% (a).................................................... 0.61% 11/01/21 6,645,998
----------------
MACHINERY-CONSTRUCTION & MINING -- 0.6%
9,879,000 Caterpillar Financial Services Corp., Medium-Term Note,
3 Mo. LIBOR + 0.28% (a)...................................... 0.46% 09/07/21 9,886,776
3,000,000 Caterpillar Financial Services Corp., Medium-Term
Note......................................................... 0.95% 05/13/22 3,022,748
15,000,000 Caterpillar Financial Services Corp., Medium-Term Note,
Series I, 3 Mo. LIBOR + 0.39% (a)............................ 0.58% 05/17/21 15,002,475
----------------
27,911,999
----------------
MACHINERY-DIVERSIFIED -- 0.4%
15,000,000 John Deere Capital Corp., Medium-Term Note, 3 Mo.
LIBOR + 0.49% (a)............................................ 0.67% 06/13/22 15,077,488
5,000,000 Otis Worldwide Corp., 3 Mo. LIBOR + 0.45% (a)................... 0.64% 04/05/23 4,998,600
----------------
20,076,088
----------------
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA -- 0.4%
$ 10,600,000 Charter Communications Operating LLC / Charter
Communications Operating Capital, 3 Mo. LIBOR +
1.65% (a).................................................... 1.83% 02/01/24 $ 10,888,843
5,000,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.25% (a).................. 0.44% 09/01/21 5,004,139
5,000,000 Walt Disney (The) Co., 3 Mo. LIBOR + 0.39% (a).................. 0.58% 09/01/22 5,024,362
----------------
20,917,344
----------------
MISCELLANEOUS MANUFACTURING -- 0.1%
4,188,000 General Electric Co., Global Medium-Term Note................... 3.15% 09/07/22 4,342,352
----------------
OIL & GAS -- 1.0%
9,169,000 BP Capital Markets America, Inc., 3 Mo. LIBOR +
0.65% (a).................................................... 0.84% 09/19/22 9,211,592
3,500,000 Chevron Corp., 3 Mo. LIBOR + 0.95% (a).......................... 1.14% 05/16/21 3,501,175
12,796,000 Chevron Corp.................................................... 2.41% 03/03/22 12,983,743
16,153,000 ConocoPhillips Co., 3 Mo. LIBOR + 0.90% (a)..................... 1.10% 05/15/22 16,289,129
3,750,000 Phillips 66, Series WI.......................................... 4.30% 04/01/22 3,883,407
----------------
45,869,046
----------------
PACKAGING AND CONTAINERS -- 0.0%
1,245,000 WestRock RKT LLC................................................ 4.90% 03/01/22 1,289,757
----------------
PHARMACEUTICALS -- 3.4%
5,575,000 AbbVie, Inc., 3 Mo. LIBOR + 0.35% (a)........................... 0.53% 05/21/21 5,575,764
10,148,000 AbbVie, Inc., 3 Mo. LIBOR + 0.46% (a)........................... 0.64% 11/19/21 10,162,998
18,715,000 AbbVie, Inc..................................................... 2.15% 11/19/21 18,901,437
12,000,000 AbbVie, Inc., 3 Mo. LIBOR + 0.65% (a)........................... 0.83% 11/21/22 12,077,610
9,840,000 AbbVie, Inc..................................................... 2.30% 11/21/22 10,127,056
5,065,000 Bayer US Finance II LLC, 3 Mo. LIBOR +
0.63% (a) (b)................................................ 0.83% 06/25/21 5,066,972
22,812,000 Bayer US Finance II LLC (b)..................................... 3.50% 06/25/21 22,857,639
12,825,000 Bayer US Finance II LLC (b)..................................... 3.88% 12/15/23 13,799,552
6,255,000 Bristol-Myers Squibb Co......................................... 2.55% 05/14/21 6,259,191
6,000,000 Bristol-Myers Squibb Co., 3 Mo. LIBOR + 0.38% (a)............... 0.57% 05/16/22 6,019,933
6,631,000 CVS Health Corp................................................. 2.13% 06/01/21 6,634,479
6,609,000 CVS Health Corp................................................. 3.50% 07/20/22 6,826,256
21,226,000 Utah Acquisition Sub, Inc....................................... 3.15% 06/15/21 21,271,367
8,840,000 Viatris, Inc. (b)............................................... 1.13% 06/22/22 8,899,048
5,120,000 Zoetis, Inc..................................................... 3.25% 08/20/21 5,164,574
----------------
159,643,876
----------------
PIPELINES -- 1.3%
25,577,000 Enbridge Energy Partners, L.P................................... 4.20% 09/15/21 25,689,536
6,442,000 Enterprise Products Operating LLC............................... 3.50% 02/01/22 6,593,051
4,838,000 Kinder Morgan Energy Partners, L.P.............................. 4.15% 03/01/22 4,985,792
9,000,000 Southern Natural Gas Co. LLC (b)................................ 0.63% 04/28/23 9,001,761
4,876,000 Southern Natural Gas Co. LLC / Southern Natural Issuing
Corp......................................................... 4.40% 06/15/21 4,881,498
11,345,000 Williams Cos., (The), Inc....................................... 3.60% 03/15/22 11,596,666
----------------
62,748,304
----------------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
15,000,000 Public Storage, SOFR + 0.47% (a)................................ 0.48% 04/23/24 15,016,459
----------------
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
RETAIL -- 1.2%
$ 10,000,000 7-Eleven, Inc., 3 Mo. LIBOR + 0.45% (a) (b)..................... 0.65% 08/10/22 $ 10,008,212
4,000,000 7-Eleven, Inc. (b).............................................. 0.63% 02/10/23 4,004,461
4,957,000 AutoZone, Inc................................................... 3.70% 04/15/22 5,077,327
10,000,000 McDonald's Corp., Medium-Term Note, 3 Mo. LIBOR +
0.43% (a).................................................... 0.61% 10/28/21 10,018,450
18,832,000 Nordstrom, Inc.................................................. 4.00% 10/15/21 18,869,429
6,067,000 O'Reilly Automotive, Inc........................................ 4.63% 09/15/21 6,097,815
----------------
54,075,694
----------------
SEMICONDUCTORS -- 0.9%
10,000,000 Intel Corp., 3 Mo. LIBOR + 0.35% (a)............................ 0.55% 05/11/22 10,031,612
25,352,000 Maxim Integrated Products, Inc.................................. 3.38% 03/15/23 26,512,988
3,247,000 Microchip Technology, Inc....................................... 3.92% 06/01/21 3,255,493
----------------
39,800,093
----------------
SOFTWARE -- 1.3%
8,387,000 Fiserv, Inc..................................................... 4.75% 06/15/21 8,429,566
14,895,000 Infor, Inc. (b)................................................. 1.45% 07/15/23 15,099,625
5,500,000 Oracle Corp..................................................... 2.80% 07/08/21 5,525,096
29,993,000 Oracle Corp..................................................... 1.90% 09/15/21 30,134,281
4,000,000 Roper Technologies, Inc......................................... 2.80% 12/15/21 4,053,111
----------------
63,241,679
----------------
TELECOMMUNICATIONS -- 1.5%
7,940,000 AT&T, Inc., 3 Mo. LIBOR + 0.75% (a)............................. 0.94% 06/01/21 7,944,683
21,600,000 AT&T, Inc., 3 Mo. LIBOR + 0.95% (a)............................. 1.13% 07/15/21 21,638,840
12,118,000 AT&T, Inc....................................................... 3.00% 06/30/22 12,438,224
8,090,000 AT&T, Inc., SOFR + 0.64% (a).................................... 0.65% 03/25/24 8,103,549
10,000,000 AT&T, Inc., 3 Mo. LIBOR + 1.18% (a)............................. 1.36% 06/12/24 10,218,700
10,000,000 Verizon Communications, Inc., SOFR + 0.50% (a).................. 0.51% 03/22/24 10,046,608
----------------
70,390,604
----------------
TRANSPORTATION -- 0.5%
5,000,000 Ryder System, Inc., Medium-Term Note............................ 2.50% 09/01/22 5,133,497
18,802,000 Union Pacific Corp.............................................. 3.20% 06/08/21 18,854,177
----------------
23,987,674
----------------
TRUCKING & LEASING -- 0.4%
9,005,000 GATX Corp., 3 Mo. LIBOR + 0.72% (a)............................. 0.92% 11/05/21 9,028,460
11,221,000 Penske Truck Leasing Co., L.P. / PTL Finance Corp. (b).......... 3.65% 07/29/21 11,277,719
----------------
20,306,179
----------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 1,823,549,911
(Cost $1,818,695,790) ----------------
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 34.8%
AGRICULTURE -- 1.2%
$ 15,000,000 BAT International Finance PLC................................... 0.26% 05/11/21 $ 14,998,917
10,000,000 BAT International Finance PLC................................... 0.26% 05/12/21 9,999,205
15,000,000 BAT International Finance PLC................................... 0.27% 05/21/21 14,997,750
15,000,000 BAT International Finance PLC................................... 0.30% 06/15/21 14,994,374
----------------
54,990,246
----------------
AUTO MANUFACTURERS -- 2.1%
15,000,000 Harley-Davidson Financial Services, Inc......................... 0.31% 05/06/21 14,999,354
15,000,000 Harley-Davidson Financial Services, Inc......................... 0.30% 05/07/21 14,999,250
15,000,000 Harley-Davidson Financial Services, Inc......................... 0.33% 05/11/21 14,998,625
15,000,000 Harley-Davidson Financial Services, Inc......................... 0.31% 06/07/21 14,995,220
16,500,000 Hyundai Capital America......................................... 0.21% 05/10/21 16,499,133
10,000,000 Volkswagen Group of America Finance LLC......................... 0.44% 08/06/21 9,988,390
15,000,000 VW Credit, Inc.................................................. 0.22% 05/04/21 14,999,725
----------------
101,479,697
----------------
CHEMICALS -- 5.5%
23,100,000 Cabot Corp...................................................... 0.29% 05/13/21 23,097,767
25,000,000 Cabot Corp...................................................... 0.30% 05/28/21 24,994,375
7,380,000 Dow Chemical (The) Co........................................... 0.16% 05/10/21 7,379,705
20,000,000 Dow Chemical (The) Co........................................... 0.25% 06/17/21 19,993,472
20,000,000 Dow Chemical (The) Co........................................... 0.25% 06/28/21 19,991,943
5,000,000 Eastman Chemical Co............................................. 0.15% 05/03/21 4,999,958
10,000,000 Eastman Chemical Co............................................. 0.15% 05/04/21 9,999,875
15,000,000 EI du Pont de Nemours and Co.................................... 0.33% 12/01/21 14,971,453
30,000,000 FMC Corp........................................................ 0.51% 05/14/21 29,994,582
24,500,000 FMC Corp........................................................ 0.51% 06/01/21 24,489,451
20,000,000 LyondellBasell Investment LLC................................... 0.22% 05/19/21 19,997,800
20,000,000 LyondellBasell Investment LLC................................... 0.20% 05/20/21 19,997,889
20,000,000 LyondellBasell Investment LLC................................... 0.22% 05/27/21 19,996,822
10,000,000 LyondellBasell Investment LLC................................... 0.22% 06/01/21 9,998,106
10,000,000 PPG Industries, Inc............................................. 0.43% 08/02/21 9,989,128
----------------
259,892,326
----------------
DIVERSIFIED FINANCIAL SERVICES -- 1.7%
20,000,000 CNPC Finance HK Ltd............................................. 0.33% 05/13/21 19,997,800
14,000,000 CNPC Finance HK Ltd............................................. 0.34% 05/14/21 13,998,281
11,275,000 CNPC Finance HK Ltd............................................. 0.33% 05/18/21 11,273,243
15,000,000 CNPC Finance HK Ltd............................................. 0.33% 05/20/21 14,997,387
10,000,000 Nissan Motor Acceptance Co. LLC................................. 0.35% 05/10/21 9,999,125
10,000,000 Nissan Motor Acceptance Co. LLC................................. 0.30% 05/12/21 9,999,083
----------------
80,264,919
----------------
ELECTRIC -- 4.2%
15,000,000 American Electric Power Co., Inc................................ 0.25% 06/23/21 14,994,479
15,000,000 CenterPoint Energy, Inc......................................... 0.20% 05/04/21 14,999,246
15,000,000 CenterPoint Energy, Inc......................................... 0.15% - 0.16% 05/13/21 14,999,233
10,000,000 Enel Finance America LLC........................................ 0.39% 08/10/21 9,989,330
10,000,000 Enel Finance America LLC........................................ 0.36% 11/16/21 9,980,652
15,000,000 Enel Finance America LLC........................................ 0.42% 03/21/22 14,944,631
15,000,000 Entergy Corp.................................................... 0.40% 05/17/21 14,997,396
10,000,000 Entergy Corp.................................................... 0.26% 06/07/21 9,997,328
15,000,000 Eversource Energy............................................... 0.15% 05/20/21 14,998,813
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ANNUALIZED
PRINCIPAL YIELD ON DATE STATED
VALUE DESCRIPTION OF PURCHASE MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER (CONTINUED)
ELECTRIC (CONTINUED)
$ 24,000,000 Southern California Edison Co................................... 0.26% - 0.35% 05/10/21 $ 23,998,102
15,000,000 Southern California Edison Co................................... 0.39% 05/11/21 14,998,416
20,000,000 Southern California Edison Co................................... 0.35% 05/13/21 19,997,666
17,000,000 WEC Energy Group, Inc........................................... 0.15% 05/19/21 16,998,725
----------------
195,894,017
----------------
ELECTRONICS -- 1.7%
40,000,000 Jabil, Inc...................................................... 0.51% 05/03/21 39,998,889
20,000,000 Jabil, Inc...................................................... 0.63% 05/14/21 19,995,521
19,000,000 Jabil, Inc...................................................... 0.62% 05/18/21 18,994,437
----------------
78,988,847
----------------
FOOD -- 2.8%
20,000,000 Conagra Brands, Inc............................................. 0.32% 05/05/21 19,999,289
10,000,000 Conagra Brands, Inc............................................. 0.38% 06/10/21 9,995,888
25,000,000 Conagra Brands, Inc............................................. 0.36% 07/01/21 24,985,174
20,000,000 Smithfield Foods, Inc........................................... 0.37% 05/05/21 19,999,178
10,000,000 Smithfield Foods, Inc........................................... 0.30% 05/18/21 9,998,583
20,000,000 Smithfield Foods, Inc........................................... 0.38% 05/19/21 19,996,300
15,000,000 Smithfield Foods, Inc........................................... 0.35% 05/21/21 14,997,083
10,000,000 Smithfield Foods, Inc........................................... 0.35% 06/04/21 9,996,694
----------------
129,968,189
----------------
GAS -- 0.7%
15,000,000 Sempra Global................................................... 0.14% 05/06/21 14,999,708
18,300,000 Sempra Global................................................... 0.15% 05/11/21 18,299,238
----------------
33,298,946
----------------
HEALTH CARE SERVICES -- 1.3%
10,000,000 Humana, Inc..................................................... 0.28% 06/14/21 9,996,577
15,000,000 Humana, Inc..................................................... 0.26% 06/17/21 14,994,908
15,000,000 Humana, Inc..................................................... 0.26% 06/21/21 14,994,474
10,000,000 Humana, Inc..................................................... 0.27% 06/24/21 9,995,950
10,000,000 Humana, Inc..................................................... 0.30% 07/21/21 9,993,249
----------------
59,975,158
----------------
INSURANCE -- 0.4%
21,200,000 Marsh & McLennan Cos., Inc...................................... 0.20% 05/03/21 21,199,764
----------------
MINING -- 1.5%
20,000,000 Glencore Funding LLC............................................ 0.27% 05/07/21 19,999,100
15,000,000 Glencore Funding LLC............................................ 0.29% 05/20/21 14,997,704
15,000,000 Glencore Funding LLC............................................ 0.30% 06/16/21 14,994,249
20,000,000 Glencore Funding LLC............................................ 0.31% 06/28/21 19,990,011
----------------
69,981,064
----------------
OIL & GAS -- 5.4%
30,000,000 Canadian Natural Resources Ltd.................................. 0.35% 05/26/21 29,992,708
20,000,000 Eni Finance USA, Inc............................................ 0.27% 05/19/21 19,997,299
10,000,000 Eni Finance USA, Inc............................................ 0.26% 05/20/21 9,998,627
10,820,000 Eni Finance USA, Inc............................................ 0.26% 05/25/21 10,818,124
10,000,000 Eni Finance USA, Inc............................................ 0.32% 07/08/21 9,993,954
10,000,000 Eni Finance USA, Inc............................................ 0.31% 07/12/21 9,993,799
10,000,000 Eni Finance USA, Inc............................................ 0.26% 07/16/21 9,994,511
25,000,000 Marathon Petroleum Corp......................................... 0.53% 05/06/21 24,998,194
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 15,000,000 Ovintiv, Inc.................................................... 0.81% 05/17/21 $ 14,994,666
10,000,000 Ovintiv, Inc.................................................... 0.81% 05/18/21 9,996,222
17,100,000 Ovintiv, Inc.................................................... 0.81% 05/19/21 17,093,160
10,000,000 Sinopec Century Bright Capital Investment America
LLC.......................................................... 0.23% 05/04/21 9,999,808
10,000,000 Sinopec Century Bright Capital Investment America
LLC.......................................................... 0.26% 05/17/21 9,998,844
10,000,000 Sinopec Century Bright Capital Investment America
LLC.......................................................... 0.27% 05/27/21 9,998,050
20,000,000 Sinopec Century Bright Capital Investment Ltd................... 0.28% 05/13/21 19,998,133
20,000,000 Sinopec Century Bright Capital Investment Ltd................... 0.28% 05/18/21 19,997,356
15,500,000 Suncor Energy, Inc.............................................. 0.19% 06/01/21 15,497,464
----------------
253,360,919
----------------
PHARMACEUTICALS -- 1.2%
16,044,000 Cigna Corp...................................................... 0.27% 06/08/21 16,039,427
20,000,000 Cigna Corp...................................................... 0.26% 06/14/21 19,993,644
10,000,000 Cigna Corp...................................................... 0.26% 06/18/21 9,996,533
11,000,000 Cigna Corp...................................................... 0.29% 07/13/21 10,993,530
----------------
57,023,134
----------------
PIPELINES -- 1.0%
9,000,000 Enbridge US, Inc................................................ 0.25% 05/06/21 8,999,687
20,000,000 Enbridge US, Inc................................................ 0.22% 05/12/21 19,998,655
20,000,000 Energy Transfer, L.P............................................ 0.41% 05/03/21 19,999,556
----------------
48,997,898
----------------
REAL ESTATE INVESTMENT TRUSTS -- 1.3%
25,000,000 Crown Castle International Corp................................. 0.35% 05/12/21 24,997,326
20,000,000 Crown Castle International Corp................................. 0.35% 05/18/21 19,996,694
15,000,000 Healthpeak Properties, Inc...................................... 0.20% 05/06/21 14,999,584
----------------
59,993,604
----------------
RETAIL -- 1.4%
20,000,000 Walgreens Boots Alliance, Inc................................... 0.20% 05/21/21 19,997,778
9,000,000 Walgreens Boots Alliance, Inc................................... 0.27% 06/04/21 8,997,705
15,000,000 Walgreens Boots Alliance, Inc................................... 0.26% 06/18/21 14,994,799
20,000,000 Walgreens Boots Alliance, Inc................................... 0.27% 07/09/21 19,989,950
----------------
63,980,232
----------------
SOFTWARE -- 1.4%
10,000,000 Fidelity National Information Services, Inc..................... 0.30% 05/03/21 9,999,833
7,450,000 Fidelity National Information Services, Inc..................... 0.20% - 0.23% 05/10/21 7,449,579
10,000,000 Fidelity National Information Services, Inc..................... 0.30% 05/14/21 9,998,917
25,194,000 Fidelity National Information Services, Inc..................... 0.26% 06/02/21 25,188,177
15,000,000 Fidelity National Information Services, Inc..................... 0.28% 06/07/21 14,995,683
----------------
67,632,189
----------------
TOTAL COMMERCIAL PAPER....................................................................... 1,636,921,149
(Cost $1,636,921,149) ----------------
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES -- 11.0%
AEROSPACE/DEFENSE -- 0.1%
$ 4,822,000 BAE Systems PLC (b)............................................. 4.75% 10/11/21 $ 4,912,227
----------------
AGRICULTURE -- 0.1%
6,248,000 BAT International Finance PLC (b)............................... 3.25% 06/07/22 6,432,178
----------------
AUTO MANUFACTURERS -- 0.1%
5,500,000 BMW Finance N.V., 3 Mo. LIBOR + 0.79% (a) (b)................... 0.99% 08/12/22 5,545,449
----------------
BANKS -- 9.6%
7,158,000 ABN AMRO Bank N.V., 3 Mo. LIBOR + 0.57% (a) (b)................. 0.76% 08/27/21 7,171,774
2,500,000 ANZ New Zealand Int'l Ltd./London, 3 Mo. LIBOR +
1.00% (a) (b)................................................ 1.18% 01/25/22 2,517,223
12,090,000 Australia & New Zealand Banking Group Ltd., 3 Mo.
LIBOR + 0.46% (a) (b)........................................ 0.65% 05/17/21 12,092,212
3,000,000 Australia & New Zealand Banking Group Ltd., 3 Mo.
LIBOR + 0.99% (a) (b)........................................ 1.18% 06/01/21 3,002,315
4,000,000 Australia & New Zealand Banking Group Ltd., 3 Mo.
LIBOR + 0.49% (a) (b)........................................ 0.67% 11/21/22 4,027,187
2,000,000 Bank of Montreal, Medium-Term Note, 3 Mo. LIBOR +
0.79% (a).................................................... 0.98% 08/27/21 2,005,338
25,000,000 Bank of Nova Scotia (The), SOFR + 0.45% (a)..................... 0.46% 04/15/24 25,017,386
3,181,000 Barclays Bank PLC............................................... 1.70% 05/12/22 3,224,639
15,000,000 BNP Paribas S.A., 3 Mo. LIBOR + 0.39% (a) (b)................... 0.58% 08/07/21 15,013,335
25,000,000 BPCE S.A., Medium-Term Note, 3 Mo. LIBOR +
0.88% (a).................................................... 1.07% 05/31/22 25,215,872
17,625,000 Canadian Imperial Bank of Commerce, SOFR +
0.80% (a).................................................... 0.81% 03/17/23 17,782,646
7,000,000 Commonwealth Bank of Australia, 3 Mo. LIBOR +
0.70% (a) (b)................................................ 0.88% 03/10/22 7,037,031
9,816,000 Cooperatieve Rabobank UA/NY, 3 Mo. LIBOR +
0.83% (a).................................................... 1.02% 01/10/22 9,873,176
20,000,000 Credit Agricole Corporate & Investment Bank S.A.,
Medium-Term Note, 3 Mo. LIBOR + 0.40% (a) (b)................ 0.60% 05/03/21 20,000,000
3,407,000 Credit Suisse AG/New York NY.................................... 2.10% 11/12/21 3,439,241
5,000,000 Credit Suisse Group AG (b) (c).................................. 3.00% 12/14/23 5,175,628
632,000 Danske Bank A/S (b) (c)......................................... 3.00% 09/20/22 637,166
5,000,000 Deutsche Bank AG, Global Medium-Term Note....................... 3.38% 05/12/21 5,003,221
17,510,000 Deutsche Bank AG/New York NY.................................... 4.25% 10/14/21 17,807,853
6,000,000 DNB Bank ASA, 3 Mo. LIBOR + 0.62% (a) (b)....................... 0.81% 12/02/22 6,050,984
2,980,000 ING Groep N.V., 3 Mo. LIBOR + 1.15% (a)......................... 1.34% 03/29/22 3,006,858
9,135,000 ING Groep N.V................................................... 3.15% 03/29/22 9,368,080
6,000,000 ING Groep N.V., 3 Mo. LIBOR + 1.00% (a)......................... 1.19% 10/02/23 6,094,588
3,410,000 Lloyds Banking Group PLC, 3 Mo. LIBOR + 0.80% (a)............... 0.99% 06/21/21 3,413,596
14,318,000 Lloyds Banking Group PLC........................................ 3.10% 07/06/21 14,389,090
12,527,000 Lloyds Banking Group PLC (c).................................... 2.86% 03/17/23 12,784,742
19,221,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.65% (a).................................................... 0.83% 07/26/21 19,247,525
1,500,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.92% (a).................................................... 1.10% 02/22/22 1,510,090
13,685,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.79% (a).................................................... 0.97% 07/25/22 13,783,587
10,991,000 Mitsubishi UFJ Financial Group, Inc., 3 Mo. LIBOR +
0.74% (a).................................................... 0.93% 03/02/23 11,078,006
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
BANKS (CONTINUED)
$ 9,200,000 Mizuho Financial Group, Inc., 3 Mo. LIBOR +
1.14% (a).................................................... 1.32% 09/13/21 $ 9,238,336
1,000,000 National Australia Bank Ltd..................................... 3.38% 09/20/21 1,011,610
13,080,000 National Bank of Canada (c)..................................... 0.90% 08/15/23 13,161,348
7,600,000 NatWest Group PLC, 3 Mo. LIBOR + 1.47% (a)...................... 1.66% 05/15/23 7,681,396
2,175,000 NatWest Markets PLC, SOFR + 1.66% (a) (b)....................... 1.67% 09/29/22 2,218,350
9,000,000 Royal Bank of Canada, Global Medium-Term Note, 3 Mo.
LIBOR + 0.47% (a)............................................ 0.65% 04/29/22 9,040,196
3,850,000 Santander UK PLC................................................ 3.40% 06/01/21 3,859,159
9,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR +
0.43% (a) (b)................................................ 0.62% 05/17/21 9,001,432
4,000,000 Skandinaviska Enskilda Banken AB, 3 Mo. LIBOR +
0.65% (a) (b)................................................ 0.83% 12/12/22 4,031,926
8,604,000 Standard Chartered PLC, 3 Mo. LIBOR + 1.20% (a) (b)............. 1.38% 09/10/22 8,632,616
7,328,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
1.11% (a).................................................... 1.30% 07/14/21 7,343,244
4,674,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
1.14% (a).................................................... 1.33% 10/19/21 4,697,128
12,779,000 Sumitomo Mitsui Financial Group, Inc............................ 2.44% 10/19/21 12,908,959
4,139,000 Sumitomo Mitsui Financial Group, Inc., 3 Mo. LIBOR +
0.97% (a).................................................... 1.16% 01/11/22 4,163,407
25,000,000 Toronto-Dominion Bank (The), Medium-Term Note, 3 Mo.
LIBOR + 0.30% (a)............................................ 0.49% 07/30/21 25,015,558
11,482,000 UBS AG/London (b)............................................... 1.75% 04/21/22 11,632,840
15,681,000 UBS Group AG, 3 Mo. LIBOR + 1.53% (a) (b)....................... 1.71% 02/01/22 15,858,537
5,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.71% (a).................. 0.90% 06/28/22 5,040,631
7,000,000 Westpac Banking Corp., 3 Mo. LIBOR + 0.39% (a).................. 0.58% 01/13/23 7,038,904
----------------
448,345,966
----------------
CHEMICALS -- 0.1%
5,575,000 Nutrien Ltd..................................................... 1.90% 05/13/23 5,724,000
----------------
DIVERSIFIED FINANCIAL SERVICES -- 0.1%
4,775,000 AerCap Ireland Capital DAC / AerCap Global Aviation
Trust........................................................ 3.95% 02/01/22 4,877,073
----------------
MISCELLANEOUS MANUFACTURING -- 0.3%
9,200,000 Siemens Financieringsmaatschappij N.V., 3 Mo. LIBOR +
0.61% (a) (b)................................................ 0.80% 03/16/22 9,249,216
6,000,000 Siemens Financieringsmaatschappij N.V., SOFR +
0.43% (a) (b)................................................ 0.44% 03/11/24 6,039,006
----------------
15,288,222
----------------
OIL & GAS -- 0.5%
2,000,000 BP Capital Markets PLC, 3 Mo. LIBOR + 0.87% (a)................. 1.06% 09/16/21 2,006,447
21,885,000 Canadian Natural Resources Ltd.................................. 3.45% 11/15/21 22,074,679
----------------
24,081,126
----------------
PIPELINES -- 0.1%
2,000,000 Enbridge, Inc., SOFR + 0.40% (a)................................ 0.41% 02/17/23 2,003,076
----------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES...................................................... 517,209,317
(Cost $515,672,843) ----------------
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES -- 8.1%
American Credit Acceptance Receivables Trust
$ 6,065,098 Series 2020-3, Class A (b)................................... 0.62% 10/13/23 $ 6,070,643
14,787,013 Series 2020-4, Class A (b)................................... 0.53% 03/13/24 14,796,311
Avis Budget Rental Car Funding AESOP LLC
5,271,667 Series 2016-1A, Class A (b).................................. 2.99% 06/20/22 5,284,427
8,060,000 Series 2016-2A, Class A (b).................................. 2.72% 11/20/22 8,125,476
Carmax Auto Owner Trust
10,671,195 Series 2020-3, Class A2A..................................... 0.49% 06/15/23 10,682,409
Countrywide Asset-Backed Certificates
1,143,129 Series 2004-SD4, Class M1, 1 Mo. LIBOR +
1.13% (a) (b)............................................. 1.23% 12/25/34 1,144,862
Dell Equipment Finance Trust
332,749 Series 2019-2, Class A2 (b).................................. 1.95% 12/22/21 333,909
23,750,000 Series 2020-2, Class A2 (b).................................. 0.47% 10/24/22 23,787,900
DT Auto Owner Trust
9,734,937 Series 2020-3A, Class A (b).................................. 0.54% 04/15/24 9,747,642
Exeter Automobile Receivables Trust
6,460,399 Series 2020-3A, Class A2..................................... 0.46% 10/17/22 6,462,040
11,000,000 Series 2020-3A, Class A3..................................... 0.52% 10/16/23 11,013,788
First Investors Auto Owner Trust
12,294,142 Series 2021-1A, Class A (b).................................. 0.45% 03/16/26 12,307,260
Flagship Credit Auto Trust
24,414,892 Series 2020-4, Class A (b)................................... 0.53% 04/15/25 24,460,091
Ford Credit Auto Lease Trust
1,002,309 Series 2019-A, Class A3...................................... 2.90% 05/15/22 1,003,423
17,450,000 Series 2020-A, Class A3...................................... 1.85% 03/15/23 17,591,649
4,329,906 Series 2020-B, Class A2A..................................... 0.50% 12/15/22 4,334,148
Ford Credit Auto Owner Trust
1,569,712 Series 2019-C, Class A2A..................................... 1.88% 07/15/22 1,571,501
Foursight Capital Automobile Receivables Trust
5,690,828 Series 2020-1, Class A2 (b).................................. 1.97% 09/15/23 5,714,279
7,250,000 Series 2021-1, Class A2 (b).................................. 0.40% 08/15/24 7,253,765
8,150,000 Series 2021-1, Class A3 (b).................................. 0.64% 07/15/25 8,147,896
GLS Auto Receivables Issuer Trust
5,266,369 Series 2020-4A, Class A (b).................................. 0.52% 02/15/24 5,269,441
GM Financial Automobile Leasing Trust
639,000 Series 2019-1, Class B....................................... 3.37% 12/20/22 642,470
GSAA Home Equity Trust
497,512 Series 2005-MTR1, Class A4, 1 Mo. LIBOR +
0.74% (a)................................................. 0.85% 10/25/35 498,689
GTE Auto Receivables Trust
1,764,035 Series 2019-1, Class A2 (b).................................. 2.17% 12/15/22 1,768,937
Honda Auto Receivables Owner Trust
4,446,545 Series 2020-1, Class A2...................................... 1.63% 10/21/22 4,467,688
HPEFS Equipment Trust
5,835,555 Series 2020-1A, Class A2 (b)................................. 1.73% 02/20/30 5,863,359
Hyundai Auto Lease Securitization Trust
20,000,000 Series 2019-B, Class B (b)................................... 2.13% 11/15/23 20,255,004
Mercedes-Benz Auto Lease Trust
14,838,395 Series 2019-B, Class A3...................................... 2.00% 10/17/22 14,953,482
Mill City Mortgage Loan Trust
1,453,494 Series 2016-1, Class A1 (b).................................. 2.50% 04/25/57 1,464,885
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
MVW Owner Trust
$ 3,178,119 Series 2018-1A, Class A (b).................................. 3.45% 01/21/36 $ 3,309,587
Nationstar Home Equity Loan Trust
1,898,192 Series 2006-B, Class AV4, 1 Mo. LIBOR + 0.28% (a)............ 0.39% 09/25/36 1,895,536
OSCAR US Funding Trust IX LLC
1,605,525 Series 2018-2A, Class A3 (b)................................. 3.39% 09/12/22 1,614,286
6,130,000 Series 2018-2A, Class A4 (b)................................. 3.63% 09/10/25 6,340,234
OSCAR US Funding Trust VII LLC
2,323,348 Series 2017-2A, Class A4 (b)................................. 2.76% 12/10/24 2,337,245
OSCAR US Funding Trust VIII LLC
3,048,628 Series 2018-1A, Class A4 (b)................................. 3.50% 05/12/25 3,123,502
OSCAR US Funding X LLC
12,296,724 Series 2019-1A, Class A3 (b)................................. 3.18% 05/10/23 12,456,059
OSCAR US Funding XI LLC
2,789,080 Series 2019-2A, Class A2 (b)................................. 2.49% 08/10/22 2,796,232
7,600,000 Series 2019-2A, Class A3 (b)................................. 2.59% 09/11/23 7,718,134
OSCAR US Funding XII LLC
13,500,000 Series 2021-1A, Class A3 (b)................................. 0.70% 04/10/25 13,510,125
Santander Consumer Auto Receivables Trust
832,230 Series 2020-AA, Class A (b).................................. 1.37% 10/15/24 838,849
10,500,000 Series 2020-BA, Class A3 (b)................................. 0.46% 08/15/24 10,514,116
Santander Drive Auto Receivables Trust
5,864,702 Series 2020-3, Class A2...................................... 0.46% 09/15/23 5,868,905
8,500,000 Series 2020-4, Class A3...................................... 0.48% 07/15/24 8,519,195
Santander Retail Auto Lease Trust
7,630,000 Series 2019-C, Class A4 (b).................................. 1.93% 11/20/23 7,779,543
Securitized Term Auto Receivables Trust
496,012 Series 2018-2A, Class A3 (b)................................. 3.33% 08/25/22 499,347
2,210,056 Series 2019-1A, Class A3 (b)................................. 2.99% 02/27/23 2,235,047
Sierra Timeshare Receivables Funding LLC
3,028,025 Series 2016-3A, Class A (b).................................. 2.43% 10/20/33 3,047,015
8,447,201 Series 2018-2A, Class A (b).................................. 3.50% 06/20/35 8,782,815
Towd Point Mortgage Trust
264,566 Series 2015-2, Class 1A12 (b)................................ 2.75% 11/25/60 264,831
14,947 Series 2015-4, Class A1B (b)................................. 2.75% 04/25/55 14,944
3,984,661 Series 2015-5, Class A1B (b)................................. 2.75% 05/25/55 3,994,193
8,674,331 Series 2015-6, Class A1B (b)................................. 2.75% 04/25/55 8,736,460
841,153 Series 2016-1, Class A1B (b)................................. 2.75% 02/25/55 844,722
6,066,566 Series 2016-2, Class A1 (b).................................. 3.00% 08/25/55 6,146,423
1,549,184 Series 2016-3, Class A1 (b).................................. 2.25% 04/25/56 1,561,408
Verizon Owner Trust
1,176,934 Series 2018-A, Class A1A..................................... 3.23% 04/20/23 1,187,807
414,620 Series 2018-1A, Class A1A (b)................................ 2.82% 09/20/22 415,406
Westlake Automobile Receivables Trust
8,671,877 Series 2020-1A, Class A2 (b)................................. 1.44% 09/15/23 8,709,976
World Omni Select Auto Trust
9,941,659 Series 2020-A, Class A2...................................... 0.47% 06/17/24 9,952,786
----------------
TOTAL ASSET-BACKED SECURITIES................................................................ 380,032,102
(Cost $379,767,897) ----------------
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES -- 4.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.1%
CIM Trust
$ 5,449,303 Series 2019-INV1, Class A2, 1 Mo. LIBOR +
1.00% (a) (b)............................................. 1.11% 02/25/49 $ 5,456,177
2,091,099 Series 2019-INV2, Class A11, 1 Mo. LIBOR +
0.95% (a) (b)............................................. 1.06% 05/25/49 2,094,388
11,946,710 Series 2019-INV3, Class A11, 1 Mo. LIBOR +
1.00% (a) (b)............................................. 1.06% 08/25/49 11,965,703
COLT Mortgage Loan Trust
1,090,320 Series 2019-3, Class A2 (b).................................. 2.97% 08/25/49 1,094,560
7,341,340 Series 2020-1, Class A1 (b).................................. 2.49% 02/25/50 7,419,593
1,076,882 Series 2020-1R, Class A2 (b)................................. 1.51% 09/25/65 1,081,466
Deephaven Residential Mortgage Trust
6,268,483 Series 2019-4A, Class A1 (b)................................. 2.79% 10/25/59 6,332,929
GCAT Trust
15,211,472 Series 2020-NQM1, Class A1 (b) (d)........................... 2.25% 01/25/60 15,462,757
JP Morgan Mortgage Trust
9,055,896 Series 2019-7, Class A11, 1 Mo. LIBOR +
0.90% (a) (b)............................................. 1.01% 02/25/50 9,077,548
701,141 Series 2019-8, Class A11, 1 Mo. LIBOR +
0.85% (a) (b)............................................. 0.96% 03/25/50 706,243
9,699,181 Series 2019-INV1, Class A11, 1 Mo. LIBOR +
0.95% (a) (b)............................................. 1.06% 10/25/49 9,778,889
5,299,612 Series 2019-LTV2, Class A11, 1 Mo. LIBOR +
0.90% (a) (b)............................................. 1.01% 12/25/49 5,315,378
3,272,475 Series 2019-LTV3, Class A11, 1 Mo. LIBOR +
0.85% (a) (b)............................................. 0.96% 03/25/50 3,295,070
2,237,300 Series 2020-1, Class A4 (b).................................. 3.50% 06/25/50 2,251,018
10,129,783 Series 2020-2, Class A11, 1 Mo. LIBOR +
0.80% (a) (b)............................................. 0.91% 07/25/50 10,227,503
4,210,465 Series 2020-LTV1, Class A11, 1 Mo. LIBOR +
1.00% (a) (b)............................................. 1.11% 06/25/50 4,255,534
Merrill Lynch Mortgage Investors Trust
264,828 Series 2005-A6, Class 2A3, 1 Mo. LIBOR + 0.76% (a)........... 0.87% 08/25/35 265,718
OBX Trust
13,691,437 Series 2019-EXP3, Class 2A1A, 1 Mo. LIBOR +
0.90% (a) (b)............................................. 1.01% 10/25/59 13,721,115
1,417,926 Series 2020-EXP1, Class 2A1A, 1 Mo. LIBOR +
0.75% (a) (b)............................................. 0.86% 02/25/60 1,422,114
5,010,304 Series 2020-INV1, Class A11, 1 Mo. LIBOR +
0.90% (a) (b)............................................. 1.01% 12/25/49 5,016,836
Residential Mortgage Loan Trust
1,948,637 Series 2019-3, Class A2 (b).................................. 2.94% 09/25/59 1,989,153
Starwood Mortgage Residential Trust
19,950,534 Series 2020-1, Class A1 (b).................................. 2.28% 02/25/50 20,243,408
Verus Securitization Trust
3,300,365 Series 2019-4, Class A2 (b) (d).............................. 2.85% 11/25/59 3,362,023
2,278,094 Series 2019-INV2, Class A2 (b)............................... 3.12% 07/25/59 2,326,448
----------------
144,161,571
----------------
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.7%
BX Commercial Mortgage Trust
$ 8,109,139 Series 2018-IND, Class A, 1 Mo. LIBOR +
0.75% (a) (b)............................................. 0.87% 11/15/35 $ 8,118,846
Citigroup Commercial Mortgage Trust
1,267,342 Series 2012-GC8, Class AAB................................... 2.61% 09/10/45 1,280,751
COMM Mortgage Trust
6,006,330 Series 2013-CR9, Class ASB................................... 3.83% 07/10/45 6,216,539
12,333,745 Series 2014-UBS3, Class ASB.................................. 3.37% 06/10/47 12,794,319
2,034,547 Series 2015-CR25, Class ASB.................................. 3.54% 08/10/48 2,155,522
GS Mortgage Securities Corp II
2,725,000 Series 2013-GC10, Class A5................................... 2.94% 02/10/46 2,819,491
JP Morgan Chase Commercial Mortgage Securities Trust
7,259,816 Series 2012-C8, Class A3..................................... 2.83% 10/15/45 7,434,829
13,974,147 Series 2012-HSBC, Class A (b)................................ 3.09% 07/05/32 14,277,582
9,339,259 Series 2014-C20, Class ASB................................... 3.46% 07/15/47 9,765,629
Morgan Stanley Capital I Trust
1,249,079 Series 2016-UBS9, Class ASB.................................. 3.34% 03/15/49 1,324,812
UBS Commercial Mortgage Trust
8,372,597 Series 2012-C1, Class A3..................................... 3.40% 05/10/45 8,487,412
VNDO Mortgage Trust
4,028,082 Series 2012-6AVE, Class A (b)................................ 3.00% 11/15/30 4,137,642
----------------
78,813,374
----------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 222,974,945
(Cost $223,170,975) ----------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 2.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5%
Federal Home Loan Mortgage Corporation
923,677 Series 2003-2723, Class KN................................... 5.00% 12/15/23 957,035
1,404,637 Series 2004-2783, Class YB................................... 5.00% 04/15/24 1,461,444
17,150 Series 2012-4011, Class KM................................... 2.00% 03/15/22 17,224
964,933 Series 2013-4199, Class YV................................... 3.50% 05/15/26 977,155
837,769 Series 2014-4387, Class DE................................... 2.00% 01/15/32 855,401
3,863,524 Series 2018-4821, Class BC................................... 3.00% 12/15/44 3,903,542
Federal National Mortgage Association
4,511 Series 2009-14, Class EB..................................... 4.50% 03/25/24 4,629
1,927 Series 2009-52, Class AJ..................................... 4.00% 07/25/24 1,970
50 Series 2011-13, Class AD..................................... 2.00% 07/25/21 50
254 Series 2011-15, Class HT..................................... 5.50% 03/25/26 257
1,843 Series 2011-86, Class DC..................................... 2.00% 09/25/21 1,844
1,012,643 Series 2012-6, Class E....................................... 3.00% 05/25/37 1,016,841
4,331,187 Series 2013-74, Class EL..................................... 3.00% 04/25/41 4,409,326
677,911 Series 2013-74, Class HA..................................... 3.00% 10/25/37 680,691
4,229,103 Series 2014-20, Class NA..................................... 3.00% 06/25/33 4,436,436
4,203,704 Series 2015-28, Class GC..................................... 2.50% 06/25/34 4,336,226
Government National Mortgage Association
1,422 Series 2018-89, Class A...................................... 3.50% 06/20/39 1,422
----------------
23,061,493
----------------
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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 -- 1.8%
Federal Home Loan Mortgage Corporation Multifamily
Structured Pass Through Certificates
$ 3,817,424 Series 2013-K025, Class A1................................... 1.88% 04/25/22 $ 3,830,881
4,524,531 Series 2013-K027, Class A1................................... 1.79% 09/25/22 4,563,127
653,649 Series 2013-K029, Class A1................................... 2.84% 10/25/22 660,468
4,984,123 Series 2013-K032, Class A1................................... 3.02% 02/25/23 5,105,228
5,578,243 Series 2013-K034, Class A1................................... 2.67% 02/25/23 5,690,064
5,156,704 Series 2013-KSMC, Class A1................................... 1.95% 01/25/23 5,231,085
4,149,839 Series 2014-K036, Class A1................................... 2.78% 04/25/23 4,260,393
1,629,723 Series 2014-K716, Class A2................................... 3.13% 06/25/21 1,633,077
5,875,028 Series 2015-K720, Class A1................................... 2.32% 11/25/21 5,912,046
5,561,858 Series 2017-K727, Class A1................................... 2.63% 10/25/23 5,667,777
FREMF Mortgage Trust
10,000,000 Series 2011-K15, Class B (b) (e)............................. 5.14% 08/25/44 10,067,478
8,617,000 Series 2011-KAIV, Class B (b)................................ 4.94% 06/25/46 8,638,666
23,047,000 Series 2012-K17, Class B (b) (e)............................. 4.46% 12/25/44 23,534,197
----------------
84,794,487
----------------
PASS-THROUGH SECURITIES -- 0.0%
Federal Home Loan Mortgage Corporation
96 Pool G12255.................................................. 5.50% 07/01/21 96
3,125 Pool G13204.................................................. 6.00% 11/01/22 3,150
477 Pool G14035.................................................. 5.50% 12/01/21 479
46,278 Pool G15435.................................................. 5.00% 11/01/24 48,593
11,204 Pool G15821.................................................. 5.00% 07/01/25 11,770
24,995 Pool G15874.................................................. 5.00% 06/01/26 26,257
Federal National Mortgage Association
21 Pool 888932.................................................. 4.50% 11/01/22 22
7,565 Pool 890403.................................................. 6.00% 05/01/23 7,631
36,961 Pool 901931.................................................. 6.00% 10/01/21 37,131
69,624 Pool 962078.................................................. 4.50% 03/01/23 73,055
78 Pool AD0285.................................................. 5.00% 09/01/22 82
142 Pool AD0402.................................................. 5.00% 02/01/23 149
391 Pool AE0237.................................................. 5.50% 11/01/23 395
106 Pool AE0314.................................................. 5.00% 08/01/21 106
8,626 Pool AE0812.................................................. 5.00% 07/01/25 9,061
51,869 Pool AL5764.................................................. 5.00% 09/01/25 54,467
40,064 Pool AL5812.................................................. 5.50% 05/01/25 40,790
22,484 Pool AL6212.................................................. 4.50% 01/01/27 23,572
66,180 Pool AL6798.................................................. 5.00% 09/01/25 69,490
221 Pool AL8539.................................................. 4.50% 01/01/27 231
353,065 Pool BM1299.................................................. 5.00% 03/01/27 370,986
252 Pool MA0772.................................................. 4.00% 06/01/21 253
120,071 Pool MA1030.................................................. 3.00% 04/01/22 126,448
Government National Mortgage Association
15,117 Pool 783524.................................................. 5.00% 09/15/24 15,752
----------------
919,966
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 108,775,946
(Cost $109,407,126) ----------------
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT NOTES -- 0.9%
$ 40,000,000 U.S. Treasury Note.............................................. 1.50% 11/30/21 $ 40,339,827
----------------
TOTAL U.S. GOVERNMENT NOTES.................................................................. 40,339,827
(Cost $39,956,219) ----------------
CERTIFICATES OF DEPOSIT -- 0.3%
BANKS -- 0.3%
15,000,000 Nordea Bank Abp, 3 Mo. LIBOR + 0.32% (a)........................ 0.50% 11/19/21 15,026,551
----------------
TOTAL CERTIFICATES OF DEPOSIT................................................................ 15,026,551
(Cost $15,000,000) ----------------
TOTAL INVESTMENTS -- 101.0%.................................................................. 4,744,829,748
(Cost $4,738,591,999) (f)
NET OTHER ASSETS AND LIABILITIES -- (1.0)%................................................... (46,779,906)
----------------
NET ASSETS -- 100.0%......................................................................... $ 4,698,049,842
================
</TABLE>
-----------------------------
(a) Floating or variable rate security.
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Pursuant to
procedures adopted by the Trust's Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P., the Fund's
Advisor. Although market instability can result in periods of increased
overall market illiquidity, liquidity for each security is determined
based on security specific factors and assumptions, which require
subjective judgment. At April 30, 2021, securities noted as such amounted
to $998,455,820 or 21.3% of net assets.
(c) Fixed-to-floating security. The interest rate shown reflects the fixed
rate in effect at April 30, 2021. At a predetermined date, the fixed rate
will change to a floating rate.
(d) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(e) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(f) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $8,076,162 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $1,838,413. The net unrealized appreciation was
$6,237,749.
LIBOR - London Interbank Offered Rates
SOFR - Secured Overnight Financing Rate
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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
4/30/2021 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Corporate Bonds and Notes*......................... $1,823,549,911 $ -- $1,823,549,911 $ --
Commercial Paper*.................................. 1,636,921,149 -- 1,636,921,149 --
Foreign Corporate Bonds and Notes*................. 517,209,317 -- 517,209,317 --
Asset-Backed Securities............................ 380,032,102 -- 380,032,102 --
Mortgage-Backed Securities......................... 222,974,945 -- 222,974,945 --
U.S. Government Agency Mortgage-Backed
Securities...................................... 108,775,946 -- 108,775,946 --
U.S. Government Notes.............................. 40,339,827 -- 40,339,827 --
Certificates of Deposit*........................... 15,026,551 -- 15,026,551 --
-------------- -------------- -------------- --------------
Total Investments.................................. $4,744,829,748 $ -- $4,744,829,748 $ --
============== ============== ============== ==============
</TABLE>
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value..................................................... $4,744,829,748
Cash...................................................................... 7,355,899
Interest receivable....................................................... 11,544,546
--------------
Total Assets........................................................... 4,763,730,193
--------------
LIABILITIES:
Payables:
Investment securities purchased ....................................... 62,743,646
Distributions to shareholders.......................................... 1,958,743
Investment advisory fees............................................... 977,962
--------------
Total Liabilities...................................................... 65,680,351
--------------
NET ASSETS................................................................ $4,698,049,842
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $4,704,284,478
Par value................................................................. 783,497
Accumulated distributable earnings (loss)................................. (7,018,133)
--------------
NET ASSETS................................................................ $4,698,049,842
==============
NET ASSET VALUE, per share................................................ $ 59.96
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................. 78,349,724
==============
Investments, at cost...................................................... $4,738,591,999
==============
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 20,230,833
--------------
Total investment income................................................ 20,230,833
--------------
EXPENSES:
Investment advisory fees.................................................. 11,155,853
--------------
Total expenses......................................................... 11,155,853
Less fees waived by the investment advisor............................. (4,958,157)
--------------
Net expenses........................................................... 6,197,696
--------------
NET INVESTMENT INCOME (LOSS).............................................. 14,033,137
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments................................... 3,581,847
Net change in unrealized appreciation (depreciation) on investments....... (8,991,122)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (5,409,275)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 8,623,862
==============
</TABLE>
Page 26 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
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
-------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 14,033,137 $ 70,548,391
Net realized gain (loss).................................................. 3,581,847 (13,118,451)
Net change in unrealized appreciation (depreciation)...................... (8,991,122) 5,207,190
-------------- ---------------
Net increase (decrease) in net assets resulting from operations........... 8,623,862 62,637,130
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (14,242,252) (71,207,363)
-------------- ---------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 99,054,059 1,187,006,127
Cost of shares redeemed................................................... (564,168,744) (1,075,402,505)
-------------- ---------------
Net increase (decrease) in net assets resulting from shareholder
transactions........................................................... (465,114,685) 111,603,622
-------------- ---------------
Total increase (decrease) in net assets................................... (470,733,075) 103,033,389
NET ASSETS:
Beginning of period....................................................... 5,168,782,917 5,065,749,528
-------------- ---------------
End of period............................................................. $4,698,049,842 $ 5,168,782,917
============== ===============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 86,099,724 84,299,724
Shares sold............................................................... 1,650,000 19,850,000
Shares redeemed........................................................... (9,400,000) (18,050,000)
-------------- ---------------
Shares outstanding, end of period......................................... 78,349,724 86,099,724
============== ===============
</TABLE>
See Notes to Financial Statements Page 27
<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,
4/30/2021 ------------------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $ 60.03 $ 60.09 $ 59.97 $ 60.02 $ 59.93 $ 59.94
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.17 0.85 1.48 1.15 0.76 0.47
Net realized and unrealized gain (loss)... (0.07) (0.05) 0.11 (0.01) 0.12 0.09
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations.......... 0.10 0.80 1.59 1.14 0.88 0.56
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income..................... (0.17) (0.86) (1.47) (1.19) (0.79) (0.57)
Return of capital......................... -- -- -- (0.00) (a) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions....................... (0.17) (0.86) (1.47) (1.19) (0.79) (0.57)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period............ $ 59.96 $ 60.03 $ 60.09 $ 59.97 $ 60.02 $ 59.93
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b).......................... 0.19% 1.34% 2.68% 1.92% 1.48% 0.94%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $4,698,050 $5,168,783 $5,065,750 $3,070,454 $1,158,324 $ 458,413
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................................. 0.25% (c) 0.38% 0.39% 0.33% 0.25% 0.25%
Ratio of net investment income (loss) to
average net assets..................... 0.57% (c) 1.41% 2.47% 2.04% 1.33% 1.06%
Portfolio turnover rate (d)............... 38% 73% 73% 45% 56% 115%
</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 28 See Notes to Financial Statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (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 ten funds that are offering shares. This report
covers the First Trust Enhanced Short Maturity ETF (the "Fund"), a diversified
series of the Trust, which trades under the ticker "FTSM" on The Nasdaq Stock
Market LLC ("Nasdaq"). The Fund represents a separate series of shares of
beneficial interest in the Trust. Unlike conventional mutual funds, the Fund
issues and redeems shares on a continuous basis, at net asset value ("NAV"),
only in large blocks of shares known as "Creation Units."
The Fund is an actively managed exchange-traded fund ("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 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:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
Page 29
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (UNAUDITED)
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.
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.
Page 30
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (UNAUDITED)
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2021, 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 United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 77,424,693
Capital gains................................... --
Return of capital............................... --
Page 31
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (UNAUDITED)
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ (2,577)
Accumulated capital and other gain (loss)....... (16,485,857)
Net unrealized appreciation (depreciation)...... 15,088,691
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 2017,
2018, 2019, and 2020 remain open to federal and state audit. As of April 30,
2021, 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, 2020, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $16,485,857.
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, 2020, 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).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and Advisor,
First Trust manages the investment of the Fund's assets and is responsible for
the Fund's expenses, including the cost of transfer agency, custody, fund
administration, legal, audit and other services, but excluding fee payments
under the Investment Management Agreement, interest, taxes, acquired fund fees
and expenses with the exception of those attributable to affiliated funds,
brokerage commissions and other expenses connected with the execution of
portfolio transactions, distribution and service fees pursuant to a Rule 12b-1
plan, if any, and extraordinary expenses.
The Fund has agreed to pay First Trust an annual unitary management fee equal to
0.45% of its average daily net assets. Pursuant to two separate contractual
agreements, First Trust has agreed to waive management fees of 0.20% of average
daily net assets until March 1, 2022. 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, 2022. 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, 2022. 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, 2021, the Advisor waived fees of $4,958,157.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (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 costs of purchases of U.S. Government securities and non-U.S. Government
securities, excluding short-term investments, for the six months ended April 30,
2021, were $50,021,652 and $1,154,372,898, 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, 2021, were
$164,166,504 and $1,728,270,879, respectively.
For the six months ended April 30, 2021, the Fund had no in-kind transactions.
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (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, 2022.
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
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (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)
--------------------------------------------------------------------------------
FIRST TRUST ENHANCED SHORT MATURITY ETF (FTSM)
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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, 2021 (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.
Operational Risk. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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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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FIRST TRUST
First Trust Exchange-Traded Fund IV
--------------------------------------------------------------------------------
First Trust Strategic Income
ETF (FDIV)
Semi-Annual Report
For the Six Months Ended
April 30, 2021
<PAGE>
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TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 12
Statement of Operations...................................................... 13
Statements of Changes in Net Assets.......................................... 14
Financial Highlights......................................................... 15
Notes to Financial Statements................................................ 16
Additional Information....................................................... 25
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or First Trust Global Portfolios Limited ("FTGP");
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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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 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>
------------------------------------------------------------------------------------------------------------------------------------
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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 13.46% 18.02% 4.76% 4.18% 26.15% 31.64%
Market Price 13.27% 17.93% 5.33% 4.17% 29.64% 31.58%
INDEX PERFORMANCE
Blended Index(2) 19.20% 23.07% 6.07% 4.50% 34.27% 34.34%
Bloomberg Barclays U.S. Aggregate
Bond Index -1.52% -0.27% 3.19% 3.21% 16.98% 23.62%
Russell 3000(R) Index 31.08% 50.92% 17.67% 14.26% 125.60% 144.63%
------------------------------------------------------------------------------------------------------------------------------------
</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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after 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 that 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.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
-----------------------------------------------------------
% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
-----------------------------------------------------------
Exchange-Traded Funds 57.0%
Common Stocks 31.1
Master Limited Partnerships 7.4
Real Estate Investment Trusts 2.6
U.S. Government Agency Mortgage-Backed
Securities 1.9
Asset-Backed Securities 0.0*
Mortgage-Backed Securities 0.0*
------
Total 100.0%
======
* Amount is less than 0.1%.
-----------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
-----------------------------------------------------------
First Trust Emerging Markets Local
Currency Bond ETF 14.9%
First Trust Tactical High Yield ETF 14.7
First Trust Preferred Securities and
Income ETF 11.2
First Trust Low Duration Opportunities
ETF 5.9
iShares J.P. Morgan USD Emerging
Markets Bond ETF 5.0
First Trust Institutional Preferred
Securities and Income ETF 3.7
Enterprise Products Partners, L.P. 1.7
Magellan Midstream Partners, L.P. 1.5
TC Energy Corp. 1.3
First Trust Long Duration Opportunities ETF 1.1
------
Total 61.0%
======
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
AUGUST 13, 2014 - APRIL 30, 2021
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
10/31/20 11,604 11,270 12,558 18,662
4/30/21 13,166 13,434 12,367 24,462
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (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 Limited ("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 JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST;
o DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND
MANAGING DIRECTOR 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 INVESTMENT TEAM;
o JEFFREY SCOTT, CFA, SENIOR VICE PRESIDENT, DEPUTY CREDIT OFFICER AND
PORTFOLIO MANAGER OF FIRST TRUST, LEVERAGED FINANCE INVESTMENT TEAM;
o JEREMIAH CHARLES, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST
TRUST; AND
o JAMES SNYDER, SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER OF FIRST TRUST.
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 DAN SUZUKI, DEPUTY CHIEF INVESTMENT OFFICER OF RBA;
o SCOTT T. FLEMING, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF STONEBRIDGE;
AND
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, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD (a) (b) PERIOD (b) (c)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
Actual $1,000.00 $1,134.60 0.42% $2.22
Hypothetical (5% return before expenses) $1,000.00 $1,022.71 0.42% $2.11
</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,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 5
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 56.3%
CAPITAL MARKETS -- 56.3%
306,913 First Trust Emerging Markets Local Currency Bond ETF (a)..................................... $ 10,688,245
130,101 First Trust Institutional Preferred Securities and Income ETF (a)............................ 2,665,782
30,010 First Trust Long Duration Opportunities ETF (a).............................................. 813,271
82,500 First Trust Low Duration Opportunities ETF (a)............................................... 4,219,875
394,178 First Trust Preferred Securities and Income ETF (a).......................................... 8,013,639
217,548 First Trust Tactical High Yield ETF (a)...................................................... 10,572,833
500 iShares 3-7 Year Treasury Bond ETF........................................................... 65,215
2,150 iShares 7-10 Year Treasury Bond ETF.......................................................... 245,079
32,148 iShares J.P. Morgan USD Emerging Markets Bond ETF............................................ 3,572,929
---------------
TOTAL EXCHANGE-TRADED FUNDS.................................................................. 40,856,868
(Cost $41,191,967) ---------------
COMMON STOCKS -- 30.8%
AUTO COMPONENTS -- 0.8%
3,801 LCI Industries............................................................................... 556,846
---------------
BANKS -- 2.9%
3,212 City Holding Co.............................................................................. 248,609
3,552 German American Bancorp, Inc................................................................. 153,908
7,056 Horizon Bancorp, Inc......................................................................... 129,407
2,871 Park National Corp........................................................................... 359,133
6,755 Prosperity Bancshares, Inc................................................................... 495,547
10,990 Trustmark Corp............................................................................... 356,186
5,472 Westamerica BanCorp.......................................................................... 346,925
---------------
2,089,715
---------------
CAPITAL MARKETS -- 0.7%
5,887 State Street Corp............................................................................ 494,214
---------------
CHEMICALS -- 1.5%
1,756 Air Products and Chemicals, Inc.............................................................. 506,571
11,008 Avient Corp.................................................................................. 558,876
---------------
1,065,447
---------------
CONSTRUCTION & ENGINEERING -- 0.2%
1,998 Quanta Services, Inc......................................................................... 193,087
---------------
ELECTRIC UTILITIES -- 6.1%
12,010 Alliant Energy Corp.......................................................................... 674,602
3,348 American Electric Power Co., Inc............................................................. 297,001
367 Duke Energy Corp............................................................................. 36,953
3,967 Eversource Energy............................................................................ 342,035
3,239 Exelon Corp.................................................................................. 145,561
3,257 Fortis, Inc. (CAD)........................................................................... 145,288
6,520 IDACORP, Inc................................................................................. 668,170
4,072 MGE Energy, Inc.............................................................................. 304,626
7,497 NextEra Energy, Inc.......................................................................... 581,092
6,249 Otter Tail Corp.............................................................................. 295,140
3,638 Pinnacle West Capital Corp................................................................... 307,957
5,726 Southern (The) Co............................................................................ 378,889
3,526 Xcel Energy, Inc............................................................................. 251,404
---------------
4,428,718
---------------
GAS UTILITIES -- 3.3%
25,433 AltaGas Ltd. (CAD)........................................................................... 475,285
3,596 Atmos Energy Corp............................................................................ 372,510
</TABLE>
Page 6 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
GAS UTILITIES (CONTINUED)
304 Chesapeake Utilities Corp.................................................................... $ 36,030
5,339 New Jersey Resources Corp.................................................................... 223,971
8,506 ONE Gas, Inc................................................................................. 684,478
4,268 Southwest Gas Holdings, Inc.................................................................. 297,565
6,881 UGI Corp..................................................................................... 300,768
---------------
2,390,607
---------------
HOUSEHOLD DURABLES -- 1.4%
3,829 Garmin Ltd................................................................................... 525,492
8,409 M.D.C. Holdings, Inc......................................................................... 493,272
---------------
1,018,764
---------------
INSURANCE -- 2.1%
8,428 Assured Guaranty Ltd......................................................................... 428,564
12,170 Fidelity National Financial, Inc............................................................. 555,195
3,453 Travelers (The) Cos., Inc.................................................................... 534,041
---------------
1,517,800
---------------
IT SERVICES -- 0.7%
2,716 Automatic Data Processing, Inc............................................................... 507,865
---------------
MULTI-UTILITIES -- 3.9%
3,613 Ameren Corp.................................................................................. 306,527
2,124 ATCO Ltd., Class I (CAD)..................................................................... 72,905
1,058 Black Hills Corp............................................................................. 72,981
12,559 CenterPoint Energy, Inc...................................................................... 307,570
3,490 CMS Energy Corp.............................................................................. 224,721
2,808 Dominion Energy, Inc......................................................................... 224,359
266 DTE Energy Co................................................................................ 37,245
9,184 MDU Resources Group, Inc..................................................................... 307,297
9,421 Public Service Enterprise Group, Inc......................................................... 595,030
4,282 Sempra Energy................................................................................ 589,075
758 WEC Energy Group, Inc........................................................................ 73,655
---------------
2,811,365
---------------
OIL, GAS & CONSUMABLE FUELS -- 3.9%
3,914 Cheniere Energy, Inc. (b).................................................................... 303,413
11,645 Enbridge, Inc................................................................................ 449,148
4,320 Equitrans Midstream Corp..................................................................... 35,251
6,798 Keyera Corp. (CAD)........................................................................... 155,467
8,485 Kinder Morgan, Inc........................................................................... 144,669
5,582 ONEOK, Inc................................................................................... 292,162
18,512 TC Energy Corp............................................................................... 915,789
20,864 Williams (The) Cos., Inc..................................................................... 508,247
---------------
2,804,146
---------------
PHARMACEUTICALS -- 0.7%
7,253 Novo Nordisk A/S, ADR........................................................................ 536,359
---------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.7%
2,681 Texas Instruments, Inc....................................................................... 483,947
---------------
TRADING COMPANIES & DISTRIBUTORS -- 1.5%
10,160 Fastenal Co.................................................................................. 531,165
1,924 Watsco, Inc.................................................................................. 563,462
---------------
1,094,627
---------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
WATER UTILITIES -- 0.4%
3,882 American States Water Co..................................................................... $ 307,416
---------------
TOTAL COMMON STOCKS.......................................................................... 22,300,923
(Cost $20,415,815) ---------------
</TABLE>
<TABLE>
<CAPTION>
UNITS DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
MASTER LIMITED PARTNERSHIPS -- 7.3%
CHEMICALS -- 0.5%
14,665 Westlake Chemical Partners, L.P.............................................................. 394,048
---------------
GAS UTILITIES -- 0.1%
2,388 Suburban Propane Partners, L.P............................................................... 36,298
---------------
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 1.0%
9,637 NextEra Energy Partners, L.P. (c)............................................................ 718,438
---------------
OIL, GAS & CONSUMABLE FUELS -- 5.7%
11,697 Cheniere Energy Partners, L.P................................................................ 492,327
18,278 Energy Transfer, L.P......................................................................... 157,374
53,930 Enterprise Products Partners, L.P............................................................ 1,240,929
9,455 Hess Midstream, L.P., Class A (c)............................................................ 211,130
11,037 Holly Energy Partners, L.P................................................................... 225,927
22,610 Magellan Midstream Partners, L.P............................................................. 1,057,470
46,270 Plains All American Pipeline, L.P............................................................ 420,132
15,747 Shell Midstream Partners, L.P................................................................ 242,976
4,869 Teekay LNG Partners, L.P. (c)................................................................ 72,548
---------------
4,120,813
---------------
TOTAL MASTER LIMITED PARTNERSHIPS............................................................ 5,269,597
(Cost $4,876,100) ---------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS -- 2.6%
EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.6%
2,774 AvalonBay Communities, Inc................................................................... 532,608
17,758 Four Corners Property Trust, Inc............................................................. 512,673
10,572 Getty Realty Corp............................................................................ 333,864
6,795 National Health Investors, Inc............................................................... 498,821
---------------
TOTAL REAL ESTATE INVESTMENT TRUSTS.......................................................... 1,877,966
(Cost $1,739,056) ---------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 1.9%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.6%
Federal Home Loan Mortgage Corporation
$ 7,176 Series 1998-192, Class IO, IO, STRIPS........................ 6.50% 02/01/28 983
69,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 78,721
80,187 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 +
6.60% (d)................................................. 6.49% 02/15/36 12,495
5,230 Series 2006-3200, Class PO, PO............................... (e) 08/15/36 4,878
6,498 Series 2007-3373, Class TO, PO............................... (e) 04/15/37 6,011
4,913 Series 2011-3917, Class AI, IO............................... 4.50% 07/15/26 171
664,332 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 31,246
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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
$ 1,349 Series 1992-205, Class Z..................................... 7.00% 11/25/22 $ 1,399
6,773 Series 1993-176, Class E, PO................................. (e) 08/25/23 6,761
6,582 Series 1993-247, Class 2, IO, STRIPS......................... 7.50% 10/25/23 304
42,254 Series 1997-22, Class PC..................................... 4.50% 03/18/27 45,310
1,299 Series 2002-1, Class HC...................................... 6.50% 02/25/22 1,312
55,521 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 8,993
11,592 Series 2003-W2, Class 1A1.................................... 6.50% 07/25/42 13,567
35,981 Series 2004-T2, Class 1PO, PO................................ (e) 11/25/43 33,966
7,556 Series 2006-125, Class FA, 1 Mo. LIBOR + 0.28% (f)........... 0.39% 01/25/37 7,582
46,745 Series 2007-32, Class KT..................................... 5.50% 04/25/37 52,704
11,065 Series 2007-42, Class AO, PO................................. (e) 05/25/37 10,257
10,135 Series 2008-44, Class PO, PO................................. (e) 05/25/38 9,126
51,878 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 8,703
112,463 Series 2015-14, Class IK, IO................................. 0.75% 03/25/45 10,126
Government National Mortgage Association
15,031 Series 2003-7, Class TA...................................... 4.50% 11/16/32 15,434
18,606 Series 2003-52, Class AP, PO................................. (e) 06/16/33 17,716
40,087 Series 2004-47, Class PD..................................... 6.00% 06/16/34 44,162
5,362 Series 2005-17, Class AD..................................... 5.00% 02/20/35 5,839
8,618 Series 2010-84, Class YB..................................... 4.00% 07/20/40 9,429
23,141 Series 2010-111, Class JA.................................... 2.50% 09/16/40 23,862
20,459 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 2,417
1,699 Series 2013-31, Class TH, 1 Mo. LIBOR + 4.35% (f)............ 4.47% 08/20/39 1,703
18,404 Series 2013-67, Class PI, IO................................. 4.00% 12/16/42 1,812
---------------
466,989
---------------
PASS-THROUGH SECURITIES -- 1.3%
Federal Home Loan Mortgage Corporation
45,570 Pool A47829.................................................. 4.00% 08/01/35 50,129
59,376 Pool A80290.................................................. 5.00% 11/01/35 68,751
37,361 Pool A94951.................................................. 4.00% 11/01/40 41,464
19,133 Pool A95134.................................................. 4.50% 11/01/40 21,356
21,480 Pool A97601.................................................. 4.50% 03/01/41 24,277
9,581 Pool G03523.................................................. 6.00% 11/01/37 11,396
23,344 Pool G06501.................................................. 4.00% 04/01/41 25,892
34,523 Pool G07286.................................................. 6.50% 09/01/39 40,235
10,008 Pool G13124.................................................. 6.00% 12/01/22 10,254
4,680 Pool G13465.................................................. 6.00% 01/01/24 4,776
14,049 Pool G13790.................................................. 4.50% 04/01/25 14,764
16,677 Pool G13844.................................................. 4.50% 07/01/25 17,755
7,532 Pool G14184.................................................. 5.00% 07/01/25 7,911
18,338 Pool G15725.................................................. 4.50% 09/01/26 19,358
5,420 Pool O20138.................................................. 5.00% 11/01/30 5,929
22,811 Pool Q05201.................................................. 4.00% 12/01/41 25,419
Federal National Mortgage Association
59,143 Pool 724888.................................................. 5.50% 06/01/33 64,549
12,380 Pool 888112.................................................. 6.50% 12/01/36 14,564
3,783 Pool 889780.................................................. 5.50% 03/01/23 3,881
4 Pool 890206.................................................. 5.50% 10/01/21 4
1,229 Pool 897936.................................................. 5.50% 08/01/21 1,231
2,084 Pool 923171.................................................. 7.50% 03/01/37 2,341
17,306 Pool 977130.................................................. 5.50% 08/01/23 17,880
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 7,468 Pool 983629.................................................. 4.50% 05/01/23 $ 7,830
8,746 Pool 995400.................................................. 7.00% 06/01/23 8,982
35,595 Pool 995700.................................................. 6.50% 03/01/27 40,021
19,628 Pool AB2265.................................................. 4.00% 02/01/41 21,797
6,555 Pool AI1191.................................................. 4.50% 04/01/41 7,405
23,332 Pool AI7800.................................................. 4.50% 07/01/41 26,357
18,515 Pool AJ5299.................................................. 4.00% 11/01/41 20,561
30,148 Pool AJ5300.................................................. 4.00% 11/01/41 33,450
28,882 Pool AK3103.................................................. 4.00% 02/01/42 32,037
37,552 Pool AL1024.................................................. 4.50% 07/01/26 40,072
6,334 Pool AL6304.................................................. 5.50% 09/01/25 6,566
37,996 Pool AU4726.................................................. 4.00% 09/01/43 42,149
Government National Mortgage Association
11,957 Pool 3500.................................................... 5.50% 01/20/34 14,011
6,660 Pool 3513.................................................... 5.00% 02/20/34 7,622
14,696 Pool 3555.................................................... 5.00% 05/20/34 16,821
38,543 Pool 3975.................................................... 5.50% 04/20/37 45,359
10,365 Pool 4230.................................................... 6.00% 09/20/23 10,787
29,906 Pool 609116.................................................. 4.50% 02/15/44 35,342
7,384 Pool MA2293.................................................. 3.50% 10/20/44 7,733
---------------
919,018
---------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES...................................... 1,386,007
(Cost $1,352,255) ---------------
ASSET-BACKED SECURITIES -- 0.0%
First Alliance Mortgage Loan Trust
14,772 Series 1999-1, Class A1...................................... 7.18% 06/20/30 15,028
---------------
TOTAL ASSET-BACKED SECURITIES................................................................ 15,028
(Cost $14,772) ---------------
MORTGAGE-BACKED SECURITIES -- 0.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.0%
Residential Accredit Loans, Inc.
1,653 Series 2003-QS5, Class A2, 1 Mo. LIBOR (x) -1.83 +
14.76% (d)................................................ 14.56% 03/25/18 1,570
1,443 Series 2003-QS14, Class A1................................... 5.00% 07/25/18 1,440
769 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 809
Structured Asset Securities Corp.
7,674 Series 2003-37A, Class 3A7 (g)............................... 2.37% 12/25/33 7,771
---------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................. 11,590
(Cost $11,580) ---------------
TOTAL INVESTMENTS -- 98.9%................................................................... 71,717,979
(Cost $69,601,545) (h)
NET OTHER ASSETS AND LIABILITIES -- 1.1%..................................................... 785,693
---------------
NET ASSETS -- 100.0%......................................................................... $ 72,503,672
===============
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
-----------------------------
(a) Investment in an affiliated fund.
(b) Non-income producing security.
(c) This security is taxed as a "C" corporation for federal income tax
purposes.
(d) Inverse floating rate security.
(e) Zero coupon security.
(f) Floating or variable rate security.
(g) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(h) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $2,848,213 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $731,779. The net unrealized appreciation was
$2,116,434.
ADR American Depositary Receipt.
IO Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
LIBOR London Interbank Offered Rate
PO Principal-Only Security
STRIPS Separate Trading of Registered Interest and Principal of Securities
Currency Abbreviations:
CAD Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Exchange-Traded Funds*............................ $ 40,856,868 $ 40,856,868 $ -- $ --
Common Stocks*.................................... 22,300,923 22,300,923 -- --
Master Limited Partnerships*...................... 5,269,597 5,269,597 -- --
Real Estate Investment Trusts*.................... 1,877,966 1,877,966 -- --
U.S. Government Agency Mortgage-Backed
Securities..................................... 1,386,007 -- 1,386,007 --
Asset-Backed Securities........................... 15,028 -- 15,028 --
Mortgage-Backed Securities........................ 11,590 -- 11,590 --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 71,717,979 $ 70,305,354 $ 1,412,625 $ --
=============== =============== =============== ===============
</TABLE>
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated................................... $ 34,744,334
Investments, at value - Affiliated..................................... 36,973,645
----------------
Total investments, at value............................................ 71,717,979
Cash................................................................... 722,589
Foreign currency, at value............................................. 5,577
Receivables:
Investment securities sold.......................................... 4,991,841
Dividends........................................................... 80,243
Interest............................................................ 7,781
Reclaims............................................................ 3,302
----------------
Total Assets........................................................ 77,529,312
----------------
LIABILITIES:
Payables:
Capital shares redeemed............................................. 5,000,141
Investment advisory fees............................................ 25,499
----------------
Total Liabilities................................................... 5,025,640
----------------
NET ASSETS............................................................. $ 72,503,672
================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 72,437,613
Par value.............................................................. 14,500
Accumulated distributable earnings (loss).............................. 51,559
----------------
NET ASSETS............................................................. $ 72,503,672
================
NET ASSET VALUE, per share............................................. $ 50.00
================
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 1,450,002
================
Investments, at cost - Unaffiliated.................................... $ 32,314,621
================
Investments, at cost - Affiliated...................................... $ 37,286,924
================
Total investments, at cost............................................. $ 69,601,545
================
Foreign currency, at cost (proceeds)................................... $ 6,169
================
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends - Unaffiliated............................................... $ 473,057
Dividends - Affiliated................................................. 823,085
Interest............................................................... (9,173)
Foreign withholding tax................................................ (9,786)
----------------
Total investment income............................................. 1,277,183
----------------
EXPENSES:
Investment advisory fees............................................... 289,113
----------------
Total expenses...................................................... 289,113
Less fees waived by the investment advisor.......................... (147,118)
----------------
Net expenses........................................................ 141,995
----------------
NET INVESTMENT INCOME (LOSS)........................................... 1,135,188
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated.......................................... 944,023
Investments - Affiliated............................................ (136,360)
In-kind redemptions - Unaffiliated.................................. 3,098,246
In-kind redemptions - Affiliated.................................... 1,217,780
Foreign currency transactions....................................... 967
----------------
Net realized gain (loss)............................................... 5,124,656
----------------
Net increase from payment by the advisor............................... 1,758
----------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated.......................................... 2,558,075
Investments - Affiliated............................................ (24,943)
Foreign currency translation........................................ 576
----------------
Net change in unrealized appreciation (depreciation)................... 2,533,708
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 7,660,122
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 8,795,310
================
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 1,135,188 $ 2,092,395
Net realized gain (loss)............................................... 5,124,656 (6,605,804)
Net increase from payment by the advisor............................... 1,758 --
Net change in unrealized appreciation (depreciation)................... 2,533,708 (2,736,147)
---------------- ----------------
Net increase (decrease) in net assets resulting from operations........ 8,795,310 (7,249,556)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (1,385,452) (2,785,206)
Return of capital...................................................... -- (88,048)
---------------- ----------------
Total distributions to shareholders.................................... (1,385,452) (2,873,254)
---------------- ----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 59,863,326 11,244,641
Cost of shares redeemed................................................ (55,488,169) (31,523,585)
---------------- ----------------
Net increase (decrease) in net assets resulting
from shareholder transactions....................................... 4,375,157 (20,278,944)
---------------- ----------------
Total increase (decrease) in net assets................................ 11,785,015 (30,401,754)
NET ASSETS:
Beginning of period.................................................... 60,718,657 91,120,411
---------------- ----------------
End of period.......................................................... $ 72,503,672 $ 60,718,657
================ ================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 1,350,002 1,800,002
Shares sold............................................................ 1,250,000 250,000
Shares redeemed........................................................ (1,150,000) (700,000)
---------------- ----------------
Shares outstanding, end of period...................................... 1,450,002 1,350,002
================ ================
</TABLE>
Page 14 See Notes to Financial Statements
<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,
4/30/2021 -------------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 44.98 $ 50.62 $ 47.72 $ 50.68 $ 49.89 $ 47.76
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.82 1.46 1.63 1.69 1.56 1.60
Net realized and unrealized gain (loss) 5.19 (a) (5.07) 3.34 (2.26) 1.10 (b) 2.45
--------- --------- --------- --------- --------- ---------
Total from investment operations 6.01 (3.61) 4.97 (0.57) 2.66 4.05
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.99) (1.97) (2.07) (2.10) (1.65) (1.92)
Net realized gain -- -- -- -- (0.22) --
Return of capital -- (0.06) -- (0.29) -- --
--------- --------- --------- --------- --------- ---------
Total distributions (0.99) (2.03) (2.07) (2.39) (1.87) (1.92)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 50.00 $ 44.98 $ 50.62 $ 47.72 $ 50.68 $ 49.89
========= ========= ========= ========= ========= =========
TOTAL RETURN (c) 13.46% (a) (7.19)% 10.60% (1.21)% 5.40% (b) 8.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 72,504 $ 60,719 $ 91,120 $ 83,504 $ 96,286 $ 17,460
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (d) 0.85% (e) 0.85% 0.85% 0.86% (f) 0.85% 0.85%
Ratio of net expenses to average net
assets (d) 0.42% (e) 0.46% 0.50% 0.50% (f) 0.52% 0.55%
Ratio of net investment income (loss) to
average net assets 3.34% (e) 3.08% 3.21% 3.40% 3.10% 3.30%
Portfolio turnover rate (g) 48% 118% 91% 113% 119% 88%
</TABLE>
(a) The Fund received a reimbursement from the Advisor in the amount of $1,758
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 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.
(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.
See Notes to Financial Statements Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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 ten 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"). The Fund represents a
separate series of shares of beneficial interest in the Trust. Unlike
conventional mutual funds, the Fund issues and redeems shares on a continuous
basis, at net asset value ("NAV"), only in large blocks of shares known as
"Creation Units."
The Fund is 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 Limited. ("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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (UNAUDITED)
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities.
Fair valuation of a debt security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in
which these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities
of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any,
securing the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt
only);
11) the economic, political and social prospects/developments of
the country of issue and the assessment of the country's
government leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of
earnings and/or cash flows) being paid for similar businesses
in that industry (for corporate debt only); and
13) other relevant factors.
Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or
the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might
affect the value of the security.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of the Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of the securities denominated in foreign
currencies is converted into U.S. dollars using exchange rates determined daily
as of the close of regular trading on the NYSE.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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, 2021, 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 United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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
contracts are marked-to-market daily with the change in value recognized as a
component of "Net change in unrealized appreciation (depreciation) on futures
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (UNAUDITED)
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. 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 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (UNAUDITED)
Amounts related to these investments at April 30, 2021 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 4/30/2021 10/31/2020 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2021 INCOME
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust
Emerging Markets
Local Currency
Bond ETF 306,913 $ 6,834,406 $12,044,261 $ (8,320,671) $ 45,921 $ 84,328 $10,688,245 $ 244,705
First Trust
Institutional
Preferred
Securities and
Income ETF 130,101 2,432,876 2,484,625 (2,411,131) 67,326 92,086 2,665,782 60,426
First Trust
Long Duration
Opportunities
ETF 30,010 525,330 335,679 -- (47,738) -- 813,271 14,285
First Trust
Low Duration
Opportunities
ETF 82,500 5,357,040 6,217,292 (7,327,514) (11,124) (15,819) 4,219,875 48,960
First Trust
Preferred
Securities
and Income ETF 394,178 7,281,495 7,447,489 (7,228,991) 130,756 382,890 8,013,639 180,651
First Trust
Tactical High
Yield ETF 217,548 8,954,370 10,208,059 (8,917,447) (210,084) 537,935 10,572,833 274,058
----------- ----------- ------------ -------------- ----------- ----------- ---------
Total Investments
in Affiliates $31,385,517 $38,737,405 $(34,205,754) $ (24,943) $ 1,081,420 $36,973,645 $ 823,085
=========== =========== ============ ============== =========== =========== =========
</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,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 2,785,206
Capital gains................................... --
Return of capital............................... 88,048
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ --
Accumulated capital and other gain (loss)....... (6,090,400)
Net unrealized appreciation (depreciation)...... (1,267,899)
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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 2017,
2018, 2019, and 2020 remain open to federal and state audit. As of April 30,
2021, 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, 2020, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $6,090,400.
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, 2020, 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. EIP and FTGP each receive a
sub-advisory fee from First Trust equal to 40% of any remaining monthly
investment management fee paid to First Trust for the average daily net assets
allocated to the Sub-Advisor after the average Fund expenses accrued during the
most recent twelve months are subtracted from the investment management fee in a
given month. RBA and Stonebridge each receive annual sub-advisory fees equal to
0.20% of the average daily net assets on the assets of the Fund allocated to the
Sub-Advisor by First Trust. 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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (UNAUDITED)
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, 2021,
the Advisor waived fees of $147,118.
During the six months ended April 30, 2021, the Fund received a reimbursement
from the Advisor of $1,758 in connection with a trade error.
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, 2021, were $0 and $35,323,526, 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, 2021, were $337,191 and $33,167,073,
respectively.
For the six months ended April 30, 2021, the cost of in-kind purchases and
proceeds from in-kind sales were $52,559,603 and $49,136,497, respectively.
5. DERIVATIVE TRANSACTIONS
During the six months ended April 30, 2021, the Fund had no derivative
instruments.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (UNAUDITED)
shares in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
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, 2022.
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 STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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 STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST STRATEGIC INCOME ETF (FDIV)
APRIL 30, 2021 (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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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<PAGE>
FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISORS
Energy Income Partners, LLC
10 Wright Street
Westport, CT 06880
First Trust Global Portfolios Limited
8 Angel Court
London EC2R 7HJ
Richard Bernstein Advisors LLC
1251 Avenue of the Americas, Suite 4102
New York, NY 10020
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]
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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, 2021
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2021
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management ........................................................ 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 48
Statement of Operations...................................................... 49
Statements of Changes in Net Assets.......................................... 50
Financial Highlights......................................................... 51
Notes to Financial Statements................................................ 52
Additional Information....................................................... 61
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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
and other Fund regulatory filings.
<PAGE>
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SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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,
/a/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST 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 (collectively, "Mortgage-Related Investments"). The Fund normally
expects to invest in Mortgage-Related Investments tied to residential and
commercial mortgages. Mortgage-Related Investments consist of: (1) residential
mortgage-backed securities (RMBS); (2) commercial mortgage-backed securities
(CMBS); (3) stripped mortgage-backed securities (SMBS), which are
mortgage-backed securities where mortgage payments are divided up between paying
the loan's principal and paying the loan's interest; and (4) collateralized
mortgage obligations (CMOs) and real estate mortgage investment conduits
(REMICs) where they are divided into multiple classes with each class being
entitled to a different share of the principal and/or interest payments received
from the pool of underlying assets. The Fund will limit its investment in
Mortgage-Related Investments that are neither issued nor guaranteed by the U.S.
government or its agencies or instrumentalities to 20% of its net assets
(including investment borrowings). The Fund may invest up to 40% of its net
assets (including investment borrowings), in the aggregate, in (i) cash, cash
equivalents and short-term investments and (ii) non-mortgage direct obligations
of the U.S. government and other non-mortgage securities issued and/or
guaranteed by the U.S. government or its agencies or instrumentalities. The Fund
may also invest up to 5% of its net assets (including investment borrowings) in
asset-backed securities ("ABS") (other than Mortgage-Related Investments) that
are not issued and/or guaranteed by Government Entities. However, the Fund's
investments in (a) Mortgage-Related Investments that are not issued and/or
guaranteed by Government Entities and (b) ABS may not, in the aggregate, exceed
20% of the Fund's 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.
<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)
4/30/21 4/30/21 4/30/21 to 4/30/21 4/30/21 to 4/30/21
<S> <C> <C> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 0.37% 1.31% 2.52% 3.04% 13.26% 21.46%
Market Price 0.37% 1.29% 2.54% 3.06% 13.37% 21.58%
INDEX PERFORMANCE
ICE BofA 1-5 Year US Treasury
& Agency Index -0.21% 0.00% 1.94% 1.89% 10.09% 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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV was calculated. Since shares of the Fund did
not trade in the secondary market until after its inception, for the period from
inception to the first day of secondary market trading in shares of the Fund,
the NAV of the Fund is used as a proxy for the secondary market trading price to
calculate market returns. NAV and market returns assume that all distributions
have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of the Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
-----------------------------------------------------------
% OF LONG-TERM
FUND ALLOCATION INVESTMENTS(1)
-----------------------------------------------------------
U.S. Government Agency Mortgage-
Backed Securities 82.1%
Mortgage-Backed Securities 7.2
Asset-Backed Securities 2.2
Exchange-Traded Funds 0.0*
U.S. Treasury Bills 8.7
Money Market Funds 0.1
Call Options Purchased 0.0*
U.S. Government Agency Mortgage-
Backed Securities Sold Short (15.1)
Written Options (0.0)**
Net Other Assets and Liabilities(1) 14.8
-------
Total 100.0%
=======
-----------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
-----------------------------------------------------------
Government and Agency 76.2%
AAA 1.2
AA 0.1
A- 0.1
BB+ 0.2
BB 0.1
B 0.1
B- 0.1
Not Rated 14.9
Cash and Cash Equivalents 7.0
-------
Total 100.00%
=======
* Amount is less than 0.05%.
** Amount is less than (0.05)%.
-----------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(3)
-----------------------------------------------------------
Federal National Mortgage Association,
Pool TBA, 2.50%, 06/15/51 6.0%
Federal Home Loan Mortgage Corporation,
Pool SB0380, 3.50%, 02/01/34 4.6
Federal National Mortgage Association,
Pool MA4325, 2.00%, 05/01/51 3.0
Federal National Mortgage Association,
Pool FM2500, 2.50%, 03/01/35 1.7
Federal National Mortgage Association,
Pool TBA, 3.00%, 07/15/51 1.6
Federal Home Loan Mortgage Corporation,
Pool SB0368, 4.00%, 03/01/34 1.6
Federal Home Loan Mortgage Corporation,
Series 2017-4673, Class WZ, 3.50%,
04/15/47 1.5
Federal National Mortgage Association,
Pool FM1194, 4.50%, 05/01/39 1.5
Federal Home Loan Mortgage Corporation,
Series 2018-4790, Class Z, 4.00%,
05/15/48 1.5
Federal Home Loan Mortgage Corporation,
Pool ZT1989, 3.50%, 01/01/33 1.4
-------
Total 24.4%
=======
-----------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
-----------------------------------------------------------
April 30, 2021 1.9 Years
High - March 31, 2021 2.4 Years
Low - December 31, 2020 1.2 Years
-----------------------------
(1) Includes variation margin on futures contracts.
(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.
(3) Percentages are based on the long positions only. U.S. Treasury bills,
money market funds and short positions are excluded.
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, 2021
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
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
10/31/20 12,101 11,314
4/30/21 12,146 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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (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, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD (a) PERIOD (a) (b)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
Actual $1,000.00 $1,003.70 0.65% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
</TABLE>
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 82.1%
ASSET-BACKED SECURITIES -- 0.0%
Federal National Mortgage Association Grantor Trust
$ 273,758 Series 2002-T7, Class A1, 1 Mo. LIBOR + 0.22% (a)............ 0.33% 07/25/32 $ 267,948
----------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 27.3%
Federal Home Loan Mortgage Corporation
11,251 Series 1992-133, Class B, IO, STRIPS (b)..................... 8.50% 06/01/22 312
11,113 Series 1992-1206, Class IB, 1 Mo. LIBOR + 0.83% (a).......... 0.94% 03/15/22 11,108
7,300 Series 1993-1498, Class I, 1 Mo. LIBOR + 1.15% (a)........... 1.26% 04/15/23 7,351
5,908 Series 1993-1552, Class I, 10 Yr. Constant Maturity Treasury
Rate - 0.65% (a).......................................... 1.01% 08/15/23 5,833
61,113 Series 1993-1579, Class PM................................... 6.70% 09/15/23 64,608
48,660 Series 1993-1630, Class PK................................... 6.00% 11/15/23 51,436
3,213 Series 1993-1643, Class PK................................... 6.50% 12/15/23 3,357
150,239 Series 1994-1710, Class G, 1 Mo. LIBOR + 1.50% (a)........... 1.61% 04/15/24 152,224
1,491 Series 1998-2089, Class PJ, IO............................... 7.00% 10/15/28 145
6,810 Series 1998-2102, Class Z.................................... 6.00% 12/15/28 7,684
642,071 Series 1999-21, Class A, 1 Mo. LIBOR + 0.36% (a)............. 0.47% 10/25/29 639,769
1,194 Series 2001-2365, Class LO, PO............................... (c) 09/15/31 1,192
170,922 Series 2002-48, Class 1A (d)................................. 4.71% 07/25/33 189,358
37,224 Series 2002-2405, Class BF................................... 7.00% 03/25/24 39,284
150,747 Series 2002-2410, Class OG................................... 6.38% 02/15/32 184,862
119,002 Series 2002-2427, Class GE................................... 6.00% 03/15/32 139,755
204,455 Series 2002-2437, Class SA, IO, 1 Mo. LIBOR (x) -1 +
7.90% (e)................................................. 7.79% 01/15/29 28,638
13,903 Series 2003-58, Class 2A..................................... 6.50% 09/25/43 16,106
251,953 Series 2003-2557, Class HL................................... 5.30% 01/15/33 290,522
161,456 Series 2003-2564, Class AC................................... 5.50% 02/15/33 184,602
386,184 Series 2003-2574, Class PE................................... 5.50% 02/15/33 447,838
162,349 Series 2003-2577, Class LI, IO............................... 5.50% 02/15/33 24,158
1,317,000 Series 2003-2581, Class LL................................... 5.25% 03/15/33 1,471,067
189,116 Series 2003-2586, Class TG................................... 5.50% 03/15/23 194,395
53,849 Series 2003-2597, Class AE................................... 5.50% 04/15/33 58,603
1,646,000 Series 2003-2613, Class LL................................... 5.00% 05/15/33 1,851,656
243,467 Series 2003-2626, Class ZW................................... 5.00% 06/15/33 259,475
530,759 Series 2003-2626, Class ZX................................... 5.00% 06/15/33 603,691
92,000 Series 2003-2669, Class LL................................... 5.50% 08/15/33 104,961
34,000 Series 2003-2676, Class LL................................... 5.50% 09/15/33 38,220
539,674 Series 2004-2771, Class NL................................... 6.00% 03/15/34 612,928
423,359 Series 2004-2793, Class PE................................... 5.00% 05/15/34 488,529
1,066,515 Series 2004-2801, Class SE, IO, 1 Mo. LIBOR (x) -1 +
7.05% (e)................................................. 6.94% 07/15/32 176,114
180,556 Series 2004-2835, Class QY, IO, 1 Mo. LIBOR (x) -1 +
7.90% (e)................................................. 7.79% 12/15/32 32,416
144,516 Series 2004-2890, Class ZA................................... 5.00% 11/15/34 165,811
579,706 Series 2004-2891, Class ZA................................... 6.50% 11/15/34 819,463
396,273 Series 2004-2907, Class DZ................................... 4.00% 12/15/34 430,263
1,474,307 Series 2005-233, Class 12, IO, STRIPS........................ 5.00% 09/15/35 220,685
1,098,066 Series 2005-234, Class IO, IO, STRIPS........................ 4.50% 10/01/35 162,652
785,000 Series 2005-2973, Class GE................................... 5.50% 05/15/35 956,865
137,710 Series 2005-3031, Class BI, IO, 1 Mo. LIBOR (x) -1 +
6.69% (e)................................................. 6.58% 08/15/35 28,684
3,139,770 Series 2005-3054, Class ZW................................... 6.00% 10/15/35 3,527,166
20,972 Series 2005-3074, Class ZH................................... 5.50% 11/15/35 27,609
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 339,101 Series 2006-238, Class 8, IO, STRIPS......................... 5.00% 04/15/36 $ 55,357
298,058 Series 2006-243, Class 11, IO, STRIPS (f).................... 7.00% 08/15/36 61,549
397,502 Series 2006-3114, Class GI, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)................................................. 6.49% 02/15/36 61,942
63,964 Series 2006-3117, Class ZU................................... 6.00% 02/15/36 89,175
31,480 Series 2006-3150, Class DZ................................... 5.50% 05/15/36 36,631
1,838,952 Series 2006-3174, Class LF, 1 Mo. LIBOR + 0.35% (a).......... 0.46% 05/15/36 1,848,854
2,587,677 Series 2006-3196, Class ZK................................... 6.50% 04/15/32 3,465,105
1,740,097 Series 2006-3210, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)................................................. 6.49% 09/15/36 328,232
523,431 Series 2006-3223, Class FC, 1 Mo. LIBOR + 0.55% (a).......... 0.66% 04/15/32 530,265
185,478 Series 2006-3245, Class PO, PO............................... (c) 11/15/36 177,748
1,134,967 Series 2007-3262, Class KS, IO, 1 Mo. LIBOR (x) -1 +
6.41% (e)................................................. 6.30% 01/15/37 129,613
37,912 Series 2007-3274, Class B.................................... 6.00% 02/15/37 43,241
268,166 Series 2007-3322, Class NF, 1 Mo. LIBOR (x) 2,566.67 -
16,683.33%, 0.00% Floor (a)............................... 0.00% 05/15/37 261,750
44,502 Series 2007-3340, Class PF, 1 Mo. LIBOR + 0.30% (a).......... 0.41% 07/15/37 44,814
60,491 Series 2007-3349, Class MY................................... 5.50% 07/15/37 70,358
132,366 Series 2007-3360, Class CB................................... 5.50% 08/15/37 151,956
1,284,897 Series 2007-3370, Class FM, 1 Mo. LIBOR + 0.62% (a).......... 0.73% 10/15/47 1,312,188
99,171 Series 2007-3380, Class FS, 1 Mo. LIBOR + 0.35% (a).......... 0.46% 11/15/36 98,037
300,171 Series 2008-3406, Class B.................................... 6.00% 01/15/38 341,512
108,934 Series 2008-3413, Class B.................................... 5.50% 04/15/37 123,640
312,494 Series 2008-3420, Class AZ................................... 5.50% 02/15/38 363,249
178,619 Series 2008-3448, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.94% 05/15/38 11,433
3,413,203 Series 2009-3522, Class SE, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.99% 04/15/39 600,986
34,254 Series 2009-3523, Class SD, 1 Mo. LIBOR (x) -2.75 +
19.66% (e)................................................ 19.35% 06/15/36 45,162
1,175,681 Series 2009-3542, Class ZP................................... 5.00% 06/15/39 1,417,532
177,000 Series 2009-3550, Class LL................................... 4.50% 07/15/39 199,689
715,932 Series 2009-3563, Class ZP................................... 5.00% 08/15/39 874,037
2,098,241 Series 2009-3572, Class JS, IO, 1 Mo. LIBOR (x) -1 +
6.80% (e)................................................. 6.69% 09/15/39 322,559
31,946 Series 2009-3585, Class QZ................................... 5.00% 08/15/39 41,125
152,108 Series 2009-3587, Class FX, 1 Mo. LIBOR (a).................. 0.11% 12/15/37 140,049
661,031 Series 2009-3593, Class F, 1 Mo. LIBOR + 0.50% (a)........... 0.62% 03/15/36 663,326
1,867,735 Series 2009-3605, Class NC................................... 5.50% 06/15/37 2,171,021
500,000 Series 2010-3622, Class PB................................... 5.00% 01/15/40 571,436
553,720 Series 2010-3632, Class BS, 1 Mo. LIBOR (x) -3.33 +
17.50% (e)................................................ 17.12% 02/15/40 764,405
6 Series 2010-3637, Class LJ................................... 3.50% 02/15/25 6
107,000 Series 2010-3645, Class WD................................... 4.50% 02/15/40 114,344
661,000 Series 2010-3667, Class PL................................... 5.00% 05/15/40 744,479
5,837 Series 2010-3688, Class HI, IO (b)........................... 5.00% 11/15/21 43
87,432 Series 2010-3699, Class FD, 1 Mo. LIBOR + 0.60% (a).......... 0.71% 07/15/40 88,722
1,293,350 Series 2010-3704, Class ED................................... 4.00% 12/15/36 1,348,638
400,000 Series 2010-3714, Class PB................................... 4.75% 08/15/40 472,206
630,139 Series 2010-3735, Class IK, IO............................... 3.50% 10/15/25 27,844
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 108,787 Series 2010-3735, Class JI, IO............................... 4.50% 10/15/30 $ 11,967
357,185 Series 2010-3740, Class SC, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 10/15/40 69,243
79,531 Series 2010-3770, Class GZ................................... 4.50% 10/15/40 103,717
312,000 Series 2010-3780, Class AV................................... 4.00% 04/15/31 335,443
97,697 Series 2011-3795, Class ED................................... 3.00% 10/15/39 100,174
600,000 Series 2011-3796, Class PB................................... 5.00% 01/15/41 706,990
283,807 Series 2011-3819, Class ZQ................................... 6.00% 04/15/36 336,106
3,498,098 Series 2011-3820, Class GZ................................... 5.00% 03/15/41 4,159,780
300,000 Series 2011-3820, Class NC................................... 4.50% 03/15/41 342,329
153,801 Series 2011-3828, Class SY, 1 Mo. LIBOR (x) -3 +
13.20% (e)................................................ 12.86% 02/15/41 216,224
1,084,625 Series 2011-3841, Class JZ................................... 5.00% 04/15/41 1,253,297
103,547 Series 2011-3842, Class BS, 1 Mo. LIBOR (x) -5 +
22.75% (e)................................................ 22.17% 04/15/41 196,629
300,000 Series 2011-3844, Class PC................................... 5.00% 04/15/41 357,052
832,096 Series 2011-3852, Class SW, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 05/15/41 128,573
3,149,137 Series 2011-3860, Class PZ................................... 5.00% 05/15/41 3,666,400
525,000 Series 2011-3890, Class ME................................... 5.00% 07/15/41 623,097
1,387,000 Series 2011-3895, Class PW................................... 4.50% 07/15/41 1,556,063
1,756,007 Series 2011-3925, Class ZD................................... 4.50% 09/15/41 2,121,977
432,294 Series 2011-3926, Class SH, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 6.44% 05/15/40 15,485
2,413,205 Series 2011-3935, Class HZ................................... 4.50% 10/15/41 2,918,242
41,667 Series 2011-3935, Class LI, IO (b)........................... 3.00% 10/15/21 89
13,210,452 Series 2011-3954, Class GS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 11/15/41 2,612,023
253,934 Series 2011-3956, Class KI, IO............................... 3.00% 11/15/21 1,309
83,207 Series 2011-3968, Class AI, IO (b)........................... 3.00% 12/15/21 445
545,448 Series 2012-267, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1
+ 6.00% (e)............................................... 5.89% 08/15/42 100,189
16,612,501 Series 2012-272, Class PO, PO, STRIPS........................ (c) 08/15/42 15,033,875
13,186,981 Series 2012-276, Class S5, IO, STRIPS, 1 Mo. LIBOR (x) -1
+ 6.00% (e)............................................... 5.89% 09/15/42 2,367,079
63,970 Series 2012-278, Class F1, STRIPS, 1 Mo. LIBOR +
0.45% (a)................................................. 0.56% 09/15/42 64,499
233,764 Series 2012-3994, Class AI, IO............................... 3.00% 02/15/22 1,601
577,379 Series 2012-3999, Class WA (f)............................... 5.50% 08/15/40 667,602
1,878,000 Series 2012-4000, Class PY................................... 4.50% 02/15/42 2,091,524
59,000 Series 2012-4012, Class GC................................... 3.50% 06/15/40 61,903
30,032 Series 2012-4015, Class KB................................... 1.75% 05/15/41 30,786
553,129 Series 2012-4021, Class IP, IO............................... 3.00% 03/15/27 28,817
1,075,867 Series 2012-4026, Class GZ................................... 4.50% 04/15/42 1,349,972
1,029,547 Series 2012-4030, Class IL, IO............................... 3.50% 04/15/27 62,899
38,731 Series 2012-4038, Class CS, 1 Mo. LIBOR (x) -3 +
12.00% (e)................................................ 11.65% 04/15/42 43,429
877,258 Series 2012-4048, Class FJ, 1 Mo. LIBOR + 0.40% (a).......... 0.52% 07/15/37 877,647
1,784,801 Series 2012-4054, Class AI, IO............................... 3.00% 04/15/27 94,805
32,728,294 Series 2012-4057, Class ZA................................... 4.00% 06/15/42 36,601,059
4,085,029 Series 2012-4057, Class ZC................................... 3.50% 06/15/42 4,451,926
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 1,817,994 Series 2012-4077, Class TS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 05/15/41 $ 339,637
627,867 Series 2012-4090, Class YZ................................... 4.50% 08/15/42 776,210
40,492 Series 2012-4097, Class ES, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.99% 08/15/42 7,338
3,974,319 Series 2012-4097, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.94% 08/15/42 959,885
2,447,000 Series 2012-4098, Class PE................................... 4.00% 08/15/42 2,691,637
408,331 Series 2012-4103, Class HI, IO............................... 3.00% 09/15/27 25,155
45,335 Series 2012-4116, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.15% (e)................................................. 6.04% 10/15/42 8,823
2,035,742 Series 2012-4121, Class HI, IO............................... 3.50% 10/15/27 135,953
1,956,793 Series 2012-4132, Class AI, IO............................... 4.00% 10/15/42 313,871
506,277 Series 2012-4136, Class TU, IO, 1 Mo. LIBOR (x) -22.50 +
139.50%, 4.50% Cap (e).................................... 4.50% 08/15/42 97,504
493,606 Series 2012-4145, Class YI, IO............................... 3.00% 12/15/27 31,293
408,686 Series 2013-299, Class S1, IO, STRIPS, 1 Mo. LIBOR (x) -1
+ 6.00% (e)............................................... 5.89% 01/15/43 71,273
519,047 Series 2013-303, Class C2, IO, STRIPS........................ 3.50% 01/15/28 36,281
8,362,230 Series 2013-303, Class C12, IO, STRIPS....................... 4.00% 12/15/32 894,203
18,678,508 Series 2013-303, Class C33, IO, STRIPS....................... 4.50% 01/15/43 3,499,514
4,821,448 Series 2013-304, Class C19, IO, STRIPS....................... 5.00% 06/15/42 1,050,741
430,585 Series 2013-304, Class C37, IO, STRIPS....................... 3.50% 12/15/27 22,494
1,997,223 Series 2013-304, Class C40, IO, STRIPS....................... 3.50% 09/15/26 99,860
16,421,503 Series 2013-311, Class PO, PO, STRIPS........................ (c) 08/15/43 15,128,339
2,101,476 Series 2013-4151, Class DI, IO............................... 3.50% 11/15/31 114,302
4,763,853 Series 2013-4154, Class IB, IO............................... 3.50% 01/15/28 326,058
11,501,404 Series 2013-4170, Class CO, PO............................... (c) 11/15/32 10,818,765
905,000 Series 2013-4176, Class HE................................... 4.00% 03/15/43 1,043,884
732,650 Series 2013-4177, Class GL................................... 3.00% 03/15/33 787,048
1,172,353 Series 2013-4184, Class GZ................................... 3.00% 03/15/43 1,177,558
5,632,296 Series 2013-4193, Class AI, IO............................... 3.00% 04/15/28 376,735
826,035 Series 2013-4193, Class PB................................... 4.00% 04/15/43 952,298
14,394,896 Series 2013-4194, Class GI, IO............................... 4.00% 04/15/43 2,044,298
2,475,237 Series 2013-4203, Class US, 1 Mo. LIBOR (x) -1.50 +
6.00% (e)................................................. 5.83% 05/15/33 2,516,737
500,000 Series 2013-4211, Class PB................................... 3.00% 05/15/43 525,728
1,777,444 Series 2013-4213, Class MZ................................... 4.00% 06/15/43 2,045,655
203,467 Series 2013-4226, Class NS, 1 Mo. LIBOR (x) -3 +
10.50% (e)................................................ 10.15% 01/15/43 245,149
413,534 Series 2013-4239, Class IO, IO............................... 3.50% 06/15/27 24,883
1,450,000 Series 2013-4247, Class AY................................... 4.50% 09/15/43 1,723,315
825,458 Series 2013-4261, Class GS, 1 Mo. LIBOR (x) -2.75 +
10.98% (e)................................................ 10.67% 01/15/41 1,030,143
727,547 Series 2013-4265, Class IB, IO............................... 4.50% 12/15/24 34,813
150,918 Series 2014-4300, Class IM, IO............................... 3.00% 03/15/37 6,449
1,077,988 Series 2014-4314, Class CI, IO............................... 6.00% 03/15/44 248,012
2,247,451 Series 2014-4316, Class XZ................................... 4.50% 03/15/44 2,561,267
15,268 Series 2014-4318, Class CI, IO (b)........................... 4.00% 03/15/22 42
14,540,077 Series 2014-4329, Class VZ................................... 4.00% 04/15/44 16,190,440
5,005,170 Series 2014-4347, Class YT................................... 3.50% 06/15/44 5,215,721
</TABLE>
Page 10 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 15,548,444 Series 2014-4375, Class MZ................................... 3.50% 08/15/44 $ 17,088,552
4,747,081 Series 2014-4387, Class IE, IO............................... 2.50% 11/15/28 260,223
30,682,295 Series 2015-4483, Class ZX................................... 4.15% 06/15/44 35,469,279
891,291 Series 2015-4503, Class MI, IO............................... 5.00% 08/15/45 169,852
768,716 Series 2015-4512, Class W (d) (f)............................ 5.41% 05/15/38 883,590
123,949 Series 2015-4520, Class AI, IO............................... 3.50% 10/15/35 13,363
552,001 Series 2015-4522, Class JZ................................... 2.00% 01/15/45 575,543
17,689,586 Series 2015-4532, Class ZX................................... 4.00% 09/15/45 19,708,739
263,186 Series 2016-4546, Class PZ................................... 4.00% 12/15/45 307,238
445,508 Series 2016-4546, Class ZT................................... 4.00% 01/15/46 521,763
9,733,426 Series 2016-4559, Class LI, IO............................... 2.50% 03/15/31 686,748
136,752 Series 2016-4568, Class MZ................................... 4.00% 04/15/46 159,063
15,548,822 Series 2016-4570, Class ST, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 04/15/46 3,694,817
6,209,322 Series 2016-4572, Class LI, IO............................... 4.00% 08/15/45 912,374
13,976,873 Series 2016-4582, Class GZ................................... 3.75% 03/15/52 15,372,181
28,333,771 Series 2016-4585, Class DS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 05/15/46 6,878,961
6,705,252 Series 2016-4587, Class ZH, steps up 07/15/21 to
4.00% (g)................................................. 3.75% 03/15/44 7,595,632
2,190,066 Series 2016-4591, Class GI, IO............................... 4.00% 12/15/44 308,382
1,226,161 Series 2016-4596, Class FL, 1 Mo. LIBOR + 0.50% (a).......... 0.62% 11/15/41 1,243,099
771,702 Series 2016-4600, Class WT................................... 3.50% 07/15/36 870,819
254,550 Series 2016-4605, Class KS, 1 Mo. LIBOR (x) -1.57 +
4.71% (e)................................................. 4.53% 08/15/43 246,949
640,363 Series 2016-4609, Class YI, IO............................... 4.00% 04/15/54 23,770
428,368 Series 2016-4613, Class AF, 1 Mo. LIBOR + 1.10% (a).......... 1.21% 11/15/37 432,895
1,054,223 Series 2016-4615, Class GT, 1 Mo. LIBOR (x) -4 + 16.00%,
4.00% Cap (e)............................................. 4.00% 10/15/42 990,282
15,838,134 Series 2016-4619, Class IB, IO............................... 4.00% 12/15/47 744,932
2,900,973 Series 2016-4641, Class DI, IO............................... 5.00% 05/15/41 420,083
8,627,904 Series 2017-4649, Class AZ................................... 3.50% 05/15/46 9,405,224
1,173,000 Series 2017-4650, Class JH................................... 3.00% 01/15/47 1,235,098
10,302,480 Series 2017-4660, Class PO, PO............................... (c) 01/15/33 8,249,567
85,830,961 Series 2017-4673, Class WZ................................... 3.50% 04/15/47 93,018,445
600,000 Series 2017-4681, Class JY................................... 2.50% 05/15/47 609,479
11,466,949 Series 2017-4682, Class KZ................................... 3.50% 09/15/46 12,543,764
5,072,083 Series 2018-4774, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.20% (e)................................................. 6.09% 04/15/48 923,968
22,620,589 Series 2018-4778, Class DZ................................... 4.00% 04/15/48 25,645,577
2,429,927 Series 2018-4780, Class VA................................... 4.00% 05/15/29 2,537,195
6,388,213 Series 2018-4780, Class Z.................................... 4.00% 01/15/48 7,250,565
4,172,864 Series 2018-4790, Class IO, IO............................... 4.50% 05/15/48 690,642
86,175,271 Series 2018-4790, Class Z.................................... 4.00% 05/15/48 92,570,570
9,907,022 Series 2018-4826, Class ME................................... 3.50% 09/15/48 10,563,350
3,517,000 Series 2018-4833, Class PY................................... 4.00% 10/15/48 3,804,345
10,282,359 Series 2018-4851, Class PO, PO............................... (c) 08/15/57 8,551,372
6,808,889 Series 2018-4855, Class AZ................................... 4.00% 08/15/48 7,423,054
10,603,038 Series 2018-4857, Class ZB................................... 4.50% 01/15/49 11,627,161
21,334,468 Series 2018-4858, Class EK................................... 4.00% 01/15/49 22,791,639
3,073,866 Series 2019-4872, Class BZ................................... 4.00% 04/15/49 3,500,858
</TABLE>
See Notes to Financial Statements Page 11
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 16,139,369 Series 2019-4894, Class PZ................................... 4.00% 07/15/49 $ 17,512,726
9,665,609 Series 2019-4910, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.94% 06/15/49 2,143,165
15,229,353 Series 2019-4938, Class BS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 12/25/49 2,452,468
15,888,513 Series 2019-4943, Class NS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 01/25/50 3,372,890
59,004,609 Series 2020-4973, Class IK, IO............................... 5.00% 05/25/50 10,150,687
2,515,155 Series 2020-4974, Class IA, IO............................... 3.50% 12/25/49 774,161
8,374,563 Series 2020-4988, Class IJ, IO............................... 4.50% 12/15/47 1,397,740
2,719,075 Series 2020-5000, Class ZE................................... 1.00% 07/25/50 2,641,550
54,769,199 Series 2020-5008, Class MI, IO............................... 4.00% 09/25/50 10,189,087
11,864,326 Series 2020-5013, Class HI, IO............................... 5.00% 03/25/40 1,989,593
6,581,552 Series 2020-5013, Class IQ, IO............................... 3.50% 09/25/50 1,136,453
31,488,499 Series 2020-5013, Class QI, IO............................... 3.50% 09/25/50 6,566,064
20,121,000 Series 2020-5023, Class AI, IO............................... 4.50% 10/25/50 4,031,548
24,033,735 Series 2020-5034, Class IO, IO (f)........................... 2.30% 10/15/45 872,578
20,148,063 Series 2020-5050, Class MI, IO............................... 3.50% 10/25/50 3,273,043
44,132,498 Series 2020-5051, Class CI, IO............................... 4.00% 12/25/35 5,510,741
2,789,019 Series 2021-5076, Class DZ................................... 1.25% 02/15/51 2,769,371
27,485,428 Series 2021-5086, Class MI, IO............................... 2.50% 03/25/51 4,277,615
Federal National Mortgage Association
57,175 Series 1992-38, Class GZ..................................... 7.50% 07/25/22 58,938
2 Series 1992-44, Class ZQ..................................... 8.00% 07/25/22 2
1,922 Series 1992-185, Class ZB.................................... 7.00% 10/25/22 1,990
323 Series 1993-3, Class K....................................... 7.00% 02/25/23 333
5,293 Series 1993-39, Class Z...................................... 7.50% 04/25/23 5,532
584 Series 1993-46, Class FH, 7 Yr. Constant Maturity Treasury
Rate - 0.20% (a).......................................... 1.10% 04/25/23 580
76,294 Series 1993-169, Class L..................................... 6.50% 09/25/23 80,771
23,684 Series 1993-171, Class SB, 10 Yr. Constant Maturity Treasury
Rate (x) -2.17 + 21.99% (e)............................... 18.42% 09/25/23 26,692
17,116 Series 1993-214, Class 2, IO, STRIPS......................... 7.50% 03/25/23 851
200,851 Series 1993-222, Class 2, IO, STRIPS......................... 7.00% 06/25/23 10,890
11,253 Series 1993-230, Class FA, 1 Mo. LIBOR + 0.60% (a)........... 0.71% 12/25/23 11,215
104,585 Series 1994-61, Class FG, 1 Mo. LIBOR + 1.50% (a)............ 1.61% 04/25/24 105,891
36,726 Series 1996-51, Class AY, IO................................. 7.00% 12/18/26 4,253
66,193 Series 1998-37, Class VZ..................................... 6.00% 06/17/28 69,804
456,022 Series 2000-45, Class SD, IO, 1 Mo. LIBOR (x) -1 +
7.95% (e)................................................. 7.84% 12/18/30 48,234
15 Series 2001-8, Class SE, IO, 1 Mo. LIBOR (x) -1 +
8.60% (b) (e)............................................. 8.49% 02/17/31 0
59,027 Series 2001-34, Class SR, IO, 1 Mo. LIBOR (x) -1 +
8.10% (e)................................................. 7.99% 08/18/31 6,544
2,777 Series 2001-42, Class SB, 1 Mo. LIBOR (x) -16 + 128.00%,
8.50% Cap (e)............................................. 8.50% 09/25/31 3,080
140,909 Series 2001-46, Class F, 1 Mo. LIBOR + 0.40% (a)............. 0.52% 09/18/31 141,400
8,215 Series 2002-22, Class G...................................... 6.50% 04/25/32 9,711
84,770 Series 2002-30, Class Z...................................... 6.00% 05/25/32 99,040
68,864 Series 2002-80, Class CZ..................................... 4.50% 09/25/32 80,009
98,507 Series 2002-320, Class 2, IO, STRIPS......................... 7.00% 04/25/32 21,480
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 96,757 Series 2002-323, Class 6, IO, STRIPS......................... 6.00% 01/25/32 $ 16,279
252,116 Series 2002-324, Class 2, IO, STRIPS......................... 6.50% 07/25/32 39,708
28,288 Series 2003-14, Class AT..................................... 4.00% 03/25/33 29,721
71,859 Series 2003-21, Class OA..................................... 4.00% 03/25/33 77,137
100,335 Series 2003-32, Class UI, IO................................. 6.00% 05/25/33 21,335
440,788 Series 2003-45, Class JB..................................... 5.50% 06/25/33 508,440
22,067 Series 2003-52, Class NA..................................... 4.00% 06/25/23 22,298
2,993,579 Series 2003-61, Class MZ..................................... 5.00% 08/25/33 3,344,175
17,837 Series 2003-63, Class F1, 1 Mo. LIBOR + 0.30% (a)............ 0.41% 11/25/27 17,840
1,641,971 Series 2003-63, Class IP, IO................................. 6.00% 07/25/33 286,387
355,000 Series 2003-71, Class NH..................................... 4.29% 08/25/33 409,007
272,279 Series 2003-75, Class GI, IO................................. 5.00% 08/25/23 4,866
172,506 Series 2003-109, Class YB.................................... 6.00% 11/25/33 202,497
157,890 Series 2003-339, Class 12, IO, STRIPS........................ 6.00% 06/25/33 25,575
303,561 Series 2003-343, Class 2, IO, STRIPS......................... 4.50% 10/25/33 42,699
274,331 Series 2003-345, Class 14, IO, STRIPS........................ 6.00% 03/25/34 48,496
54,585 Series 2003-348, Class 17, IO, STRIPS........................ 7.50% 12/25/33 10,330
79,523 Series 2003-348, Class 18, IO, STRIPS (f).................... 7.50% 12/25/33 15,693
85,539 Series 2003-W3, Class 2A5.................................... 5.36% 06/25/42 98,176
790,132 Series 2003-W6, Class 1A41................................... 5.40% 10/25/42 902,253
31,824 Series 2003-W10, Class 1A4................................... 4.51% 06/25/43 35,260
991,222 Series 2003-W12, Class 1A8................................... 4.55% 06/25/43 1,098,114
254,968 Series 2004-10, Class ZB..................................... 6.00% 02/25/34 295,714
821,376 Series 2004-18, Class EZ..................................... 6.00% 04/25/34 966,301
289,250 Series 2004-25, Class LC..................................... 5.50% 04/25/34 337,031
311,966 Series 2004-25, Class UC..................................... 5.50% 04/25/34 367,126
40,668 Series 2004-28, Class ZH..................................... 5.50% 05/25/34 51,967
610,039 Series 2004-60, Class AC..................................... 5.50% 04/25/34 692,513
10,941 Series 2004-W9, Class 1A3.................................... 6.05% 02/25/44 12,575
1,149,745 Series 2004-W10, Class A6.................................... 5.75% 08/25/34 1,261,371
2,270,214 Series 2005-2, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (e)... 6.49% 02/25/35 394,202
461,034 Series 2005-2, Class TB, IO, 1 Mo. LIBOR (x) -1 + 5.90%,
0.40% Cap (e)............................................. 0.40% 07/25/33 4,701
55,777 Series 2005-29, Class ZT..................................... 5.00% 04/25/35 67,620
96,521 Series 2005-40, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.70% (e)................................................. 6.59% 05/25/35 17,410
280,608 Series 2005-52, Class TZ..................................... 6.50% 06/25/35 397,776
1,021,004 Series 2005-57, Class KZ..................................... 6.00% 07/25/35 1,310,319
10,885 Series 2005-67, Class SC, 1 Mo. LIBOR (x) -2.15 +
14.41% (e)................................................ 14.18% 08/25/35 14,023
51,750 Series 2005-79, Class NS, IO, 1 Mo. LIBOR (x) -1 +
6.09% (e)................................................. 5.98% 09/25/35 8,770
5,484,245 Series 2005-86, Class WZ..................................... 5.50% 10/25/35 6,231,785
16,952 Series 2005-87, Class SC, 1 Mo. LIBOR (x) -1.67 +
13.83% (e)................................................ 13.66% 10/25/35 22,961
26,851 Series 2005-90, Class ES, 1 Mo. LIBOR (x) -2.50 +
16.88% (e)................................................ 16.61% 10/25/35 37,063
53,101 Series 2005-95, Class WZ..................................... 6.00% 11/25/35 76,113
36,641 Series 2005-102, Class DS, 1 Mo. LIBOR (x) -2.75 +
19.80% (e)................................................ 19.51% 11/25/35 42,885
604,403 Series 2005-104, Class UE.................................... 5.50% 12/25/35 687,269
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 153,151 Series 2005-359, Class 6, IO, STRIPS......................... 5.00% 11/25/35 $ 21,654
451,808 Series 2005-359, Class 12, IO, STRIPS........................ 5.50% 10/25/35 83,357
125,879 Series 2005-362, Class 13, IO, STRIPS........................ 6.00% 08/25/35 24,461
73,986 Series 2005-W1, Class 1A2.................................... 6.50% 10/25/44 88,197
62,470 Series 2006-5, Class 2A2 (a)................................. 2.10% 02/25/35 66,267
28,204,847 Series 2006-5, Class N2, IO (d).............................. 0.00% 02/25/35 282
66,480 Series 2006-15, Class IS, IO, 1 Mo. LIBOR (x) -1 +
6.58% (e)................................................. 6.47% 03/25/36 13,325
1,398,288 Series 2006-20, Class PI, IO, 1 Mo. LIBOR (x) -1 +
6.68% (e)................................................. 6.57% 11/25/30 150,785
24,541 Series 2006-31, Class PZ..................................... 6.00% 05/25/36 35,024
55,897 Series 2006-42, Class CF, 1 Mo. LIBOR + 0.45% (a)............ 0.56% 06/25/36 55,042
1,742,981 Series 2006-42, Class EI, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 6.44% 06/25/36 338,679
460,700 Series 2006-59, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.57% (e)................................................. 6.46% 07/25/36 90,229
654,468 Series 2006-80, Class PH..................................... 6.00% 08/25/36 777,333
81,089 Series 2006-85, Class MZ..................................... 6.50% 09/25/36 96,426
2,252,400 Series 2006-110, Class PI, IO................................ 5.50% 11/25/36 418,780
2,434,644 Series 2006-116, Class ES, IO, 1 Mo. LIBOR (x) -1 +
6.65% (e)................................................. 6.54% 12/25/36 521,425
232,255 Series 2006-117, Class GF, 1 Mo. LIBOR + 0.35% (a)........... 0.46% 12/25/36 234,277
2,471,494 Series 2006-118, Class A1, 1 Mo. LIBOR + 0.06% (a)........... 0.17% 12/25/36 2,458,311
1,342 Series 2006-126, Class DZ.................................... 5.50% 01/25/37 1,421
313,274 Series 2007-7, Class KA...................................... 5.75% 08/25/36 380,788
33,560 Series 2007-25, Class FB, 1 Mo. LIBOR + 0.33% (a)............ 0.44% 04/25/37 33,842
799,558 Series 2007-28, Class ZA..................................... 6.00% 04/25/37 924,270
55,253 Series 2007-32, Class KT..................................... 5.50% 04/25/37 62,296
805,952 Series 2007-57, Class ZG..................................... 4.75% 06/25/37 958,007
524,012 Series 2007-60, Class ZS..................................... 4.75% 07/25/37 654,500
505,051 Series 2007-68, Class AE..................................... 6.50% 07/25/37 631,432
419,412 Series 2007-116, Class PB.................................... 5.50% 08/25/35 488,250
135,535 Series 2007-117, Class MD.................................... 5.50% 07/25/37 148,988
4,180,934 Series 2007-W10, Class 3A (d)................................ 2.91% 06/25/47 4,427,061
120,353 Series 2008-3, Class FZ, 1 Mo. LIBOR + 0.55% (a)............. 0.66% 02/25/38 117,010
19,369 Series 2008-8, Class ZA...................................... 5.00% 02/25/38 22,683
14,632 Series 2008-17, Class IP, IO................................. 6.50% 02/25/38 1,646
862,827 Series 2008-389, Class 4, IO, STRIPS......................... 6.00% 03/25/38 149,457
12,642 Series 2009-10, Class AB..................................... 5.00% 03/25/24 13,075
997,276 Series 2009-11, Class PI, IO................................. 5.50% 03/25/36 182,092
4,640 Series 2009-14, Class BS, IO, 1 Mo. LIBOR (x) -1 +
6.25% (b) (e)............................................. 6.14% 03/25/24 109
1,084,906 Series 2009-37, Class NZ..................................... 5.71% 02/25/37 1,372,347
29,941 Series 2009-47, Class PE..................................... 4.00% 07/25/39 30,382
4,400,000 Series 2009-50, Class GX..................................... 5.00% 07/25/39 5,235,713
672,382 Series 2009-64, Class ZD..................................... 8.00% 08/25/39 847,740
115,704 Series 2009-69, Class PO, PO................................. (c) 09/25/39 106,150
3,515,591 Series 2009-85, Class J...................................... 4.50% 10/25/39 3,945,072
286,822 Series 2009-91, Class HL..................................... 5.00% 11/25/39 311,944
97,000 Series 2009-92, Class DB..................................... 5.00% 11/25/39 115,429
754,528 Series 2009-103, Class PZ.................................... 6.00% 12/25/39 1,063,888
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 257,996 Series 2009-106, Class SN, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 6.14% 01/25/40 $ 43,565
260,263 Series 2009-109, Class PZ.................................... 4.50% 01/25/40 303,213
78,296 Series 2009-115, Class HZ.................................... 5.00% 01/25/40 85,160
1,365,646 Series 2009-397, Class 2, IO, STRIPS......................... 5.00% 09/25/39 228,292
299,299 Series 2009-398, Class C13, IO, STRIPS....................... 4.00% 06/25/24 11,730
1,350,000 Series 2010-2, Class LC...................................... 5.00% 02/25/40 1,578,089
187,296 Series 2010-3, Class DZ...................................... 4.50% 02/25/40 221,711
212,573 Series 2010-21, Class KO, PO................................. (c) 03/25/40 198,885
500,000 Series 2010-35, Class EP..................................... 5.50% 04/25/40 612,306
451,524 Series 2010-35, Class SJ, 1 Mo. LIBOR (x) -3.33 +
17.67% (e)................................................ 17.31% 04/25/40 603,734
400,000 Series 2010-38, Class KC..................................... 4.50% 04/25/40 451,671
446,070 Series 2010-45, Class WB..................................... 5.00% 05/25/40 506,244
38,814 Series 2010-49, Class SC, 1 Mo. LIBOR (x) -2 + 12.66% (e).... 12.45% 03/25/40 49,336
452,444 Series 2010-68, Class BI, IO................................. 5.50% 07/25/50 104,022
45,716 Series 2010-75, Class MT (d)................................. 2.05% 12/25/39 47,043
374,513 Series 2010-110, Class KI, IO................................ 5.50% 10/25/25 13,879
170,698 Series 2010-115, Class PO, PO................................ (c) 04/25/40 161,643
310,970 Series 2010-129, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 11/25/40 35,353
2,821,000 Series 2010-142, Class DL.................................... 4.00% 12/25/40 3,222,897
2,204,193 Series 2010-147, Class KS, IO, 1 Mo. LIBOR (x) -1 +
5.95% (e)................................................. 5.84% 01/25/41 241,974
288,201 Series 2011-9, Class AZ...................................... 5.00% 05/25/40 321,420
1,507,000 Series 2011-10, Class AY..................................... 6.00% 02/25/41 2,002,709
168,856 Series 2011-30, Class LS, IO (f)............................. 1.96% 04/25/41 11,245
124,040 Series 2011-30, Class ZB..................................... 5.00% 04/25/41 144,368
170,916 Series 2011-47, Class AI, IO (b)............................. 5.50% 01/25/40 155
478,222 Series 2011-52, Class GB..................................... 5.00% 06/25/41 547,443
87,296 Series 2011-60, Class OA, PO................................. (c) 08/25/39 79,621
2,135,389 Series 2011-73, Class PI, IO................................. 4.50% 05/25/41 141,968
302,756 Series 2011-74, Class TQ, IO, 1 Mo. LIBOR (x) -6.43 +
55.93%, 4.50% Cap (e)..................................... 4.50% 12/25/33 36,373
5,868 Series 2011-75, Class BL..................................... 3.50% 08/25/21 5,873
17,529 Series 2011-86, Class DI, IO (b)............................. 3.50% 09/25/21 54
1,936,430 Series 2011-87, Class YI, IO................................. 5.00% 09/25/41 355,426
3,388,100 Series 2011-101, Class EI, IO................................ 3.50% 10/25/26 149,249
750,000 Series 2011-105, Class MB.................................... 4.00% 10/25/41 834,668
1,679,284 Series 2011-111, Class PZ.................................... 4.50% 11/25/41 2,035,745
3,388 Series 2011-113, Class GA.................................... 2.00% 11/25/21 3,396
226,289 Series 2011-118, Class IC, IO (b)............................ 3.50% 11/25/21 836
6,395,573 Series 2011-123, Class JS, IO, 1 Mo. LIBOR (x) -1 +
6.65% (e)................................................. 6.54% 03/25/41 971,371
12,507,890 Series 2011-123, Class ZP.................................... 4.50% 12/25/41 14,359,265
194,509 Series 2011-137, Class AI, IO (b)............................ 3.00% 01/25/22 999
330,634 Series 2011-145, Class IO, IO................................ 3.00% 01/25/22 1,911
83,278 Series 2012-8, Class TI, IO (b).............................. 3.00% 10/25/21 302
12,978,336 Series 2012-15, Class PZ..................................... 4.00% 03/25/42 14,487,232
1,340,741 Series 2012-28, Class PT..................................... 4.00% 03/25/42 1,482,412
776,952 Series 2012-39, Class PB..................................... 4.25% 04/25/42 899,050
</TABLE>
See Notes to Financial Statements Page 15
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 191,951 Series 2012-52, Class BZ..................................... 4.00% 05/25/42 $ 203,107
641,619 Series 2012-53, Class CI, IO................................. 3.00% 05/25/22 5,920
878,277 Series 2012-65, Class IO, IO................................. 5.50% 07/25/40 159,435
223,453 Series 2012-66, Class DI, IO................................. 3.50% 06/25/27 13,836
5,925,850 Series 2012-101, Class AI, IO................................ 3.00% 06/25/27 258,635
5,336,598 Series 2012-103, Class HI, IO................................ 3.00% 09/25/27 283,002
323,227 Series 2012-111, Class B..................................... 7.00% 10/25/42 391,098
2,156,527 Series 2012-118, Class DI, IO................................ 3.50% 01/25/40 83,494
231,395 Series 2012-118, Class IB, IO................................ 3.50% 11/25/42 35,955
12,499,075 Series 2012-122, Class SD, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.99% 11/25/42 2,331,615
435,138 Series 2012-133, Class KO, PO................................ (c) 12/25/42 265,044
594,646 Series 2012-138, Class MA.................................... 1.00% 12/25/42 586,057
1,780,380 Series 2012-146, Class QA.................................... 1.00% 01/25/43 1,739,262
393,991 Series 2012-409, Class 49, IO, STRIPS (f).................... 3.50% 11/25/41 52,841
506,709 Series 2012-409, Class 53, IO, STRIPS (f).................... 3.50% 04/25/42 69,312
1,425,113 Series 2012-409, Class C17, IO, STRIPS....................... 4.00% 11/25/41 239,083
690,000 Series 2013-10, Class HQ..................................... 2.50% 02/25/43 604,479
596,905 Series 2013-13, Class IK, IO................................. 2.50% 03/25/28 29,041
105,552 Series 2013-22, Class TS, 1 Mo. LIBOR (x) -1.50 +
6.08% (e)................................................. 5.90% 03/25/43 101,675
48,534 Series 2013-23, Class ZB..................................... 3.00% 03/25/43 39,818
13,768,246 Series 2013-33, Class UZ..................................... 3.50% 04/25/43 15,071,380
750,000 Series 2013-41, Class DB..................................... 3.00% 05/25/43 779,397
1,580,326 Series 2013-43, Class IX, IO................................. 4.00% 05/25/43 318,620
512,801 Series 2013-51, Class PI, IO................................. 3.00% 11/25/32 48,412
655,445 Series 2013-52, Class MD..................................... 1.25% 06/25/43 657,569
7,041,865 Series 2013-54, Class LI, IO................................. 7.00% 11/25/34 1,442,836
847,478 Series 2013-55, Class AI, IO................................. 3.00% 06/25/33 88,729
5,001,284 Series 2013-67, Class IL, IO................................. 6.50% 07/25/43 1,013,527
126,453 Series 2013-70, Class JZ..................................... 3.00% 07/25/43 133,919
177,555 Series 2013-75, Class FC, 1 Mo. LIBOR + 0.25% (a)............ 0.36% 07/25/42 178,090
75,214 Series 2013-94, Class CA..................................... 3.50% 08/25/38 75,410
30,671 Series 2013-103, Class IO, IO (b)............................ 3.50% 03/25/38 130
379,979 Series 2013-105, Class BN.................................... 4.00% 05/25/43 422,569
238,435 Series 2013-105, Class KO, PO................................ (c) 10/25/43 227,670
195,852 Series 2013-106, Class KN.................................... 3.00% 10/25/43 203,885
336,752 Series 2013-128, Class PO, PO................................ (c) 12/25/43 297,430
1,003,000 Series 2013-130, Class QY.................................... 4.50% 06/25/41 1,173,838
2,989,074 Series 2013-417, Class C21, IO, STRIPS....................... 4.00% 12/25/42 553,102
5,794,207 Series 2013-418, Class C1, IO, STRIPS........................ 3.50% 08/25/43 811,850
150,545 Series 2014-29, Class GI, IO................................. 3.00% 05/25/29 9,006
4,806,251 Series 2014-44, Class NI, IO................................. 4.50% 08/25/29 241,097
630,153 Series 2014-46, Class KA (f)................................. 7.44% 08/25/44 778,735
200,389 Series 2014-68, Class GI, IO................................. 4.50% 10/25/43 20,541
567,007 Series 2014-82, Class GZ..................................... 4.00% 12/25/44 649,775
1,152,993 Series 2014-84, Class LI, IO................................. 3.50% 12/25/26 51,835
875,000 Series 2015-16, Class MY..................................... 3.50% 04/25/45 978,213
8,000,000 Series 2015-19, Class JB..................................... 3.50% 04/25/45 8,838,582
171,965 Series 2015-38, Class GI, IO................................. 3.00% 09/25/43 8,285
14,238,747 Series 2015-40, Class AI, IO................................. 6.00% 05/25/37 2,789,795
</TABLE>
Page 16 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 1,191,230 Series 2015-76, Class BI, IO................................. 4.00% 10/25/39 $ 76,079
10,785,026 Series 2015-80, Class HZ..................................... 3.50% 11/25/45 11,614,076
182,771 Series 2015-93, Class KI, IO................................. 3.00% 09/25/44 12,277
4,061,172 Series 2015-97, Class AI, IO................................. 4.00% 09/25/41 192,251
5,434,998 Series 2016-2, Class EZ...................................... 2.50% 02/25/46 5,521,752
24,511,022 Series 2016-40, Class MS, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 07/25/46 5,571,809
11,840,549 Series 2016-44, Class Z...................................... 3.50% 07/25/46 12,690,270
10,538,480 Series 2016-62, Class SB, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.99% 09/25/46 1,863,329
1,102,912 Series 2016-71, Class NI, IO................................. 3.50% 04/25/46 142,200
5,548,478 Series 2016-73, Class PI, IO................................. 3.00% 08/25/46 695,546
488,085 Series 2016-74, Class HI, IO................................. 3.50% 10/25/46 77,248
447,962 Series 2016-84, Class DF, 1 Mo. LIBOR + 0.42% (a)............ 0.54% 11/25/46 448,054
1,162,916 Series 2016-87, Class AF, 1 Mo. LIBOR + 0.40% (a)............ 0.52% 11/25/46 1,160,277
12,190,495 Series 2017-18, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.94% 03/25/47 2,726,533
597,364 Series 2017-46, Class BY..................................... 3.00% 06/25/47 624,598
8,740,622 Series 2017-49, Class ZJ..................................... 4.00% 07/25/57 10,160,745
11,723,494 Series 2017-50, Class BZ..................................... 3.00% 07/25/47 12,655,034
22,769,555 Series 2017-54, Class IG, IO................................. 4.00% 07/25/47 3,279,169
9,792,320 Series 2017-65, Class SA, IO, 1 Mo. LIBOR (x) -1 + 5.90%,
5.00% Cap (e)............................................. 5.00% 09/25/47 1,639,688
3,853,607 Series 2017-84, Class ZK..................................... 3.50% 10/25/57 4,430,950
5,313,995 Series 2017-87, Class GI, IO................................. 4.00% 06/25/44 847,944
2,038,267 Series 2017-87, Class ZA..................................... 4.00% 11/25/57 2,349,806
2,465,444 Series 2018-17, Class Z...................................... 3.50% 03/25/48 2,780,332
29,311,138 Series 2018-76, Class ZL..................................... 4.00% 10/25/58 33,470,904
12,557,063 Series 2018-86, Class DL..................................... 3.50% 12/25/48 13,519,500
4,767,522 Series 2018-92, Class DA..................................... 3.50% 11/25/46 4,905,674
3,957,386 Series 2018-92, Class DB..................................... 3.50% 01/25/49 4,255,307
5,804,256 Series 2018-94, Class AZ..................................... 4.00% 01/25/49 6,357,971
14,849,991 Series 2019-8, Class DY...................................... 3.50% 03/25/49 15,791,848
18,690,413 Series 2019-12, Class HY..................................... 3.50% 04/25/59 20,775,882
7,816,751 Series 2019-17, Class GZ..................................... 4.00% 11/25/56 9,119,247
13,844,501 Series 2019-21, Class BL..................................... 4.00% 05/25/59 16,111,236
19,260,978 Series 2019-26, Class GA..................................... 3.50% 06/25/49 20,516,258
9,414,566 Series 2019-27, Class HA..................................... 3.00% 06/25/49 9,848,468
12,213,112 Series 2019-29, Class HT..................................... 3.00% 06/25/49 13,013,362
12,770,025 Series 2019-34, Class JA..................................... 3.00% 07/25/49 13,462,972
22,677,094 Series 2019-34, Class LA..................................... 3.00% 07/25/49 24,135,422
9,298,369 Series 2019-37, Class A...................................... 3.00% 07/25/49 9,790,825
20,884,990 Series 2019-41, Class SN, IO, 1 Mo. LIBOR (x) -1 +
6.05% (e)................................................. 5.94% 08/25/49 3,795,951
7,805,000 Series 2019-45, Class BU..................................... 3.00% 08/25/49 8,436,709
21,143,689 Series 2019-57, Class JA..................................... 2.50% 10/25/49 21,930,279
11,897,950 Series 2019-59, Class PT..................................... 2.50% 10/25/49 12,357,111
20,777,607 Series 2019-66, Class C...................................... 3.00% 11/25/49 21,764,275
46,726,779 Series 2019-68, Class KP..................................... 2.50% 11/25/49 49,289,313
33,207,995 Series 2019-70, Class WA, PO................................. (c) 11/25/42 30,193,221
23,839,665 Series 2020-1, Class LA...................................... 4.00% 02/25/60 28,313,259
</TABLE>
See Notes to Financial Statements Page 17
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 28,794,735 Series 2020-9, Class SJ, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.89% 02/25/50 $ 6,438,569
11,969,763 Series 2020-20, Class KI, IO................................. 4.00% 03/25/50 4,650,297
48,509,975 Series 2020-34, Class AI, IO................................. 3.50% 06/25/35 4,686,607
17,798,080 Series 2020-37, Class QI, IO................................. 4.50% 06/25/50 3,213,564
2,781,159 Series 2020-44, Class QZ..................................... 1.00% 07/25/50 2,671,366
2,922,460 Series 2020-44, Class ZQ..................................... 0.75% 07/25/50 2,796,101
6,896,242 Series 2020-66, Class IC, IO................................. 6.00% 10/25/47 1,394,600
57,771,769 Series 2020-74, Class IQ, IO................................. 6.00% 10/25/50 12,177,515
49,753,832 Series 2020-77, Class DI, IO................................. 4.00% 11/25/35 6,096,073
21,542,994 Series 2020-93, Class NI, IO................................. 3.00% 01/25/51 2,337,094
21,066,066 Series 2021-1, Class IB, IO.................................. 3.50% 02/25/61 4,407,126
25,828,472 Series 2021-11, Class YI, IO................................. 3.00% 11/25/50 3,494,778
6,057,747 Series 2021-18, Class GZ..................................... 3.00% 06/25/50 6,032,181
Government National Mortgage Association
26,873 Series 2001-60, Class PZ..................................... 6.00% 12/20/31 26,875
179,743 Series 2002-72, Class ZB..................................... 6.00% 10/20/32 179,857
261,626 Series 2002-75, Class PJ..................................... 5.50% 11/20/32 263,150
227,081 Series 2003-4, Class MZ...................................... 5.50% 01/20/33 244,255
413,515 Series 2003-18, Class PG..................................... 5.50% 03/20/33 446,185
1,404,076 Series 2003-35, Class TZ..................................... 5.75% 04/16/33 1,474,142
199,299 Series 2003-42, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)................................................. 6.48% 07/16/31 875
884,268 Series 2003-42, Class SH, IO, 1 Mo. LIBOR (x) -1 +
6.55% (e)................................................. 6.43% 05/20/33 3,160
119,185 Series 2003-62, Class MZ..................................... 5.50% 07/20/33 137,794
242,535 Series 2003-84, Class Z...................................... 5.50% 10/20/33 273,343
133,698 Series 2004-37, Class B...................................... 6.00% 04/17/34 151,633
504,378 Series 2004-49, Class MZ..................................... 6.00% 06/20/34 595,665
55,456 Series 2004-68, Class ZC..................................... 6.00% 08/20/34 62,977
66,891 Series 2004-71, Class ST, 1 Mo. LIBOR (x) -6.25 + 44.50%,
7.00% Cap (e)............................................. 7.00% 09/20/34 72,716
115,564 Series 2004-83, Class AK, 1 Mo. LIBOR (x) -3 +
16.49% (e)................................................ 16.14% 10/16/34 144,275
518,005 Series 2004-88, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 10/16/34 62,555
46,707 Series 2004-92, Class AK, 1 Mo. LIBOR (x) -3 +
16.50% (e)................................................ 16.15% 11/16/34 62,402
1,588,528 Series 2004-92, Class BZ..................................... 5.50% 11/16/34 1,815,486
225,911 Series 2004-105, Class JZ.................................... 5.00% 12/20/34 253,223
243,323 Series 2004-105, Class KA.................................... 5.00% 12/16/34 264,610
224,973 Series 2005-3, Class JZ...................................... 5.00% 01/16/35 240,381
224,973 Series 2005-3, Class KZ...................................... 5.00% 01/16/35 249,740
22,513 Series 2005-7, Class AJ, 1 Mo. LIBOR (x) -4 + 22.00% (e)..... 21.54% 02/16/35 33,300
75,998 Series 2005-7, Class KA, 1 Mo. LIBOR (x) -2.81 +
18.95% (e)................................................ 18.62% 12/17/34 82,697
253,752 Series 2005-7, Class MA, 1 Mo. LIBOR (x) -2.81 +
18.95% (e)................................................ 18.62% 12/17/34 301,226
182,386 Series 2005-33, Class AY..................................... 5.50% 04/16/35 204,259
161,464 Series 2005-41, Class PA..................................... 4.00% 05/20/35 175,808
356,205 Series 2005-44, Class IO, IO................................. 5.50% 07/20/35 41,043
</TABLE>
Page 18 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 3,174,803 Series 2005-78, Class ZA..................................... 5.00% 10/16/35 $ 3,559,751
280,044 Series 2005-93, Class PO, PO................................. (c) 06/20/35 270,837
529,331 Series 2006-17, Class TW..................................... 6.00% 04/20/36 609,699
500,000 Series 2006-38, Class OH..................................... 6.50% 08/20/36 594,340
180,670 Series 2006-61, Class ZA..................................... 5.00% 11/20/36 202,031
421,067 Series 2007-16, Class OZ..................................... 6.00% 04/20/37 501,807
162,271 Series 2007-27, Class SD, IO, 1 Mo. LIBOR (x) -1 +
6.20% (e)................................................. 6.08% 05/20/37 24,752
135,435 Series 2007-41, Class OL, PO................................. (c) 07/20/37 129,226
246,813 Series 2007-42, Class SB, IO, 1 Mo. LIBOR (x) -1 +
6.75% (e)................................................. 6.63% 07/20/37 39,848
124,571 Series 2007-68, Class NA..................................... 5.00% 11/20/37 137,132
779,038 Series 2007-71, Class ZD..................................... 6.00% 11/20/37 873,034
149,657 Series 2007-81, Class FZ, 1 Mo. LIBOR + 0.35% (a)............ 0.47% 12/20/37 150,461
111,402 Series 2008-16, Class PO, PO................................. (c) 02/20/38 102,338
5,471 Series 2008-20, Class PO, PO................................. (c) 09/20/37 5,455
1,861 Series 2008-29, Class PO, PO................................. (c) 02/17/33 1,860
120,150 Series 2008-33, Class XS, IO, 1 Mo. LIBOR (x) -1 +
7.70% (e)................................................. 7.58% 04/16/38 19,552
659,992 Series 2008-47, Class ML..................................... 5.25% 06/16/38 751,919
187,500 Series 2008-54, Class PE..................................... 5.00% 06/20/38 215,050
535,710 Series 2008-71, Class JI, IO................................. 6.00% 04/20/38 56,899
75,528 Series 2009-10, Class PA..................................... 4.50% 12/20/38 78,507
148,263 Series 2009-14, Class KI, IO................................. 6.50% 03/20/39 27,034
48,649 Series 2009-14, Class KS, IO, 1 Mo. LIBOR (x) -1 +
6.30% (e)................................................. 6.18% 03/20/39 6,678
114,619 Series 2009-25, Class SE, IO, 1 Mo. LIBOR (x) -1 +
7.60% (e)................................................. 7.48% 09/20/38 18,382
2,562,549 Series 2009-29, Class PC..................................... 7.00% 05/20/39 3,225,131
384,943 Series 2009-32, Class SZ..................................... 5.50% 05/16/39 464,031
417,668 Series 2009-42, Class BI, IO................................. 6.00% 06/20/39 52,416
3,732,521 Series 2009-57, Class VB..................................... 5.00% 06/16/39 4,295,763
809,835 Series 2009-61, Class OW, PO................................. (c) 11/16/35 763,434
253,309 Series 2009-61, Class PZ..................................... 7.50% 08/20/39 345,355
11,841,769 Series 2009-61, Class WQ, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 6.13% 11/16/35 2,066,936
1,005,122 Series 2009-69, Class ZB..................................... 6.00% 08/20/39 1,126,981
964,248 Series 2009-72, Class SM, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 6.13% 08/16/39 146,550
455,000 Series 2009-75, Class JN..................................... 5.50% 09/16/39 544,396
577,791 Series 2009-78, Class KZ..................................... 5.50% 09/16/39 708,687
136,015 Series 2009-79, Class OK, PO................................. (c) 11/16/37 128,244
135,951 Series 2009-81, Class TZ..................................... 5.50% 09/20/39 165,363
995,676 Series 2009-87, Class EI, IO................................. 5.50% 08/20/39 101,737
69,000 Series 2009-94, Class AL..................................... 5.00% 10/20/39 80,592
275,039 Series 2009-106, Class DZ.................................... 5.50% 11/20/39 334,716
5,261,705 Series 2009-106, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 04/20/36 873,326
46,775 Series 2009-106, Class WZ.................................... 5.50% 11/16/39 57,487
732,000 Series 2009-126, Class LB.................................... 5.00% 12/20/39 873,940
38,879 Series 2010-4, Class WA...................................... 3.00% 01/16/40 41,001
</TABLE>
See Notes to Financial Statements Page 19
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 3,430 Series 2010-7, Class BC...................................... 4.00% 09/16/24 $ 3,430
13,640 Series 2010-11, Class HE..................................... 4.00% 04/20/39 13,694
1,378,712 Series 2010-14, Class BV, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 6.13% 02/16/40 193,358
369,608 Series 2010-42, Class CO, PO................................. (c) 06/16/39 367,427
2,297,050 Series 2010-46, Class FC, 1 Mo. LIBOR + 0.80% (a)............ 0.92% 03/20/35 2,330,523
852,287 Series 2010-59, Class ZD..................................... 6.50% 05/20/40 1,148,535
1,544,791 Series 2010-85, Class SL, IO, 1 Mo. LIBOR (x) -1 +
6.60% (e)................................................. 6.48% 07/20/37 179,344
87,000 Series 2010-116, Class BM.................................... 4.50% 09/16/40 103,149
2,102,189 Series 2010-116, Class JB.................................... 5.00% 06/16/40 2,291,544
902,373 Series 2010-157, Class OP, PO................................ (c) 12/20/40 822,344
227,204 Series 2010-166, Class DI, IO................................ 4.50% 02/20/39 12,594
145,088 Series 2011-4, Class PZ...................................... 5.00% 01/20/41 170,743
402,282 Series 2011-19, Class MI, IO................................. 5.00% 06/16/40 6,728
771,202 Series 2011-35, Class BP..................................... 4.50% 03/16/41 884,088
311,231 Series 2011-48, Class LI, IO................................. 5.50% 01/16/41 48,698
7,977,212 Series 2011-61, Class WS, IO, 1 Mo. LIBOR (x) -1 +
6.47% (e)................................................. 6.35% 02/20/38 1,475,653
75,720 Series 2011-63, Class BI, IO................................. 6.00% 02/20/38 6,327
799,638 Series 2011-71, Class ZC..................................... 5.50% 07/16/34 897,083
2,079,103 Series 2011-81, Class IC, IO, 1 Mo. LIBOR (x) -1 + 6.72%,
0.62% Cap (e)............................................. 0.62% 07/20/35 32,049
608,526 Series 2011-112, Class IP, IO (b)............................ 0.50% 08/16/26 1
239,265 Series 2011-129, Class CL.................................... 5.00% 03/20/41 270,158
8,313 Series 2011-136, Class GB.................................... 2.50% 05/20/40 8,495
208,413 Series 2011-137, Class WA (f)................................ 5.58% 07/20/40 244,161
300,437 Series 2011-146, Class EI, IO................................ 5.00% 11/16/41 57,272
56,465 Series 2011-151, Class TB, IO, 1 Mo. LIBOR (x) -70 +
465.50%, 3.50% Cap (e).................................... 3.50% 04/20/41 4,333
1,076,380 Series 2012-10, Class LI, IO................................. 3.50% 07/20/40 19,890
2,954,743 Series 2012-18, Class IA, IO, 1 Mo. LIBOR (x) -1 + 6.68%,
0.58% Cap (e)............................................. 0.58% 07/20/39 31,734
1,331,453 Series 2012-48, Class MI, IO................................. 5.00% 04/16/42 245,676
10,758,384 Series 2012-84, Class QS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 07/16/42 1,657,117
6,711,842 Series 2012-84, Class SJ, 1 Mo. LIBOR (x) -0.57 +
2.51% (e)................................................. 2.45% 07/16/42 5,739,377
251,623 Series 2012-108, Class KB.................................... 2.75% 09/16/42 264,447
129,422 Series 2012-143, Class IB, IO................................ 3.50% 12/20/39 1,104
6,260,245 Series 2012-143, Class TI, IO................................ 3.00% 12/16/27 398,468
2,242,253 Series 2012-149, Class PC (f)................................ 6.34% 12/20/42 2,653,642
18,528,201 Series 2013-4, Class IC, IO.................................. 4.00% 09/20/42 3,881,069
104,565 Series 2013-5, Class IA, IO.................................. 3.50% 10/16/42 13,058
962,967 Series 2013-10, Class DI, IO................................. 3.50% 09/20/42 137,727
238,691 Series 2013-20, Class KI, IO................................. 5.00% 01/20/43 28,200
2,223,000 Series 2013-20, Class QM..................................... 2.63% 02/16/43 2,241,206
1,944,891 Series 2013-22, Class IO, IO................................. 3.00% 02/20/43 255,918
5,162,994 Series 2013-23, Class IP, IO................................. 3.50% 08/20/42 767,610
2,680,218 Series 2013-53, Class OI, IO................................. 3.50% 04/20/43 281,333
2,369,424 Series 2013-69, Class AI, IO................................. 3.50% 05/20/43 329,535
</TABLE>
Page 20 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 276,258 Series 2013-69, Class PI, IO................................. 5.00% 05/20/43 $ 32,225
953,680 Series 2013-70, Class PM..................................... 2.50% 05/20/43 947,984
4,629,000 Series 2013-91, Class PB..................................... 3.50% 09/20/42 4,868,922
1,240,819 Series 2013-130, Class WS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 09/20/43 262,734
4,809,923 Series 2013-170, Class IG, IO................................ 5.50% 11/16/43 547,936
688,000 Series 2013-183, Class PB.................................... 4.50% 12/20/43 775,024
3,840,491 Series 2014-6, Class IJ, IO.................................. 4.50% 06/16/43 247,035
17,404,539 Series 2014-30, Class EA (f)................................. 1.81% 02/16/44 17,864,679
5,174,997 Series 2014-43, Class Z...................................... 4.00% 03/20/44 6,121,638
3,813,170 Series 2014-44, Class IC, IO................................. 3.00% 04/20/28 241,236
9,198,622 Series 2014-44, Class ID, IO (d) (f)......................... 0.34% 03/16/44 88,197
36,750 Series 2014-91, Class JI, IO................................. 4.50% 01/20/40 2,158
553,507 Series 2014-94, Class Z...................................... 4.50% 01/20/44 681,491
4,353,132 Series 2014-99, Class HI, IO................................. 4.50% 06/20/44 628,282
5,500,452 Series 2014-115, Class QI, IO................................ 3.00% 03/20/29 244,095
3,782,461 Series 2014-116, Class SB, IO, 1 Mo. LIBOR (x) -1 +
5.60% (e)................................................. 5.48% 08/20/44 743,324
2,365,104 Series 2014-118, Class TV, IO, 1 Mo. LIBOR (x) -1 +
6.25% (e)................................................. 6.13% 05/20/44 417,593
6,956,525 Series 2015-3, Class ZD...................................... 4.00% 01/20/45 8,191,088
13,789,656 Series 2015-40, Class IO, IO................................. 4.00% 03/20/45 2,245,996
7,190,650 Series 2015-66, Class LI, IO................................. 5.00% 05/16/45 801,916
49,567 Series 2015-95, Class IK, IO (f)............................. 1.37% 05/16/37 963
14,331,056 Series 2015-99, Class EI, IO................................. 5.50% 07/16/45 2,749,030
9,593,455 Series 2015-119, Class TI, IO................................ 3.50% 05/20/41 204,676
12,244,285 Series 2015-124, Class DI, IO................................ 3.50% 01/20/38 717,499
350,962 Series 2015-137, Class WA (d) (f)............................ 5.53% 01/20/38 412,106
725,529 Series 2015-138, Class MI, IO................................ 4.50% 08/20/44 85,950
155,527 Series 2015-151, Class KW (f)................................ 5.64% 04/20/34 171,395
3,546,778 Series 2015-162, Class ZG.................................... 4.00% 11/20/45 4,285,552
5,464,982 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 787,830
186,789 Series 2016-16, Class KZ..................................... 3.00% 02/16/46 189,451
271,800 Series 2016-55, Class PB (f)................................. 5.86% 03/20/31 296,258
1,376,216 Series 2016-69, Class WI, IO................................. 4.50% 05/20/46 327,958
3,864,755 Series 2016-75, Class SA, IO, 1 Mo. LIBOR (x) -1 +
6.00% (e)................................................. 5.88% 05/20/40 655,276
857,301 Series 2016-78, Class UI, IO................................. 4.00% 06/20/46 93,524
4,193,226 Series 2016-89, Class HI, IO................................. 3.50% 07/20/46 701,040
465,147 Series 2016-99, Class JA (f)................................. 5.52% 11/20/45 542,921
978,211 Series 2016-109, Class ZM.................................... 3.50% 08/20/36 1,063,599
9,295,322 Series 2016-111, Class PI, IO................................ 3.50% 06/20/45 924,542
1,035,654 Series 2016-118, Class GI, IO................................ 4.50% 02/16/40 146,905
10,997,700 Series 2016-120, Class AS, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 09/20/46 2,899,082
464,000 Series 2016-141, Class PC.................................... 5.00% 10/20/46 571,752
314,693 Series 2016-145, Class LZ.................................... 3.00% 10/20/46 303,671
931,717 Series 2016-154, Class WF, 1 Mo. LIBOR + 0.40% (a)........... 0.52% 11/20/45 930,935
11,404,434 Series 2016-156, Class ZM.................................... 3.50% 11/20/46 11,598,430
303,000 Series 2016-160, Class LE.................................... 2.50% 11/20/46 296,106
277,631 Series 2016-167, Class KI, IO................................ 6.00% 12/16/46 46,529
</TABLE>
See Notes to Financial Statements Page 21
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 3,033,637 Series 2017-12, Class SD, IO, 1 Mo. LIBOR (x) -1 +
6.10% (e)................................................. 5.98% 01/20/47 $ 627,517
897,607 Series 2017-17, Class KZ..................................... 4.50% 02/20/47 1,102,129
5,800,081 Series 2017-32, Class DI, IO................................. 5.50% 05/20/35 1,133,263
3,402,633 Series 2017-32, Class IB, IO................................. 5.00% 02/16/47 415,918
5,867,104 Series 2017-33, Class PZ..................................... 3.00% 02/20/47 6,234,284
6,261,835 Series 2017-56, Class BI, IO................................. 6.00% 04/16/47 1,151,574
12,538,450 Series 2017-57, Class IO, IO................................. 5.00% 04/20/47 2,335,543
22,175,784 Series 2017-104, Class LT.................................... 3.00% 07/20/47 23,956,872
4,422,484 Series 2017-113, Class IE, IO................................ 5.50% 07/20/47 696,986
7,897,021 Series 2017-117, Class ZN.................................... 3.00% 08/20/47 8,651,471
12,001,684 Series 2017-122, Class CZ.................................... 3.00% 08/20/47 13,135,946
5,807,298 Series 2017-123, Class IO, IO................................ 5.00% 08/16/47 1,272,831
6,893,420 Series 2017-130, Class LS, IO, 1 Mo. LIBOR (x) -1 +
6.20% (e)................................................. 6.08% 08/16/47 1,156,329
6,916,302 Series 2017-133, Class JI, IO................................ 7.00% 06/20/41 1,200,592
11,201,170 Series 2017-134, Class AZ.................................... 3.00% 09/20/47 12,230,572
7,093,082 Series 2017-177, Class DI, IO................................ 4.50% 11/16/47 1,262,008
15,510,450 Series 2017-179, Class IN, IO................................ 5.00% 07/20/44 4,225,349
5,281,732 Series 2017-186, Class TI, IO, 1 Mo. LIBOR (x) -1 + 6.50%,
0.50% Cap (e)............................................. 0.50% 05/20/40 61,824
881,483 Series 2018-44, Class Z...................................... 2.50% 09/20/47 855,126
3,217,810 Series 2018-53, Class VA..................................... 3.50% 07/20/29 3,474,542
5,175,212 Series 2018-78, Class EZ..................................... 3.00% 04/20/48 5,405,845
7,149,501 Series 2018-79, Class IO, IO................................. 5.00% 06/20/48 1,118,522
5,484 Series 2018-89, Class A...................................... 3.50% 06/20/39 5,485
12,609,482 Series 2018-97, Class DZ..................................... 3.50% 07/20/48 14,225,893
8,784,919 Series 2018-131, Class IA, IO................................ 5.00% 04/20/44 1,104,913
10,000,000 Series 2018-134, Class KB.................................... 3.50% 10/20/48 10,664,223
10,556,000 Series 2018-155, Class KD.................................... 4.00% 11/20/48 11,505,008
10,908,217 Series 2018-160, Class GY.................................... 4.50% 11/20/48 11,719,231
4,818,799 Series 2019-6, Class EI, IO.................................. 5.00% 09/20/39 651,925
12,160,066 Series 2019-15, Class MZ..................................... 4.50% 02/20/49 13,272,559
12,488,006 Series 2019-18, Class TP..................................... 3.50% 02/20/49 13,499,496
1,547,712 Series 2019-27, Class DI, IO................................. 5.50% 01/20/40 249,767
3,349,950 Series 2019-35, Class BZ..................................... 3.50% 03/20/49 3,960,187
5,282,388 Series 2019-45, Class ZB..................................... 3.50% 04/20/49 6,089,129
25,700,785 Series 2020-31, Class IO, IO................................. 6.50% 03/20/50 4,335,411
18,901,799 Series 2020-62, Class IA, IO................................. 5.50% 05/20/50 3,870,228
3,000,000 Series 2020-62, Class IC, IO................................. 2.50% 01/20/50 790,025
14,014,801 Series 2020-62, Class WI, IO................................. 2.50% 08/20/49 3,839,345
7,097,422 Series 2020-84, Class IM, IO................................. 2.50% 05/20/50 1,871,247
19,759,118 Series 2020-84, Class IO, IO................................. 2.50% 04/20/50 5,763,099
36,849,161 Series 2020-104, Class AI, IO................................ 3.00% 07/20/50 5,303,637
31,846,398 Series 2020-129, Class IO, IO................................ 2.50% 09/20/50 3,987,481
102,760,236 Series 2020-129, Class IU, IO................................ 2.50% 09/20/50 13,228,849
21,474,539 Series 2020-144, Class IK, IO................................ 2.50% 09/20/50 2,791,413
66,370,765 Series 2020-146, Class CI, IO................................ 2.50% 10/20/50 8,009,093
49,904,099 Series 2020-162, Class NI, IO................................ 2.50% 10/20/50 6,455,729
67,448,864 Series 2020-173, Class MI, IO................................ 2.50% 11/20/50 9,191,142
24,776,120 Series 2020-189, Class IV, IO................................ 3.00% 12/20/50 3,455,744
</TABLE>
Page 22 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 130,655,591 Series 2021-7, Class KI, IO.................................. 2.50% 01/20/51 $ 17,008,288
28,371,148 Series 2021-8, Class DI, IO.................................. 3.50% 01/20/51 4,236,927
18,709,706 Series 2021-15, Class JI, IO................................. 2.50% 01/20/51 2,245,404
117,512,368 Series 2021-24, Class XI, IO................................. 2.00% 02/20/51 14,217,962
54,462,042 Series 2021-27, Class IO, IO................................. 2.50% 02/20/51 8,316,120
41,623,435 Series 2021-27, Class PI, IO................................. 2.00% 02/20/51 4,542,178
38,629,485 Series 2021-32, Class AI, IO................................. 2.00% 02/20/51 4,590,133
Vendee Mortgage Trust
2,529,604 Series 2003-2, Class Z....................................... 5.00% 05/15/33 2,856,030
1,167 Series 2010-1, Class DA...................................... 4.25% 02/15/35 1,165
8,228,557 Series 2010-1, Class DZ...................................... 4.25% 04/15/40 8,831,070
13,476,684 Series 2011-1, Class DZ...................................... 3.75% 09/15/46 14,131,022
25,086,535 Series 2011-2, Class DZ...................................... 3.75% 10/15/41 26,746,220
----------------
1,890,961,291
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 9.4%
Federal Home Loan Mortgage Corporation Multiclass Certificates
50,000,000 Series 2020-RR06, Class BX, IO (f)........................... 1.84% 05/27/33 7,642,424
37,600,000 Series 2020-RR09, Class AX, IO (f) (h) (i)................... 2.63% 11/27/28 6,750,328
47,500,000 Series 2020-RR09, Class BX, IO (f) (h) (i)................... 2.20% 02/27/29 7,410,950
96,907,000 Series 2020-RR10, Class X, IO (f)............................ 2.01% 12/27/27 10,613,095
112,919,000 Series 2020-RR11, Class AX, IO (f)........................... 2.84% 01/27/29 20,414,028
112,345,000 Series 2021-RR15, Class X, IO (d) (h)........................ 1.56% 10/27/34 17,624,122
Federal Home Loan Mortgage Corporation Multifamily
Structured Pass Through Certificates
85,767,505 Series 2011-K016, Class X1, IO (d)........................... 1.64% 10/25/21 57,473
57,392,782 Series 2012-K019, Class X1, IO (d)........................... 1.72% 03/25/22 425,372
63,108,256 Series 2012-K020, Class X1, IO (d)........................... 1.47% 05/25/22 677,770
120,171,638 Series 2013-K030, Class X1, IO (d)........................... 0.28% 04/25/23 350,312
77,144,572 Series 2014-K036, Class X1, IO (d)........................... 0.86% 10/25/23 1,218,252
91,381,374 Series 2015-K721, Class X1, IO (d)........................... 0.41% 08/25/22 301,686
239,596,525 Series 2016-KIR1, Class X, IO (d)............................ 1.20% 03/25/26 10,504,966
4,310,000 Series 2017-K153, Class A3................................... 3.12% 10/25/31 4,772,411
11,000,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 12,753,427
189,269,481 Series 2018-K156, Class X1, IO (d)........................... 0.21% 06/25/33 1,993,784
5,500,000 Series 2018-K158, Class A3................................... 3.90% 10/25/33 6,493,601
352,423,192 Series 2018-K158, Class X1, IO (d)........................... 0.21% 10/25/33 4,206,241
40,568,008 Series 2019-K094, Class X1, IO (d)........................... 1.02% 06/25/29 2,591,732
57,921,930 Series 2019-K099, Class X1, IO (d)........................... 1.01% 09/25/29 3,783,750
57,790,000 Series 2019-K099, Class XAM, IO (d).......................... 1.26% 09/25/29 5,087,358
69,827,780 Series 2019-K101, Class X1, IO (f)........................... 0.95% 10/25/29 4,355,878
64,993,000 Series 2019-K102, Class XAM, IO (f).......................... 1.21% 10/25/29 5,494,069
59,029,000 Series 2019-K103, Class XAM, IO (d).......................... 1.01% 11/25/29 4,206,430
104,133,812 Series 2019-K734, Class X1, IO (d)........................... 0.79% 02/25/26 2,809,874
68,018,000 Series 2019-K734, Class XAM, IO (d).......................... 0.56% 02/25/26 1,401,120
42,654,346 Series 2019-K735, Class X1, IO (d)........................... 1.09% 05/25/26 1,864,421
58,269,035 Series 2019-K736, Class X1, IO (d)........................... 1.44% 07/25/26 3,358,551
28,648,914 Series 2019-K1510, Class X1, IO (d).......................... 0.64% 01/25/34 1,396,924
158,681,423 Series 2019-K1512, Class X1, IO (d).......................... 1.05% 04/25/34 13,926,659
57,054,969 Series 2019-K1513, Class X1, IO (d).......................... 0.99% 08/25/34 4,810,995
152,761,204 Series 2019-K1514, Class X1, IO (d).......................... 0.70% 10/25/34 9,454,421
</TABLE>
See Notes to Financial Statements Page 23
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
Federal Home Loan Mortgage Corporation Multifamily
Structured Pass Through Certificates (Continued)
$ 18,674,000 Series 2020-K109, Class XAM, IO (d).......................... 1.92% 04/25/30 $ 2,715,739
106,975,561 Series 2020-K110, Class X1, IO (d)........................... 1.81% 04/25/30 13,745,600
75,261,419 Series 2020-K112, Class X1, IO (d)........................... 1.54% 05/25/30 8,496,231
29,090,000 Series 2020-K112, Class XAM, IO (d).......................... 1.77% 05/25/30 3,958,070
82,019,000 Series 2020-K113, Class XAM, IO (d).......................... 1.69% 06/25/30 10,752,732
34,000,000 Series 2020-K114, Class XAM, IO (d).......................... 1.44% 06/25/30 3,766,078
45,150,029 Series 2020-K115, Class X1, IO (d)........................... 1.43% 06/25/30 4,740,825
55,537,412 Series 2020-K115, Class XAM, IO (d).......................... 1.65% 07/25/30 7,109,733
16,486,266 Series 2020-K116, Class X1, IO (d)........................... 1.53% 07/25/30 1,830,579
55,500,000 Series 2020-K116, Class XAM, IO (d).......................... 1.70% 08/25/30 7,440,086
63,500,000 Series 2020-K117, Class XAM, IO (d).......................... 1.53% 09/25/30 7,667,676
34,956,473 Series 2020-K118, Class X1, IO (d)........................... 1.05% 09/25/30 2,722,550
37,051,661 Series 2020-K118, Class XAM, IO (d).......................... 1.26% 09/25/30 3,701,928
51,000,000 Series 2020-K119, Class XAM, IO (d).......................... 1.23% 10/25/30 4,923,316
75,535,017 Series 2020-K120, Class XAM, IO (d).......................... 1.31% 10/25/30 7,834,009
21,236,000 Series 2020-K121, Class XAM, IO (d).......................... 1.29% 11/25/30 2,187,805
53,573,681 Series 2020-K122, Class X1, IO (d)........................... 0.97% 11/25/30 3,850,748
35,210,000 Series 2020-K122, Class XAM, IO (d).......................... 1.17% 11/25/30 3,280,882
75,880,030 Series 2020-K737, Class X1, IO (f)........................... 0.75% 10/25/26 2,335,246
38,559,000 Series 2020-K738, Class XAM, IO (f).......................... 1.48% 03/25/27 2,909,940
136,044,691 Series 2020-K739, Class X1, IO (d)........................... 1.39% 09/25/27 9,386,648
40,072,531 Series 2020-K739, Class XAM, IO (d).......................... 1.71% 09/25/27 3,776,876
33,000,000 Series 2020-K740, Class XAM (d).............................. 1.20% 10/25/27 2,227,002
76,925,338 Series 2020-K1515, Class X1, IO (d).......................... 1.64% 02/25/35 12,076,117
52,251,646 Series 2020-K1516, Class X1, IO (d).......................... 1.63% 05/25/35 8,671,061
64,463,259 Series 2020-K1517, Class X1, IO (d).......................... 1.45% 07/25/35 9,405,654
52,985,502 Series 2020-KG04, Class X1, IO (d)........................... 0.94% 11/25/30 3,630,106
49,625,000 Series 2021-K123, Class XAM, IO (a).......................... 1.07% 12/25/30 4,230,278
26,688,000 Series 2021-K124, Class XAM, IO (d).......................... 1.03% 01/25/31 2,189,323
41,267,000 Series 2021-K125, Class XAM, IO (d).......................... 0.87% 02/25/31 2,874,907
33,900,000 Series 2021-K128, Class XAM, IO (d).......................... 0.74% 03/25/31 2,276,649
107,703,000 Series 2021-K741, Class XAM, IO (d).......................... 1.03% 12/25/27 6,377,633
150,000,000 Series 2021-K1520, Class X1, IO (d).......................... 0.47% 02/25/36 8,046,255
142,000,000 Series 2021-KG05, Class X1, IO (d)........................... 0.40% 01/25/31 3,909,601
FREMF Mortgage Trust
3,000,000 Series 2011-K15, Class B (d) (j)............................. 5.14% 08/25/44 3,020,244
3,260,829 Series 2015-K721, Class B (d) (j)............................ 3.67% 11/25/47 3,379,712
Government National Mortgage Association
3,400,807 Series 2011-31, Class Z (f).................................. 3.80% 09/16/52 3,610,715
18,200,079 Series 2012-120, Class Z (f)................................. 2.51% 01/16/55 17,665,985
12,798,624 Series 2012-125, Class Z (f)................................. 2.34% 05/16/53 11,625,510
532,000 Series 2013-57, Class D (f).................................. 2.35% 06/16/46 536,975
100,000 Series 2013-74, Class AG (d)................................. 2.80% 12/16/53 99,324
12,634 Series 2013-194, Class AE (f)................................ 2.75% 11/16/44 13,091
23,000,000 Series 2014-153, Class D (f)................................. 3.00% 04/16/56 23,670,685
15,590,204 Series 2015-30, Class DZ..................................... 2.95% 05/16/55 15,742,988
36,214,200 Series 2015-30, Class IO, IO (f)............................. 0.83% 07/16/56 1,472,466
9,770,692 Series 2015-70, Class IO, IO (f)............................. 0.67% 12/16/49 294,205
36,496,062 Series 2015-107, Class IO, IO (f)............................ 0.67% 03/16/57 1,033,408
5,108,238 Series 2015-125, Class VA (f)................................ 2.70% 05/16/35 5,304,620
</TABLE>
Page 24 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 30,629,907 Series 2016-2, Class IO, IO (f).............................. 0.75% 04/16/57 $ 1,204,402
2,500,000 Series 2016-7, Class B....................................... 2.80% 07/16/57 2,583,614
21,074,115 Series 2016-11, Class IO, IO (f)............................. 0.86% 01/16/56 1,049,272
16,616,019 Series 2016-26, Class IO, IO (f)............................. 0.78% 02/16/58 703,472
67,710,082 Series 2016-28, Class IO, IO (f)............................. 0.85% 12/16/57 3,328,452
48,524,596 Series 2016-34, Class IO, IO (f)............................. 0.96% 01/16/58 2,622,604
44,086,750 Series 2016-35, Class IO, IO (f)............................. 0.80% 03/16/58 2,096,964
17,194,176 Series 2016-36, Class IO, IO (f)............................. 0.79% 08/16/57 734,643
30,312,797 Series 2016-50, Class IO, IO (f)............................. 0.90% 08/16/57 1,287,375
27,704,440 Series 2016-52, Class IO, IO (f)............................. 0.82% 03/16/58 1,296,266
89,949,912 Series 2016-64, Class IO, IO (f)............................. 0.93% 12/16/57 4,411,998
4,279,236 Series 2016-110, Class VA.................................... 2.10% 01/16/38 4,212,634
24,873,706 Series 2016-113, Class IO, IO (f)............................ 1.15% 02/16/58 1,619,602
16,757,560 Series 2016-127, Class IO, IO (f)............................ 0.89% 05/16/58 937,919
157,281,192 Series 2016-131, Class IO, IO (f)............................ 0.85% 08/16/58 8,594,709
85,832,591 Series 2016-133, Class IO, IO (f)............................ 0.93% 12/16/57 3,995,353
62,914,493 Series 2016-143, Class IO, IO................................ 0.88% 10/16/56 3,544,917
30,853,413 Series 2016-152, Class IO, IO (d)............................ 0.80% 08/15/58 1,682,511
52,079,590 Series 2016-158, Class IO, IO (f)............................ 0.79% 06/16/58 2,555,504
102,814,337 Series 2016-166, Class IO, IO (f)............................ 1.02% 04/16/58 6,187,130
68,736,396 Series 2017-7, Class IO, IO (f).............................. 0.76% 12/16/58 3,572,395
3,068,384 Series 2017-23, Class Z...................................... 2.50% 05/16/59 2,943,590
3,992,414 Series 2017-35, Class Z (f).................................. 2.50% 05/16/59 3,812,779
4,405,906 Series 2017-44, Class B...................................... 2.60% 04/17/50 4,405,247
7,020,000 Series 2017-76, Class B...................................... 2.60% 12/16/56 6,880,623
7,390,000 Series 2017-90, Class B...................................... 2.75% 12/16/57 7,486,829
4,780,000 Series 2017-106, Class AE.................................... 2.60% 12/16/56 4,837,672
81,282,313 Series 2017-126, Class IO, IO (d) (f)........................ 0.77% 08/16/59 4,812,579
2,068,126 Series 2017-145, Class B..................................... 2.70% 10/16/51 2,077,987
2,533,338 Series 2017-146, Class Z..................................... 2.60% 09/16/57 2,478,304
18,101,870 Series 2018-2, Class IO, IO (f).............................. 0.73% 12/16/59 981,386
4,174,600 Series 2018-4, Class Z....................................... 2.50% 10/16/59 3,979,197
16,695,224 Series 2018-123, Class Z..................................... 2.50% 06/16/60 14,801,736
9,182,473 Series 2018-150, Class Z..................................... 3.20% 02/16/60 9,011,424
23,878,016 Series 2018-170, Class Z..................................... 2.50% 11/16/60 23,281,173
17,641,420 Series 2019-7, Class Z....................................... 2.50% 01/16/61 16,961,706
1,805,480 Series 2019-104, Class Z..................................... 2.80% 05/16/61 1,738,584
2,347,829 Series 2019-113, Class Z..................................... 3.00% 06/16/61 2,083,440
1,549,723 Series 2019-122, Class Z..................................... 3.00% 07/16/61 1,491,341
4,690,293 Series 2019-139, Class Z (f)................................. 2.90% 11/16/61 4,394,495
5,190,817 Series 2020-12, Class Z (f).................................. 3.00% 11/16/61 4,998,873
10,200,000 Series 2020-143, Class B..................................... 2.00% 03/16/62 9,298,994
6,700,000 Series 2020-161, Class B..................................... 2.00% 08/16/62 5,736,159
8,562,746 Series 2020-169, Class Z..................................... 1.83% 06/16/62 6,449,556
----------------
654,435,645
----------------
PASS-THROUGH SECURITIES -- 45.4%
Federal Home Loan Mortgage Corporation
1,930,225 Pool 760043, 5 Yr. Constant Maturity Treasury Rate +
1.39% (a)................................................. 2.95% 12/01/48 2,017,594
</TABLE>
See Notes to Financial Statements Page 25
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
PASS-THROUGH SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corporation (Continued)
$ 5,705,508 Pool 840359, 12 Mo. LIBOR + 1.64% (a)........................ 2.34% 06/01/46 $ 5,960,207
106,218 Pool A19763.................................................. 5.00% 04/01/34 119,725
51,917 Pool A47333.................................................. 5.00% 10/01/35 60,122
457,238 Pool A47828.................................................. 3.50% 08/01/35 490,229
254,278 Pool A47829.................................................. 4.00% 08/01/35 279,719
231,842 Pool A47937.................................................. 5.50% 08/01/35 268,882
83,979 Pool A48972.................................................. 5.50% 05/01/36 96,794
82,120 Pool A54675.................................................. 5.50% 01/01/36 95,680
184,522 Pool A65324.................................................. 5.50% 09/01/37 209,501
58,911 Pool A86143.................................................. 5.00% 05/01/39 68,232
20,328 Pool A90319.................................................. 5.00% 12/01/39 23,545
297,520 Pool A92197.................................................. 5.00% 05/01/40 344,598
8,132 Pool A93093.................................................. 4.50% 07/01/40 9,190
12,398 Pool A93891.................................................. 4.00% 09/01/40 13,773
14,585 Pool A94729.................................................. 4.00% 11/01/40 16,047
62,513 Pool A94843.................................................. 4.00% 11/01/40 69,442
250,665 Pool A95441.................................................. 4.00% 12/01/40 278,199
25,892 Pool A95653.................................................. 4.00% 12/01/40 28,762
40,974 Pool A95728.................................................. 4.00% 12/01/40 45,516
52,072 Pool A96380.................................................. 4.00% 01/01/41 57,526
126,583 Pool A97294.................................................. 4.00% 02/01/41 139,147
738,602 Pool B70791.................................................. 4.00% 06/01/39 807,329
4,308 Pool C01310.................................................. 6.50% 03/01/32 4,998
12,997 Pool C01574.................................................. 5.00% 06/01/33 14,968
15,187 Pool C03458.................................................. 5.00% 02/01/40 17,590
50,701 Pool C03949.................................................. 3.50% 05/01/42 55,564
120,857 Pool C04269.................................................. 3.00% 10/01/42 129,295
231,191 Pool C91167.................................................. 5.00% 04/01/28 256,155
161,132 Pool C91353.................................................. 3.50% 01/01/31 172,328
351,691 Pool C91366.................................................. 4.50% 04/01/31 388,520
22,912 Pool C91482.................................................. 3.50% 07/01/32 24,643
21,426 Pool E02883.................................................. 4.00% 04/01/26 22,910
21,016 Pool G01443.................................................. 6.50% 08/01/32 24,137
50,496 Pool G01737.................................................. 5.00% 12/01/34 58,454
27,760 Pool G01840.................................................. 5.00% 07/01/35 32,132
320,522 Pool G02017.................................................. 5.00% 12/01/35 371,150
59,165 Pool G03072.................................................. 5.00% 11/01/36 68,429
326,118 Pool G04593.................................................. 5.50% 01/01/37 379,677
30,483 Pool G04632.................................................. 5.00% 11/01/36 35,256
141,828 Pool G04814.................................................. 5.50% 10/01/38 165,835
53,432 Pool G04913.................................................. 5.00% 03/01/38 61,870
30,313 Pool G05173.................................................. 4.50% 11/01/31 33,439
460,767 Pool G05275.................................................. 5.50% 02/01/39 538,348
89,603 Pool G05449.................................................. 4.50% 05/01/39 101,258
344,323 Pool G05792.................................................. 4.50% 02/01/40 389,116
289,033 Pool G05927.................................................. 4.50% 07/01/40 326,655
20,562 Pool G06252.................................................. 4.00% 02/01/41 22,708
405,125 Pool G06359.................................................. 4.00% 02/01/41 449,523
63,222 Pool G06501.................................................. 4.00% 04/01/41 70,124
251,626 Pool G06583.................................................. 5.00% 06/01/41 290,988
122,110 Pool G06687.................................................. 5.00% 07/01/41 141,201
</TABLE>
Page 26 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 68,343 Pool G06739.................................................. 4.50% 09/01/41 $ 77,235
387,447 Pool G07025.................................................. 5.00% 02/01/42 448,048
596,113 Pool G07100.................................................. 5.50% 07/01/40 696,382
12,401 Pool G07219.................................................. 5.00% 10/01/41 14,285
65,162 Pool G07266.................................................. 4.00% 12/01/42 72,296
427,525 Pool G07329.................................................. 4.00% 01/01/43 474,439
477,048 Pool G07683.................................................. 4.00% 03/01/44 529,370
383,751 Pool G07806.................................................. 5.00% 06/01/41 438,136
2,455 Pool G08113.................................................. 6.50% 02/01/36 2,762
1,931,317 Pool G08854.................................................. 5.00% 12/01/48 2,145,628
4,314 Pool G12312.................................................. 6.00% 09/01/21 4,328
2,609 Pool G12797.................................................. 6.50% 02/01/22 2,618
25,552 Pool G12959.................................................. 6.50% 10/01/22 26,112
1,223 Pool G12978.................................................. 5.50% 12/01/22 1,252
9 Pool G13581.................................................. 5.50% 11/01/21 9
25,807 Pool G13623.................................................. 4.50% 08/01/24 27,138
24,797 Pool G13625.................................................. 5.50% 01/01/24 25,697
57,640 Pool G13733.................................................. 5.00% 11/01/24 61,079
51,145 Pool G14088.................................................. 4.00% 02/01/26 54,582
67,112 Pool G14106.................................................. 6.00% 10/01/24 69,715
19,097 Pool G14167.................................................. 5.50% 07/01/23 19,700
19,622 Pool G14233.................................................. 6.00% 01/01/24 19,776
549,312 Pool G14348.................................................. 4.00% 10/01/26 586,482
21,072 Pool G14376.................................................. 4.00% 09/01/25 22,471
27,350 Pool G14676.................................................. 4.50% 09/01/26 28,753
98,179 Pool G14995.................................................. 5.50% 12/01/24 100,477
26,121 Pool G15019.................................................. 4.50% 07/01/26 27,394
26,966 Pool G15039.................................................. 4.50% 09/01/26 28,496
28,250 Pool G15725.................................................. 4.50% 09/01/26 29,822
3,056 Pool G15821.................................................. 5.00% 07/01/25 3,210
123,468 Pool G15949.................................................. 4.00% 01/01/29 131,761
47,754 Pool G15957.................................................. 5.50% 12/01/24 48,896
154,349 Pool G18264.................................................. 5.00% 07/01/23 162,157
151,794 Pool G18287.................................................. 5.50% 12/01/23 159,431
48,528 Pool G18306.................................................. 4.50% 04/01/24 50,971
12,318 Pool G60020.................................................. 4.50% 12/01/43 13,914
570,409 Pool G60114.................................................. 5.50% 06/01/41 663,500
874,188 Pool G60168.................................................. 4.50% 07/01/45 973,163
298,868 Pool G60194.................................................. 3.50% 08/01/45 325,841
286,092 Pool G60737.................................................. 4.50% 08/01/42 324,185
806,493 Pool G60762.................................................. 5.00% 07/01/41 932,490
312,195 Pool G60808.................................................. 3.00% 10/01/46 331,458
3,275,189 Pool G60921.................................................. 4.50% 02/01/47 3,607,561
12,177,899 Pool G60940.................................................. 4.00% 09/01/46 13,426,912
4,481,017 Pool G61160.................................................. 4.50% 11/01/45 5,017,997
9,007 Pool H09034.................................................. 5.50% 05/01/37 10,050
446 Pool J03523.................................................. 5.00% 09/01/21 469
12,230 Pool J05364.................................................. 6.00% 08/01/22 12,346
126,271 Pool J09465.................................................. 4.00% 04/01/24 134,664
55,377 Pool J09504.................................................. 4.00% 04/01/24 59,052
17,576 Pool J09798.................................................. 4.00% 05/01/24 18,748
</TABLE>
See Notes to Financial Statements Page 27
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 37,385 Pool J10623.................................................. 4.00% 09/01/24 $ 39,866
489,913 Pool J10827.................................................. 4.50% 10/01/24 516,474
221,088 Pool N70075.................................................. 5.00% 01/01/35 241,988
362,552 Pool N70081.................................................. 5.50% 07/01/38 405,710
41,805 Pool O20138.................................................. 5.00% 11/01/30 45,727
678,978 Pool Q00841.................................................. 4.50% 05/01/41 757,833
86,010 Pool Q03139.................................................. 4.00% 09/01/41 95,462
33,749 Pool Q04031.................................................. 4.00% 10/01/41 37,653
26,297 Pool Q04905.................................................. 4.00% 12/01/41 29,338
43,644 Pool Q05035.................................................. 4.00% 12/01/41 48,437
46,653 Pool Q05173.................................................. 4.00% 12/01/41 52,049
36,143 Pool Q05181.................................................. 4.00% 12/01/41 40,323
26,936 Pool Q05445.................................................. 4.00% 01/01/42 30,052
77,506 Pool Q07189.................................................. 4.00% 04/01/42 85,219
28,061 Pool Q07479.................................................. 3.50% 04/01/42 30,580
105,513 Pool Q11791.................................................. 3.50% 10/01/42 114,980
75,126 Pool Q11836.................................................. 3.50% 10/01/42 82,332
519,736 Pool Q14034.................................................. 3.50% 12/01/42 572,611
2,038,225 Pool Q43309.................................................. 4.00% 09/01/46 2,272,881
4,750,623 Pool Q45763.................................................. 4.00% 01/01/47 5,242,908
2,749,520 Pool Q50564.................................................. 4.50% 09/01/47 3,013,562
9,373,121 Pool Q53219.................................................. 4.50% 12/01/47 10,452,752
5,720,826 Pool Q53875.................................................. 4.00% 01/01/48 6,265,098
586,303 Pool Q54651.................................................. 4.50% 03/01/48 655,826
1,130,398 Pool Q55037.................................................. 4.50% 04/01/48 1,273,398
8,813,478 Pool Q55152.................................................. 4.50% 04/01/48 9,735,260
5,114,931 Pool Q55606.................................................. 4.00% 04/01/48 5,635,546
3,645,293 Pool Q56260.................................................. 5.00% 05/01/48 4,121,753
4,538,366 Pool Q58363.................................................. 5.00% 09/01/48 5,029,503
2,828,140 Pool Q58483.................................................. 4.50% 09/01/48 3,085,849
2,988,893 Pool Q61217.................................................. 4.00% 01/01/49 3,260,804
10,835,099 Pool Q63173.................................................. 4.00% 04/01/49 11,720,288
2,491,852 Pool QA1997.................................................. 3.00% 08/01/49 2,614,427
13,405,089 Pool QA2693.................................................. 4.00% 09/01/49 14,899,469
5,444,555 Pool QA3965.................................................. 4.00% 10/01/49 5,971,229
5,993,267 Pool QA4774.................................................. 4.00% 11/01/49 6,580,508
10,011,995 Pool QA5778.................................................. 3.50% 01/01/50 10,718,150
140,566 Pool QA6906.................................................. 3.00% 02/01/50 148,916
13,253,240 Pool QA7078.................................................. 3.50% 01/01/50 14,245,817
175,272 Pool QA7625.................................................. 3.00% 03/01/50 183,864
844,921 Pool QA9063.................................................. 3.00% 04/01/50 887,307
993,423 Pool QA9162.................................................. 3.00% 05/01/50 1,042,327
3,495,647 Pool QB4340.................................................. 3.00% 10/01/50 3,696,391
7,741,699 Pool QC0570.................................................. 2.50% 04/01/51 8,064,275
10,572,543 Pool QC0591.................................................. 2.00% 04/01/51 10,706,274
4,095,706 Pool QN2804.................................................. 1.50% 07/01/35 4,147,964
376,070 Pool QN3055.................................................. 1.50% 08/01/35 380,869
15,901,663 Pool RA1624.................................................. 4.00% 08/01/49 17,524,309
26,751,160 Pool RA2415.................................................. 3.00% 04/01/50 28,100,190
3,728,414 Pool RB5017.................................................. 3.00% 11/01/39 3,909,539
1,529,702 Pool RB5022.................................................. 3.00% 11/01/39 1,602,043
</TABLE>
Page 28 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 770,073 Pool RB5027.................................................. 3.00% 01/01/40 $ 808,835
4,359,876 Pool RB5033.................................................. 3.00% 02/01/40 4,574,840
234,950 Pool RB5044.................................................. 3.00% 04/01/40 246,433
215,495 Pool SC0036.................................................. 3.00% 06/01/38 226,444
6,378,954 Pool SB0366.................................................. 3.50% 02/01/34 6,880,333
91,935,983 Pool SB0368.................................................. 4.00% 03/01/34 101,295,025
271,148,803 Pool SB0380.................................................. 3.50% 02/01/34 294,439,376
5,880,482 Pool SB8044.................................................. 2.00% 05/01/35 6,076,815
24,525,811 Pool SD0559.................................................. 2.00% 03/01/51 24,850,604
422,649 Pool U50165.................................................. 4.00% 05/01/32 458,942
2,841,827 Pool U59020.................................................. 4.00% 06/01/35 3,086,127
2,036,161 Pool U64762.................................................. 4.50% 10/01/45 2,275,034
7,764,321 Pool U69020.................................................. 5.00% 07/01/44 8,794,526
8,473,205 Pool U69040.................................................. 4.00% 05/01/45 9,307,647
4,740,978 Pool U69041.................................................. 5.00% 11/01/43 5,388,675
22,919,568 Pool U69055.................................................. 4.50% 10/01/47 25,603,039
12,126,009 Pool U69060.................................................. 4.50% 06/01/47 13,546,795
3,240,648 Pool U79023.................................................. 3.50% 10/01/28 3,478,526
144,896 Pool U80068.................................................. 3.50% 10/01/32 157,403
85,124 Pool U80212.................................................. 3.50% 02/01/33 92,471
113,490 Pool U90245.................................................. 3.50% 10/01/42 124,937
34,806 Pool U90291.................................................. 4.00% 10/01/42 38,658
477,163 Pool U90316.................................................. 4.00% 10/01/42 525,074
425,837 Pool U90490.................................................. 4.00% 06/01/42 469,321
1,273,998 Pool U90690.................................................. 3.50% 06/01/42 1,398,097
16,393 Pool U90932.................................................. 3.00% 02/01/43 17,597
126,307 Pool U90975.................................................. 4.00% 06/01/42 139,421
402,935 Pool U91254.................................................. 4.00% 04/01/43 447,539
1,366,256 Pool U91619.................................................. 4.00% 06/01/43 1,518,481
46,889 Pool U92272.................................................. 4.50% 12/01/43 52,837
660,457 Pool U92432.................................................. 4.00% 02/01/44 734,149
35,058 Pool U95137.................................................. 4.00% 08/01/43 38,639
135,140 Pool U99045.................................................. 3.50% 03/01/43 148,771
172,924 Pool U99084.................................................. 4.50% 02/01/44 194,641
73,307 Pool U99091.................................................. 4.50% 03/01/44 81,887
214,424 Pool U99096.................................................. 4.50% 05/01/44 241,348
2,698,401 Pool U99134.................................................. 4.00% 01/01/46 2,998,057
5,774,187 Pool U99184.................................................. 4.00% 08/01/43 6,413,346
12,249,930 Pool ZM4944.................................................. 4.00% 11/01/47 13,512,302
2,436,389 Pool ZM6088.................................................. 4.50% 04/01/48 2,668,232
1,817,120 Pool ZS2492.................................................. 6.50% 04/01/35 2,174,408
83,994,817 Pool ZT1989.................................................. 3.50% 01/01/33 91,467,580
Federal National Mortgage Association
56,327 Pool 190371.................................................. 6.50% 07/01/36 65,505
18,314 Pool 254636.................................................. 5.00% 02/01/33 20,833
33,003 Pool 255190.................................................. 5.50% 05/01/34 38,393
20,837 Pool 255984.................................................. 4.50% 11/01/25 22,663
129,419 Pool 256181.................................................. 5.50% 03/01/36 143,755
363,859 Pool 256576.................................................. 5.50% 01/01/37 404,492
19,250 Pool 256808.................................................. 5.50% 07/01/37 20,846
83,149 Pool 256936.................................................. 6.00% 10/01/37 93,489
</TABLE>
See Notes to Financial Statements Page 29
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 66,605 Pool 545759.................................................. 6.50% 07/01/32 $ 77,319
15,121 Pool 555851.................................................. 6.50% 01/01/33 17,237
277,511 Pool 683246.................................................. 5.50% 02/01/33 324,059
207,313 Pool 725014.................................................. 5.50% 12/01/33 240,649
310,422 Pool 734922.................................................. 4.50% 09/01/33 346,700
449,923 Pool 735415.................................................. 6.50% 12/01/32 529,328
4,143 Pool 745875.................................................. 6.50% 09/01/36 4,898
45,308 Pool 747097.................................................. 6.00% 10/01/29 49,514
420,172 Pool 788149.................................................. 5.50% 05/01/33 486,960
171,238 Pool 812741.................................................. 5.50% 02/01/35 191,941
307,289 Pool 827948.................................................. 5.50% 05/01/35 348,219
321,994 Pool 850000.................................................. 5.50% 01/01/36 375,200
66,813 Pool 871039.................................................. 5.50% 02/01/37 75,602
1,289,155 Pool 879015.................................................. 4.00% 10/01/35 1,422,288
151,819 Pool 888001.................................................. 5.50% 10/01/36 177,536
123,451 Pool 888163.................................................. 7.00% 12/01/33 145,314
7,399 Pool 888435.................................................. 5.50% 06/01/22 7,503
401,000 Pool 889610.................................................. 5.50% 06/01/38 469,053
310,405 Pool 889834.................................................. 5.00% 12/01/35 358,724
14,377 Pool 890149.................................................. 6.50% 10/01/38 17,042
28,977 Pool 890231.................................................. 5.00% 07/01/25 30,471
22,028 Pool 890314.................................................. 5.50% 12/01/22 22,472
7,862 Pool 890378.................................................. 6.00% 05/01/24 8,169
968,191 Pool 890556.................................................. 4.50% 10/01/43 1,094,927
239,454 Pool 890561.................................................. 4.50% 01/01/27 251,323
850,674 Pool 890736.................................................. 5.00% 07/01/30 949,686
196,023 Pool 905917.................................................. 5.50% 01/01/37 229,195
71,268 Pool 922386.................................................. 5.50% 01/01/37 75,055
13,747 Pool 930562.................................................. 5.00% 02/01/39 15,916
125,730 Pool 931808.................................................. 5.50% 08/01/39 145,853
189,065 Pool 953115.................................................. 5.50% 11/01/38 212,080
56,311 Pool 962556.................................................. 5.00% 04/01/23 59,137
25,693 Pool 973561.................................................. 5.00% 03/01/23 26,978
53,527 Pool 976871.................................................. 6.50% 08/01/36 61,701
51,182 Pool 995002.................................................. 5.00% 07/01/37 58,789
17,851 Pool 995097.................................................. 6.50% 10/01/37 21,350
103,752 Pool 995149.................................................. 6.50% 10/01/38 121,346
43,490 Pool 995228.................................................. 6.50% 11/01/38 52,275
72,037 Pool 995252.................................................. 5.00% 12/01/23 75,646
31,478 Pool 995259.................................................. 6.50% 11/01/23 32,700
151,410 Pool AA0916.................................................. 5.00% 08/01/37 175,211
114,186 Pool AA3303.................................................. 5.50% 06/01/38 128,899
566,599 Pool AB0460.................................................. 5.50% 02/01/37 646,769
203,893 Pool AB0731.................................................. 4.00% 06/01/39 225,527
56,324 Pool AB1953.................................................. 4.00% 12/01/40 62,486
48,308 Pool AB2092.................................................. 4.00% 01/01/41 53,581
29,253 Pool AB2133.................................................. 4.00% 01/01/26 31,229
356,770 Pool AB2265.................................................. 4.00% 02/01/41 396,188
22,440 Pool AB2467.................................................. 4.50% 03/01/41 25,351
1,134,957 Pool AB2506.................................................. 5.00% 03/01/41 1,300,949
1,330,756 Pool AB2959.................................................. 4.50% 07/01/40 1,445,063
</TABLE>
Page 30 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 97,433 Pool AB5174.................................................. 3.50% 05/01/42 $ 106,736
110,227 Pool AB5919.................................................. 3.00% 08/01/42 117,970
56,563 Pool AB6632.................................................. 3.50% 10/01/42 61,617
232,915 Pool AB6671.................................................. 3.00% 10/01/42 249,079
296,397 Pool AB7765.................................................. 3.00% 02/01/43 316,970
190,674 Pool AB7859.................................................. 3.50% 02/01/43 208,870
1,451,669 Pool AB8289.................................................. 4.50% 04/01/42 1,633,323
547,093 Pool AB8676.................................................. 3.50% 05/01/42 571,474
84,945 Pool AB9382.................................................. 4.00% 05/01/43 94,240
763,928 Pool AB9551.................................................. 3.00% 06/01/43 816,960
199,948 Pool AB9615.................................................. 4.00% 06/01/33 217,158
52,163 Pool AB9959.................................................. 4.00% 07/01/43 57,871
32,564 Pool AC1232.................................................. 5.00% 07/01/24 34,284
82,317 Pool AC3236.................................................. 5.00% 09/01/39 95,280
234,182 Pool AC3267.................................................. 5.50% 09/01/39 273,351
127,381 Pool AD0889.................................................. 6.00% 09/01/24 131,969
452,387 Pool AD4317.................................................. 4.00% 04/01/40 498,551
14,235 Pool AD5222.................................................. 4.50% 05/01/30 15,646
102,304 Pool AD5583.................................................. 5.00% 04/01/40 114,696
118,337 Pool AD6369.................................................. 4.50% 05/01/40 133,653
65,353 Pool AD6938.................................................. 4.50% 06/01/40 73,825
73,275 Pool AD7137.................................................. 5.50% 07/01/40 85,742
25,183 Pool AD8526.................................................. 4.50% 08/01/40 28,450
254,176 Pool AE0137.................................................. 4.50% 03/01/36 282,849
20,684 Pool AE0383.................................................. 4.50% 09/01/25 22,002
84,396 Pool AE4476.................................................. 4.00% 03/01/41 93,147
119,469 Pool AE7005.................................................. 4.00% 10/01/40 132,500
3,937,404 Pool AE7733.................................................. 5.00% 11/01/40 4,558,747
28,209 Pool AE9284.................................................. 4.00% 11/01/40 31,286
511,779 Pool AE9959.................................................. 5.00% 03/01/41 584,114
15,389 Pool AH0057.................................................. 4.50% 02/01/41 17,139
347,793 Pool AH0943.................................................. 4.00% 12/01/40 385,841
330,621 Pool AH0979.................................................. 3.50% 01/01/41 351,256
237,930 Pool AH1089.................................................. 4.00% 11/01/40 263,899
118,110 Pool AH1141.................................................. 4.50% 12/01/40 133,360
102,377 Pool AH4404.................................................. 4.00% 01/01/41 112,505
74,937 Pool AH7204.................................................. 4.00% 03/01/41 83,141
39,636 Pool AI1190.................................................. 4.50% 04/01/41 44,777
56,385 Pool AI1969.................................................. 4.50% 05/01/41 63,693
308,796 Pool AI4268.................................................. 5.00% 06/01/41 356,959
8,372,238 Pool AI5614.................................................. 5.00% 07/01/41 9,678,069
177,197 Pool AI6093.................................................. 4.50% 06/01/31 194,363
61,152 Pool AI6503.................................................. 5.00% 11/01/39 67,789
28,935 Pool AI6581.................................................. 4.50% 07/01/41 32,688
23,741 Pool AI7800.................................................. 4.50% 07/01/41 26,820
126,710 Pool AI8779.................................................. 4.00% 11/01/41 140,521
376,945 Pool AI9114.................................................. 4.00% 06/01/42 421,540
1,972,645 Pool AI9124.................................................. 4.00% 08/01/42 2,206,023
1,042,122 Pool AI9158.................................................. 6.50% 01/01/41 1,279,166
1,441,394 Pool AJ2311.................................................. 5.00% 10/01/41 1,631,112
22,792 Pool AJ4756.................................................. 4.00% 10/01/41 25,417
</TABLE>
See Notes to Financial Statements Page 31
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 30,158 Pool AJ5424.................................................. 4.00% 11/01/41 $ 33,631
16,446 Pool AJ5736.................................................. 4.00% 12/01/41 18,340
21,437 Pool AJ6061.................................................. 4.00% 12/01/41 23,906
24,931 Pool AJ7538.................................................. 4.00% 01/01/42 27,802
30,619 Pool AJ8104.................................................. 4.00% 12/01/41 34,145
12,225 Pool AJ8203.................................................. 4.50% 01/01/42 13,809
24,035 Pool AJ8341.................................................. 4.00% 12/01/41 26,803
21,224 Pool AJ8369.................................................. 4.00% 01/01/42 23,668
35,577 Pool AJ8436.................................................. 4.00% 12/01/41 39,675
19,521 Pool AJ9162.................................................. 4.00% 01/01/42 21,767
743,470 Pool AJ9332.................................................. 4.00% 01/01/42 831,895
35,982 Pool AK0543.................................................. 4.00% 01/01/42 40,126
905,873 Pool AK0765.................................................. 4.00% 03/01/42 993,314
27,785 Pool AK1827.................................................. 4.00% 01/01/42 30,983
168,061 Pool AK4520.................................................. 4.00% 03/01/42 186,373
160,768 Pool AK5555.................................................. 4.00% 04/01/42 178,254
14,846 Pool AL0147.................................................. 4.00% 04/01/41 16,486
100,513 Pool AL0212.................................................. 5.50% 02/01/38 116,863
237,755 Pool AL0241.................................................. 4.00% 04/01/41 263,739
14,524 Pool AL0399.................................................. 6.00% 08/01/24 14,965
7,846 Pool AL0446.................................................. 6.00% 05/01/24 8,061
37,676 Pool AL0815.................................................. 4.00% 09/01/41 42,015
10,750 Pool AL1195.................................................. 6.00% 09/01/23 11,109
478,907 Pool AL1850.................................................. 5.50% 07/01/40 556,862
32,660 Pool AL1948.................................................. 4.00% 01/01/42 36,234
26,387 Pool AL1953.................................................. 4.50% 01/01/27 27,688
94,102 Pool AL2142.................................................. 6.50% 09/01/38 110,473
442,399 Pool AL2551.................................................. 3.50% 10/01/42 484,647
45,455 Pool AL2589.................................................. 5.50% 05/01/25 46,388
80,105 Pool AL2892.................................................. 3.50% 12/01/42 87,690
604,365 Pool AL3093.................................................. 3.50% 02/01/43 662,039
22,125 Pool AL3154.................................................. 3.00% 02/01/43 23,680
1,592,734 Pool AL4703.................................................. 3.50% 12/01/28 1,688,582
6,368,447 Pool AL4741.................................................. 4.50% 01/01/44 7,165,530
14,324 Pool AL4962.................................................. 6.00% 05/01/24 14,869
130,145 Pool AL5616.................................................. 5.50% 09/01/41 151,974
665,187 Pool AL5760.................................................. 4.00% 09/01/43 734,407
596,001 Pool AL5890.................................................. 4.50% 03/01/43 681,941
430,983 Pool AL6031.................................................. 4.00% 10/01/44 478,059
8,864 Pool AL6057.................................................. 6.00% 08/01/24 8,942
47,324 Pool AL6449.................................................. 4.50% 01/01/27 49,816
2,644,000 Pool AL6513.................................................. 5.00% 07/01/44 2,992,286
138,038 Pool AL6948.................................................. 5.00% 09/01/25 145,038
96,439 Pool AL7046.................................................. 3.50% 06/01/45 105,094
3,822,286 Pool AL7162, 12 Mo. LIBOR + 1.72% (a)........................ 2.52% 09/01/42 4,039,683
261,402 Pool AL7231.................................................. 3.50% 08/01/45 284,584
525,017 Pool AL7449.................................................. 8.50% 12/01/37 642,713
666,504 Pool AL7637.................................................. 5.00% 01/01/42 731,675
2,224,595 Pool AL7905.................................................. 4.50% 03/01/34 2,469,443
106,519 Pool AL8139.................................................. 4.00% 02/01/32 114,315
8,478,489 Pool AL8263.................................................. 4.50% 02/01/44 9,539,726
</TABLE>
Page 32 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 74,494 Pool AL8353.................................................. 3.50% 08/01/44 $ 81,581
7,559,979 Pool AL8640, 12 Mo. LIBOR + 1.81% (a)........................ 2.22% 12/01/41 8,005,305
3,792,158 Pool AL8652.................................................. 5.00% 07/01/44 4,390,619
464,745 Pool AL9143.................................................. 3.50% 09/01/36 505,781
151,594 Pool AL9226.................................................. 5.50% 12/01/41 178,766
1,179,575 Pool AL9777.................................................. 4.50% 01/01/47 1,301,655
4,109,201 Pool AO3529.................................................. 4.00% 06/01/42 4,534,033
1,332,586 Pool AO5527.................................................. 4.00% 07/01/42 1,479,494
1,350,248 Pool AO8106.................................................. 4.00% 08/01/42 1,499,113
387,596 Pool AO8167.................................................. 4.00% 09/01/42 426,339
196,582 Pool AP1197.................................................. 3.50% 09/01/42 216,078
678,656 Pool AP2109.................................................. 4.00% 08/01/32 738,420
91,522 Pool AP5113.................................................. 4.00% 09/01/42 101,539
181,556 Pool AP7963.................................................. 4.00% 09/01/42 199,554
2,192,828 Pool AQ0411.................................................. 3.50% 10/01/42 2,400,745
868,710 Pool AQ0535.................................................. 3.00% 11/01/42 928,990
596,012 Pool AQ1534.................................................. 3.50% 10/01/32 645,909
751,990 Pool AQ1584.................................................. 4.00% 11/01/42 837,333
483,414 Pool AQ1607.................................................. 3.50% 11/01/32 524,924
398,636 Pool AQ3310.................................................. 4.00% 11/01/42 442,703
1,412,839 Pool AQ4086.................................................. 4.00% 06/01/43 1,568,634
57,874 Pool AQ9715.................................................. 3.00% 01/01/43 62,082
397,940 Pool AQ9999.................................................. 3.00% 02/01/43 426,922
1,604,578 Pool AR7582.................................................. 3.50% 03/01/33 1,742,177
260,285 Pool AR7961.................................................. 3.50% 03/01/33 282,621
3,454,492 Pool AS1719.................................................. 5.00% 02/01/44 3,993,659
495,519 Pool AS5236.................................................. 4.00% 05/01/45 530,921
779,979 Pool AS5515.................................................. 3.50% 06/01/30 836,999
284,806 Pool AS5635.................................................. 3.00% 08/01/45 305,481
627,178 Pool AS7211.................................................. 3.00% 04/01/46 663,942
1,506,991 Pool AS7537.................................................. 3.00% 07/01/46 1,614,065
6,556,500 Pool AS8548.................................................. 3.50% 12/01/46 7,212,676
986,816 Pool AS9244.................................................. 4.50% 08/01/39 1,111,184
368,587 Pool AS9990.................................................. 4.50% 07/01/47 402,071
134,525 Pool AS9994.................................................. 4.50% 04/01/47 148,306
89,876 Pool AT0332.................................................. 3.00% 04/01/43 93,603
623,818 Pool AT1747.................................................. 3.00% 04/01/43 667,649
559,951 Pool AT3892.................................................. 3.00% 06/01/43 595,100
263,688 Pool AT4180.................................................. 3.50% 05/01/33 286,312
108,189 Pool AT5915.................................................. 4.00% 06/01/43 120,119
656,885 Pool AT6303.................................................. 4.00% 06/01/43 732,460
39,182 Pool AT6306.................................................. 4.00% 06/01/43 43,507
129,972 Pool AU5787.................................................. 4.50% 09/01/43 146,641
649,994 Pool AU6278.................................................. 5.00% 11/01/43 734,023
153,412 Pool AY0013.................................................. 4.50% 01/01/45 168,857
589,063 Pool BA4113.................................................. 3.00% 04/01/46 623,214
1,391,867 Pool BD4509, 12 Mo. LIBOR + 1.67% (a)........................ 2.31% 01/01/44 1,462,179
1,607,485 Pool BD4533, 12 Mo. LIBOR + 1.66% (a)........................ 2.62% 09/01/44 1,681,347
206,249 Pool BD8660, 1 Yr. Constant Maturity Treasury Rate +
1.67% (a)................................................. 2.49% 12/01/45 207,277
13,420,056 Pool BE2973.................................................. 4.00% 01/01/47 14,804,349
</TABLE>
See Notes to Financial Statements Page 33
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 457,653 Pool BE3631.................................................. 4.50% 05/01/47 $ 503,222
2,096,477 Pool BH2633.................................................. 5.00% 08/01/47 2,357,401
20,520 Pool BH9428.................................................. 4.50% 09/01/47 22,491
12,001,735 Pool BJ1637.................................................. 3.50% 11/01/47 13,019,106
53,144 Pool BJ5781.................................................. 4.50% 04/01/48 58,216
241,709 Pool BJ6232.................................................. 5.00% 04/01/48 269,012
16,901 Pool BJ6234.................................................. 5.00% 05/01/48 18,773
1,014,060 Pool BJ9100.................................................. 4.50% 02/01/48 1,148,354
800,805 Pool BJ9111.................................................. 4.50% 03/01/48 906,878
1,455,416 Pool BJ9124.................................................. 4.50% 04/01/48 1,648,168
680,352 Pool BK0922.................................................. 4.50% 07/01/48 743,940
466,565 Pool BK4769.................................................. 5.00% 08/01/48 519,171
288,501 Pool BK4851.................................................. 5.00% 05/01/48 321,688
5,369,058 Pool BK8883.................................................. 5.00% 09/01/48 6,087,124
2,026,100 Pool BK9563.................................................. 4.50% 12/01/48 2,220,251
5,035,307 Pool BK9599.................................................. 5.00% 08/01/48 5,592,650
355,200 Pool BM1880.................................................. 4.00% 02/01/45 392,007
908,195 Pool BM3013, 12 Mo. LIBOR + 1.53% (a)........................ 2.28% 07/01/44 937,213
13,238,922 Pool BM3076.................................................. 4.50% 07/01/47 14,782,837
7,086,170 Pool BM3625.................................................. 3.00% 03/01/48 7,535,647
14,255,274 Pool BM3980, 12 Mo. LIBOR + 1.78% (a)........................ 2.46% 02/01/43 15,097,203
15,715,284 Pool BM4122.................................................. 7.47% 01/01/40 18,932,739
6,605,305 Pool BM4561.................................................. 5.00% 09/01/48 7,491,902
7,752,001 Pool BM4785.................................................. 4.50% 10/01/38 8,708,118
15,666,089 Pool BM5039.................................................. 4.50% 12/01/48 17,235,302
15,582,013 Pool BM5130.................................................. 4.50% 08/01/47 17,426,431
50,245,523 Pool BM5508.................................................. 5.00% 02/01/49 56,310,403
18,893,798 Pool BM5667.................................................. 4.00% 12/01/48 20,862,530
7,043,518 Pool BM5671.................................................. 4.50% 01/01/49 8,065,161
11,019,882 Pool BM6018.................................................. 5.00% 05/01/49 11,781,874
1,762,442 Pool BM6602.................................................. 3.50% 02/01/48 1,852,017
847,514 Pool BN1027.................................................. 5.50% 03/01/49 974,714
11,751,575 Pool BN1345.................................................. 4.00% 09/01/48 12,684,209
25,425,170 Pool BN3925.................................................. 4.50% 01/01/49 28,554,370
1,270,923 Pool BN4059.................................................. 4.00% 12/01/48 1,362,312
5,499,551 Pool BN4328.................................................. 5.00% 01/01/49 6,116,798
2,224,682 Pool BN5323.................................................. 3.50% 03/01/49 2,366,816
8,762,926 Pool BN6078.................................................. 4.00% 06/01/49 9,415,609
7,538,896 Pool BN8210.................................................. 4.50% 07/01/49 8,391,768
4,939,708 Pool BO1420.................................................. 3.50% 09/01/49 5,255,316
17,532,831 Pool BO2179.................................................. 4.00% 09/01/49 19,487,211
11,270,169 Pool BO2653.................................................. 3.50% 07/01/49 12,058,384
6,464,681 Pool BO3030.................................................. 4.00% 10/01/49 7,109,104
5,531,739 Pool BO5044.................................................. 3.00% 09/01/49 5,817,334
3,817,710 Pool BO5425.................................................. 4.00% 10/01/49 4,194,025
8,485,450 Pool BO5426.................................................. 4.00% 10/01/49 9,235,457
7,684,112 Pool BO5430.................................................. 4.00% 10/01/49 8,377,764
1,076,541 Pool BO7242.................................................. 3.00% 01/01/50 1,128,760
12,494,475 Pool BP1950.................................................. 3.00% 04/01/50 13,402,212
356,426 Pool BP2754.................................................. 3.00% 04/01/50 373,820
3,813,520 Pool BP4238.................................................. 3.00% 04/01/50 4,005,622
</TABLE>
Page 34 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 822,076 Pool BP6504.................................................. 1.50% 07/01/35 $ 832,545
2,436,037 Pool BP8797.................................................. 3.00% 07/01/50 2,577,205
7,535,025 Pool BQ3099.................................................. 3.00% 10/01/50 7,984,774
41,338,306 Pool BQ9451.................................................. 2.00% 03/01/51 41,848,778
8,070,179 Pool BR4537.................................................. 2.00% 02/01/51 8,163,506
9,991,280 Pool BR4569.................................................. 2.00% 02/01/51 10,106,825
8,621,680 Pool BR4728.................................................. 2.50% 03/01/51 8,977,534
22,694,156 Pool BR5559.................................................. 2.00% 03/01/51 22,949,700
12,472,589 Pool BR7216.................................................. 2.00% 04/01/51 12,616,745
8,376,576 Pool BR7233.................................................. 2.00% 04/01/51 8,482,940
34,134,484 Pool BR7241.................................................. 2.00% 04/01/51 34,523,941
17,570,383 Pool BR7258.................................................. 2.00% 04/01/51 17,792,621
12,971,660 Pool BR7265.................................................. 2.50% 04/01/51 13,490,645
17,068,586 Pool BR7266.................................................. 2.50% 04/01/51 17,762,894
8,034,501 Pool BR7272.................................................. 2.00% 04/01/51 8,142,102
6,784,303 Pool BR7726.................................................. 2.50% 04/01/51 7,075,848
5,480,748 Pool CA0843.................................................. 3.00% 12/01/47 5,848,612
11,415,967 Pool CA1576.................................................. 5.00% 01/01/48 12,787,292
9,522,339 Pool CA1902.................................................. 4.50% 06/01/48 10,474,280
6,315,578 Pool CA1917.................................................. 5.00% 06/01/48 7,171,210
2,623,523 Pool CA2520.................................................. 4.00% 10/01/33 2,831,313
5,210,054 Pool CA2947.................................................. 4.00% 12/01/48 5,847,059
460,537 Pool CA3684.................................................. 4.50% 06/01/49 503,819
5,745,222 Pool CA3938.................................................. 3.00% 08/01/49 6,024,657
27,682,109 Pool CA4175.................................................. 4.00% 09/01/49 30,768,062
16,842,865 Pool FM0050.................................................. 5.50% 11/01/49 19,030,972
56,259,314 Pool FM0085.................................................. 4.00% 03/01/50 62,526,511
82,531,524 Pool FM1194.................................................. 4.50% 05/01/39 92,690,805
2,601,640 Pool FM1284.................................................. 3.50% 02/01/46 2,846,500
2,500,691 Pool FM1285.................................................. 4.00% 10/01/43 2,769,863
5,794,785 Pool FM1286.................................................. 4.50% 06/01/46 6,443,326
2,408,129 Pool FM1287.................................................. 5.00% 11/01/44 2,678,641
55,767,678 Pool FM1725.................................................. 2.50% 11/01/47 58,043,878
12,948,583 Pool FM2001.................................................. 5.00% 09/01/49 14,436,154
18,991,870 Pool FM2329.................................................. 5.00% 12/01/49 21,642,732
18,110,494 Pool FM2397.................................................. 4.50% 01/01/50 20,225,954
7,129,537 Pool FM2450.................................................. 3.50% 12/01/39 7,859,957
99,866,615 Pool FM2500.................................................. 2.50% 03/01/35 105,917,910
5,283,465 Pool FM2853.................................................. 5.00% 03/01/41 5,876,972
415,514 Pool FM3129.................................................. 3.00% 05/01/50 436,443
418,838 Pool FM3529.................................................. 3.00% 06/01/40 441,386
14,216,494 Pool FM4819.................................................. 4.00% 06/01/50 15,288,312
14,624,604 Pool FM5575.................................................. 3.50% 01/01/36 15,887,258
122,909 Pool MA0096.................................................. 4.50% 06/01/29 133,888
2,705 Pool MA0293.................................................. 4.50% 01/01/30 2,973
42,634 Pool MA0295.................................................. 5.00% 01/01/30 47,651
40,007 Pool MA0353.................................................. 4.50% 03/01/30 43,971
1,066,274 Pool MA0443.................................................. 5.00% 05/01/30 1,191,819
28,532 Pool MA0444.................................................. 5.00% 06/01/40 32,215
283,552 Pool MA0575.................................................. 4.50% 11/01/30 313,145
177,557 Pool MA0633.................................................. 5.00% 01/01/41 201,002
</TABLE>
See Notes to Financial Statements Page 35
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 4,848 Pool MA0777.................................................. 5.00% 06/01/31 $ 5,504
658,135 Pool MA1125.................................................. 4.00% 07/01/42 725,051
1,190,744 Pool MA1217.................................................. 4.00% 10/01/42 1,311,808
40,615 Pool MA1222.................................................. 4.00% 10/01/32 44,647
70,364 Pool MA1228.................................................. 3.00% 09/01/42 75,477
413,999 Pool MA1373.................................................. 3.50% 03/01/43 455,588
448,012 Pool MA1510.................................................. 4.00% 07/01/43 497,412
147,315 Pool MA1591.................................................. 4.50% 09/01/43 165,786
14,237,284 Pool MA1629.................................................. 4.50% 10/01/43 16,019,332
385,451 Pool MA1664.................................................. 4.50% 11/01/43 433,698
382,835 Pool MA1711.................................................. 4.50% 12/01/43 430,753
613,364 Pool MA1866.................................................. 4.50% 04/01/44 690,308
511,653 Pool MA1900.................................................. 4.50% 04/01/44 575,699
477,956 Pool MA2024.................................................. 4.00% 07/01/29 512,324
876,248 Pool MA2099.................................................. 3.50% 11/01/29 940,472
412,055 Pool MA2454.................................................. 3.50% 09/01/30 442,366
3,582 Pool MA2509.................................................. 3.00% 01/01/46 3,708
1,903,856 Pool MA2695.................................................. 4.00% 07/01/46 2,114,755
1,899,300 Pool MA2916.................................................. 4.00% 02/01/47 2,094,398
169,853 Pool MA3078.................................................. 3.00% 07/01/37 178,395
334,991 Pool MA3101.................................................. 4.50% 08/01/47 368,116
154,652 Pool MA3123.................................................. 5.00% 08/01/47 173,523
554,070 Pool MA3205.................................................. 5.00% 10/01/47 620,464
366,566 Pool MA3237.................................................. 3.00% 01/01/48 385,036
8,607,450 Pool MA3385.................................................. 4.50% 06/01/48 9,379,216
1,123,929 Pool MA3934.................................................. 3.00% 02/01/40 1,177,529
5,288,886 Pool MA3937.................................................. 3.00% 02/01/50 5,542,556
2,423,668 Pool MA3958.................................................. 3.00% 03/01/40 2,541,758
511,688 Pool MA3988.................................................. 3.00% 04/01/40 537,022
12,186,341 Pool MA4018.................................................. 2.00% 05/01/50 12,324,963
1,438,175 Pool MA4020.................................................. 3.00% 05/01/50 1,507,327
3,296,113 Pool MA4048.................................................. 3.00% 06/01/50 3,453,540
1,208,741 Pool MA4122.................................................. 1.50% 09/01/35 1,224,132
988,268 Pool MA4154.................................................. 1.50% 10/01/35 1,000,872
190,909,056 Pool MA4325.................................................. 2.00% 05/01/51 192,852,539
367,900,000 Pool TBA (k)................................................. 2.50% 06/15/51 380,705,871
35,000,000 Pool TBA..................................................... 3.00% 06/15/51 36,632,302
25,000,000 Pool TBA..................................................... 3.50% 06/15/51 26,571,660
100,000,000 Pool TBA (k)................................................. 3.00% 07/15/51 104,589,502
Government National Mortgage Association
76,868 Pool 3149.................................................... 6.00% 10/20/31 87,247
48,333 Pool 3172.................................................... 6.00% 12/20/31 56,413
51,473 Pool 3227.................................................... 6.00% 04/20/32 58,806
365,946 Pool 3345.................................................... 5.00% 02/20/33 413,969
120,294 Pool 3389.................................................... 5.00% 05/20/33 137,066
21,231 Pool 3390.................................................... 5.50% 05/20/33 24,842
571,478 Pool 3428.................................................... 5.00% 08/20/33 652,613
49,147 Pool 3442.................................................... 5.00% 09/20/33 56,245
20,368 Pool 3459.................................................... 5.50% 10/20/33 23,456
10,482 Pool 3474.................................................... 6.00% 11/20/33 12,316
66,864 Pool 3487.................................................... 5.00% 12/20/33 76,496
361,218 Pool 3529.................................................... 5.00% 03/20/34 410,171
</TABLE>
Page 36 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 55,549 Pool 3555.................................................... 5.00% 05/20/34 $ 63,582
79,313 Pool 3596.................................................... 5.50% 08/20/34 93,173
69,780 Pool 3786.................................................... 5.50% 11/20/35 82,074
48,517 Pool 3807.................................................... 5.50% 01/20/36 57,043
352,188 Pool 4029.................................................... 6.50% 09/20/37 422,615
196,291 Pool 4251.................................................... 5.50% 10/20/23 204,581
109,958 Pool 455986.................................................. 5.25% 07/15/25 117,871
126,797 Pool 487108.................................................. 6.00% 04/15/29 146,793
48,279 Pool 553144.................................................. 5.50% 04/15/33 55,880
4,884 Pool 589331.................................................. 6.00% 10/15/22 5,245
135,259 Pool 604338.................................................. 5.00% 05/15/33 157,039
137,745 Pool 604897.................................................. 5.00% 12/15/33 159,839
128,880 Pool 605389.................................................. 5.00% 04/15/34 149,618
329,643 Pool 615403.................................................. 4.50% 08/15/33 375,115
12,453 Pool 627123.................................................. 5.50% 03/15/34 14,456
73,924 Pool 638704.................................................. 5.50% 11/15/36 83,510
167,136 Pool 653143.................................................. 4.90% 04/15/36 189,355
255,532 Pool 658324.................................................. 5.50% 03/15/37 288,270
160,052 Pool 677190.................................................. 5.00% 06/15/38 185,297
23,314 Pool 687833.................................................. 6.00% 08/15/38 27,655
46,071 Pool 706840.................................................. 4.50% 05/15/40 54,443
197,384 Pool 706855.................................................. 4.50% 09/15/40 233,492
285,181 Pool 711483.................................................. 4.00% 01/15/40 328,641
125,115 Pool 711543.................................................. 4.00% 11/15/40 145,028
779,028 Pool 711563.................................................. 4.50% 03/15/41 937,054
6,866,563 Pool 720225.................................................. 4.50% 07/15/39 7,836,987
325,222 Pool 723216.................................................. 4.50% 08/15/40 366,481
84,328 Pool 723248.................................................. 5.00% 10/15/39 98,267
330,447 Pool 724230.................................................. 5.00% 08/15/39 383,802
82,938 Pool 724267.................................................. 5.00% 09/15/39 96,025
282,344 Pool 724340.................................................. 4.50% 09/15/39 322,200
84,255 Pool 725272.................................................. 4.50% 11/15/39 93,924
59,456 Pool 726394.................................................. 4.50% 10/15/39 67,858
33,726 Pool 728921.................................................. 4.50% 12/15/24 35,496
267,654 Pool 733595.................................................. 4.50% 04/15/40 317,813
109,482 Pool 733733.................................................. 5.00% 06/15/40 126,601
684,579 Pool 736317.................................................. 4.25% 06/20/36 746,410
126,653 Pool 736617.................................................. 4.00% 12/15/35 138,112
1,129,786 Pool 737673.................................................. 4.50% 11/15/40 1,284,066
225,528 Pool 737996.................................................. 4.00% 02/15/41 249,635
255,896 Pool 739341.................................................. 3.50% 10/15/41 289,997
192,770 Pool 743673.................................................. 4.50% 07/15/40 220,217
323,090 Pool 745478.................................................. 5.00% 08/20/40 360,525
642,580 Pool 748939.................................................. 4.00% 09/20/40 702,162
106,875 Pool 754384.................................................. 4.50% 03/20/42 121,028
421,976 Pool 762905.................................................. 4.50% 04/15/41 480,346
1,437,644 Pool 769102.................................................. 4.50% 07/20/41 1,576,789
404,064 Pool 781623.................................................. 5.00% 06/15/33 460,115
61,351 Pool 781697.................................................. 6.00% 11/15/33 72,625
365,068 Pool 781824.................................................. 5.50% 11/15/34 423,945
12,579 Pool 781862.................................................. 5.50% 01/15/35 14,611
</TABLE>
See Notes to Financial Statements Page 37
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 51,201 Pool 782070.................................................. 7.00% 06/15/32 $ 57,526
12,978 Pool 782133.................................................. 6.00% 01/15/22 13,069
129,567 Pool 782259.................................................. 5.00% 02/15/36 150,397
70,816 Pool 782810.................................................. 4.50% 11/15/39 81,618
1,298,360 Pool 783009.................................................. 6.10% 12/20/33 1,491,708
104,644 Pool 783091.................................................. 5.50% 06/15/40 122,234
37,401 Pool 783220.................................................. 5.50% 09/15/24 39,346
169,524 Pool 783375.................................................. 5.00% 08/15/41 195,092
11,101,071 Pool 783590.................................................. 4.50% 06/20/41 12,461,002
279,716 Pool 783760.................................................. 5.00% 02/15/42 324,940
4,513,602 Pool 784063.................................................. 5.00% 09/20/45 5,040,619
197,071 Pool 784343.................................................. 5.00% 02/15/41 227,987
3,225,316 Pool 784573.................................................. 5.00% 12/15/43 3,730,844
4,079,729 Pool 784752.................................................. 4.00% 03/15/45 4,575,850
10,868,782 Pool 784758.................................................. 5.50% 05/20/49 12,389,934
4,448,364 Pool 785020.................................................. 3.00% 05/20/50 4,660,785
2,764,528 Pool AC0197.................................................. 4.00% 12/20/42 3,001,882
467,062 Pool AD0026.................................................. 3.50% 06/20/33 501,266
103,925 Pool AD0856.................................................. 3.75% 08/20/33 112,554
45,404 Pool AG8899.................................................. 4.00% 12/20/43 49,547
1,249,227 Pool AI6317.................................................. 4.50% 06/20/44 1,367,130
420,682 Pool AK2389.................................................. 4.50% 11/20/44 459,274
119,526 Pool AN4469.................................................. 5.00% 12/15/40 135,203
365,145 Pool AR8421.................................................. 5.00% 10/20/41 402,238
1,336,294 Pool BB1216.................................................. 4.50% 06/20/47 1,514,104
607,378 Pool BB4731.................................................. 4.00% 07/20/47 662,831
323,612 Pool BB4757.................................................. 4.00% 08/20/47 349,948
170,673 Pool BB4769.................................................. 4.00% 08/20/47 182,796
595,485 Pool BD0483.................................................. 4.50% 11/20/47 663,278
483,664 Pool BF0415.................................................. 5.00% 06/20/35 534,099
636,690 Pool BF2472.................................................. 5.50% 04/20/48 712,924
323,351 Pool BF2604.................................................. 5.50% 05/20/48 358,358
734,734 Pool BG1872.................................................. 5.50% 04/20/48 856,108
880,010 Pool BG1886.................................................. 5.50% 05/20/48 1,027,908
903,857 Pool BG1888.................................................. 5.50% 05/20/48 1,012,523
653,720 Pool BG5094.................................................. 5.50% 08/20/48 745,028
561,402 Pool BH7648.................................................. 5.50% 08/20/48 633,669
727,900 Pool BI2592.................................................. 5.50% 09/20/48 848,369
635,314 Pool BJ9554.................................................. 5.50% 01/20/49 717,761
482,786 Pool BK0831.................................................. 5.50% 12/20/48 538,929
310,008 Pool BK4821.................................................. 5.50% 12/20/48 350,542
604,662 Pool BK5396.................................................. 5.50% 12/20/48 672,787
444,702 Pool BK7681.................................................. 5.50% 12/20/48 495,525
381,452 Pool BL1291.................................................. 5.50% 01/20/49 421,855
689,698 Pool BL4638.................................................. 5.50% 04/20/49 779,869
386,472 Pool BL6909.................................................. 5.00% 03/20/49 425,442
186,390 Pool BL6923.................................................. 6.00% 03/20/49 206,429
1,161,042 Pool BL7446.................................................. 5.50% 03/20/49 1,320,769
948,681 Pool BL7950.................................................. 5.50% 05/20/49 1,074,222
615,903 Pool BL9104.................................................. 5.50% 05/20/49 698,883
321,385 Pool BL9105.................................................. 5.50% 05/20/49 356,162
</TABLE>
Page 38 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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)
$ 2,208,946 Pool BM5456.................................................. 5.50% 07/20/49 $ 2,503,337
1,448,955 Pool BM5457.................................................. 5.50% 07/20/49 1,613,912
957,021 Pool BM9249.................................................. 5.50% 05/20/49 1,083,961
430,443 Pool BM9832.................................................. 5.50% 06/20/49 479,543
555,749 Pool BN1982.................................................. 5.50% 05/20/49 636,620
883,756 Pool BN1985.................................................. 5.50% 05/20/49 1,023,897
479,923 Pool BN1986.................................................. 5.50% 05/20/49 534,317
807,310 Pool BN1987.................................................. 5.50% 05/20/49 905,799
1,403,399 Pool BN1989.................................................. 5.50% 05/20/49 1,575,867
1,622,686 Pool BN3607.................................................. 5.50% 05/20/49 1,862,027
1,254,115 Pool BN3608.................................................. 5.50% 05/20/49 1,420,091
1,020,716 Pool BN8877.................................................. 5.50% 07/20/49 1,161,661
1,784,847 Pool BN9929.................................................. 5.50% 08/20/49 2,003,810
777,954 Pool BO2380.................................................. 5.50% 07/20/49 903,004
917,794 Pool BO5553.................................................. 5.50% 08/20/49 1,063,215
1,065,759 Pool BO5554.................................................. 5.50% 08/20/49 1,198,038
1,079,249 Pool BO5555.................................................. 5.50% 08/20/49 1,208,468
791,734 Pool BO6139.................................................. 5.50% 07/20/49 896,357
1,295,931 Pool BO8096.................................................. 5.50% 08/20/49 1,452,954
1,103,747 Pool BO8097.................................................. 5.50% 08/20/49 1,232,107
202,070 Pool MA1017.................................................. 6.00% 05/20/43 237,525
122,122 Pool MA1162.................................................. 6.00% 07/20/43 143,509
203,902 Pool MA2077.................................................. 5.50% 07/20/44 239,570
21,080 Pool MA2215.................................................. 3.50% 09/20/44 22,078
127,596 Pool MA2683.................................................. 6.00% 03/20/45 149,785
128,259 Pool MA2759.................................................. 6.00% 01/20/45 150,565
346,748 Pool MA2829.................................................. 5.00% 05/20/45 398,965
52,338 Pool MA2897.................................................. 6.00% 03/20/45 61,507
248,575 Pool MA2966.................................................. 6.00% 09/20/39 289,081
261,184 Pool MA3249.................................................. 6.00% 04/20/40 306,615
43,393 Pool MA3380.................................................. 5.50% 01/20/46 51,059
507,866 Pool MA3459.................................................. 6.00% 08/20/39 596,192
294,828 Pool MA3525.................................................. 5.50% 03/20/46 346,944
292,504 Pool MA3941.................................................. 5.50% 09/20/46 343,929
665,571 Pool MA4076.................................................. 7.00% 01/20/39 797,471
5,274,647 Pool MA5714.................................................. 6.00% 01/20/49 5,951,207
----------------
3,152,580,101
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 5,698,244,985
(Cost $5,656,505,272) ----------------
MORTGAGE-BACKED SECURITIES -- 7.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.5%
Alternative Loan Trust
44,110 Series 2003-J3, Class 2A1.................................... 6.25% 12/25/33 44,890
American Home Mortgage Investment Trust
1,565 Series 2004-3, Class 6A1..................................... 5.32% 10/25/34 1,593
Arroyo Mortgage Trust
3,140,764 Series 2019-3, Class A3 (j).................................. 3.42% 10/25/48 3,204,882
Banc of America Funding Trust
984 Series 2005-2, Class 2A4..................................... 5.75% 04/25/35 1,098
</TABLE>
See Notes to Financial Statements Page 39
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Banc of America Mortgage Trust
$ 320,622 Series 2005-A, Class 2A2 (d)................................. 2.58% 02/25/35 $ 331,881
BCAP LLC Trust
2,180 Series 2009-RR5, Class 8A1 (j)............................... 5.50% 11/26/34 2,182
Chase Home Lending Mortgage Trust
6,047,858 Series 2019-1, Class A11, 1 Mo. LIBOR + 0.85% (a) (j)........ 0.96% 03/25/50 6,097,204
479,417 Series 2019-ATR2, Class A11, 1 Mo. LIBOR +
0.90% (a) (j)............................................. 1.01% 07/25/49 482,713
CHL Mortgage Pass-Through Trust
39,000 Series 2004-8, Class 1A7..................................... 5.75% 07/25/34 39,655
30,798 Series 2004-8, Class 2A1..................................... 4.50% 06/25/19 32,557
CIM Trust
3,053,886 Series 2017-7, Class A (j)................................... 3.00% 04/25/57 3,111,762
1,384,764 Series 2018-INV1, Class A4 (j)............................... 4.00% 08/25/48 1,420,068
3,776,716 Series 2018-J1, Class A22 (j)................................ 3.50% 03/25/48 3,824,704
6,841,415 Series 2019-INV1, Class A11 (j).............................. 4.00% 02/25/49 6,951,787
7,655,778 Series 2019-INV3, Class A11, 1 Mo. LIBOR +
1.00% (a) (j)............................................. 1.06% 08/25/49 7,667,949
Citigroup Global Markets Mortgage Securities VII, Inc.
247 Series 2003-UP2, Class PO1, PO............................... (c) 12/25/18 228
Citigroup Mortgage Loan Trust
7,330 Series 2003-1, Class WA2..................................... 6.50% 06/25/31 7,540
Connecticut Avenue Securities Trust
1,406,531 Series 2019-R02, Class 1M2, 1 Mo. LIBOR + 2.30% (a) (j)...... 2.41% 08/25/31 1,417,927
1,535,253 Series 2019-R05, Class 1M2, 1 Mo. LIBOR + 2.00% (a) (j)...... 2.11% 07/25/39 1,542,940
5,415,399 Series 2019-R06, Class 2M2, 1 Mo. LIBOR + 2.10% (a) (j)...... 2.21% 09/25/39 5,441,131
Credit Suisse First Boston Mortgage Securities Corp.
3,615 Series 2003-11, Class 1A39................................... 5.25% 06/25/33 3,644
49,057 Series 2005-5, Class 3A2, 1 Mo. LIBOR + 0.30% (a)............ 0.41% 07/25/35 48,183
1,759 Series 2005-7, Class 1A5..................................... 5.15% 08/25/35 1,783
CSFB Mortgage-Backed Pass-Through Certificates
10,372 Series 2003-AR18, Class 2A3 (d).............................. 2.48% 07/25/33 10,669
Federal Home Loan Mortgage Corporation STACR Debt Notes
10,931,932 Series 2018-DNA1, Class M2, 1 Mo. LIBOR + 1.80% (a).......... 1.91% 07/25/30 10,941,181
Federal Home Loan Mortgage Corporation STACR REMIC Trust
4,000,000 Series 2021-DNA3, Class M1, SOFR + 0.75% (a) (j)............. 0.76% 10/25/33 4,006,481
Federal Home Loan Mortgage Corporation STACR Trust
12,000,000 Series 2018-DNA2, Class M2, 1 Mo. LIBOR + 2.15% (a) (j)...... 2.26% 12/25/30 12,105,866
Federal National Mortgage Association Connecticut Avenue
Securities
14,073,186 Series 2018-C03, Class 1M2, 1 Mo. LIBOR + 2.15% (a).......... 2.26% 10/25/30 14,246,416
14,257,170 Series 2018-C05, Class 1M2, 1 Mo. LIBOR + 2.35% (a).......... 2.46% 01/25/31 14,471,033
11,604,812 Series 2018-C06, Class 1M2, 1 Mo. LIBOR + 2.00% (a).......... 2.11% 03/25/31 11,696,587
Flagstar Mortgage Trust
803,666 Series 2018-2, Class A4 (j).................................. 3.50% 04/25/48 808,928
2,544,226 Series 2018-4, Class B1 (d) (j).............................. 4.28% 07/25/48 2,709,653
3,677,356 Series 2019-2, Class A11 (j)................................. 3.50% 12/25/49 3,784,213
3,789,910 Series 2020-1INV, Class A11, 1 Mo. LIBOR +
0.85% (a) (j)............................................. 0.96% 03/25/50 3,793,583
Galton Funding Mortgage Trust
1,150,755 Series 2018-1, Class A43 (j)................................. 3.50% 11/25/57 1,157,976
1,581,875 Series 2018-2, Class A41 (j)................................. 4.50% 10/25/58 1,597,309
GMACM Mortgage Loan Trust
892 Series 2003-J10, Class A1.................................... 4.75% 01/25/19 886
</TABLE>
Page 40 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
GS Mortgage-Backed Securities Corp. Trust
$ 3,282,394 Series 2019-PJ3, Class A1 (j)................................ 3.50% 03/25/50 $ 3,362,432
GSR Mortgage Loan Trust
20,745 Series 2004-8F, Class 2A3.................................... 6.00% 09/25/34 21,258
176,972 Series 2004-12, Class 3A6 (d)................................ 2.62% 12/25/34 178,370
Impac CMB Trust
308,047 Series 2004-6, Class M3, 1 Mo. LIBOR + 1.05% (a)............. 1.16% 10/25/34 311,228
JP Morgan Mortgage Trust
6,924 Series 2004-S2, Class 5A1.................................... 5.50% 12/25/19 6,952
19,889 Series 2014-IVR3, Class 2A1 (d) (j).......................... 2.45% 09/25/44 20,117
5,586,952 Series 2015-IVR2, Class A5 (d) (j)........................... 2.62% 01/25/45 5,698,871
86,377 Series 2016-3, Class 1A3 (j)................................. 3.45% 10/25/46 86,512
8,780,923 Series 2018-7FRB, Class A2, 1 Mo. LIBOR + 0.75% (a) (j)...... 0.86% 04/25/46 8,794,942
5,742,333 Series 2018-8, Class A7 (j).................................. 4.00% 01/25/49 5,904,379
6,246,632 Series 2019-1, Class A5 (j).................................. 4.00% 05/25/49 6,354,898
5,473,621 Series 2019-1, Class A11, 1 Mo. LIBOR + 0.95% (a) (j)........ 1.06% 05/25/49 5,508,912
1,526,644 Series 2019-2, Class A11, 1 Mo. LIBOR + 0.95% (a) (j)........ 1.06% 08/25/49 1,530,454
2,883,297 Series 2019-3, Class A11, 1 Mo. LIBOR + 0.95% (a) (j)........ 1.06% 09/25/49 2,895,879
2,463,341 Series 2019-5, Class A11, 1 Mo. LIBOR + 0.90% (a) (j)........ 1.01% 11/25/49 2,480,062
2,544,117 Series 2019-5, Class A15 (j)................................. 4.00% 11/25/49 2,600,311
2,373,541 Series 2019-8, Class A15 (j)................................. 3.50% 03/25/50 2,433,453
346,235 Series 2019-9, Class A11, 1 Mo. LIBOR + 0.90% (a) (j)........ 1.01% 05/25/50 350,154
12,632,702 Series 2019-INV2, Class A11, 1 Mo. LIBOR +
0.90% (a) (j)............................................. 1.01% 02/25/50 12,765,156
3,663,777 Series 2019-INV2, Class A15 (j).............................. 3.50% 02/25/50 3,793,039
1,700,781 Series 2019-INV3, Class A4 (j)............................... 3.50% 05/25/50 1,731,237
92,215 Series 2019-LTV2, Class A11, 1 Mo. LIBOR +
0.90% (a) (j)............................................. 1.01% 12/25/49 92,489
2,121,895 Series 2019-LTV3, Class A15 (j).............................. 3.50% 03/25/50 2,154,984
10,983,340 Series 2020-INV1, Class A15 (j).............................. 3.50% 08/25/50 11,413,515
4,463,560 Series 2020-LTV1, Class A11, 1 Mo. LIBOR +
1.00% (a) (j)............................................. 1.11% 06/25/50 4,511,339
JP Morgan Resecuritization Trust
156,838 Series 2009-7, Class 17A1 (d) (j)............................ 5.27% 07/27/37 157,489
MASTR Alternative Loan Trust
3,571 Series 2004-13, Class 8A1.................................... 5.50% 01/25/25 3,353
MASTR Asset Securitization Trust
95,466 Series 2003-11, Class 7A5.................................... 5.25% 12/25/33 98,639
195,268 Series 2003-12, Class 1A1.................................... 5.25% 12/25/24 196,900
28,929 Series 2003-12, Class 1A2.................................... 5.25% 12/25/24 28,829
6,437 Series 2004-1, Class 30PO, PO................................ (c) 02/25/34 5,394
7,028 Series 2004-3, Class 1A3..................................... 5.25% 03/25/24 7,052
MASTR Seasoned Securitization Trust
55,255 Series 2005-1, Class 3A1 (d)................................. 2.52% 10/25/32 56,859
1,003 Series 2005-2, Class 3A1..................................... 6.00% 11/25/17 1,030
Mello Mortgage Capital Acceptance
9,574,588 Series 2018-MTG2, Class A9 (j)............................... 4.44% 10/25/48 9,857,229
MetLife Securitization Trust
4,260,831 Series 2018-1A, Class A (j).................................. 3.75% 03/25/57 4,460,052
Morgan Stanley Mortgage Loan Trust
652,711 Series 2005-6AR, Class 1M1, 1 Mo. LIBOR + 0.69% (a).......... 0.80% 11/25/35 652,836
MRA Issuance Trust
6,000,000 Series 2021-8, Class A1X, 1 Mo. LIBOR + 1.15% (a) (j)........ 1.27% 10/15/21 6,006,002
</TABLE>
See Notes to Financial Statements Page 41
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
New Residential Mortgage Loan Trust
$ 514,021 Series 2014-2A, Class A3 (j)................................. 3.75% 05/25/54 $ 547,968
6,609,302 Series 2015-2A, Class B1 (j)................................. 4.50% 08/25/55 7,129,047
6,372,009 Series 2016-1A, Class A1 (j)................................. 3.75% 03/25/56 6,765,056
23,766,212 Series 2018-4A, Class A1S, 1 Mo. LIBOR + 0.75% (a) (j)....... 0.86% 01/25/48 23,869,942
Nomura Asset Acceptance Corp. Alternative Loan Trust
1,696 Series 2004-AP3, Class A6.................................... 5.29% 10/25/34 1,699
2,127 Series 2005-WF1, Class 2A5................................... 5.66% 03/25/35 2,164
OBX Trust
3,931,078 Series 2018-EXP1, Class 1A3 (j).............................. 4.00% 04/25/48 4,021,739
5,635,812 Series 2018-EXP1, Class 2A1, 1 Mo. LIBOR +
0.85% (a) (j)............................................. 0.96% 04/25/48 5,690,128
840,239 Series 2018-EXP2, Class 1A1 (j).............................. 4.00% 07/25/58 849,868
Provident Funding Mortgage Trust
38,945 Series 2019-1, Class A3 (j).................................. 3.00% 12/25/49 39,065
2,464,399 Series 2019-1, Class A5 (j).................................. 3.00% 12/25/49 2,490,074
296,122 Series 2020-1, Class A3 (j).................................. 3.00% 02/25/50 297,233
3,521,075 Series 2020-1, Class A5 (j).................................. 3.00% 02/25/50 3,572,751
Residential Accredit Loans, Inc.
3,397 Series 2003-QS20, Class CB................................... 5.00% 11/25/18 3,572
Sequoia Mortgage Trust
17,055 Series 2000-4, Class A, 1 Mo. LIBOR + 0.72% (a).............. 0.83% 11/22/24 17,077
140,595 Series 2017-3, Class A4 (j).................................. 3.50% 04/25/47 140,857
225,240 Series 2018-CH2, Class A12 (j)............................... 4.00% 06/25/48 225,560
2,234,756 Series 2020-1, Class A4 (j).................................. 3.50% 02/25/50 2,247,968
13,200,000 Series 2020-1, Class A7 (j).................................. 3.50% 02/25/50 13,665,697
1,240,269 Series 2020-1, Class A19 (j)................................. 3.50% 02/25/50 1,269,985
Shellpoint Co-Originator Trust
212,845 Series 2016-1, Class 1A10 (j)................................ 3.50% 11/25/46 213,686
216,639 Series 2017-1, Class A4 (j).................................. 3.50% 04/25/47 217,200
Structured Asset Securities Corp.
1,823 Series 2004-4XS, Class A3A (l)............................... 5.14% 02/25/34 1,840
Structured Asset Securities Corp. Mortgage Pass-Through
Certificates
9,936 Series 2004-11XS, Class 1A6 (l).............................. 5.10% 06/25/34 10,188
TIAA Bank Mortgage Loan Trust
939,299 Series 2018-3, Class A1 (j).................................. 4.00% 11/25/48 954,001
WaMu Mortgage Pass-Through Certificates Trust
21,612 Series 2003-S3, Class 3A1.................................... 5.50% 05/25/33 22,523
6,725 Series 2004-RS1, Class A11................................... 5.50% 11/25/33 6,892
Wells Fargo Mortgage Backed Securities Trust
2,188 Series 2004-K, Class 2A12 (d)................................ 3.04% 07/25/34 2,169
2,834,234 Series 2019-1, Class A1 (j).................................. 4.00% 11/25/48 2,876,561
602,120 Series 2019-3, Class A1 (j).................................. 3.50% 07/25/49 613,295
WinWater Mortgage Loan Trust
2,641,137 Series 2016-1, Class 1A18 (j)................................ 3.50% 01/20/46 2,700,959
1,217,825 Series 2016-1, Class 2A3 (j)................................. 3.00% 12/20/30 1,245,139
4,686,936 Series 2016-1, Class B1 (d) (j).............................. 3.80% 01/20/46 4,898,935
----------------
316,152,527
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 2.7%
Austin Fairmont Hotel Trust
5,000,000 Series 2019-FAIR, Class A, 1 Mo. LIBOR + 1.05% (a) (j)....... 1.17% 09/15/32 5,004,454
</TABLE>
Page 42 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
BBCMS Mortgage Trust
$ 12,000,000 Series 2017-DELC, Class A, 1 Mo. LIBOR + 0.85% (a) (j)....... 0.96% 08/15/36 $ 12,025,600
Benchmark Mortgage Trust
4,810,000 Series 2020-B21, Class A5.................................... 1.98% 12/17/53 4,719,524
10,000,000 Series 2020-B22, Class A5.................................... 1.97% 01/15/54 9,800,040
7,000,000 Series 2021-B23, Class A5.................................... 2.07% 02/15/54 6,915,156
BX Commercial Mortgage Trust
15,000,000 Series 2019-IMC, Class A, 1 Mo. LIBOR + 1.00% (a) (j)........ 1.12% 04/15/34 14,978,773
Citigroup Commercial Mortgage Trust
7,000,000 Series 2020-GC46, Class A5................................... 2.72% 02/15/53 7,314,831
CSAIL Commercial Mortgage Trust
5,000,000 Series 2021-C20, Class A3.................................... 2.80% 03/15/54 5,202,447
DBCG Mortgage Trust
10,000,000 Series 2017-BBG, Class A, 1 Mo. LIBOR + 0.70% (a) (j)........ 0.81% 06/15/34 10,016,236
DBWF Mortgage Trust
10,844,968 Series 2018-GLKS, Class A, 1 Mo. LIBOR + 1.03% (a) (j)....... 1.15% 12/19/30 10,870,685
GS Mortgage Securities Corp Trust
19,050,000 Series 2019-BOCA, Class A, 1 Mo. LIBOR + 1.20% (a) (j)....... 1.32% 06/15/38 19,110,373
GS Mortgage Securities Corp. II
10,717,000 Series 2012-TMSQ, Class A (j)................................ 3.01% 12/10/30 10,968,100
GS Mortgage Securities Trust
3,604,148 Series 2014-GC18, Class A3................................... 3.80% 01/10/47 3,782,273
10,000,000 Series 2020-GSA2, Class A5................................... 2.01% 12/12/53 9,808,158
Hawaii Hotel Trust
19,290,000 Series 2019-MAUI, Class A, 1 Mo. LIBOR + 1.15% (a) (j)....... 1.26% 05/15/38 19,349,784
Morgan Stanley Bank of America Merrill Lynch Trust
7,700,000 Series 2014-C15, Class AS.................................... 4.26% 04/15/47 8,339,499
UBS-Barclays Commercial Mortgage Trust
4,526,000 Series 2012-C3, Class B (d) (j).............................. 4.37% 08/10/49 4,700,230
Wells Fargo Commercial Mortgage Trust
7,500,000 Series 2015-NXS2, Class B (d)................................ 4.44% 07/15/58 8,228,898
WFRBS Commercial Mortgage Trust
9,400,000 Series 2012-C6, Class AS..................................... 3.84% 04/15/45 9,581,637
4,636,955 Series 2013-C18, Class A4.................................... 3.90% 12/15/46 4,950,371
----------------
185,667,069
----------------
TOTAL MORTGAGE-BACKED SECURITIES............................................................ 501,819,596
(Cost $500,049,937) ----------------
ASSET-BACKED SECURITIES -- 2.2%
Aegis Asset Backed Securities Trust
630,654 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.66% (a)............. 0.77% 06/25/35 628,992
AMSR Trust
2,500,000 Series 2020-SFR2, Class A (j)................................ 1.63% 07/17/37 2,525,074
6,393,000 Series 2020-SFR5, Class A (j)................................ 1.38% 11/17/37 6,367,920
Citicorp Residential Mortgage Trust
8,450 Series 2007-2, Class A6 (l).................................. 4.97% 06/25/37 8,602
Citigroup Global Markets Mortgage Securities VII, Inc.
1,046 Series 1998-AQ1, Class A6.................................... 6.63% 06/25/28 1,065
Countrywide Asset-Backed Certificates
301,681 Series 2005-9, Class M1, 1 Mo. LIBOR + 0.78% (a)............. 0.89% 01/25/36 301,980
Credit-Based Asset Servicing & Securitization LLC
930,712 Series 2007-MX1, Class A3, steps up to 6.33% after
Redemption Date (g) (j)................................... 5.83% 12/25/36 928,158
</TABLE>
See Notes to Financial Statements Page 43
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (CONTINUED)
CWABS, Inc. Asset-Backed Certificates Trust
$ 5,122,471 Series 2004-5, Class M1, 1 Mo. LIBOR + 0.86% (a)............. 0.96% 08/25/34 $ 5,118,370
Diamond Resorts Owner Trust
12,000,000 Series 2021-1A, Class A (j).................................. 1.51% 11/21/33 12,029,653
FBR Securitization Trust
1,650,928 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.75% (a)............. 0.86% 09/25/35 1,651,254
FCI Funding LLC
12,923,472 Series 2019-1A, Class A (j).................................. 3.63% 02/18/31 13,122,571
First Alliance Mortgage Loan Trust
24,620 Series 1999-1, Class A1...................................... 7.18% 06/20/30 25,047
FirstKey Homes Trust
10,000,000 Series 2020-SFR1, Class A (j)................................ 1.34% 09/17/25 10,005,744
15,964,687 Series 2020-SFR2, Class A (j)................................ 1.27% 10/19/37 15,917,215
FNA VI LLC
6,942,563 Series 2021-1A, Class A (j).................................. 1.35% 01/10/32 6,942,648
Fremont Home Loan Trust
469,312 Series 2005-1, Class M4, 1 Mo. LIBOR + 1.02% (a)............. 1.13% 06/25/35 470,736
GMACM Home Equity Loan Trust
47,100 Series 2000-HE2, Class A1, 1 Mo. LIBOR + 0.44% (a)........... 0.61% 06/25/30 36,708
83,439 Series 2004-HE1, Class A3, 1 Mo. LIBOR + 0.50% (a)........... 0.61% 06/25/34 82,258
GSAMP Trust
7,994,000 Series 2006-SEA1, Class M2, 1 Mo. LIBOR + 1.65% (a) (j)...... 1.76% 05/25/36 8,026,478
Home Partners of America Trust
14,336,107 Series 2020-2, Class A (j)................................... 1.53% 01/17/41 14,194,079
Morgan Stanley Dean Witter Capital I, Inc. Trust
5,331 Series 2003-NC2, Class M2, 1 Mo. LIBOR + 3.00% (a)........... 3.11% 02/25/33 5,547
New Century Home Equity Loan Trust
8,189 Series 2003-5, Class AI7..................................... 4.93% 11/25/33 8,498
Park Place Securities, Inc. Asset-Backed Pass-Through
Certificates
947,492 Series 2004-WCW2, Class M2, 1 Mo. LIBOR + 0.98% (a).......... 1.08% 10/25/34 954,127
Progress Residential Trust
10,685,000 Series 2018-SFR2, Class A (j)................................ 3.71% 08/17/35 10,776,028
1,444,251 Series 2019-SFR3, Class A (j)................................ 2.27% 09/17/36 1,468,529
19,070,000 Series 2019-SFR4, Class A (j)................................ 2.69% 10/17/36 19,521,623
Saxon Asset Securities Trust
3,783 Series 2004-2, Class MV3, 1 Mo. LIBOR + 1.91% (a)............ 2.01% 08/25/35 3,728
Sierra Timeshare Receivables Funding LLC
3,017,477 Series 2020-2A, Class A (j).................................. 1.33% 07/20/37 3,040,190
Towd Point Mortgage Trust
863,494 Series 2015-1, Class A2 (j).................................. 3.25% 10/25/53 868,175
226,960 Series 2015-2, Class 1A12 (j)................................ 2.75% 11/25/60 227,187
241,899 Series 2015-3, Class A4B (j)................................. 3.50% 03/25/54 247,002
13,024 Series 2015-4, Class A1B (j)................................. 2.75% 04/25/55 13,021
1,500,000 Series 2015-4, Class A2A (j)................................. 3.50% 04/25/55 1,519,176
234,119 Series 2015-5, Class A1B (j)................................. 2.75% 05/25/55 234,679
1,300,000 Series 2015-5, Class A2 (j).................................. 3.50% 05/25/55 1,323,835
397,897 Series 2016-1, Class A1B (j)................................. 2.75% 02/25/55 399,586
Tricon American Homes Trust
14,993,545 Series 2020-SFR2, Class A (j)................................ 1.48% 11/17/39 14,684,588
----------------
TOTAL ASSET-BACKED SECURITIES............................................................... 153,680,071
(Cost $154,227,907) ----------------
</TABLE>
Page 44 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
EXCHANGE-TRADED FUNDS -- 0.0%
CAPITAL MARKETS -- 0.0%
29,359 First Trust Long Duration Opportunities ETF (m)............................................. $ 795,629
(Cost $805,933) ----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. TREASURY BILLS -- 8.7%
$ 300,000,000 U.S. Treasury Bill.............................................. (c) 05/18/21 299,999,688
300,000,000 U.S. Treasury Bill.............................................. (c) 05/27/21 300,000,000
----------------
TOTAL U.S. TREASURY BILLS................................................................... 599,999,688
(Cost $599,998,208) ----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
MONEY MARKET FUNDS -- 0.1%
4,089,605 BlackRock Treasury Trust Fund - Institutional Shares - 0.02% (n)............................ 4,089,605
4,089,605 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Shares - 0.01% (n)......................................................... 4,089,605
----------------
TOTAL MONEY MARKET FUNDS.................................................................... 8,179,210
(Cost $8,179,210) ----------------
TOTAL INVESTMENTS -- 100.3%................................................................. 6,962,719,179
(Cost $6,919,766,467) (o) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ------------------------------------------------- ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS PURCHASED -- 0.0%
20 U.S. Treasury Long Bond Futures Call............. $ 3,145,000 $ 159.00 05/21/21 10,938
(Cost $10,712) ----------------
</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 -- (15.1)%
Federal National Mortgage Association
$ (50,000,000) Pool TBA (k)................................................. 1.50% 05/15/51 (48,974,609)
(90,000,000) Pool TBA..................................................... 2.00% 05/15/51 (90,840,234)
(65,000,000) Pool TBA..................................................... 3.00% 05/15/51 (68,073,313)
(40,000,000) Pool TBA (k)................................................. 3.50% 05/15/51 (42,575,000)
(290,000,000) Pool TBA (k)................................................. 4.00% 05/15/51 (311,563,083)
(250,000,000) Pool TBA (k)................................................. 1.50% 06/15/51 (244,414,895)
(90,000,000) Pool TBA..................................................... 2.00% 06/15/51 (90,661,237)
(45,000,000) Pool TBA..................................................... 4.00% 06/15/51 (48,388,183)
(100,000,000) Pool TBA (k)................................................. 3.50% 07/15/51 (106,396,013)
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES SOLD SHORT.......................... (1,051,886,567)
(Proceeds $1,050,615,820) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ------------------------------------------------- ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
WRITTEN OPTIONS -- (0.0)%
CALL OPTIONS WRITTEN -- (0.0)%
(1,200) U.S. 5-Year Treasury Futures Call................ $(148,725,000) $ 124.25 05/21/21 (150,000)
(50) U.S. Treasury Long Bond Futures Call............. (7,862,500) 166.00 05/21/21 (1,563)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (151,563)
(Premiums received $207,857) ----------------
</TABLE>
See Notes to Financial Statements Page 45
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- ------------------------------------------------- ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
WRITTEN OPTIONS (CONTINUED)
PUT OPTIONS WRITTEN -- (0.0)%
(1,000) U.S. 5-Year Treasury Futures Put................. $(123,937,500) $ 122.25 05/21/21 $ (15,625)
(50) U.S. Treasury Long Bond Futures Put.............. (7,862,500) 155.00 05/21/21 (26,563)
----------------
TOTAL PUT OPTIONS WRITTEN................................................................... (42,188)
(Premiums received $194,529) ----------------
TOTAL WRITTEN OPTIONS....................................................................... (193,751)
(Premiums received $402,386) ----------------
NET OTHER ASSETS AND LIABILITIES -- 14.8%................................................... 1,027,930,739
----------------
NET ASSETS -- 100.0%........................................................................ $ 6,938,580,538
================
</TABLE>
FUTURES CONTRACTS AT APRIL 30, 2021 (See Note 2D - Futures Contracts in the
Notes to Financial Statements):
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
------------------------------------------------------ ----------- ----------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
U.S. 2-Year Treasury Notes Short 1,367 Jun-2021 $ (301,775,929) $ 33,769
U.S. 5-Year Treasury Notes Short 5,222 Jun-2021 (647,201,625) (140,474)
U.S. 10-Year Treasury Notes Short 2,023 Jun-2021 (267,099,218) 3,262,163
U.S. 10-Year Ultra Treasury Notes Short 849 Jun-2021 (123,569,297) 1,469,619
U.S. Treasury Long Bond Futures Short 90 Jun-2021 (14,152,500) 155,002
U.S. Treasury Ultra Bond Futures Short 119 Jun-2021 (22,122,844) (117,081)
--------------- ----------------
$(1,375,921,413) $ 4,662,998
=============== ================
</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 "Advisor"), the Fund's 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.
(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 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, 2021, securities noted as such are valued at
$31,785,400 or 0.5% of net assets.
(i) This security's value was determined using significant unobservable inputs
(See Note 2A - Portfolio Valuation in the Notes to Financial Statements).
(j) 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, 2021,
securities noted as such amounted to $520,443,229 or 7.5% of net assets.
(k) 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).
(l) Step security. The coupon rate is determined based on the underlying
investments. The coupon rate resets periodically.
(m) Investment in an affiliated fund.
Page 46 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
(n) Rate shown reflects yield as of April 30, 2021.
(o) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $145,390,834 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $98,837,010. The net unrealized appreciation
was $46,553,824. The unrealized 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 Rates
PO - Principal-Only Security
REMIC - Real Estate Mortgage Investment Conduit
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,
2021 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
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 5,698,244,985 $ -- $ 5,684,083,707 $ 14,161,278
Mortgage-Backed Securities............................ 501,819,596 -- 501,819,596 --
Asset-Backed Securities............................... 153,680,071 -- 153,680,071 --
Exchange-Traded Funds*................................ 795,629 795,629 -- --
U.S. Treasury Bills................................... 599,999,688 -- 599,999,688 --
Money Market Funds.................................... 8,179,210 8,179,210 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... 6,962,719,179 8,974,839 6,939,583,062 14,161,278
Call Options Purchased................................ 10,938 10,938 -- --
Futures Contracts**................................... 4,920,553 4,920,553 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 6,967,650,670 $ 13,906,330 $ 6,939,583,062 $ 14,161,278
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
U.S. Government Agency Mortgage-Backed Securities
Sold Short......................................... $(1,051,886,567) $ -- $(1,051,886,567) $ --
Call Options Written.................................. (151,563) (151,563) -- --
Put Options Written................................... (42,188) (42,188) -- --
Futures Contracts**................................... (257,555) (257,555) -- --
--------------- --------------- --------------- ---------------
Total................................................. $(1,052,337,873) $ (451,306) $(1,051,886,567) $ --
=============== =============== =============== ===============
</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.
Level 3 Investments that are fair valued by the Advisor's Pricing Committee are
footnoted in the Portfolio of Investments. All Level 3 values are based on
unobservable inputs.
See Notes to Financial Statements Page 47
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value - Unaffiliated...................................... $ 6,961,923,550
Investments, at value - Affiliated........................................ 795,629
---------------
Total investments, at value............................................... 6,962,719,179
Options contracts purchased, at value..................................... 10,938
Cash...................................................................... 501,094,354
Cash segregated as collateral for open futures contracts.................. 12,912,912
Receivables:
Investment securities sold............................................. 3,095,655,874
Interest............................................................... 23,701,471
Capital shares sold.................................................... 5,114,296
Dividends.............................................................. 1,492
---------------
Total Assets........................................................... 10,601,210,516
---------------
LIABILITIES:
Investments sold short, at value (proceeds $1,050,615,820)................ 1,051,886,567
Options contracts written, at value....................................... 193,751
Payables:
Investment securities purchased........................................ 2,606,399,300
Investment advisory fees............................................... 3,706,708
Variation margin....................................................... 443,652
---------------
Total Liabilities...................................................... 3,662,629,978
---------------
NET ASSETS................................................................ $ 6,938,580,538
===============
NET ASSETS CONSIST OF:
Paid-in capital........................................................... $ 6,989,240,419
Par value................................................................. 1,358,000
Accumulated distributable earnings (loss)................................. (52,017,881)
---------------
NET ASSETS................................................................ $ 6,938,580,538
---------------
NET ASSET VALUE, per share................................................ $ 51.09
===============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share)............................................. 135,800,002
===============
Investments, at cost - Unaffiliated....................................... $ 6,918,960,534
===============
Investments, at cost - Affiliated......................................... $ 805,933
===============
Total investments, at cost................................................ $ 6,919,766,467
===============
Premiums paid on options contracts purchased.............................. $ 10,712
===============
Premiums received on options contracts written............................ $ 402,386
===============
</TABLE>
Page 48 See Notes to Financial Statements
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Interest.................................................................. $ 50,435,927
Dividends - Unaffiliated.................................................. 22,076
Dividends - Affiliated.................................................... 12,372
---------------
Total investment income................................................ 50,470,375
---------------
EXPENSES:
Investment advisory fees.................................................. 21,584,014
---------------
Total expenses......................................................... 21,584,014
---------------
NET INVESTMENT INCOME (LOSS).............................................. 28,886,361
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated............................................. 14,302,730
Investments - Affiliated............................................... --
Investments sold short................................................. (3,257,126)
Futures contracts...................................................... 42,653,755
Purchased options contracts............................................ (187,105)
Written options contracts.............................................. 4,618,729
---------------
Net realized gain (loss).................................................. 58,130,983
---------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated............................................. (59,409,156)
Investments - Affiliated............................................... (48,035)
Investments sold short................................................. (1,038,505)
Futures contracts...................................................... (4,595,440)
Purchased options contracts............................................ 226
Written options contracts.............................................. 208,635
---------------
Net change in unrealized appreciation (depreciation)...................... (64,882,275)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (6,751,292)
---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS........................................................ $ 22,135,069
===============
</TABLE>
See Notes to Financial Statements Page 49
<PAGE>
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................................. $ 28,886,361 $ 80,552,527
Net realized gain (loss).................................................. 58,130,983 (64,269,937)
Net change in unrealized appreciation (depreciation)...................... (64,882,275) 48,842,781
-------------- --------------
Net increase (decrease) in net assets resulting from operations........... 22,135,069 65,125,371
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations..................................................... (70,582,501) (98,308,815)
Return of capital......................................................... -- (19,702,687)
-------------- --------------
Total distributions to shareholders....................................... (70,582,501) (118,011,502)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold................................................. 658,637,594 2,755,885,309
Cost of shares redeemed................................................... (61,351,387) (78,726,417)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................... 597,286,207 2,677,158,892
-------------- --------------
Total increase (decrease) in net assets................................... 548,838,775 2,624,272,761
NET ASSETS:
Beginning of period....................................................... 6,389,741,763 3,765,469,002
-------------- --------------
End of period............................................................. $6,938,580,538 $6,389,741,763
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................... 124,200,002 72,600,002
Shares sold............................................................... 12,800,000 53,150,000
Shares redeemed........................................................... (1,200,000) (1,550,000)
-------------- --------------
Shares outstanding, end of period......................................... 135,800,002 124,200,002
============== ==============
</TABLE>
Page 50 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,
4/30/2021 --------------------------------------------------------------------------
(UNAUDITED) 2020 2019 2018 2017 2016
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 51.45 $ 51.87 $ 50.78 $ 51.76 $ 52.54 $ 50.32
---------- ---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.25 0.87 1.24 1.17 1.13 1.31
Net realized and unrealized gain (loss).. (0.07) (0.10) 1.21 (0.74) (0.50) 2.41
---------- ---------- ---------- ---------- ---------- --------
Total from investment operations......... 0.18 0.77 2.45 0.43 0.63 3.72
---------- ---------- ---------- ---------- ---------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.54) (0.99) (1.23) (1.13) (1.14) (1.50)
Net realized gain........................ -- -- (0.05) (0.28) (0.02) --
Return of capital........................ -- (0.20) (0.08) -- (0.25) --
---------- ---------- ---------- ---------- ---------- --------
Total distributions...................... (0.54) (1.19) (1.36) (1.41) (1.41) (1.50)
---------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period........... $ 51.09 $ 51.45 $ 51.87 $ 50.78 $ 51.76 $ 52.54
========== ========== ========== ========== ========== ========
TOTAL RETURN (a)......................... 0.37% 1.50% 4.88% 0.84% 1.22% 7.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $6,938,581 $6,389,742 $3,765,469 $1,729,078 $ 846,322 $270,586
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average
net assets (b)........................ 0.65% (c) 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income (loss) to
average net assets.................... 0.87% (c) 1.57% 2.41% 2.32% 2.20% 2.06%
Portfolio turnover rate (d).............. 216% (e) 434% (e) 373% (e) 331% (e) 190% (e) 92%
</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.
(e) The portfolio turnover rate not including mortgage dollar rolls was 154%
for the six months ended April 30, 2021, and 245%, 246%, 117% and 97% for
the years ended October 31, 2020, 2019, 2018 and 2017, respectively.
See Notes to Financial Statements Page 51
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (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 ten funds that are offering shares. This report
covers the First Trust Low Duration Opportunities ETF (the "Fund"), a
diversified series of the Trust, which trades under the ticker "LMBS" on The
Nasdaq Stock Market LLC ("Nasdaq"). The Fund represents a separate series of
shares of beneficial interest in the Trust. Unlike conventional mutual funds,
the Fund issues and redeems shares on a continuous basis, at net asset value
("NAV"), only in large blocks of shares known as "Creation Units."
The Fund is an actively managed exchange-traded fund ("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 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
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 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, 2021, 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 United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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
Page 54
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
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
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, 2021, the Fund had no when-issued or
delayed-delivery securities. At April 30, 2021, the Fund held $925,023,380 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
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
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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
G. PRINCIPAL-ONLY SECURITIES
A principal-only security ("PO Security") is the principal-only portion of a
mortgage-backed security that does not receive any interest, is priced at a deep
discount to its redemption value and ultimately receives the redemption value.
Generally speaking, when interest rates are falling and prepayment rates are
increasing, the value of a PO Security will rise. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of a
PO Security will fall. These securities, if any, are identified on the Portfolio
of Investments.
H. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped mortgage-backed securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage-backed securities may be partially
stripped so that each investor class receives some interest and some principal.
When securities are completely stripped, however, all of the interest is
distributed to holders of one type of security known as an IO Security and all
of the principal is distributed to holders of another type of security known as
a PO Security. These securities, if any, are identified on the Portfolio of
Investments.
I. MORTGAGE DOLLAR ROLLS AND TBA TRANSACTIONS
The Fund may invest, without limitation, in mortgage dollar rolls. The Fund
intends to enter into mortgage dollar rolls only with high quality securities
dealers and banks, as determined by the Fund's investment advisor. In a mortgage
dollar roll, the Fund will sell (or buy) mortgage-backed securities for delivery
on a specified date and simultaneously contract to repurchase (or sell)
substantially similar (same type, coupon and maturity) securities on a future
date. Mortgage dollar rolls are recorded as separate purchases 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, 2021 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 4/30/2021 10/31/2020 PURCHASES SALES (DEPRECIATION) (LOSS) 4/30/2021 INCOME
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Trust Long Duration
Opportunities ETF 29,359 $ 342,924 $ 500,740 $ -- $ (48,035) $ -- $ 795,629 $ 12,372
==============================================================================================
</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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
The tax character of distributions paid during the fiscal year ended October 31,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 87,387,315
Capital gains................................... --
Return of capital............................... 19,702,687
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ (10,921,500)
Accumulated capital and other gain (loss)....... (108,942,487)
Net unrealized appreciation (depreciation)...... 116,293,538
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 2017,
2018, 2019, and 2020 remain open to federal and state audit. As of April 30,
2021, 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, 2020, the
Fund had non-expiring capital loss carryforwards available for federal income
tax purposes of $108,942,487.
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, 2020, 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).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets. In addition, the
Fund incurs acquired fund fees and expenses. The total of the unitary management
fee and acquired fund fees and expenses represents the Fund's total annual
operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a 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, 2021, were $7,512,248,285 and $564,049,379,
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, 2021, were
$7,235,442,160 and $253,165,889, respectively. The cost of purchases to cover
investments sold short and the proceeds of investments sold short were
$6,034,683,676 and $6,507,863,190, respectively.
For the six months ended April 30, 2021, 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, 2021, 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* $ 4,920,553 futures contracts* $ 257,555
Options Interest Options contracts purchased, Options contracts written,
rate risk at value 10,938 at value 193,751
</TABLE>
* Includes cumulative appreciation/depreciation on futures contracts as reported
in the Portfolio of Investments. Only the current day's variation margin is
presented on the Statement of Assets and Liabilities.
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2021, 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 $ 42,653,755
Purchased options contracts (187,105)
Written options contracts 4,618,729
Net change in unrealized appreciation (depreciation) on:
Futures contracts (4,595,440)
Purchased options contracts 226
Written options contracts 208,635
</TABLE>
For the six months ended April 30, 2021, the notional value of futures contracts
opened and closed were $6,066,248,981 and $5,882,704,518, respectively.
During the six months ended April 30, 2021, the premiums for purchased options
contracts opened were $254,176 and the premiums for purchased options contracts
closed, exercised and expired were $243,464.
During the six months ended April 30, 2021, the premiums for written options
contracts opened were $7,085,074 and the premiums for written options contracts
closed, exercised and expired were $6,682,688.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LOW DURATION OPPORTUNITIES ETF (LMBS)
APRIL 30, 2021 (UNAUDITED)
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
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
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, 2022.
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, 2021 (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, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively- managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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, 2021 (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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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FIRST TRUST
First Trust Exchange-Traded Fund IV
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR, CUSTODIAN,
FUND ACCOUNTANT &
TRANSFER AGENT
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
<PAGE>
[BLANK BACK COVER]
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First Trust Exchange-Traded Fund IV
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
For the Six Months Ended
April 30, 2021
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2021
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, 2021
Dear Shareholders,
First Trust is pleased to provide you with the semi-annual report for the First Trust SSI Convertible Securities ETF (the “Fund”), which contains detailed information about the Fund for the six months ended April 30, 2021.
I would like to begin my remarks by saying that this is a time for all of us to be thankful. It is astounding to me that our scientists and extended health care community successfully discovered, developed, and distributed multiple effective vaccines to treat the coronavirus (“COVID-19”) in the span of just 15 months. Suffice it to say that we are witnessing history in the making. We even received some good news recently with respect to wearing masks in public, a polarizing act for many politicians and Americans. The Centers for Disease Control and Prevention released a new set of guidelines in mid-May for those individuals who have been fully vaccinated. It essentially says fully vaccinated Americans can quit wearing their masks outdoors (even in crowds), in most indoor settings, and can drop social distancing altogether. This is a big step towards expediting the reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of investing here at First Trust Advisors L.P., even though it means enduring lots of tough times. While the notion of being able to time the market is seductive on its face, very few investors are skilled enough to make it work over time. I can think of no better example than the COVID-19 pandemic. The degree of uncertainty surrounding the onset of the virus alone was enough to make the average investor want to run for cover. And if that was not enough, the 33.8% plunge in the S&P 500® Index (the “Index”) from February 19, 2020, through March 23, 2020 (23 trading days) was a real gut check for most of us. But a funny thing happened on the way to another potential collapse of the market − it did not happen. In fact, thanks to the U.S. Federal government stepping up with trillions of dollars of timely fiscal and monetary support, the stock market roared. From March 23, 2020 through May 14, 2021, the Index posted a total return of 90.14%, according to Bloomberg. What a shame for those investors who may have moved some, or all, of their capital out of equities. What looked like a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S. real gross domestic product (“GDP”) growth is expected to grow by 6.4% year-over-year in 2021, according to the International Monetary Fund. The last time the U.S. economy grew that fast was in 1984, when real GDP growth reached 7.2%. Second, corporate earnings are expected to recover from their 2020 slide. Bloomberg’s consensus year-over-year earnings growth rate estimates for the Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14, 2021. That is a significant rebound from the 12.44% decline in earnings in 2020. Third, inflation is rising, and that is exactly what the Federal Reserve has been wanting for some time. Central banks around the world have spent years battling deflationary pressures, so a little bit of inflation is welcome at this stage of the recovery. Lastly, the U.S. labor market is robust despite the talk about the millions of people who lost their jobs in the COVID-19 pandemic and are living off unemployment benefits. As of March 31, 2021, there were 8.12 million job openings in the U.S., the highest total since record-keeping began in December 2000, according to the Bureau of Labor Statistics. We need to get people back to work.
While it seems fashionable to sell fear these days, we choose to follow the data. Remember, the Index has never failed to fully recoup the losses sustained in a market correction or bear market. 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
4/30/21 | 1 Year
Ended
4/30/21 | 5 Years
Ended
4/30/21 | Inception
(11/3/15)
to 4/30/21 | | 5 Years
Ended
4/30/21 | Inception
(11/3/15)
to 4/30/21 |
| Fund Performance | | | | | | | |
| NAV | 30.02% | 64.64% | 18.50% | 16.31% | | 133.66% | 129.15% |
| Market Price | 29.20% | 64.20% | 18.45% | 16.34% | | 133.18% | 129.43% |
| Index Performance | | | | | | | |
| ICE BofA All US Convertible Index | 27.33% | 60.79% | 19.06% | 16.39% | | 139.24% | 129.97% |
Total returns for the period since inception are calculated from the inception date of the Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.
The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. Prior to January 1, 2019, the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the index. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund’s past performance is no guarantee of future performance.
Fund Performance Overview (Unaudited) (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT) (Continued)
| Sector Allocation | % of Total
Investments |
| Information Technology | 29.4% |
| Consumer Discretionary | 22.3 |
| Health Care | 16.3 |
| Industrials | 11.8 |
| Communication Services | 10.1 |
| Financials | 2.9 |
| Energy | 2.6 |
| Materials | 2.5 |
| Real Estate | 1.3 |
| Utilities | 0.8 |
| Total | 100.0% |
| Top Ten Holdings | % of Total
Investments |
| Broadcom, Inc., Series A, 9/30/22 | 2.0% |
| Tesla, Inc., 5/15/24 | 2.0 |
| Square, Inc., 5/15/23 | 1.9 |
| Snap, Inc., 8/1/26 | 1.7 |
| Palo Alto Networks, Inc., 7/1/23 | 1.6 |
| Zillow Group, Inc., 5/15/25 | 1.5 |
| Chegg, Inc., 9/1/26 | 1.5 |
| NCL Corp. Ltd., 8/1/25 | 1.4 |
| Match Group Financeco 2, Inc., 6/15/26 | 1.3 |
| Teladoc Health, Inc., 6/1/27 | 1.3 |
| Total | 16.2% |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Frequency Distribution of Discounts and Premiums
Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter), is available at https://www.ftportfolios.com/Retail/etf/home.aspx.
Portfolio Management
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Semi-Annual Report
April 30, 2021 (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, Principal and Chief Investment Officer of SSI
Ravi Malik – CFA, Principal and Portfolio Manager 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, 2021 (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, 2021.
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, 2020 | Ending
Account Value
April 30, 2021 | 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 | $1,300.20 | 0.95% | $5.42 |
| Hypothetical (5% return before expenses) | $1,000.00 | $1,020.08 | 0.95% | $4.76 |
| (a) | Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (November 1, 2020 through April 30, 2021), multiplied by 181/365 (to reflect the six-month period). |
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments
April 30, 2021 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS – 86.1% |
| | | Aerospace & Defense – 1.0% | | | | | | |
| $1,005,000 | | Parsons Corp. (a)
| | 0.25% | | 08/15/25 | | $1,153,237 |
| 957,835 | | Safran S.A., Series SAF (EUR) (b)
| | 0.88% | | 05/15/27 | | 1,689,370 |
| | | | | 2,842,607 |
| | | Airlines – 3.4% | | | | | | |
| 850,000 | | Air Canada (a)
| | 4.00% | | 07/01/25 | | 1,312,400 |
| 815,000 | | American Airlines Group, Inc.
| | 6.50% | | 07/01/25 | | 1,299,925 |
| 245,000 | | Copa Holdings S.A.
| | 4.50% | | 04/15/25 | | 448,497 |
| 1,115,000 | | JetBlue Airways Corp. (a)
| | 0.50% | | 04/01/26 | | 1,223,713 |
| 1,865,000 | | Southwest Airlines Co.
| | 1.25% | | 05/01/25 | | 3,247,431 |
| 340,000 | | Spirit Airlines, Inc.
| | 4.75% | | 05/15/25 | | 1,017,892 |
| 1,130,000 | | Spirit Airlines, Inc.
| | 1.00% | | 05/15/26 | | 1,165,201 |
| | | | | 9,715,059 |
| | | Auto Components – 0.3% | | | | | | |
| 780,000 | | Patrick Industries, Inc.
| | 1.00% | | 02/01/23 | | 952,088 |
| | | Automobiles – 2.6% | | | | | | |
| 2,000,000 | | Ford Motor Co. (a)
| | (c) | | 03/15/26 | | 1,985,000 |
| 491,000 | | Tesla, Inc.
| | 2.00% | | 05/15/24 | | 5,605,686 |
| | | | | 7,590,686 |
| | | Banks – 0.6% | | | | | | |
| 1,275,000 | | Deutshce Bank AG, Series GMTN
| | 1.00% | | 05/01/23 | | 1,642,672 |
| | | Biotechnology – 2.5% | | | | | | |
| 385,000 | | Apellis Pharmaceuticals, Inc., Series May (a)
| | 3.50% | | 09/15/26 | | 603,026 |
| 1,075,000 | | Bridgebio Pharma, Inc. (a)
| | 2.25% | | 02/01/29 | | 993,202 |
| 1,640,000 | | Exact Sciences Corp.
| | 0.38% | | 03/15/27 | | 2,241,675 |
| 1,178,000 | | Gossamer Bio, Inc.
| | 5.00% | | 06/01/27 | | 1,025,596 |
| 515,000 | | Halozyme Therapeutics, Inc.
| | 1.25% | | 12/01/24 | | 1,107,250 |
| 495,000 | | Invitae Corp.
| | 2.00% | | 09/01/24 | | 698,569 |
| 290,000 | | Novavax, Inc.
| | 3.75% | | 02/01/23 | | 570,037 |
| | | | | 7,239,355 |
| | | Capital Markets – 0.4% | | | | | | |
| 455,000 | | Cowen, Inc.
| | 3.00% | | 12/15/22 | | 1,051,903 |
| | | Communications Equipment – 0.7% | | | | | | |
| 1,750,000 | | Lumentum Holdings, Inc.
| | 0.50% | | 12/15/26 | | 1,940,400 |
| | | Construction & Engineering – 0.5% | | | | | | |
| 1,200,000 | | Vinci S.A., Series DGFP (b)
| | 0.38% | | 02/16/22 | | 1,406,400 |
| | | Diversified Consumer Services – 1.4% | | | | | | |
| 3,715,000 | | Chegg, Inc. (a)
| | (c) | | 09/01/26 | | 4,099,502 |
| | | Electrical Equipment – 0.7% | | | | | | |
| 550,000 | | Bloom Energy Corp. (a)
| | 2.50% | | 08/15/25 | | 970,031 |
| 172,000 | | Plug Power, Inc. (a)
| | 3.75% | | 06/01/25 | | 975,013 |
| | | | | 1,945,044 |
| | | Electronic Equipment, Instruments & Components – 0.6% | | | | | | |
| 725,000 | | II-VI, Inc.
| | 0.25% | | 09/01/22 | | 1,082,969 |
| 600,000 | | Itron, Inc. (a)
| | (c) | | 03/15/26 | | 599,027 |
| | | | | 1,681,996 |
Page 6
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Energy Equipment & Services – 0.4% | | | | | | |
| $730,000 | | Helix Energy Solutions Group, Inc.
| | 6.75% | | 02/15/26 | | $788,035 |
| 480,000 | | Oil States International, Inc. (a)
| | 4.75% | | 04/01/26 | | 438,966 |
| | | | | 1,227,001 |
| | | Entertainment – 2.9% | | | | | | |
| 349,000 | | Bilibili, Inc. (a)
| | 1.25% | | 06/15/27 | | 968,693 |
| 290,000 | | Cinemark Holdings, Inc. (a)
| | 4.50% | | 08/15/25 | | 500,069 |
| 970,000 | | IMAX Corp. (a)
| | 0.50% | | 04/01/26 | | 1,010,515 |
| 1,140,000 | | Liberty Media Corp. - Liberty Formula One
| | 1.00% | | 01/30/23 | | 1,529,167 |
| 1,400,000 | | Live Nation Entertainment, Inc.
| | 2.50% | | 03/15/23 | | 1,889,160 |
| 435,000 | | Marcus Corp. (The) (a)
| | 5.00% | | 09/15/25 | | 881,122 |
| 590,000 | | Sea Ltd. (a)
| | 2.38% | | 12/01/25 | | 1,679,656 |
| | | | | 8,458,382 |
| | | Equity Real Estate Investment Trusts – 1.2% | | | | | | |
| 950,000 | | Kite Realty Group L.P. (a)
| | 0.75% | | 04/01/27 | | 957,695 |
| 1,150,000 | | Pebblebrook Hotel Trust
| | 1.75% | | 12/15/26 | | 1,319,050 |
| 1,045,000 | | Summit Hotel Properties, Inc.
| | 1.50% | | 02/15/26 | | 1,136,960 |
| | | | | 3,413,705 |
| | | Health Care Equipment & Supplies – 4.5% | | | | | | |
| 915,000 | | CONMED Corp.
| | 2.63% | | 02/01/24 | | 1,514,943 |
| 960,000 | | Cutera, Inc. (a)
| | 2.25% | | 03/15/26 | | 1,082,400 |
| 260,000 | | DexCom, Inc.
| | 0.75% | | 12/01/23 | | 613,600 |
| 2,625,000 | | DexCom, Inc. (a)
| | 0.25% | | 11/15/25 | | 2,638,125 |
| 670,000 | | Envista Holdings Corp. (a)
| | 2.38% | | 06/01/25 | | 1,437,552 |
| 1,850,000 | | Insulet Corp.
| | 0.38% | | 09/01/26 | | 2,660,531 |
| 435,000 | | Integra LifeSciences Holdings Corp.
| | 0.50% | | 08/15/25 | | 502,990 |
| 1,000,000 | | Novocure, Ltd. (a)
| | (c) | | 11/01/25 | | 1,426,875 |
| 945,000 | | NuVasive, Inc.
| | 0.38% | | 03/15/25 | | 985,753 |
| | | | | 12,862,769 |
| | | Health Care Providers & Services – 1.1% | | | | | | |
| 233,000 | | Anthem, Inc.
| | 2.75% | | 10/15/42 | | 1,235,925 |
| 1,485,000 | | Guardant Health, Inc. (a)
| | (c) | | 11/15/27 | | 1,953,703 |
| | | | | 3,189,628 |
| | | Health Care Technology – 1.2% | | | | | | |
| 3,200,000 | | Teladoc Health, Inc. (a)
| | 1.25% | | 06/01/27 | | 3,594,000 |
| | | Hotels, Restaurants & Leisure – 6.9% | | | | | | |
| 635,000 | | Bloomin’ Brands, Inc.
| | 5.00% | | 05/01/25 | | 1,756,966 |
| 1,700,000 | | Booking Holdings, Inc.
| | 0.75% | | 05/01/25 | | 2,578,900 |
| 815,000 | | Carnival Corp.
| | 5.75% | | 04/01/23 | | 2,405,495 |
| 1,130,000 | | DraftKings, Inc. (a)
| | (c) | | 03/15/28 | | 1,084,235 |
| 1,100,000 | | Marriott Vacations Worldwide Corp. (a)
| | (c) | | 01/15/26 | | 1,306,250 |
| 2,140,000 | | NCL Corp. Ltd. (a)
| | 5.38% | | 08/01/25 | | 4,061,720 |
| 275,000 | | Penn National Gaming, Inc.
| | 2.75% | | 05/15/26 | | 1,063,563 |
| 2,465,000 | | Royal Caribbean Cruises Ltd. (a)
| | 4.25% | | 06/15/23 | | 3,471,952 |
| 960,000 | | Shake Shack, Inc. (a)
| | (c) | | 03/01/28 | | 912,600 |
| 1,185,000 | | Vail Resorts, Inc. (a)
| | (c) | | 01/01/26 | | 1,262,766 |
| | | | | 19,904,447 |
| | | Insurance – 0.7% | | | | | | |
| 1,375,000 | | AXA S.A. (a)
| | 7.25% | | 05/15/21 | | 2,026,406 |
See Notes to Financial Statements
Page 7
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Interactive Media & Services – 5.6% | | | | | | |
| $805,000 | | Eventbrite, Inc. (a)
| | 0.75% | | 09/15/26 | | $884,997 |
| 1,955,000 | | Match Group Financeco 2, Inc. (a)
| | 0.88% | | 06/15/26 | | 3,610,660 |
| 1,775,000 | | Snap, Inc.
| | 0.75% | | 08/01/26 | | 4,879,031 |
| 1,125,000 | | Snap, Inc. (a)
| | (c) | | 05/01/27 | | 1,156,641 |
| 1,025,000 | | Twitter, Inc.
| | 0.25% | | 06/15/24 | | 1,257,900 |
| 2,095,000 | | Zillow Group, Inc.
| | 2.75% | | 05/15/25 | | 4,337,959 |
| | | | | 16,127,188 |
| | | Internet & Direct Marketing Retail – 4.0% | | | | | | |
| 1,900,000 | | Etsy, Inc. (a)
| | 0.13% | | 09/01/27 | | 2,464,062 |
| 370,000 | | Farfetch Ltd.
| | 3.75% | | 05/01/27 | | 1,173,825 |
| 825,000 | | Fiverr International Ltd. (a)
| | (c) | | 11/01/25 | | 1,002,870 |
| 660,000 | | MercadoLibre, Inc.
| | 2.00% | | 08/15/28 | | 2,352,075 |
| 1,395,000 | | Pinduoduo, Inc.
| | (c) | | 12/01/25 | | 1,463,355 |
| 600,000 | | Wayfair, Inc.
| | 1.13% | | 11/01/24 | | 1,549,140 |
| 1,540,000 | | Wayfair, Inc. (a)
| | 0.63% | | 10/01/25 | | 1,604,488 |
| | | | | 11,609,815 |
| | | IT Services – 6.4% | | | | | | |
| 1,100,000 | | 21 Vianet Group, Inc. (a)
| | (c) | | 02/01/26 | | 976,250 |
| 1,000,000 | | Akamai Technologies, Inc.
| | 0.13% | | 05/01/25 | | 1,256,500 |
| 820,000 | | MongoDB, Inc.
| | 0.25% | | 01/15/26 | | 1,274,075 |
| 1,625,000 | | Okta, Inc.
| | 0.13% | | 09/01/25 | | 2,509,609 |
| 363,000 | | Sabre GLBL, Inc.
| | 4.00% | | 04/15/25 | | 766,293 |
| 823,000 | | Shift4Payments, Inc. (a)
| | (c) | | 12/15/25 | | 1,159,442 |
| 760,000 | | Shopify, Inc.
| | 0.13% | | 11/01/25 | | 894,425 |
| 1,725,000 | | Square, Inc.
| | 0.50% | | 05/15/23 | | 5,439,950 |
| 690,000 | | Twilio, Inc.
| | 0.25% | | 06/01/23 | | 3,582,825 |
| 700,000 | | Wix.com Ltd. (a)
| | (c) | | 08/15/25 | | 772,625 |
| | | | | 18,631,994 |
| | | Leisure Products – 0.5% | | | | | | |
| 865,000 | | Callaway Golf, Co.
| | 2.75% | | 05/01/26 | | 1,562,947 |
| | | Life Sciences Tools & Services – 1.4% | | | | | | |
| 660,000 | | Illumina, Inc.
| | 0.50% | | 06/15/21 | | 1,018,462 |
| 350,000 | | NanoString Technologies, Inc.
| | 2.63% | | 03/01/25 | | 649,460 |
| 990,000 | | NeoGenomics, Inc.
| | 0.25% | | 01/15/28 | | 1,004,873 |
| 760,000 | | Repligen Corp.
| | 0.38% | | 07/15/24 | | 1,434,044 |
| | | | | 4,106,839 |
| | | Machinery – 2.0% | | | | | | |
| 630,000 | | Chart Industries, Inc. (a)
| | 1.00% | | 11/15/24 | | 1,750,219 |
| 960,000 | | Greenbrier Cos., Inc (The) (a)
| | 2.88% | | 04/15/28 | | 1,046,400 |
| 1,385,000 | | Meritor, Inc.
| | 3.25% | | 10/15/37 | | 1,552,066 |
| 875,000 | | Middleby Corp. (The) (a)
| | 1.00% | | 09/01/25 | | 1,312,937 |
| | | | | 5,661,622 |
| | | Marine – 0.4% | | | | | | |
| 890,000 | | Seaspan Corp. (a)
| | 3.75% | | 12/15/25 | | 1,082,240 |
| | | Media – 1.4% | | | | | | |
| 1,260,000 | | DISH Network Corp. (a)
| | (c) | | 12/15/25 | | 1,546,020 |
| 1,000,000 | | Liberty Media Corp.
| | 1.38% | | 10/15/23 | | 1,306,188 |
| 880,000 | | TechTarget, Inc. (a)
| | 0.13% | | 12/15/25 | | 1,106,688 |
| | | | | 3,958,896 |
Page 8
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Metals & Mining – 1.8% | | | | | | |
| $1,155,000 | | Allegheny Technologies, Inc. (a)
| | 3.50% | | 06/15/25 | | $1,947,676 |
| 865,000 | | Cleveland-Cliffs, Inc.
| | 1.50% | | 01/15/25 | | 2,024,965 |
| 1,260,000 | | MP Materials Corp. (a)
| | 0.25% | | 04/01/26 | | 1,204,088 |
| | | | | 5,176,729 |
| | | Mortgage Real Estate Investment Trusts – 0.2% | | | | | | |
| 565,000 | | Hannon Armstrong Sustainable Infrastructure Capital, Inc.
| | (c) | | 08/15/23 | | 678,706 |
| | | Oil, Gas & Consumable Fuels – 2.1% | | | | | | |
| 475,000 | | Antero Resources Corp. (a)
| | 4.25% | | 09/01/26 | | 1,088,367 |
| 180,000 | | Centennial Resource Production LLC
| | 3.25% | | 04/01/28 | | 177,534 |
| 755,000 | | CNX Resources Corp.
| | 2.25% | | 05/01/26 | | 962,625 |
| 700,000 | | Green Plains, Inc. (a)
| | 4.00% | | 07/01/24 | | 1,424,770 |
| 1,635,000 | | Pioneer Natural Resources Co. (a)
| | 0.25% | | 05/15/25 | | 2,488,470 |
| | | | | 6,141,766 |
| | | Pharmaceuticals – 1.3% | | | | | | |
| 900,000 | | Jazz Investments I Ltd. (a)
| | 2.00% | | 06/15/26 | | 1,155,375 |
| 1,800,000 | | Pacira BioSciences, Inc. (a)
| | 0.75% | | 08/01/25 | | 2,004,750 |
| 550,000 | | Revance Therapeutics, Inc.
| | 1.75% | | 02/15/27 | | 634,219 |
| | | | | 3,794,344 |
| | | Professional Services – 0.8% | | | | | | |
| 825,000 | | FTI Consulting, Inc.
| | 2.00% | | 08/15/23 | | 1,195,013 |
| 775,000 | | KBR, Inc.
| | 2.50% | | 11/01/23 | | 1,254,337 |
| | | | | 2,449,350 |
| | | Real Estate Management & Development – 0.4% | | | | | | |
| 950,000 | | Redfin Corp. (a)
| | (c) | | 10/15/25 | | 1,148,550 |
| | | Road & Rail – 1.1% | | | | | | |
| 900,000 | | Lyft, Inc. (a)
| | 1.50% | | 05/15/25 | | 1,442,700 |
| 1,575,000 | | Uber Technologies, Inc. (a)
| | (c) | | 12/15/25 | | 1,660,093 |
| | | | | 3,102,793 |
| | | Semiconductors & Semiconductor Equipment – 6.7% | | | | | | |
| 505,000 | | Canadian Solar, Inc. (a)
| | 2.50% | | 10/01/25 | | 667,257 |
| 585,000 | | Cree, Inc.
| | 1.75% | | 05/01/26 | | 1,282,963 |
| 405,000 | | Enphase Energy, Inc. (a)
| | 0.25% | | 03/01/25 | | 765,450 |
| 1,315,000 | | Enphase Energy, Inc. (a)
| | (c) | | 03/01/28 | | 1,159,758 |
| 525,000 | | Inphi Corp.
| | 0.75% | | 04/15/25 | | 769,453 |
| 945,000 | | MACOM Technology Solutions Holdings, Inc. (a)
| | 0.25% | | 03/15/26 | | 946,181 |
| 1,355,000 | | Microchip Technology, Inc.
| | 1.63% | | 02/15/27 | | 3,009,475 |
| 237,000 | | Micron Technology, Inc., Series D
| | 3.13% | | 05/01/32 | | 2,042,063 |
| 740,000 | | Nova Measuring Instruments Ltd. (a)
| | (c) | | 10/15/25 | | 1,007,787 |
| 1,405,000 | | ON Semiconductor Corp.
| | 1.63% | | 10/15/23 | | 2,744,141 |
| 640,000 | | SMART Global Holdings, Inc.
| | 2.25% | | 02/15/26 | | 855,616 |
| 1,125,000 | | Synaptics, Inc.
| | 0.50% | | 06/15/22 | | 2,146,641 |
| 505,000 | | Teradyne, Inc.
| | 1.25% | | 12/15/23 | | 1,998,222 |
| | | | | 19,395,007 |
| | | Software – 12.0% | | | | | | |
| 1,070,000 | | Bentley Systems, Inc. (a)
| | 0.13% | | 01/15/26 | | 1,138,213 |
| 450,000 | | Blackline, Inc.
| | 0.13% | | 08/01/24 | | 749,250 |
| 962,000 | | Box, Inc. (a)
| | (c) | | 01/15/26 | | 1,052,236 |
| 545,000 | | Cerence Inc. (a)
| | 3.00% | | 06/01/25 | | 1,469,054 |
See Notes to Financial Statements
Page 9
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
Principal
Value | | Description | | Stated
Coupon | | Stated
Maturity | | Value |
| CONVERTIBLE CORPORATE BONDS (Continued) |
| | | Software (Continued) | | | | | | |
| $1,975,000 | | Coupa Software, Inc. (a)
| | 0.38% | | 06/15/26 | | $2,286,062 |
| 267,000 | | DocuSign, Inc.
| | 0.50% | | 09/15/23 | | 831,204 |
| 1,190,000 | | Dropbox, Inc. (a)
| | (c) | | 03/01/28 | | 1,185,240 |
| 650,000 | | FireEye, Inc.
| | 0.88% | | 06/01/24 | | 738,969 |
| 905,000 | | Five9, Inc. (a)
| | 0.50% | | 06/01/25 | | 1,378,705 |
| 1,160,000 | | HubSpot, Inc. (a)
| | 0.38% | | 06/01/25 | | 2,247,500 |
| 1,130,000 | | LivePerson, Inc. (a)
| | (c) | | 12/15/26 | | 1,139,153 |
| 515,000 | | MicroStrategy, Inc. (a)
| | 0.75% | | 12/15/25 | | 952,750 |
| 675,000 | | Mitek Systems, Inc. (a)
| | 0.75% | | 02/01/26 | | 713,391 |
| 1,045,000 | | Nuance Communications, Inc.
| | 1.00% | | 12/15/35 | | 2,299,627 |
| 3,200,000 | | Palo Alto Networks, Inc.
| | 0.75% | | 07/01/23 | | 4,512,000 |
| 850,000 | | Q2 Holdings, Inc. (a)
| | 0.13% | | 11/15/25 | | 862,560 |
| 1,125,000 | | RingCentral, Inc.
| | (c) | | 03/01/25 | | 1,279,449 |
| 385,000 | | Sailpoint Technologies Holdings, Inc.
| | 0.13% | | 09/15/24 | | 696,080 |
| 235,000 | | ServiceNow, Inc.
| | (c) | | 06/01/22 | | 881,984 |
| 1,010,000 | | Splunk, Inc.
| | 0.50% | | 09/15/23 | | 1,122,994 |
| 815,000 | | Verint Systems, Inc. (a)
| | 0.25% | | 04/15/26 | | 825,943 |
| 1,700,000 | | Workday, Inc.
| | 0.25% | | 10/01/22 | | 2,901,730 |
| 1,515,000 | | Zendesk, Inc. (a)
| | 0.63% | | 06/15/25 | | 2,230,837 |
| 750,000 | | Zscaler, Inc. (a)
| | 0.13% | | 07/01/25 | | 1,061,250 |
| | | | | 34,556,181 |
| | | Specialty Retail – 3.6% | | | | | | |
| 430,000 | | American Eagle Outfitters, Inc.
| | 3.75% | | 04/15/25 | | 1,732,900 |
| 940,000 | | Burlington Stores, Inc.
| | 2.25% | | 04/15/25 | | 1,504,587 |
| 850,000 | | Dick’s Sporting Goods, Inc.
| | 3.25% | | 04/15/25 | | 2,091,000 |
| 1,125,000 | | Guess?, Inc.
| | 2.00% | | 04/15/24 | | 1,411,172 |
| 660,000 | | National Vision Holdings, Inc.
| | 2.50% | | 05/15/25 | | 1,146,338 |
| 710,000 | | RH
| | (c) | | 06/15/23 | | 2,516,098 |
| | | | | 10,402,095 |
| | | Technology Hardware, Storage & Peripherals – 0.3% | | | | | | |
| 690,000 | | Pure Storage, Inc.
| | 0.13% | | 04/15/23 | | 735,713 |
| | | Textiles, Apparel & Luxury Goods – 0.5% | | | | | | |
| 685,000 | | Under Armour, Inc. (a)
| | 1.50% | | 06/01/24 | | 1,432,934 |
| | | Total Convertible Corporate Bonds
| | 248,539,759 |
| | | (Cost $183,781,118) | | | | | | |
| Shares | | Description | | Stated
Rate | | Stated
Maturity (d) | | Value |
| CONVERTIBLE PREFERRED SECURITIES – 11.5% |
| | | Auto Components – 0.9% | | | | | | |
| 15,850 | | Aptiv PLC, Series A
| | 5.50% | | 06/15/23 | | 2,588,305 |
| | | Capital Markets – 0.7% | | | | | | |
| 25,300 | | KKR & Co., Inc., Series C
| | 6.00% | | 09/15/23 | | 1,896,994 |
| | | Electric Utilities – 0.8% | | | | | | |
| 47,500 | | NextEra Energy, Inc.
| | 5.28% | | 03/01/23 | | 2,392,575 |
| | | Health Care Equipment & Supplies – 1.9% | | | | | | |
| 13,845 | | Boston Scientific Corp., Series A
| | 5.50% | | 06/01/23 | | 1,627,895 |
| 1,800 | | Danaher Corp., Series A
| | 4.75% | | 04/15/22 | | 3,084,318 |
| 525 | | Danaher Corp., Series B
| | 5.00% | | 04/15/23 | | 745,448 |
| | | | | 5,457,661 |
Page 10
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
| Shares | | Description | | Stated
Rate | | Stated
Maturity (d) | | Value |
| CONVERTIBLE PREFERRED SECURITIES (Continued) |
| | | Internet & Direct Marketing Retail – 0.5% | | | | | | |
| 775 | | 2020 Mandatory Exchangeable Trust (a)
| | 6.50% | | 05/16/23 | | $1,409,647 |
| | | Life Sciences Tools & Services – 1.1% | | | | | | |
| 31,500 | | Avantor, Inc., Series A
| | 6.25% | | 05/15/22 | | 3,113,460 |
| | | Machinery – 1.8% | | | | | | |
| 7,775 | | Colfax Corp.
| | 5.75% | | 01/15/22 | | 1,428,890 |
| 1,815 | | Fortive Corp., Series A
| | 5.00% | | 07/01/21 | | 1,803,202 |
| 15,500 | | Stanley Black & Decker, Inc.
| | 5.25% | | 11/15/22 | | 1,891,155 |
| | | | | 5,123,247 |
| | | Media – 0.3% | | | | | | |
| 14,025 | | ViacomCBS, Inc., Series A
| | 5.75% | | 04/01/24 | | 1,017,373 |
| | | Metals & Mining – 0.7% | | | | | | |
| 27,700 | | ArcelorMittal S.A.
| | 5.50% | | 05/18/23 | | 1,906,314 |
| | | Semiconductors & Semiconductor Equipment – 2.0% | | | | | | |
| 3,960 | | Broadcom, Inc., Series A
| | 8.00% | | 09/30/22 | | 5,739,822 |
| | | Wireless Telecommunication Services – 0.8% | | | | | | |
| 2,100 | | 2020 Cash Mandatory Exchangeable Trust (a)
| | 5.25% | | 06/01/23 | | 2,471,343 |
| | | Total Convertible Preferred Securities
| | 33,116,741 |
| | | (Cost $24,534,194) | | | | | | |
| | | Total Investments – 97.6%
| | 281,656,500 |
| | | (Cost $208,315,312) (e) | | | | | | |
| | Net Other Assets and Liabilities – 2.4%
| | 7,062,662 |
| | Net Assets – 100.0%
| | $288,719,162 |
|
| (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 SSI Investment Management LLC (“SSI”), the Fund’s sub-advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At April 30, 2021, securities noted as such amounted to $112,054,080 or 38.8% of net assets. |
| (b) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
| (c) | Zero coupon security. |
| (d) | Stated maturity represents the mandatory conversion date. |
| (e) | Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of April 30, 2021, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $74,981,033 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,639,845. The net unrealized appreciation was $73,341,188. |
See Notes to Financial Statements
Page 11
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Portfolio of Investments (Continued)
April 30, 2021 (Unaudited)
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of April 30, 2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
| | Total
Value at
4/30/2021 | Level 1
Quoted
Prices | Level 2
Significant
Observable
Inputs | Level 3
Significant
Unobservable
Inputs |
Convertible Corporate Bonds*
| $ 248,539,759 | $ — | $ 248,539,759 | $ — |
| Convertible Preferred Securities: | | | | |
Health Care Equipment & Supplies
| 5,457,661 | 4,712,213 | 745,448 | — |
Internet & Direct Marketing Retail
| 1,409,647 | — | 1,409,647 | — |
Wireless Telecommunication Services
| 2,471,343 | — | 2,471,343 | — |
Other industry categories*
| 23,778,090 | 23,778,090 | — | — |
Total Investments
| $ 281,656,500 | $ 28,490,303 | $ 253,166,197 | $— |
| * | See Portfolio of Investments for industry breakout. |
Page 12
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statement of Assets and Liabilities
April 30, 2021 (Unaudited)
| ASSETS: | |
Investments, at value
(Cost $208,315,312)
| $ 281,656,500 |
Cash
| 7,557,072 |
| Receivables: | |
Fund shares sold
| 10,337,987 |
Investment securities sold
| 1,530,081 |
Interest
| 600,411 |
Dividends
| 29,412 |
Total Assets
| 301,711,463 |
| LIABILITIES: | |
| Payables: | |
Investment securities purchased
| 12,775,133 |
Investment advisory fees
| 217,168 |
Total Liabilities
| 12,992,301 |
NET ASSETS
| $288,719,162 |
| NET ASSETS consist of: | |
Paid-in capital
| $ 165,079,166 |
Par value
| 56,000 |
Accumulated distributable earnings (loss)
| 123,583,996 |
NET ASSETS
| $288,719,162 |
NET ASSET VALUE, per share
| $51.56 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)
| 5,600,002 |
See Notes to Financial Statements
Page 13
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statement of Operations
For the Six Months Ended April 30, 2021 (Unaudited)
| INVESTMENT INCOME: | |
Dividends
| $ 697,206 |
Interest
| (2,856,647) |
Total investment income
| (2,159,441) |
| EXPENSES: | |
Investment advisory fees
| 1,408,192 |
Total expenses
| 1,408,192 |
NET INVESTMENT INCOME (LOSS)
| (3,567,633) |
| NET REALIZED AND UNREALIZED GAIN (LOSS): | |
| Net realized gain (loss) on: | |
Investments
| 59,113,570 |
Foreign currency transactions
| (2,904) |
Net realized gain (loss)
| 59,110,666 |
| Net change in unrealized appreciation (depreciation) on: | |
Investments
| 15,814,198 |
Foreign currency translation
| 99 |
Net change in unrealized appreciation (depreciation)
| 15,814,297 |
NET REALIZED AND UNREALIZED GAIN (LOSS)
| 74,924,963 |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
| $ 71,357,330 |
Page 14
See Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Statements of Changes in Net Assets
| | Six Months
Ended
4/30/2021
(Unaudited) | | Year
Ended
10/31/2020 |
| OPERATIONS: | | | |
Net investment income (loss)
| $ (3,567,633) | | $ (2,981,635) |
Net realized gain (loss)
| 59,110,666 | | 9,201,568 |
Net change in unrealized appreciation (depreciation)
| 15,814,297 | | 39,005,257 |
Net increase (decrease) in net assets resulting from operations
| 71,357,330 | | 45,225,190 |
| DISTRIBUTIONS TO SHAREHOLDERS FROM: | | | |
Investment operations
| (3,599,471) | | (3,308,156) |
| SHAREHOLDER TRANSACTIONS: | | | |
Proceeds from shares sold
| 46,081,391 | | 106,145,960 |
Cost of shares redeemed
| (61,922,166) | | (105,418,747) |
Net increase (decrease) in net assets resulting from shareholder transactions
| (15,840,775) | | 727,213 |
Total increase (decrease) in net assets
| 51,917,084 | | 42,644,247 |
| NET ASSETS: | | | |
Beginning of period
| 236,802,078 | | 194,157,831 |
End of period
| $288,719,162 | | $236,802,078 |
| CHANGES IN SHARES OUTSTANDING: | | | |
Shares outstanding, beginning of period
| 5,900,002 | | 6,150,002 |
Shares sold
| 950,000 | | 3,050,000 |
Shares redeemed
| (1,250,000) | | (3,300,000) |
Shares outstanding, end of period
| 5,600,002 | | 5,900,002 |
See Notes to Financial Statements
Page 15
First Trust SSI Strategic Convertible Securities ETF (FCVT)
Financial Highlights
For a share outstanding throughout each period
| | Six Months
Ended
4/30/2021
(Unaudited) | | Year Ended October 31, | | Period
Ended
10/31/2016 (a) |
| 2020 | | 2019 | | 2018 | | 2017 |
Net asset value, beginning of period
| $ 40.14 | | $ 31.57 | | $ 28.72 | | $ 29.01 | | $ 25.21 | | $ 25.00 |
| Income from investment operations: | | | | | | | | | | | |
Net investment income (loss)
| (0.68) | | (0.55) | | (0.24) | | (0.09) | | (0.14) | | (0.24) |
Net realized and unrealized gain (loss)
| 12.70 | | 9.65 | | 3.58 | | 0.52 | | 4.45 | | 0.90 |
Total from investment operations
| 12.02 | | 9.10 | | 3.34 | | 0.43 | | 4.31 | | 0.66 |
| Distributions paid to shareholders from: | | | | | | | | | | | |
Net investment income
| (0.24) | | (0.53) | | (0.49) | | (0.67) | | (0.51) | | (0.45) |
Net realized gain
| (0.36) | | — | | — | | (0.05) | | — | | — |
Total distributions
| (0.60) | | (0.53) | | (0.49) | | (0.72) | | (0.51) | | (0.45) |
Net asset value, end of period
| $51.56 | | $40.14 | | $31.57 | | $28.72 | | $29.01 | | $25.21 |
Total return (b)
| 30.02% | | 29.10% | | 11.72% | | 1.46% | | 17.29% | | 2.68% |
| Ratios to average net assets/supplemental data: | | | | | | | | | | | |
Net assets, end of period (in 000’s)
| $ 288,719 | | $ 236,802 | | $ 194,158 | | $ 202,467 | | $ 58,016 | | $ 7,564 |
Ratio of total expenses to average net assets
| 0.95% (c) | | 0.95% | | 0.95% | | 0.95% | | 0.95% | | 0.95% (c) |
Ratio of net investment income (loss) to average net assets
| (2.41)% (c) | | (1.36)% | | (0.63)% | | (2.16)% | | (1.86)% | | (2.34)% (c) |
Portfolio turnover rate (d)
| 67% | | 119% | | 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) | 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
Notes to Financial Statements
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (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 ten funds that are offering shares. This report covers the First Trust SSI Strategic Convertible Securities ETF (the “Fund”), a 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 blocks of shares known as “Creation Units.”
The Fund is an actively managed exchange-traded fund. The investment objective of the Fund is to seek 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. |
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.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (Unaudited)
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; |
| 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. |
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (Unaudited)
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, 2021, 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. Foreign Currency
The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statement of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in “Net change in unrealized appreciation (depreciation) on investments” on the Statement of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are shown 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” on the Statement of Operations.
D. 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.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (Unaudited)
The tax character of distributions paid by the Fund during the fiscal year ended October 31, 2020, was as follows:
| Distributions paid from: | |
Ordinary income
| $3,308,156 |
Capital gains
| — |
Return of capital
| — |
As of October 31, 2020, the components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income
| $— |
Accumulated capital and other gain (loss)
| 2,284,319 |
Net unrealized appreciation (depreciation)
| 53,541,818 |
E. Income Taxes
The Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.
The Fund 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, 2020, for federal income tax purposes, the Fund had no capital loss carryforwards available to the extent provided by regulations to offset future capital gains.
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, 2020, 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 2017, 2018, 2019, and 2020 remain open to federal and state audit. As of April 30, 2021, management has evaluated the application of these standards to the Fund, and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.
F. Expenses
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (See Note 3).
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 equal to 50% of any remaining monthly investment management fee paid to First Trust after the average Fund expenses accrued during the most recent twelve months are subtracted from the investment management fee in a given month. First Trust 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.
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (Unaudited)
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.
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, 2021, were $190,737,034 and $212,815,377, respectively.
For the six months ended April 30, 2021, the Fund had no in-kind transactions.
5. Creations, Redemptions and Transaction Fees
The Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with the Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as “Creation Units.” Prior to the start of trading on every business day, the Fund publishes through the National Securities Clearing Corporation (“NSCC”) the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of the Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of the Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in the Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of the Fund’s shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.
6. Distribution Plan
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale
Notes to Financial Statements (Continued)
First Trust SSI Strategic Convertible Securities ETF (FCVT)
April 30, 2021 (Unaudited)
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, 2022.
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, 2021 (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, 2021 (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. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a reference rate over a phase-out period that will begin immediately after December 31, 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, and they could result in losses to the fund.
Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
Market Risk. 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, 2021 (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.
Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Although the funds and the Advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
| NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
Liquidity Risk Management Program
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund and each other fund in the First Trust Fund Complex, other than the closed-end funds, have adopted and implemented a liquidity risk management program (the “Program”) reasonably designed to assess and manage the funds’ liquidity risk, i.e., the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of remaining investors’ interests in the fund. The Board of Trustees of the First Trust Funds has appointed First Trust Advisors, L.P. (the “Advisor”) as the person designated to administer the Program, and in this capacity the Advisor performs its duties primarily through the activities and efforts of the First Trust Liquidity Committee (the “Liquidity Committee”).
Pursuant to the Program, the Liquidity Committee classifies the liquidity of each fund’s portfolio investments into one of the four liquidity categories specified by Rule 22e-4: highly liquid investments, moderately liquid investments, less liquid investments and illiquid investments. The Liquidity Committee determines certain of the inputs for this classification process, including reasonably anticipated trade sizes and significant investor dilution thresholds. The Liquidity Committee also determines and periodically reviews a highly liquid investment minimum for certain funds, monitors the funds’ holdings of assets classified as illiquid investments to seek to ensure they do not exceed 15% of a fund’s net assets and establishes policies and procedures regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule 22e-4 and the Program, the Advisor provided the Board with a written report prepared by the Advisor that addressed the operation of the Program during the period from March 20, 2020 through the Liquidity Committee’s annual meeting held on March 16, 2021 and assessed the Program’s adequacy and effectiveness of implementation during this period, including the operation of the highly liquid investment minimum for each fund that is required under the Program to have one, and any material changes to the Program. Note that because the Fund primarily holds assets that are highly liquid investments, the Fund has not adopted a highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the 15% limitation on illiquid investments, no fund with a highly liquid investment minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor concluded that each fund’s investment strategy is appropriate for an open-end fund; that the Program operated effectively in all material respects during the review period; and that the Program is reasonably designed to assess and manage the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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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, 2021
----------------------------
<PAGE>
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TABLE OF CONTENTS
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2021
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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
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, 2021
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, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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)
4/30/21 4/30/21 to 4/30/21 to 4/30/21
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV -4.07% -5.44% 7.41% 17.60%
Market Price -4.80% -4.46% 7.39% 17.55%
INDEX PERFORMANCE
ICE BofA 5+ Year US Treasury Index -7.52% -9.71% 6.73% 15.93%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total returns for the periods 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 of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund a the time 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 NET
FUND ALLOCATION ASSETS
---------------------------------------------------------------
U.S. Government Agency Mortgage-Backed
Securities 70.5%
U.S. Government Bonds and Notes 3.3
Money Market Funds 28.3
Call Options Purchased 0.0*
Put Options Purchased 0.0*
Net Other Assets and Liabilities(1) (2.1)
-------
Total 100.0%
=======
*Amount is less than 0.05%.
---------------------------------------------------------------
% OF TOTAL LONG
FIXED-INCOME
CREDIT QUALITY(2) INVESTMENTS & CASH
---------------------------------------------------------------
Government and Agency 72.0%
Cash & Cash Equivalents 28.0
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF LONG-TERM
TOP TEN HOLDINGS INVESTMENTS(3)
---------------------------------------------------------------
Government National Mortgage Association,
Series 2010-61, Class KE, 5.00%, 05/16/40 6.2%
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2018-K158, Class A2,
3.90%, 12/25/30 5.0
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2018-K158, Class A3,
3.90%, 10/25/33 4.5
U.S. Treasury Bond, 1.25%, 05/15/50 4.5
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2018-K156, Class A3,
3.70%, 06/25/33 4.5
Federal National Mortgage Association, Pool
TBA, 2.50%, 06/15/51 4.0
Federal National Mortgage Association,
Series 2015-66, Class CL, 3.50%, 07/25/41 3.9
Federal National Mortgage Association,
Series 2016-101, Class ZP, 3.50%, 01/25/47 2.8
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2021-K123, Class
XAM, IO, 1.07%, 12/25/30 2.7
Federal Home Loan Mortgage Corporation
Multifamily Structured Pass Through
Certificates, Series 2021-K124, Class
XAM, IO, 1.03%, 01/25/31 2.7
-------
Total 40.8%
=======
---------------------------------------------------------------
WEIGHTED AVERAGE EFFECTIVE NET DURATION
---------------------------------------------------------------
April 30, 2021 11.0 Years
High - March 31, 2021 11.8 Years
Low - April 30, 2021 11.0 Years
-----------------------------
(1) Includes variation margin on futures.
(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.
(3) Percentages are based on the long positions only. Money market funds are
excluded.
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, 2021
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
10/31/19 11,408 11,321
4/30/20 12,436 12,839
10/31/20 12,259 12,536
4/30/21 11,760 11,593
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (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
JAMES SNYDER - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER, FIRST
TRUST SECURITIZED PRODUCTS GROUP
JEREMIAH CHARLES - 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, 2021 (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD (a) PERIOD (a) (b)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
Actual $1,000.00 $ 959.30 0.65% $3.16
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
</TABLE>
(a) Annualized expense ratio and expenses paid during the six-month period do
not include fees and expenses of the underlying funds in which the Fund
invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- ---------------------------------------------------------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 70.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 27.8%
Federal Home Loan Mortgage Corporation
$ 186,159 Series 2003-2649, Class IM, IO............................... 7.00% 07/15/33 $ 42,894
264,000 Series 2010-3653, Class UJ................................... 5.00% 04/15/40 318,252
344,076 Series 2013-4239, Class OU, PO............................... (a) 07/15/43 263,256
137,194 Series 2013-4255, Class SN, 1 Mo. LIBOR (x) -2.67 +
12.27% (b)................................................ 11.96% 05/15/35 171,591
308,354 Series 2020-4980, Class ZU................................... 3.00% 06/25/50 308,533
Federal National Mortgage Association
136,845 Series 2005-69, Class JI, IO................................. 6.00% 08/25/35 28,885
415,062 Series 2005-74, Class NZ..................................... 6.00% 09/25/35 555,541
957,656 Series 2005-113, Class AI, IO, 1 Mo. LIBOR (x) -1 +
7.23% (b)................................................. 7.12% 01/25/36 200,487
131,565 Series 2008-94, Class JS, 1 Mo. LIBOR (x) -6 + 30.00% (b).... 29.36% 04/25/36 225,105
433,000 Series 2012-93, Class LY..................................... 2.50% 09/25/42 432,042
85,760 Series 2015-34, Class OK, PO................................. (a) 03/25/44 83,734
944,376 Series 2015-66, Class CL..................................... 3.50% 07/25/41 1,017,120
298,685 Series 2016-23, Class PL..................................... 3.00% 11/25/45 310,268
670,536 Series 2016-101, Class ZP.................................... 3.50% 01/25/47 729,925
395,045 Series 2018-9, Class PL...................................... 3.50% 02/25/48 430,899
169,905 Series 2018-94, Class KZ..................................... 4.50% 01/25/49 211,615
89,950 Series 2018-94, Class LZ..................................... 4.50% 01/25/49 111,589
710,669 Series 2020-17, Class L...................................... 2.50% 03/25/50 687,442
Government National Mortgage Association
278,158 Series 2009-32, Class ZA..................................... 5.50% 05/20/39 335,207
1,292,000 Series 2010-61, Class KE..................................... 5.00% 05/16/40 1,625,824
587,251 Series 2015-168, Class GI, IO................................ 5.50% 02/16/33 84,658
403,000 Series 2018-112, Class CG.................................... 3.50% 08/20/48 435,420
430,680 Series 2018-125, Class KZ.................................... 3.50% 09/20/48 464,742
339,889 Series 2019-132, Class NZ.................................... 3.50% 10/20/49 376,093
343,000 Series 2020-83, Class KY..................................... 3.00% 06/20/50 360,860
----------------
9,811,982
----------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 37.9%
Federal Home Loan Mortgage Corporation Multifamily Structured
Pass Through Certificates
7,714,466 Series 2014-K036, Class X1, IO (c)........................... 0.86% 10/25/23 121,825
55,000 Series 2017-K153, Class A3................................... 3.12% 10/25/31 60,901
1,000,000 Series 2018-K156, Class A3................................... 3.70% 06/25/33 1,159,403
39,846,207 Series 2018-K156, Class X1, IO (c)........................... 0.21% 06/25/33 419,744
570,000 Series 2018-K157, Class A3................................... 3.99% 08/25/33 678,284
1,100,000 Series 2018-K158, Class A2................................... 3.90% 12/25/30 1,293,201
1,000,000 Series 2018-K158, Class A3................................... 3.90% 10/25/33 1,180,655
4,645,000 Series 2019-K093, Class XAM, IO (c).......................... 1.33% 05/25/29 410,293
1,695,386 Series 2019-K095, Class X1, IO (c)........................... 1.08% 06/25/29 114,737
1,200,000 Series 2019-K095, Class XAM, IO (c).......................... 1.37% 06/25/29 111,290
520,000 Series 2019-K1510, Class A2.................................. 3.72% 01/25/31 598,931
60,000 Series 2019-K1510, Class A3.................................. 3.79% 01/25/34 70,260
4,870,000 Series 2020-K109, Class XAM, IO (c).......................... 1.92% 04/25/30 708,239
6,850,000 Series 2020-K120, Class XAM, IO (c).......................... 1.31% 10/25/30 710,438
1,998,061 Series 2020-K1515, Class X1, IO (c).......................... 1.64% 02/25/35 313,665
2,645,021 Series 2020-K1516, Class X1, IO (c).......................... 1.63% 05/25/35 438,936
3,498,006 Series 2020-K1517, Class X1, IO (c).......................... 1.45% 07/25/35 510,384
8,375,000 Series 2021-K123, Class XAM, IO.............................. 1.07% 12/25/30 713,926
8,690,000 Series 2021-K124, Class XAM, IO (c).......................... 1.03% 01/25/31 712,876
10,125,000 Series 2021-K125, Class XAM, IO (c).......................... 0.87% 01/25/31 705,368
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (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
$ 768,760 Series 2020-145, Class BD (d)................................ 2.30% 03/16/63 $ 648,393
840,842 Series 2020-159, Class Z (d)................................. 2.50% 10/16/62 646,532
466,847 Series 2020-197, Class Z (c)................................. 2.25% 10/16/62 332,264
203,249 Series 2021-4, Class Z (c)................................... 2.00% 09/16/62 127,265
874,319 Series 2021-28, Class Z (c).................................. 2.00% 10/16/62 590,308
----------------
13,378,118
----------------
PASS-THROUGH SECURITIES -- 4.8%
Federal Home Loan Mortgage Corporation
584,836 Pool U99176.................................................. 4.00% 12/01/47 650,304
Federal National Mortgage Association
1,000,000 Pool TBA (e)................................................. 2.50% 06/15/51 1,034,808
----------------
1,685,112
----------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES..................................... 24,875,212
(Cost $24,970,950) ----------------
U.S. GOVERNMENT BONDS AND NOTES -- 3.3%
1,500,000 U.S. Treasury Bond.............................................. 1.25% 05/15/50 1,162,149
----------------
TOTAL U.S. GOVERNMENT BONDS AND NOTES....................................................... 1,162,149
(Cost $1,399,922) ----------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
MONEY MARKET FUNDS -- 28.3%
10,005,209 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -
Institutional Class - 0.01% (f).......................................................... 10,005,209
(Cost $10,005,209) ----------------
TOTAL INVESTMENTS -- 102.1%................................................................. 36,042,570
(Cost $36,376,081) (g) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
PURCHASED OPTIONS - 0.0%
CALL OPTIONS PURCHASED -- 0.0%
29 U.S. 5-Year Treasury Futures Call................. $ 3,594,188 $ 124.00 05/21/21 7,023
20 U.S. 5-Year Treasury Futures Call................. 2,478,750 124.25 05/21/21 2,500
----------------
TOTAL CALL OPTIONS PURCHASED................................................................ 9,523
(Cost $14,861) ----------------
PUT OPTIONS PURCHASED -- 0.0%
6 U.S. Treasury Long Bond Futures Put............... 943,500 155.00 05/21/21 3,187
3 U.S. Treasury Long Bond Futures Put............... 471,750 156.00 05/21/21 2,391
3 U.S. Treasury Long Bond Futures Put............... 471,750 157.00 05/21/21 3,516
3 U.S. Treasury Long Bond Futures Put............... 466,969 154.00 06/25/21 4,406
----------------
TOTAL PUT OPTIONS PURCHASED................................................................. 13,500
(Cost $15,065) ----------------
TOTAL PURCHASED OPTIONS..................................................................... 23,023
(Cost $29,926) ----------------
NET OTHER ASSETS AND LIABILITIES -- (2.1)%.................................................. (745,874)
----------------
NET ASSETS -- 100.0%........................................................................ $ 35,319,719
================
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
FUTURES CONTRACTS AT APRIL 30, 2021 (See Note 2D - Futures Contracts in the
Notes to Financial Statements)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/
FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE
------------------------------------------------------- ----------- ----------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
U.S. 2-Year Treasury Notes Long 5 Jun-2021 $ 1,103,789 $ 62
U.S. 5-Year Treasury Notes Long 9 Jun-2021 1,115,438 (139)
U.S. Treasury Long Bond Futures Long 24 Jun-2021 3,774,000 23,427
U.S. Treasury Ultra Bond Futures Long 8 Jun-2021 1,487,250 4,465
-------------- ----------------
$ 7,480,477 $ 27,815
============== ================
</TABLE>
(a) Zero coupon security.
(b) Inverse floating rate security.
(c) Collateral Strip Rate security. Coupon is based on the weighted net
interest rate of the investment's underlying collateral. The interest rate
resets periodically.
(d) 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.
(e) 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).
(f) Rate shown reflects yield as of April 30, 2021.
(g) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $829,780 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $1,142,379. The net unrealized depreciation was
$312,599. The unrealized amounts presented are inclusive of derivative
contracts.
IO - Interest-Only Security - Principal amount shown represents par value on
which interests payments are based.
LIBOR - London Interbank Offered Rates
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,
2021 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
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U.S. Government Agency Mortgage-Backed Securities..... $ 24,875,212 $ -- $ 24,875,212 $ --
U.S. Government Bonds and Notes....................... 1,162,149 -- 1,162,149 --
Money Market Funds.................................... 10,005,209 10,005,209 -- --
--------------- --------------- --------------- ---------------
Total Investments..................................... 36,042,570 10,005,209 26,037,361 --
Call Options Purchased................................ 9,523 9,523 -- --
Put Options Purchased................................. 13,500 13,500 -- --
Futures Contracts*.................................... 27,954 27,954 -- --
--------------- --------------- --------------- ---------------
Total................................................. $ 36,093,547 $ 10,056,186 $ 26,037,361 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Futures Contracts*.................................... $ (139) $ (139) $ -- $ --
=============== =============== =============== ===============
</TABLE>
* 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, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 36,042,570
Options contracts purchased, at value ................................. 23,023
Cash segregated as collateral for open futures contracts............... 137,013
Receivables:
Investment securities sold.......................................... 4,052,844
Interest............................................................ 139,359
Variation margin.................................................... 4,093
Dividends........................................................... 82
--------------
Total Assets........................................................ 40,398,984
--------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 5,060,387
Investment advisory fees............................................ 18,878
--------------
Total Liabilities................................................... 5,079,265
--------------
NET ASSETS............................................................. $ 35,319,719
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ 36,166,566
Par value.............................................................. 13,000
Accumulated distributable earnings (loss).............................. (859,847)
--------------
NET ASSETS............................................................. $ 35,319,719
==============
NET ASSET VALUE, per share............................................. $ 27.17
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 1,300,002
==============
Investments, at cost................................................... $ 36,376,081
==============
Premiums paid on options contracts purchased........................... $ 29,926
==============
</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, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INTEREST:
<S> <C>
Interest............................................................... $ 411,104
Dividends.............................................................. 810
--------------
Total investment income............................................. 411,914
--------------
EXPENSES:
Investment advisory fees............................................... 102,775
--------------
Total expenses...................................................... 102,775
--------------
NET INVESTMENT INCOME (LOSS)........................................... 309,139
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (32,310)
Futures contracts................................................... (644,122)
Purchased options contracts......................................... (41,674)
Written options contracts........................................... 11,942
--------------
Net realized gain (loss)............................................... (706,164)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... (1,132,080)
Futures contracts................................................... 46,434
Purchased options contracts......................................... (5,658)
Written options contracts........................................... 1,091
--------------
Net change in unrealized appreciation (depreciation)................... (1,090,213)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (1,796,377)
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (1,487,238)
==============
</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 YEAR
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 309,139 $ 255,307
Net realized gain (loss)............................................... (706,164) 632,940
Net change in unrealized appreciation (depreciation)................... (1,090,213) (206,777)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ (1,487,238) 681,470
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (713,702) (478,522)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 17,240,725 11,691,878
Cost of shares redeemed................................................ (1,445,002) (1,384,694)
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 15,795,723 10,307,184
-------------- --------------
Total increase (decrease) in net assets................................ 13,594,783 10,510,132
NET ASSETS:
Beginning of period.................................................... 21,724,936 11,214,804
-------------- --------------
End of period.......................................................... $ 35,319,719 $ 21,724,936
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 750,002 400,002
Shares sold............................................................ 600,000 400,000
Shares redeemed........................................................ (50,000) (50,000)
-------------- --------------
Shares outstanding, end of period...................................... 1,300,002 750,002
============== ==============
</TABLE>
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 YEAR PERIOD
4/30/2021 ENDED ENDED
(UNAUDITED) 10/31/2020 10/31/2019 (a)
-------------- -------------- --------------
<S> <C> <C>
Net asset value, beginning of period $ 28.97 $ 28.04 $ 25.00
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.29 0.82 0.55
Net realized and unrealized gain (loss) (1.45) 1.24 2.95
---------- ---------- ----------
Total from investment operations (1.16) 2.06 3.50
---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income (0.44) (1.13) (0.46)
Net realized gains (0.20) -- --
---------- ---------- ----------
Total distributions (0.64) (1.13) (0.46)
---------- ---------- ----------
Net asset value, end of period $ 27.17 $ 28.97 $ 28.04
========== ========== ==========
TOTAL RETURN (b) (4.07)% 7.46% 14.08%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 35,320 $ 21,725 $ 11,215
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets (c) 0.65% (d) 0.69% (e) 0.65% (d)
Ratio of net investment income (loss)
to average net assets 1.96% (d) 1.89% 2.64% (d)
Portfolio turnover rate (f) 102% (g) 174% (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 43%,
118% and 104% for the periods ended April 30, 2021, October 31, 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, 2021 (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 ten 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"). The Fund represents a separate series of shares
of beneficial interest in the Trust. Unlike conventional mutual funds, the Fund
issues and redeems shares on a continuous basis, at net asset value ("NAV"),
only in large blocks of shares known as "Creation Units."
The Fund is an actively managed exchange-traded fund ("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 objective 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
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:
Page 14
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
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:
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;
Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
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, 2021, 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 United Kingdom's Financial Conduct Authority, which regulates the London
Interbank Offered Rates ("LIBOR"), announced on March 5, 2021 that all non-USD
LIBOR reference rates and the 1-week and 2-month USD LIBOR reference rates will
cease to be provided or no longer be representative immediately after December
31, 2021 and the remaining USD LIBOR settings will cease to be provided or no
longer be representative immediately after June 30, 2023. The International
Swaps and Derivatives Association, Inc. ("ISDA") confirmed that the March 5,
2021 announcement constituted an index cessation event under the Interbank
Offered Rates ("IBOR") Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks
Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to
be used in ISDA fallbacks was fixed as of the date of the announcement.
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
Page 16
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
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, 2021, the Fund had no when-issued,
delayed-delivery securities. At April 30, 2021, the Fund held $1,034,808 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 changes in interest rates (interest rate risk).
Futures contracts are agreements between the Fund and a counterparty to buy or
sell a specific quantity of an underlying instrument at a specified price and at
a specified date. Depending on the terms of the contract, futures contracts are
settled either through physical delivery of the underlying instrument on the
settlement date or by payment of a cash settlement amount on the settlement
date. Open futures contracts can also be closed out prior to settlement by
entering into an offsetting transaction in a matching futures contract. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain margin deposits on the futures contract. When the
contract is closed or expires, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed or expired. This gain or loss is included in
"Net realized gain (loss) on futures contracts" on the Statement of Operations.
Upon entering into a futures contract, the Fund must deposit funds, called
margin, with its custodian in the name of the clearing broker equal to a
specified percentage of the current value of the contract. Open futures
contracts are marked-to-market daily with the change in value recognized as a
component of "Net change in unrealized appreciation (depreciation) on futures
contracts" on the Statement of Operations. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
variation margin and are included in "Variation margin" receivable or payable on
the Statement of Assets and Liabilities. If market conditions change
unexpectedly, the Fund may not achieve the anticipated benefits of the futures
contract and may realize a loss. The use of futures contracts involves the risk
of imperfect correlation in movements in the price of the futures contracts,
interest rates and the underlying instruments.
E. OPTIONS CONTRACTS
In the normal course of pursuing its investment objective, the Fund may invest
up to 20% of its net assets in derivative instruments in connection with hedging
strategies. The Fund may invest in exchange-listed 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
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
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
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
Page 18
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
date. Mortgage dollar rolls are recorded as separate purchases 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. 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,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 478,522
Capital gains................................... --
Return of capital............................... --
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 571,152
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... 769,941
K. 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 2019 and
2020 remain open to federal and state audit. As of April 30, 2021, 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, 2020, the
Fund had no non-expiring capital loss carryforwards for federal income tax
purposes.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended October 31, 2020, the Fund had no
net late year ordinary or capital losses.
L. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
Page 19
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (UNAUDITED)
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the
Advisor, First Trust manages the investment of the Fund's assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, pro rata
share of fees and expenses attributable to investments in other investment
companies ("acquired fund fees and expenses"), brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees payable pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary
management fee equal to 0.65% of its average daily net assets.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
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,
2021, were $30,519,023 and $0, 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, 2021, were
$22,319,485 and $134,340, respectively. The cost of purchases to cover
investments sold short and the proceeds of investments sold short were
$2,017,813 and $2,017,813, respectively.
For the six months ended April 30, 2021, 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, 2021, 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* $ 27,954 on futures contracts* $ 139
Options Interest Options contracts Options contracts
rate risk purchased, at value 23,023 written, at value --
</TABLE>
* Includes cumulative appreciation/depreciation on futures contracts as reported
in the Portfolio of Investments. Only the current day's variation margin is
presented on the Statement of Assets and Liabilities.
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (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, 2021, 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 $ (644,122)
Purchased options contracts (41,674)
Written options contracts 11,942
Net change in unrealized appreciation (depreciation) on:
Futures contracts 46,434
Purchased options contracts (5,658)
Written options contracts 1,091
</TABLE>
For the six months ended April 30, 2021, the notional value of futures contracts
opened and closed were $4,283,653 and $2,058,398, respectively.
During the six months ended April 30, 2021, the premiums for purchased options
contracts opened were $315,872 and the premiums for purchased options contracts
closed, exercised and expired were $293,847.
During the six months ended April 30, 2021, the premiums for written options
contracts opened were $51,660 and the premiums for written options contracts
closed, exercised and expired were $55,163.
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
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (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, 2022.
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, 2021 (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, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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 24
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--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST LONG DURATION OPPORTUNITIES ETF (LGOV)
APRIL 30, 2021 (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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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
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
--------------------------------------------------------------------------------
FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (KNG)
----------------------------
Semi-Annual Report
For the Six Months
Ended
April 30, 2021
----------------------------
<PAGE>
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (UNAUDITED)
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Management......................................................... 5
Understanding Your Fund Expenses............................................. 6
Portfolio of Investments..................................................... 7
Statement of Assets and Liabilities.......................................... 12
Statement of Operations...................................................... 13
Statements of Changes in Net Assets.......................................... 14
Financial Highlights......................................................... 15
Notes to Financial Statements................................................ 16
Additional Information....................................................... 22
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Cboe VestSM Financial LLC ("Cboe Vest" 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 (FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R);
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 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 certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's
performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
<PAGE>
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2021 (UNAUDITED)
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the FT
Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the "Fund")
which contains detailed information about the Fund for the period from the
Fund's inception date of six months ended April 30, 2021.
I would like to begin my remarks by saying that this is a time for all of us to
be thankful. It is astounding to me that our scientists and extended health care
community successfully discovered, developed, and distributed multiple effective
vaccines to treat the coronavirus ("COVID-19") in the span of just 15 months.
Suffice it to say that we are witnessing history in the making. We even received
some good news recently with respect to wearing masks in public, a polarizing
act for many politicians and Americans. The Centers for Disease Control and
Prevention released a new set of guidelines in mid-May for those individuals who
have been fully vaccinated. It essentially says fully vaccinated Americans can
quit wearing their masks outdoors (even in crowds), in most indoor settings, and
can drop social distancing altogether. This is a big step towards expediting the
reopening of the U.S. economy.
For those who may not know, we subscribe to the buy-and-hold philosophy of
investing here at First Trust Advisors L.P., even though it means enduring lots
of tough times. While the notion of being able to time the market is seductive
on its face, very few investors are skilled enough to make it work over time. I
can think of no better example than the COVID-19 pandemic. The degree of
uncertainty surrounding the onset of the virus alone was enough to make the
average investor want to run for cover. And if that was not enough, the 33.8%
plunge in the S&P 500(R) Index (the "Index") from February 19, 2020, through
March 23, 2020 (23 trading days) was a real gut check for most of us. But a
funny thing happened on the way to another potential collapse of the market - it
did not happen. In fact, thanks to the U.S. Federal government stepping up with
trillions of dollars of timely fiscal and monetary support, the stock market
roared. From March 23, 2020 through May 14, 2021, the Index posted a total
return of 90.14%, according to Bloomberg. What a shame for those investors who
may have moved some, or all, of their capital out of equities. What looked like
a great time to de-risk turned out to be just the opposite.
The overall climate for investing looks bright for a few reasons. First, U.S.
real gross domestic product ("GDP") growth is expected to grow by 6.4%
year-over-year in 2021, according to the International Monetary Fund. The last
time the U.S. economy grew that fast was in 1984, when real GDP growth reached
7.2%. Second, corporate earnings are expected to recover from their 2020 slide.
Bloomberg's consensus year-over-year earnings growth rate estimates for the
Index for 2021 and 2022 were 33.17% and 12.87%, respectively, as of May 14,
2021. That is a significant rebound from the 12.44% decline in earnings in 2020.
Third, inflation is rising, and that is exactly what the Federal Reserve has
been wanting for some time. Central banks around the world have spent years
battling deflationary pressures, so a little bit of inflation is welcome at this
stage of the recovery. Lastly, the U.S. labor market is robust despite the talk
about the millions of people who lost their jobs in the COVID-19 pandemic and
are living off unemployment benefits. As of March 31, 2021, there were 8.12
million job openings in the U.S., the highest total since record-keeping began
in December 2000, according to the Bureau of Labor Statistics. We need to get
people back to work.
While it seems fashionable to sell fear these days, we choose to follow the
data. Remember, the Index has never failed to fully recoup the losses sustained
in a market correction or bear market. 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,
/a/ 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)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
The FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the
"Fund") seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called the Cboe
S&P 500(R) Dividend Aristocrats Target Income Index Monthly Series (the
"Index").
The Fund will normally invest at least 80% of its total assets (including
investment borrowings) in the common stocks and call options that comprise the
Index. The Fund, using an indexing investment approach, attempts to replicate,
before fees and expenses, the performance of the Index. The Index is owned,
developed, maintained and calculated by S&P Opco, LLC (the "Index Provider").
The Index is a rules-based buy-write index designed with the primary goal of
generating an annualized level of income from stock dividends and option
premiums that is approximately 3% over the annual dividend yield of the S&P
500(R) Index and a secondary goal of generating capital appreciation based on
the price returns of the equity securities contained in the Index. The Index's
objective to deliver a target level of income could result in the Fund selling
securities to meet the target, which could make the Fund less tax-efficient than
other ETFs. The Index is composed of two parts: (1) an equal-weighted portfolio
of the stocks contained in the S&P 500 Dividend Aristocrats Index (the
"Aristocrat Stocks") that have options that trade on a national securities
exchange and (2) a rolling series of short (written) call options on each of the
Aristocrat Stocks (the "Covered Calls"). The S&P 500 Dividend Aristocrats Index
includes companies in the S&P 500(R) Index that have increased dividend payments
each year for at least 25 consecutive years and have a float adjusted market-cap
of at least $3 billion as of the rebalancing reference date and have an average
daily value traded of at least $5 million.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE
------------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months Ended 1 Year Ended Inception (3/26/18) Inception (3/26/18)
4/30/21 4/30/21 to 4/30/21 to 4/30/21
<S> <C> <C> <C> <C>
FUND PERFORMANCE
NAV 27.71% 43.02% 14.20% 50.84%
Market Price 27.78% 42.64% 14.22% 50.95%
INDEX PERFORMANCE
Cboe S&P 500(R) Dividend Aristocrats Target Income
Index Monthly Series 28.27% 44.09% 15.07% 54.44%
S&P 500 Dividend Aristocrats Index 28.87% 45.12% 15.81% 57.53%
S&P 500(R) Index 28.85% 45.98% 17.94% 66.67%
------------------------------------------------------------------------------------------------------------------------------------
</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 periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Prior to January 1,
2019, the price used was the midpoint between the highest bid and the lowest
offer on the stock exchange on which shares of the Fund were listed for trading
as of the time that the Fund's NAV 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)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
---------------------------------------------------------------
% OF TOTAL
SECTOR CLASSIFICATION INVESTMENTS
---------------------------------------------------------------
Consumer Staples 20.0%
Industrials 20.0
Materials 12.4
Financials 10.9
Health Care 10.7
Consumer Discretionary 9.2
Real Estate 4.6
Utilities 4.6
Energy 3.1
Information Technology 3.0
Communication Services 1.5
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF NET
FUND ALLOCATION ASSETS
---------------------------------------------------------------
Common Stocks 100.0%
Call Options Written (0.2)
Net Other Assets and Liabilities 0.2
-------
Total 100.0%
=======
---------------------------------------------------------------
% OF TOTAL
TOP TEN HOLDINGS INVESTMENTS
---------------------------------------------------------------
Archer-Daniels-Midland Co. 1.6%
Nucor Corp. 1.6
Albemarle Corp. 1.6
Cincinnati Financial Corp. 1.6
Exxon Mobil Corp. 1.6
Roper Technologies, Inc. 1.6
Federal Realty Investment Trust 1.6
Sysco Corp. 1.6
W.W. Grainger, Inc. 1.6
Genuine Parts Co. 1.6
-------
Total 16.0%
=======
Page 3
<PAGE>
--------------------------------------------------------------------------------
FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
<TABLE>
<CAPTION>
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MARCH 26, 2018 - APRIL 30, 2021
FT Cboe Vest S&P 500(R) Cboe S&P 500(R) Dividend
Dividend Aristocrats Aristocrats Target Income S&P 500 Dividend S&P 500(R)
Target Income ETF(R) Index Monthly Series Aristocrats Index Index
<S> <C> <C> <C> <C>
3/26/18 $10,000 $10,000 $10,000 $10,000
4/30/18 9,957 9,962 9,958 9,974
10/31/18 10,285 10,331 10,349 10,313
4/30/19 11,264 11,355 11,449 11,320
10/31/19 11,929 12,076 12,181 11,791
4/30/20 10,550 10,720 10,856 11,418
10/31/20 11,814 12,042 12,225 12,935
4/30/21 15,084 15,444 15,753 16,667
</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
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
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--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
SEMI-ANNUAL REPORT
APRIL 30, 2021 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R)
("KNG") (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
Cboe VestSM Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the
investment sub-advisor to the Fund. In this capacity, Cboe Vest is responsible
for the selection and ongoing monitoring of the securities in the Fund's
investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro
Station Pl., 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest
had approximately $2.4 billion under management or committed to management as of
April 30, 2021.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
Page 5
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
UNDERSTANDING YOUR FUND EXPENSES
APRIL 30, 2021 (UNAUDITED)
As a shareholder of FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income
ETF(R) (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, 2021.
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, 2020 APRIL 30, 2021 PERIOD PERIOD (a)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
Actual $1,000.00 $1,277.10 0.75% $4.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
</TABLE>
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (November 1,
2020 through April 30, 2021), multiplied by 181/365 (to reflect the
six-month period).
Page 6
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS -- 100.0%
AEROSPACE & DEFENSE -- 1.6%
12,376 General Dynamics Corp (a)................................................................... $ 2,354,286
----------------
AIR FREIGHT & LOGISTICS -- 1.5%
20,822 Expeditors International of Washington, Inc. (a)............................................ 2,287,505
----------------
BANKS -- 1.6%
128,932 People's United Financial, Inc. (a)......................................................... 2,337,537
----------------
BEVERAGES -- 4.6%
29,934 Brown-Forman Corp., Class B (a)............................................................. 2,283,365
42,370 Coca-Cola (The) Co. (a)..................................................................... 2,287,133
15,826 PepsiCo, Inc. (a)........................................................................... 2,281,476
----------------
6,851,974
----------------
BIOTECHNOLOGY -- 1.5%
20,721 AbbVie, Inc. (a)............................................................................ 2,310,391
----------------
BUILDING PRODUCTS -- 1.5%
33,761 A.O. Smith Corp. (a)........................................................................ 2,287,308
----------------
CAPITAL MARKETS -- 4.7%
78,446 Franklin Resources, Inc. (a)................................................................ 2,353,380
5,946 S&P Global, Inc. (a)........................................................................ 2,321,259
12,925 T. Rowe Price Group, Inc. (a)............................................................... 2,316,160
----------------
6,990,799
----------------
CHEMICALS -- 9.2%
7,950 Air Products and Chemicals, Inc. (a)........................................................ 2,293,416
14,314 Albemarle Corp. (a)......................................................................... 2,407,185
10,177 Ecolab, Inc. (a)............................................................................ 2,280,869
7,915 Linde PLC (a)............................................................................... 2,262,424
13,214 PPG Industries, Inc. (a).................................................................... 2,262,765
8,425 Sherwin-Williams (The) Co. (a).............................................................. 2,307,355
----------------
13,814,014
----------------
COMMERCIAL SERVICES & SUPPLIES -- 1.5%
6,525 Cintas Corp. (a)............................................................................ 2,252,039
----------------
CONTAINERS & PACKAGING -- 1.5%
196,750 Amcor PLC (a)............................................................................... 2,311,813
----------------
DISTRIBUTORS -- 1.6%
18,866 Genuine Parts Co. (a)....................................................................... 2,357,684
----------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.5%
73,499 AT&T, Inc. (a).............................................................................. 2,308,604
----------------
ELECTRIC UTILITIES -- 1.5%
29,497 NextEra Energy, Inc. (a).................................................................... 2,286,312
----------------
ELECTRICAL EQUIPMENT -- 1.5%
24,961 Emerson Electric Co. (a).................................................................... 2,258,721
----------------
EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.6%
7,762 Essex Property Trust, Inc. (a).............................................................. 2,255,016
21,013 Federal Realty Investment Trust (a)......................................................... 2,371,107
33,255 Realty Income Corp. (a)..................................................................... 2,299,583
----------------
6,925,706
----------------
</TABLE>
See Notes to Financial Statements Page 7
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD & STAPLES RETAILING -- 4.7%
27,927 Sysco Corp. (a)............................................................................. $ 2,366,255
43,528 Walgreens Boots Alliance, Inc. (a).......................................................... 2,311,337
16,497 Walmart, Inc. (a)........................................................................... 2,308,095
----------------
6,985,687
----------------
FOOD PRODUCTS -- 4.7%
38,847 Archer-Daniels-Midland Co. (a).............................................................. 2,452,411
49,749 Hormel Foods Corp. (a)...................................................................... 2,298,404
25,231 McCormick & Co., Inc. (a)................................................................... 2,279,873
----------------
7,030,688
----------------
GAS UTILITIES -- 1.5%
22,331 Atmos Energy Corp. (a)...................................................................... 2,313,268
----------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 6.1%
18,716 Abbott Laboratories (a)..................................................................... 2,247,417
9,020 Becton, Dickinson and Co. (a)............................................................... 2,244,266
17,591 Medtronic PLC (a)........................................................................... 2,303,014
7,130 West Pharmaceutical Services, Inc. (a)...................................................... 2,342,348
----------------
9,137,045
----------------
HEALTH CARE PROVIDERS & SERVICES -- 1.5%
37,581 Cardinal Health, Inc. (a)................................................................... 2,267,638
----------------
HOTELS, RESTAURANTS & LEISURE -- 1.6%
9,838 McDonald's Corp. (a)........................................................................ 2,322,555
----------------
HOUSEHOLD DURABLES -- 1.5%
45,701 Leggett & Platt, Inc. (a)................................................................... 2,269,969
----------------
HOUSEHOLD PRODUCTS -- 6.1%
12,241 Clorox (The) Co. (a)........................................................................ 2,233,982
28,924 Colgate-Palmolive Co. (a)................................................................... 2,334,167
17,469 Kimberly-Clark Corp. (a).................................................................... 2,328,967
17,231 Procter & Gamble (The) Co. (a).............................................................. 2,298,960
----------------
9,196,076
----------------
INDUSTRIAL CONGLOMERATES -- 3.1%
11,414 3M Co. (a).................................................................................. 2,250,156
5,315 Roper Technologies, Inc. (a)................................................................ 2,372,829
----------------
4,622,985
----------------
INSURANCE -- 4.7%
43,243 Aflac, Inc. (a)............................................................................. 2,323,446
13,635 Chubb Ltd. (a).............................................................................. 2,339,630
21,104 Cincinnati Financial Corp. (a).............................................................. 2,377,999
----------------
7,041,075
----------------
IT SERVICES -- 3.0%
11,783 Automatic Data Processing, Inc. (a)......................................................... 2,203,303
16,204 International Business Machines Corp. (a)................................................... 2,299,024
----------------
4,502,327
----------------
MACHINERY -- 7.7%
10,029 Caterpillar, Inc. (a)....................................................................... 2,287,715
15,579 Dover Corp. (a)............................................................................. 2,324,231
</TABLE>
Page 8 See Notes to Financial Statements
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------------- -------------------------------------------------------------------------------------------- ----------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
MACHINERY (CONTINUED)
10,099 Illinois Tool Works, Inc. (a)............................................................... $ 2,327,416
35,887 Pentair PLC (a)............................................................................. 2,315,070
11,038 Stanley Black & Decker, Inc. (a)............................................................ 2,282,327
----------------
11,536,759
----------------
METALS & MINING -- 1.6%
29,653 Nucor Corp. (a)............................................................................. 2,439,256
----------------
MULTILINE RETAIL -- 1.6%
11,203 Target Corp. (a)............................................................................ 2,321,934
----------------
MULTI-UTILITIES -- 1.5%
29,798 Consolidated Edison, Inc. (a)............................................................... 2,306,663
----------------
OIL, GAS & CONSUMABLE FUELS -- 3.1%
22,728 Chevron Corp. (a)........................................................................... 2,342,575
41,531 Exxon Mobil Corp. (a)....................................................................... 2,377,234
----------------
4,719,809
----------------
PHARMACEUTICALS -- 1.5%
13,943 Johnson & Johnson (a)....................................................................... 2,268,944
----------------
SPECIALTY RETAIL -- 1.5%
11,486 Lowe's Cos., Inc. (a)....................................................................... 2,254,128
----------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.5%
26,113 V.F. Corp. (a).............................................................................. 2,289,066
----------------
TRADING COMPANIES & DISTRIBUTORS -- 1.6%
5,449 W.W. Grainger, Inc. (a)..................................................................... 2,362,359
----------------
TOTAL INVESTMENTS -- 100.0%................................................................. 150,122,924
(Cost $125,762,097) (b) ----------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS WRITTEN -- (0.2)%
(7) 3M Co............................................. $ (137,998) $ 200.00 05/21/21 (1,295)
(19) A.O. Smith Corp................................... (128,725) 70.00 05/21/21 (1,045)
(10) Abbott Laboratories............................... (120,080) 125.00 05/21/21 (560)
(12) AbbVie, Inc....................................... (133,800) 110.00 05/21/21 (3,636)
(24) Aflac, Inc........................................ (128,952) 52.50 05/21/21 (3,600)
(4) Air Products and Chemicals, Inc................... (115,392) 290.00 05/21/21 (2,604)
(9) Albemarle Corp.................................... (151,353) 150.00 05/21/21 (18,000)
(109) Amcor PLC......................................... (128,075) 12.00 05/21/21 (1,417)
(22) Archer-Daniels-Midland Co......................... (138,886) 60.00 05/21/21 (6,996)
(43) AT&T, Inc......................................... (135,063) 30.00 05/21/21 (6,235)
(13) Atmos Energy Corp................................. (134,667) 100.00 05/21/21 (6,500)
(7) Automatic Data Processing, Inc.................... (130,893) 195.00 05/21/21 (385)
(5) Becton, Dickinson and Co.......................... (124,405) 260.00 05/21/21 (1,125)
(17) Brown-Forman Corp................................. (129,676) 75.00 05/21/21 (3,995)
(21) Cardinal Health, Inc.............................. (126,714) 62.50 05/21/21 (1,953)
(6) Caterpillar, Inc.................................. (136,866) 230.00 05/21/21 (2,712)
(8) Chubb Ltd......................................... (137,272) 165.00 05/21/21 (6,376)
(4) Cintas Corp....................................... (138,056) 350.00 05/21/21 (2,000)
(7) Clorox (The) Co................................... (127,750) 190.00 05/21/21 (735)
(24) Coca-Cola (The) Co................................ (129,552) 52.50 05/21/21 (4,056)
</TABLE>
See Notes to Financial Statements Page 9
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF NOTIONAL EXERCISE EXPIRATION
CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE
---------------- -------------------------------------------------- ------------ ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
CALL OPTIONS WRITTEN (CONTINUED)
(16) Colgate-Palmolive Co.............................. $ (129,120) $ 80.00 05/21/21 $ (2,496)
(17) Consolidated Edison, Inc.......................... (131,597) 77.50 05/21/21 (1,700)
(9) Dover Corp........................................ (134,271) 140.00 05/21/21 (9,090)
(6) Ecolab, Inc....................................... (134,472) 220.00 05/21/21 (3,960)
(14) Emerson Electric Co............................... (126,686) 92.50 05/21/21 (1,680)
(4) Essex Property Trust, Inc......................... (116,208) 290.00 05/21/21 (2,100)
(23) Exxon Mobil Corp.................................. (131,652) 57.50 05/21/21 (2,760)
(12) Federal Realty Investment Trust................... (135,408) 105.00 05/21/21 (9,984)
(43) Franklin Resources, Inc........................... (129,000) 30.00 05/21/21 (3,870)
(7) General Dynamics Corp............................. (133,161) 185.00 05/21/21 (4,130)
(11) Genuine Parts Co.................................. (137,467) 120.00 05/21/21 (7,260)
(28) Hormel Foods Corp................................. (129,360) 47.00 05/21/21 (1,680)
(6) Illinois Tool Works, Inc.......................... (138,276) 220.00 05/21/21 (6,870)
(10) International Business Machines Corp.............. (141,880) 135.00 05/21/21 (6,980)
(8) Johnson & Johnson................................. (130,184) 160.00 05/21/21 (3,360)
(9) Kimberly-Clark Corp............................... (119,988) 140.00 05/21/21 (225)
(27) Leggett & Platt, Inc.............................. (134,109) 50.00 05/21/21 (3,645)
(4) Linde PLC......................................... (114,336) 290.00 05/21/21 (1,720)
(6) Lowe's Cos., Inc.................................. (117,750) 210.00 05/21/21 (924)
(15) McCormick & Co., Inc.............................. (135,540) 90.00 05/21/21 (2,588)
(6) McDonald's Corp................................... (141,648) 230.00 05/21/21 (4,494)
(10) Medtronic PLC..................................... (130,920) 125.00 05/21/21 (6,650)
(16) NextEra Energy, Inc............................... (124,016) 82.50 05/21/21 (304)
(16) Nucor Corp........................................ (131,616) 80.00 05/21/21 (6,016)
(20) Pentair PLC....................................... (129,020) 65.00 05/21/21 (2,500)
(72) People's United Financial, Inc.................... (130,536) 18.00 05/21/21 (3,960)
(9) PepsiCo, Inc...................................... (129,744) 145.00 05/21/21 (1,539)
(8) PPG Industries, Inc............................... (136,992) 170.00 05/21/21 (3,280)
(9) Procter & Gamble (The) Co......................... (120,078) 140.00 05/21/21 (198)
(19) Realty Income Corp................................ (131,385) 67.50 05/21/21 (4,560)
(3) Roper Technologies, Inc........................... (133,932) 420.00 05/21/21 (8,613)
(3) S&P Global, Inc................................... (117,117) 380.00 05/21/21 (3,660)
(5) Sherwin-Williams (The) Co......................... (136,935) 266.67 05/21/21 (5,250)
(6) Stanley Black & Decker, Inc....................... (124,062) 210.00 05/21/21 (1,770)
(16) Sysco Corp........................................ (135,568) 80.00 05/21/21 (9,280)
(7) T. Rowe Price Group, Inc.......................... (125,440) 180.00 05/21/21 (2,310)
(6) Target Corp....................................... (124,356) 210.00 05/21/21 (3,030)
(15) V.F. Corp......................................... (131,490) 85.00 05/21/21 (7,260)
(3) W.W. Grainger, Inc................................ (130,062) 410.00 05/21/21 (7,380)
(24) Walgreens Boots Alliance, Inc..................... (127,440) 52.50 05/21/21 (3,696)
(9) Walmart, Inc...................................... (125,919) 140.00 05/21/21 (2,637)
(4) West Pharmaceutical Services, Inc................. (131,408) 310.00 05/21/21 (8,540)
----------------
TOTAL CALL OPTIONS WRITTEN.................................................................. (249,174)
(Premiums received $214,901) ----------------
NET OTHER ASSETS AND LIABILITIES -- 0.2%.................................................... 229,834
----------------
NET ASSETS -- 100.0%........................................................................ $ 150,103,584
================
</TABLE>
-----------------------------
(a) All or a portion of this security is held as collateral for the options
written. At April 30, 2021, the value of these securities amount to
$8,084,324 or 5.4% of net assets.
(b) Aggregate cost for financial reporting purposes approximates the aggregate
cost for federal income tax purposes. As of April 30, 2021, the aggregate
gross unrealized appreciation for all investments in which there was an
excess of value over tax cost was $24,450,913 and the aggregate gross
unrealized depreciation for all investments in which there was an excess
of tax cost over value was $124,359. The net unrealized appreciation was
$24,326,554. The unrealized amounts presented are inclusive of derivative
contracts.
Page 10 See Notes to Financial Statements
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2021 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2021 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
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Common Stocks*........................................ $ 150,122,924 $ 150,122,924 $ -- $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2021 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Call Options Written.................................. $ (249,174) $ (249,174) $ -- $ --
=============== =============== =============== ===============
</TABLE>
*See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 11
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value.................................................. $ 150,122,924
Cash segregated as collateral for open option contracts................ 219,803
Receivables:
Investment securities sold.......................................... 4,714,658
Capital shares sold................................................. 2,670,651
Dividends........................................................... 188,904
--------------
Total Assets........................................................ 157,916,940
--------------
LIABILITIES:
Options contracts written, at value.................................... 249,174
Due to custodian....................................................... 80,174
Payables:
Investment securities purchased..................................... 7,409,927
Investment advisory fees............................................ 74,081
--------------
Total Liabilities................................................... 7,813,356
--------------
NET ASSETS............................................................. $ 150,103,584
==============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 130,870,175
Par value.............................................................. 28,250
Accumulated distributable earnings (loss).............................. 19,205,159
--------------
NET ASSETS............................................................. $ 150,103,584
==============
NET ASSET VALUE, per share............................................. $ 53.13
==============
Number of shares outstanding (unlimited number of shares authorized,
par value $0.01 per share).......................................... 2,825,000
==============
Investments, at cost................................................... $ 125,762,097
==============
Premiums received on options contracts written......................... $ 214,901
==============
</TABLE>
Page 12 See Notes to Financial Statements
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2021 (UNAUDITED)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.............................................................. $ 1,200,510
--------------
Total investment income............................................. 1,200,510
--------------
EXPENSES:
Investment advisory fees............................................... 346,942
--------------
Total expenses...................................................... 346,942
--------------
NET INVESTMENT INCOME (LOSS)........................................... 853,568
--------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (562,164)
Written options contracts........................................... 218,657
--------------
Net realized gain (loss)............................................... (343,507)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments......................................................... 21,164,066
Written options contracts........................................... (102,596)
--------------
Net change in unrealized appreciation (depreciation)................... 21,061,470
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 20,717,963
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ 21,571,531
==============
</TABLE>
See Notes to Financial Statements Page 13
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
4/30/2021 ENDED
(UNAUDITED) 10/31/2020
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)........................................... $ 853,568 $ 1,029,038
Net realized gain (loss)............................................... (343,507) (648,972)
Net change in unrealized appreciation (depreciation)................... 21,061,470 (419,026)
-------------- --------------
Net increase (decrease) in net assets resulting from operations........ 21,571,531 (38,960)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (1,816,042) (2,257,817)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 63,569,858 30,068,687
Cost of shares redeemed................................................ -- (4,573,665)
Transaction fees (Note 8).............................................. -- 6,236
-------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................................ 63,569,858 25,501,258
-------------- --------------
Total increase (decrease) in net assets................................ 83,325,347 23,204,481
NET ASSETS:
Beginning of period.................................................... 66,778,237 43,573,756
-------------- --------------
End of period.......................................................... $ 150,103,584 $ 66,778,237
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ 1,575,000 975,000
Shares sold............................................................ 1,250,000 700,000
Shares redeemed........................................................ -- (100,000)
-------------- --------------
Shares outstanding, end of period...................................... 2,825,000 1,575,000
============== ==============
</TABLE>
Page 14 See Notes to Financial Statements
<PAGE>
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, PERIOD
4/30/2021 ------------------------------- ENDED
(UNAUDITED) 2020 2019 10/31/2018 (a)
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 42.40 $ 44.69 $ 40.28 $ 40.00
---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............. 0.57 0.81 (b) 0.74 (b) 0.43 (b)
Net realized and unrealized gain (loss).. 11.11 (1.35) (c) 5.52 0.70 (c)
---------- ---------- ---------- ----------
Total from investment operations......... 11.68 (0.54) 6.26 1.13
---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................... (0.84) (1.75) (1.57) (0.40)
Net realized gain........................ (0.11) -- (0.29) (0.46)
---------- ---------- ---------- ----------
Total distributions...................... (0.95) (1.75) (1.86) (0.86)
---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Transaction fees (Note 8)................ -- 0.00 (b) (d) 0.01 (b) 0.01 (b)
---------- ---------- ---------- ----------
Net asset value, end of period........... $ 53.13 $ 42.40 $ 44.69 $ 40.28
========== ========== ========== ==========
TOTAL RETURN (e)......................... 27.71% (0.93)% 15.98% 2.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)..... $ 150,104 $ 66,778 $ 43,574 $ 19,134
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net
assets................................ 0.75% (f) 0.75% 0.75% 0.75% (f)
Ratio of net investment income (loss) to
average net assets.................... 1.85% (f) 1.89% 1.75% 1.73% (f)
Portfolio turnover rate (g).............. 38% 86% 83% 50%
</TABLE>
(a) Inception date is March 26, 2018, 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) Realized and unrealized gains (losses) per share are balancing amounts
necessary to reconcile the change in net asset value per share for the
period and may not reconcile with the aggregate gains and losses in the
Statement of Operations due to share transactions for the period.
(d) Amount is less than $0.01.
(e) 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.
(f) Annualized.
(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.
See Notes to Financial Statements Page 15
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (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 ten funds that are offering shares. This report
covers the FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R)
(the "Fund"), which trades under the ticker "KNG" on the Cboe BZX Exchange, Inc.
("Cboe BZX"). The Fund represents a separate series of shares of beneficial
interest in the Trust. Unlike conventional mutual funds, the Fund issues and
redeems shares on a continuous basis, at net asset value ("NAV"), only in large
blocks of shares known as "Creation Units."
The Fund's investment objective seeks investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of an
equity index called the Cboe S&P 500(R) Dividend Aristocrats Target Income Index
Monthly Series (the "Index"). The Fund will normally invest at least 80% of its
total assets (including investment borrowings) in the common stocks and call
options that comprise the Index. The Index's primary goal is to generate an
annualized level of income from stock dividends and option premiums that is
approximately 3% over the annual dividend yield of the S&P 500(R) Index and has
a secondary goal of generating price returns that are proportional to the price
returns of the S&P 500(R) Index.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor")
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Common stocks 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.
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.
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
Page 16
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, 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.
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, 2021, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded using the effective interest method.
Distributions received from the Fund's investments in 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 by the REITs after their tax
reporting periods conclude.
C. OPTIONS CONTRACTS
The Fund will employ a "partial covered call strategy," meaning that covered
calls will be written on a notional value of no more than 20% of the value of
each underlying stock contained in the S&P 500 Dividend Aristocrats Index (the
"Aristocrat Stocks"), such that the short position in each call option is
"covered" by a portion of the corresponding Aristocrat Stock held by the Fund to
generate income. A written (sold) call option gives the seller the obligation to
sell shares of the underlying asset at a specified price ("strike price") at a
specified date ("expiration date"). The writer (seller) of the call option
Page 17
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
receives an amount (premium) for writing (selling) the option. In the event the
underlying asset appreciates above the strike price as of the expiration date,
the writer (seller) of the call option will have to pay the difference between
the value of the underlying asset and the strike price (which loss is offset by
the premium initially received), and in the event the underlying asset declines
in value, the call option may end up worthless and the writer (seller) of the
call option retains the premium.
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. 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.
Premiums received from writing options that expire unexercised are treated by
the Fund on the expiration date as realized gains from options written. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or, if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a call option is exercised, the
premium is added to the proceeds from the sale of the underlying security in
determining whether the Fund has realized a gain or loss. Any gain or loss on
written options would be included in "Net realized gain (loss) on written
options contracts" on the Statement of Operations. The Fund, as a writer of an
option, bears the market risk of an unfavorable change in the price of the
security underlying the written option.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid quarterly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized capital gains earned by the Fund, if any, are
distributed at least annually.
Distributions from 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,
2020 was as follows:
Distributions paid from:
Ordinary income................................. $ 1,542,140
Capital gains................................... 715,677
As of October 31, 2020, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income................... $ 193,816
Accumulated capital and other gain (loss)....... --
Net unrealized appreciation (depreciation)...... (744,146)
E. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2018,
2019, and 2020 remain open to federal and state audit. As of April 30, 2021,
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, 2020, the
Fund had no capital loss carryforwards for federal income tax purposes.
Page 18
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
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, 2020, the Fund had no
net late year ordinary or capital losses.
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 Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in the Fund's portfolio, managing the Fund's business affairs and providing
certain administrative services necessary for the management of the Fund.
First Trust is responsible for the expenses of the Fund including the cost of
transfer agency, sub-advisory, custody, fund administration, legal, audit and
other services and license fees (if any), but excluding fee payments under the
Investment Management Agreement, interest, taxes, acquired fund fees and
expenses, if any, brokerage commissions and other expenses connected with the
execution of portfolio transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has
agreed to pay First Trust an annual management fee equal to 0.75% of its average
daily net assets.
Cboe Vest(SM) Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves
as the Fund's sub-advisor and manages the Fund's portfolio subject to First
Trust's supervision. Pursuant to the Investment Management Agreement, between
the Trust, on behalf of the Fund, and the Advisor, and the Investment
Sub-Advisory Agreement among the Trust, on behalf of the Fund, the Advisor and
Cboe Vest, First Trust will supervise Cboe Vest and its management of the
investment of the Fund's assets and will pay Cboe Vest for its services as the
Fund's sub-advisory fee equal to 0.20% of the average daily net assets of the
Fund, less Cboe Vest's share of the Fund's expenses. Cboe Vest's fee is paid by
the Advisor out of its management fee.
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. REORGANIZATION
On October 7, 2020, the Board of Trustees of Cboe Vest S&P 500(R) Dividend
Aristocrats Target Income ETF(R) ("Target Fund"), an index based exchange-traded
fund ("ETF") managed by Cboe Vest(SM) Financial LLC, approved a reorganization
into FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF(R) (the
"Acquiring Fund" or "KNG"), an index based ETF managed by First Trust. The
reorganization resulted in a shift in the management responsibility for the
Target Fund. Other than the management responsibility, the primary
characteristics of Target Fund and the Acquiring Fund are materially the same.
The Acquiring Fund's investment objective, investment strategies, policies and
risks are identical in all material respects to those of the Target Fund. The
reorganization was completed on March 1, 2021.
Under the terms of the reorganization, which was tax-free, the assets of Target
Fund were transferred to, and the liabilities of Target Fund were assumed by
KNG. The shareholders of the Target Fund received shares of the KNG with a value
equal to the aggregate net asset value of the shares of the Target Fund held by
them.
Page 19
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--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
5. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 2021, the cost of purchases and proceeds from
sales of investments, excluding short-term investments and in-kind transactions,
were $36,628,415 and $36,658,696, respectively.
For the six months ended April 30, 2021, the cost of in-kind purchases and
proceeds from in-kind sales were $63,537,933 and $0, respectively.
6. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2021, the primary underlying risk exposure and the location of these
instruments as presented on the Statements 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>
Equity Options contracts purchased, Options contracts written,
Options Risk at value $ -- at value $ 249,174
</TABLE>
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, 2021, 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>
INTEREST RATE RISK EXPOSURE
Net realized gain (loss) on written option contracts $ 218,657
Net change in unrealized appreciation (depreciation) on
written option contracts (102,596)
</TABLE>
During the six months ended April 30, 2021, the premiums for written options
contracts opened were $959,475 and the premiums for written options contracts
closed, exercised and expired were $864,543.
7. OFFSETTING ASSETS AND LIABILITIES
The Fund is subject to a Master Netting Arrangement, which governs the terms of
certain transactions with select counterparties. The Master Netting Arrangement
allows the Fund to close out and net its total exposure to a counterparty in the
event of a default with respect to all the transactions governed under a single
agreement with a counterparty. The Master Netting Arrangement also specifies
collateral posting arrangements at pre-arranged exposure levels. Under the
Master Netting Arrangement, collateral is routinely transferred if the total net
exposure to certain transactions (net of existing collateral already in place)
governed under the relevant Master Netting Arrangement with a counterparty in a
given account exceeds a specified threshold depending on the counterparty and
type of Master Netting Arrangement.
The following is a summary of the Assets and Liabilities subject to offsetting
in the Fund as of the end of the reporting period:
<TABLE>
<CAPTION>
GROSS AMOUNT NOT OFFSET
ROSS AMOUNT GROSS AMOUNT IN THE STATEMENT OF
GROSS OFFSET IN THE OFFSET IN THE ASSETS AND LIABILITIES
AMOUNT OF STATEMENT OF STATEMENT OF ----------------------------
DESCRIPTION/ RECOGNIZED ASSETS AND ASSETS AND FINANCIAL COLLATERAL NET
COUNTERPARTY LIABILITIES LIABILITIES LIABILITIES INSTRUMENTS PLEDGED AMOUNT
-------------------------------- ------------ ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Written Options
Societe Generale $ 249,174 $ -- $ 249,174 $ 249,174 $ -- $ --
</TABLE>
In some instances, the collateral amounts disclosed in the tables were adjusted
due to the requirement to limit the collateral amounts to avoid the effect of
overcollateralization. Actual collateral received/pledged may be more than the
amounts disclosed herein.
Page 20
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
8. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with the Fund's service providers to
purchase and redeem Fund shares directly with the Fund in large blocks of shares
known as "Creation Units." Prior to the start of trading on every business day,
the Fund publishes through the National Securities Clearing Corporation ("NSCC")
the "basket" of securities, cash or other assets that it will accept in exchange
for a Creation Unit of the Fund's shares. An Authorized Participant that wishes
to effectuate a creation of the Fund's shares deposits with the Fund the
"basket" of securities, cash or other assets identified by the Fund that day,
and then receives the Creation Unit of the Fund's shares in return for those
assets. After purchasing a Creation Unit, the Authorized Participant may
continue to hold the Fund's shares or sell them in the secondary market. The
redemption process is the reverse of the purchase process: the Authorized
Participant redeems a Creation Unit of the Fund's shares for a basket of
securities, cash or other assets. The combination of the creation and redemption
process with secondary market trading in the Fund's shares and underlying
securities provides arbitrage opportunities that are designed to help keep the
market price of the Fund's shares at or close to the NAV per share of the Fund.
The Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of the Fund times the number of shares
in a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
The Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of the Fund times the
number of shares in a Creation Unit, minus the fees described above and, if
applicable, any operational processing and brokerage costs, transfer fees, stamp
taxes and part or all of the spread between the expected bid and offer side of
the market related to the securities comprising the redemption basket. Investors
who use the services of a broker or other such intermediary in addition to an
Authorized Participant to effect a redemption of a Creation Unit may also be
assessed an amount to cover the cost of such services. The redemption fee
charged by the Fund will comply with Rule 22c-2 of the 1940 Act which limits
redemption fees to no more than 2% of the value of the shares redeemed.
9. 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 February 24, 2023.
10. 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.
11. 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 21
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (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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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (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. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a
reference rate over a phase-out period that will begin immediately after
December 31, 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, and they could result in losses
to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. 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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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (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.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Although the funds and the Advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND INVESTMENT
SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust Exchange-Traded Fund IV (the "Trust"),
including the Independent Trustees, approved the Investment Management Agreement
(the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor"), on
behalf of FT Cboe Vest S&P 500(R) Dividend Aristocrats Target Income ETF (the
"Fund"), and the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement"
and together with the Advisory Agreement, the "Agreements") among the Trust, on
behalf of the Fund, the Advisor and Cboe Vest(SM) Financial LLC (the
"Sub-Advisor"), for an initial two-year term at a meeting held on October 19,
2020. The Board determined that the Agreements are in the best interests of the
Fund in light of the nature, extent and quality of the services expected to be
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements for
the Fund, the Independent Trustees received a separate report from each of the
Advisor and the Sub-Advisor in advance of the Board meeting responding to
requests for information from counsel to the Independent Trustees, submitted on
behalf of the Independent Trustees, that, among other things, outlined: the
services to be provided by the Advisor and the Sub-Advisor to the Fund
(including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate payable by the Fund as compared to
fees charged to a peer group of funds (the "Expense Group") and a broad peer
universe of funds (the "Expense Universe"), each assembled by Broadridge
Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared
to fees charged to other clients of the Advisor, including other exchange-traded
funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rate as
compared to fees charged to other clients of the Sub-Advisor; the estimated
expense ratio of the Fund as compared to expense ratios of the funds in the
Fund's Expense Group and Expense Universe; the nature of expenses to be incurred
in providing services to the Fund and the potential for the Advisor and the
Sub-Advisor to realize economies of scale, if any; profitability and other
financial data for the Advisor; financial data for the Sub-Advisor; any fall-out
benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP")
and First Trust Capital Partners, LLC ("FTCP"), and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs. The
Independent Trustees and their counsel also met separately to discuss the
information provided by the Advisor and the Sub-Advisor. The Board applied its
business judgment to determine whether the arrangements between the Trust and
the Advisor and among the Trust, the Advisor and the Sub-Advisor are reasonable
business arrangements from the Fund's perspective.
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
In evaluating whether to approve the Agreements for the Fund, the Board
considered the nature, extent and quality of the services to be provided by the
Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory
Agreement, the Board considered that the Advisor will be responsible for the
overall management and administration of the Fund and reviewed all of the
services to be provided by the Advisor to the Fund, including the oversight of
the Sub-Advisor, as well as the background and experience of the persons
responsible for such services. The Board considered that the Fund will use a
passive index-tracking approach for the long-only equity portion of its
portfolio, while employing a covered call strategy with discretion in
implementation. The Board also noted that the Fund will employ an
advisor/sub-advisor management structure and considered that the Advisor manages
other ETFs with a similar structure in the First Trust Fund Complex. The Board
noted that the Advisor will oversee the Sub-Advisor's day-to-day management of
the Fund's investments, including portfolio risk monitoring and performance
review. In reviewing the services to be provided, the Board noted the compliance
program that had been developed by the Advisor and considered that it includes a
robust program for monitoring the Advisor's, the Sub-Advisor's and the Fund's
compliance with the 1940 Act, as well as the Fund's compliance with its
investment objective, policies and restrictions. The Board noted that employees
of the Advisor provide management services to other ETFs and to other funds in
the First Trust Fund Complex with diligence and care. With respect to the
Sub-Advisory Agreement, in addition to the materials provided by the
Sub-Advisor, at the October 19, 2020 meeting, the Board also received a
presentation from representatives of the Sub-Advisor discussing the services
that the Sub-Advisor will provide to the Fund, and the Trustees were able to ask
questions about the proposed investment strategy for the Fund. The Board
considered that the Fund was being proposed in connection with a reorganization
transaction, pursuant to which the Fund would acquire the assets of an existing
ETF advised by the Sub-Advisor with the same investment objective, strategies
and policies and portfolio management team as proposed for the Fund (the
"Predecessor Fund"). The Board noted the background and experience of the
Sub-Advisor's portfolio management team and the Sub-Advisor's investment style
and that the Sub-Advisor manages other funds in the First Trust Fund Complex.
The Board considered the historical investment performance of the Predecessor
Fund, noting that the Fund would adopt the performance of the Predecessor Fund
as a result of the reorganization transaction. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services to be provided to the Fund by the Advisor and
the Sub-Advisor under the Agreements are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by the Fund under the
Advisory Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal
to an annual rate of 0.75% of its average daily net assets. The Board considered
that, from the unitary fee for the Fund, the Advisor would pay the Sub-Advisor a
sub-advisory fee equal to an annual rate of 0.20% of the Fund's average daily
net assets. The Board noted that the Advisor would be responsible for the Fund's
expenses, including the cost of sub-advisory, transfer agency, custody, fund
administration, legal, audit and other services and license fees, if any, but
excluding the fee payment under the Advisory Agreement and interest, taxes,
acquired fund fees and expenses, if any, brokerage commissions and other
expenses connected with the execution of portfolio transactions, distribution
and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary
expenses, if any. The Board received and reviewed information showing the
advisory or unitary fee rates and expense ratios of the peer funds in the
Expense Group, as well as advisory and unitary fee rates charged by the Advisor
and the Sub-Advisor to other fund (including ETF) and non-fund clients, as
applicable. Because the Fund will pay a unitary fee, the Board determined that
expense ratios were the most relevant comparative data point. Based on the
information provided, the Board noted that the unitary fee rate for the Fund was
equal to the median total (net) expense ratio of the peer funds in the Expense
Group. With respect to the Expense Group, the Board discussed with
representatives of the Advisor how the Expense Group was assembled and how the
Fund compared and differed from the peer funds. The Board took this information
into account in considering the peer data. With respect to fees charged to other
clients, the Board considered the Advisor's statement that, although the Fund
will be unique in the ETF market, it is most similar to two actively-managed
ETFs in the First Trust Fund Complex that employ options-based strategies and
pay unitary fees equal to an annual rate of 0.85% of their respective average
daily net assets. The Board considered the Advisor's statement that it believes
the Fund warrants a lower unitary fee than the two similar ETFs given its
passive index-tracking approach for the long-only equity portion of its
portfolio. In light of the information considered and the nature, extent and
quality of the services expected to be provided to the Fund under the
Agreements, the Board determined that the proposed unitary fee, including the
sub-advisory fee to be paid by the Advisor to the Sub-Advisor from the unitary
fee, was fair and reasonable.
The Board noted that the proposed unitary fee for the Fund was not structured to
pass on to shareholders the benefits of any economies of scale as the Fund's
assets grow. The Board noted that any reduction in fixed costs associated with
the management of the Fund would benefit the Advisor and the Sub-Advisor, but
that the unitary fee structure provides a level of certainty in expenses for the
Fund. The Board noted that the Advisor has continued to hire personnel and build
infrastructure, including technology, to improve the services to the funds in
the First Trust Fund Complex. The Board took into consideration the types of
costs to be borne by the Advisor in connection with its services to be performed
for the Fund under the Advisory Agreement. The Board considered the Advisor's
estimate of the asset level for the Fund at which the Advisor expects the
Advisory Agreement to be profitable to the Advisor, noting that the assets to be
acquired by the Fund from the Predecessor Fund currently exceed that level, and
the Advisor's estimate of the profitability of the Advisory Agreement if the
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FT CBOE VEST S&P 500(R) DIVIDEND ARISTOCRATS TARGET INCOME ETF(R) (KNG)
APRIL 30, 2021 (UNAUDITED)
Fund's assets reach $100 million. The Board noted the inherent limitations in
the profitability analysis and concluded that, based on the information
provided, the Advisor's estimated profitability level for the Fund was not
unreasonable. The Board reviewed financial information provided by the
Sub-Advisor, but did not review any potential profitability of the Sub-Advisory
Agreement to the Sub-Advisor. The Board considered that the Sub-Advisor would be
paid by the Advisor from the Fund's unitary fee and its understanding that the
sub-advisory fee rate was the product of an arm's length negotiation. In
addition, the Board considered fall-out benefits described by the Advisor that
may be realized from its relationship with the Fund. The Board noted that FTCP
has a controlling ownership interest in the Sub-Advisor's parent company and
considered potential fall-out benefits to the Advisor from such ownership
interest. The Board also considered that the Advisor had identified as a
fall-out benefit to the Advisor and FTP their exposure to investors and brokers
who, absent their exposure to the Fund, may have had no dealings with the
Advisor or FTP. The Board also noted that the Advisor may execute trades for the
Fund and will not utilize soft dollars in connection with the Fund. The Board
also considered the potential fall-out benefits to the Sub-Advisor from FTCP's
controlling ownership interest in the Sub-Advisor's parent company. The Board
noted the Sub-Advisor's statements that it does not foresee any fall-out
benefits from its relationship with the Fund and that, as a policy, it does not
enter into soft-dollar arrangements for the procurement of research services in
connection with client securities transactions. The Board concluded that the
character and amount of potential fall-out benefits to the Advisor and the
Sub-Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreements are fair and reasonable and that the approval of the Agreements is in
the best interests of the Fund. No single factor was determinative in the
Board's analysis.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 26, 2021 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 20, 2020 through the Liquidity Committee's annual meeting held
on March 16, 2021 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted a
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
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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
INVESTMENT SUB-ADVISOR
Cboe VestSM Financial LLC
1765 Greensboro Station Pl, 9th Floor
McLean, VA 22102
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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<PAGE>
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 reports to shareholders filed under Item 1 of this form. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | | The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)). |
| (b) | | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Item 13. Exhibits.
| (a)(2) | | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (b) | | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (registrant) | | First Trust Exchange-Traded Fund IV |
| By (Signature and Title)* | | /s/ James M. Dykas |
| | | James M. Dykas, President and Chief Executive Officer
(principal executive officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* | | /s/ James M. Dykas |
| | | James M. Dykas, President and Chief Executive Officer
(principal executive officer) |
| By (Signature and Title)* | | /s/ Donald P. Swade |
| | | Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer) |
* Print the name and title of each signing officer under his or her signature.
