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 811-22767
First Trust Exchange-Traded Fund VII
(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: December 31
Date of reporting period: December 31, 2023
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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders.
(a) The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Annual Report |
For the Year Ended December 31, 2023 |
First Trust Global Tactical Commodity Strategy Fund (FTGC) |
Annual Report
December 31, 2023
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Annual Letter from the Chairman and CEO
December 31, 2023
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Performance | |||||||
Average Annual Total Returns | Cumulative Total Returns | ||||||
1 Year Ended 12/31/23 | 5 Years Ended 12/31/23 | 10 Years Ended 12/31/23 | Inception (10/21/13) to 12/31/23 | 5 Years Ended 12/31/23 | 10 Years Ended 12/31/23 | Inception (10/21/13) to 12/31/23 | |
Fund Performance | |||||||
NAV | -5.01% | 9.09% | -0.53% | -0.59% | 54.50% | -5.13% | -5.83% |
Market Price | -5.21% | 9.04% | -0.54% | -0.60% | 54.17% | -5.29% | -5.92% |
Index Performance | |||||||
Bloomberg Commodity Index | -7.91% | 7.23% | -1.11% | -1.27% | 41.77% | -10.57% | -12.20% |
S&P GSCI® Total Return Index | -4.27% | 8.72% | -3.60% | -3.58% | 51.88% | -30.71% | -31.04% |
S&P 500® Index | 26.29% | 15.69% | 12.03% | 12.41% | 107.21% | 211.49% | 229.54% |
Fund Allocation | % of Net Assets |
U.S. Government Bonds and Notes | 45.4% |
U.S. Treasury Bills | 6.2 |
Money Market Funds | 39.9 |
Net Other Assets and Liabilities* | 8.5 |
Total | 100.0% |
* | Includes variation margin on futures contracts. |
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. |
Rob A. Guttschow – CFA, Senior Portfolio Manager, Alternatives Investment Team of First Trust
Beginning Account Value July 1, 2023 | Ending Account Value December 31, 2023 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period (a) | |
First Trust Global Tactical Commodity Strategy Fund (FTGC) | ||||
Actual | $1,000.00 | $1,001.30 | 0.95% | $4.79 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.42 | 0.95% | $4.84 |
(a) | Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2023 through December 31, 2023), multiplied by 184/365 (to reflect the six-month period). |
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
U.S. GOVERNMENT BONDS AND NOTES — 45.4% | |||||
$150,000,000 | U.S. Treasury Note | 0.25% | 06/15/24 | $146,727,841 | |
150,000,000 | U.S. Treasury Note | 0.38% | 09/15/24 | 145,270,589 | |
175,000,000 | U.S. Treasury Note | 1.00% | 12/15/24 | 168,766,605 | |
170,000,000 | U.S. Treasury Note | 0.50% | 03/31/25 | 161,662,695 | |
150,000,000 | U.S. Treasury Note | 0.25% | 06/30/25 | 140,912,109 | |
185,000,000 | U.S. Treasury Note | 0.25% | 09/30/25 | 172,313,769 | |
170,000,000 | U.S. Treasury Note | 0.38% | 11/30/25 | 157,890,820 | |
Total U.S. Government Bonds and Notes | 1,093,544,428 | ||||
(Cost $1,088,606,381) | |||||
U.S. TREASURY BILLS — 6.2% | |||||
150,000,000 | U.S. Treasury Bill | (a) | 03/12/24 | 148,485,375 | |
(Cost $148,454,419) |
Shares | Description | Value | |||
MONEY MARKET FUNDS — 39.9% | |||||
479,489,436 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.25% (b) | 479,489,436 | |||
479,489,436 | Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 5.22% (b) | 479,489,436 | |||
Total Money Market Funds | 958,978,872 | ||||
(Cost $958,978,872) | |||||
Total Investments — 91.5% | 2,201,008,675 | ||||
(Cost $2,196,039,672) | |||||
Net Other Assets and Liabilities — 8.5% | 204,032,084 | ||||
Net Assets — 100.0% | $2,405,040,759 |
Futures Contracts | Position | Number of Contracts | Expiration Date | Notional Value | Unrealized Appreciation (Depreciation)/ Value |
Brent Crude Oil Futures | Long | 363 | Jan-2024 | $27,965,520 | $(3,150,534 ) |
Brent Crude Oil Futures | Long | 399 | Feb-2024 | 30,687,090 | (1,550,298 ) |
Cocoa Futures | Long | 2,293 | Mar-2024 | 96,214,280 | 360,909 |
Coffee “C” Futures | Long | 2,017 | Mar-2024 | 142,425,413 | 11,886,889 |
Copper Futures | Long | 1,330 | Mar-2024 | 129,359,125 | 5,927,951 |
Corn Futures | Long | 2,596 | Mar-2024 | 61,168,250 | (2,431,930 ) |
Cotton No. 2 Futures | Long | 1,313 | Mar-2024 | 53,176,500 | (1,280,280 ) |
Gasoline RBOB Futures | Long | 1,772 | Jan-2024 | 156,759,271 | 946,633 |
Gold 100 Oz. Futures | Long | 1,101 | Feb-2024 | 228,105,180 | 9,030,694 |
Kansas City Hard Red Winter Wheat Futures | Long | 1,757 | Mar-2024 | 56,399,700 | (402,694 ) |
Lean Hogs Futures | Long | 701 | Feb-2024 | 19,060,190 | (2,012,820 ) |
Live Cattle Futures | Long | 633 | Feb-2024 | 42,664,200 | (1,986,097 ) |
LME Aluminum Futures | Long | 1,249 | Mar-2024 | 74,346,725 | 4,612,778 |
LME Lead Futures | Long | 486 | Mar-2024 | 25,180,875 | (1,299,169 ) |
LME Nickel Futures | Long | 560 | Mar-2024 | 55,752,480 | 102,795 |
LME Zinc Futures | Long | 602 | Mar-2024 | 40,085,675 | 1,981,453 |
Low Sulphur Gasoil “G” Futures | Long | 976 | Feb-2024 | 72,443,600 | (3,096,474 ) |
Low Sulphur Gasoil “G” Futures | Long | 760 | Mar-2024 | 55,841,000 | (3,364,926 ) |
Futures Contracts | Position | Number of Contracts | Expiration Date | Notional Value | Unrealized Appreciation (Depreciation)/ Value |
Natural Gas Futures | Long | 3,742 | Jan-2024 | $94,073,880 | $(6,922,210 ) |
NY Harbor ULSD Futures | Long | 723 | Jan-2024 | 76,792,577 | (6,552,384 ) |
NY Harbor ULSD Futures | Long | 731 | Feb-2024 | 76,607,630 | (3,960,434 ) |
Silver Futures | Long | 684 | Mar-2024 | 82,374,120 | 1,216,289 |
Soybean Futures | Long | 1,562 | Mar-2024 | 101,373,800 | (2,853,708 ) |
Soybean Meal Futures | Long | 2,650 | Mar-2024 | 102,290,000 | (6,792,064 ) |
Soybean Meal Futures | Long | 1,744 | May-2024 | 67,109,120 | (3,263,054 ) |
Soybean Oil Futures | Long | 897 | Mar-2024 | 25,930,476 | (1,162,699 ) |
Soybean Oil Futures | Long | 1,450 | May-2024 | 42,255,900 | (2,390,695 ) |
Soybean Oil Futures | Long | 555 | Jul-2024 | 16,267,050 | (508,732 ) |
Sugar #11 (World) Futures | Long | 5,608 | Feb-2024 | 129,262,157 | (28,358,899 ) |
Wheat Futures | Long | 2,031 | Mar-2024 | 63,773,400 | 1,672,948 |
WTI Crude Futures | Long | 221 | Jan-2024 | 15,834,650 | (1,167,883 ) |
WTI Crude Futures | Long | 438 | Feb-2024 | 31,465,920 | (4,228,364 ) |
$2,293,045,754 | $(50,997,009 ) |
(a) | Zero coupon security. |
(b) | Rate shown reflects yield as of December 31, 2023. |
Valuation Inputs
ASSETS TABLE | ||||
Total Value at 12/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
U.S. Government Bonds and Notes | $1,093,544,428 | $— | $1,093,544,428 | $— |
U.S. Treasury Bills | 148,485,375 | — | 148,485,375 | — |
Money Market Funds | 958,978,872 | 958,978,872 | — | — |
Total Investments | 2,201,008,675 | 958,978,872 | 1,242,029,803 | — |
Futures Contracts* | 39,599,045 | 39,599,045 | — | — |
Total | $2,240,607,720 | $998,577,917 | $1,242,029,803 | $— |
LIABILITIES TABLE | ||||
Total Value at 12/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Futures Contracts* | $(90,596,054 ) | $(90,596,054 ) | $— | $— |
* | 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 Consolidated Statement of Assets and Liabilities. |
ASSETS: | |
Investments, at value | $2,201,008,675 |
Cash segregated as collateral for open futures contracts | 245,060,108 |
Receivables: | |
Dividends | 4,664,230 |
Interest | 843,370 |
Capital shares sold | 4,718 |
Total Assets | 2,451,581,101 |
LIABILITIES: | |
Payables: | |
Variation margin | 28,754,512 |
Capital shares redeemed | 15,726,601 |
Investment advisory fees | 2,059,229 |
Total Liabilities | 46,540,342 |
NET ASSETS | $2,405,040,759 |
NET ASSETS consist of: | |
Paid-in capital | $2,494,654,567 |
Par value | 1,070,533 |
Accumulated distributable earnings (loss) | (90,684,341 ) |
NET ASSETS | $2,405,040,759 |
NET ASSET VALUE, per share | $22.47 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 107,053,334 |
Investments, at cost | $2,196,039,672 |
INVESTMENT INCOME: | |
Interest | $77,411,559 |
Dividends | 57,757,542 |
Total investment income | 135,169,101 |
EXPENSES: | |
Investment advisory fees | 26,968,057 |
Total expenses | 26,968,057 |
NET INVESTMENT INCOME (LOSS) | 108,201,044 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
Investments | (60,457 ) |
Futures contracts | (164,480,805 ) |
Net realized gain (loss) | (164,541,262 ) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | 4,578,787 |
Futures contracts | (122,109,271 ) |
Net change in unrealized appreciation (depreciation) | (117,530,484 ) |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (282,071,746 ) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(173,870,702 ) |
Year Ended 12/31/2023 | Year Ended 12/31/2022 | |
OPERATIONS: | ||
Net investment income (loss) | $108,201,044 | $19,079,378 |
Net realized gain (loss) | (164,541,262 ) | 198,246,266 |
Net change in unrealized appreciation (depreciation) | (117,530,484 ) | 45,214,928 |
Net increase (decrease) in net assets resulting from operations | (173,870,702 ) | 262,540,572 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||
Investment operations | (86,724,096 ) | (355,942,657 ) |
SHAREHOLDER TRANSACTIONS: | ||
Proceeds from shares sold | 430,212,741 | 2,714,257,172 |
Cost of shares redeemed | (1,140,520,073 ) | (1,224,296,838 ) |
Net increase (decrease) in net assets resulting from shareholder transactions | (710,307,332 ) | 1,489,960,334 |
Total increase (decrease) in net assets | (970,902,130 ) | 1,396,558,249 |
NET ASSETS: | ||
Beginning of period | 3,375,942,889 | 1,979,384,640 |
End of period | $2,405,040,759 | $3,375,942,889 |
CHANGES IN SHARES OUTSTANDING: | ||
Shares outstanding, beginning of period | 138,203,334 | 86,003,334 |
Shares sold | 18,200,000 | 98,950,000 |
Shares redeemed | (49,350,000 ) | (46,750,000 ) |
Shares outstanding, end of period | 107,053,334 | 138,203,334 |
Year Ended December 31, | |||||
2023 | 2022 | 2021 | 2020 | 2019 | |
Net asset value, beginning of period | $24.43 | $23.02 | $19.27 | $18.94 | $17.92 |
Income from investment operations: | |||||
Net investment income (loss) | 0.90 (a) | 0.13 (a) | (0.22 ) (a) | (0.14 ) | 0.26 |
Net realized and unrealized gain (loss) | (2.11 ) | 3.82 | 5.63 | 0.47 | 0.91 |
Total from investment operations | (1.21 ) | 3.95 | 5.41 | 0.33 | 1.17 |
Distributions paid to shareholders from: | |||||
Net investment income | (0.75 ) | (2.54 ) | (1.66 ) | — | (0.15 ) |
Net asset value, end of period | $22.47 | $24.43 | $23.02 | $19.27 | $18.94 |
Total return (b) | (5.01 )% | 17.14 % | 28.09 % | 1.74 % | 6.55 % |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $2,405,041 | $3,375,943 | $1,979,385 | $238,039 | $163,876 |
Ratio of total expenses to average net assets | 0.95 % | 0.95 % | 0.95 % | 0.95 % | 0.95 % |
Ratio of net investment income (loss) to average net assets | 3.80 % | 0.48 % | (0.94 )% | (0.54 )% | 1.13 % |
Portfolio turnover rate (c) | 0 % | 0 % | 0 % | 0 % | 0 % |
(a) | Based on average shares outstanding. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
(c) | Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions, derivatives and in-kind transactions. |
Distributions paid from: | 2023 | 2022 |
Ordinary income | $86,724,096 | $355,942,657 |
Capital gains | — | — |
Return of capital | — | — |
Undistributed ordinary income | $2,028,055 |
Accumulated capital and other gain (loss) | (22,709,770 ) |
Net unrealized appreciation (depreciation) | (23,378,693 ) |
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) | Paid-In Capital |
$(557,016 ) | $164,480,805 | $(163,923,789 ) |
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) |
$2,173,390,359 | $42,708,342 | $(66,087,035 ) | $(23,378,693 ) |
Breakpoints | |
Fund net assets up to and including $2.5 billion | 0.95000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.92625 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.90250 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.87875 % |
Fund net assets greater than $10 billion | 0.85500 % |
Asset Derivatives | Liability Derivatives | ||||
Derivative Instrument | Risk Exposure | Consolidated Statement of Assets and Liabilities Location | Value | Consolidated Statement of Assets and Liabilities Location | Value |
Futures contracts | Commodity Risk | Unrealized appreciation on futures contracts* | $37,739,339 | Unrealized depreciation on futures contracts* | $88,736,348 |
* | Includes cumulative appreciation/depreciation on futures contracts as reported in the Fund’s Consolidated Portfolio of Investments. Only the current day’s variation margin is presented on the Consolidated Statement of Assets and Liabilities. |
Consolidated Statement of Operations Location | |
Commodity Risk Exposure | |
Net realized gain (loss) on futures contracts | $(164,480,805 ) |
Net change in unrealized appreciation (depreciation) on futures contracts | (122,109,271 ) |
February 23, 2024
Dividend Received Deduction | Qualified Dividend Income |
0.00 % | 0.00 % |
Name, Year of Birth and Position with the Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Indefinite Term • Since Inception | Retired; Physician, Edward-Elmhurst Medical Group (2021 to September 2023); Physician and Officer, Wheaton Orthopedics (1990 to 2021) | 257 | None |
Thomas R. Kadlec, Trustee (1957) | • Indefinite Term • Since Inception | Retired; President, ADM Investors Services, Inc. (Futures Commission Merchant) (2010 to July 2022) | 257 | Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association |
Denise M. Keefe, Trustee (1964) | • Indefinite Term • Since 2021 | Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System) | 257 | Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director of RML Long Term Acute Care Hospitals; Director of Senior Helpers (since 2021); and Director of MobileHelp (since 2022) |
Robert F. Keith, Trustee (1956) | • Indefinite Term • Since Inception | President, Hibs Enterprises (Financial and Management Consulting) | 257 | Formerly, Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Indefinite Term • Since Inception | Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 257 | None |
Bronwyn Wright, Trustee (1971) | • Indefinite Term • Since 2023 | Independent Director to a number of Irish collective investment funds (2009 to Present); Various roles at international affiliates of Citibank (1994 to 2009), including Managing Director, Citibank Europe plc and Head of Securities and Fund Services, Citi Ireland (2007 to 2009) | 233 | None |
Name, Year of Birth and Position with the Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INTERESTED TRUSTEE | ||||
James A. Bowen(1), Trustee, Chairman of the Board (1955) | • Indefinite Term • Since Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 257 | None |
Name and Year of Birth | Position and Offices with Trust | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(2) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since 2016 | Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Derek D. Maltbie (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since 2023 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., July 2021 to Present. Previously, Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., 2014 - 2021. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since Inception | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term • Since Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Roger F. Testin (1966) | Vice President | • Indefinite Term • Since Inception | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Stan Ueland (1970) | Vice President | • Indefinite Term • Since Inception | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
FUND ACCOUNTANT &
TRANSFER AGENT
240 Greenwich Street
New York, NY 10286
PUBLIC ACCOUNTING FIRM
111 South Wacker Drive
Chicago, IL 60606
320 South Canal Street
Chicago, IL 60606
Annual Report |
For the Year Ended December 31, 2023 |
First Trust Alternative Absolute Return Strategy ETF (FAAR) |
Annual Report
December 31, 2023
1 | |
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4 | |
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7 | |
9 | |
10 | |
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12 | |
13 | |
20 | |
21 | |
26 | |
28 |
Annual Letter from the Chairman and CEO
December 31, 2023
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Performance | |||||
Average Annual Total Returns | Cumulative Total Returns | ||||
1 Year Ended 12/31/23 | 5 Years Ended 12/31/23 | Inception (5/18/16) to 12/31/23 | 5 Years Ended 12/31/23 | Inception (5/18/16) to 12/31/23 | |
Fund Performance | |||||
NAV | -5.79% | 4.51% | 1.71% | 24.69% | 13.82% |
Market Price | -5.85% | 4.47% | 1.71% | 24.44% | 13.80% |
Index Performance | |||||
3 Month U.S. Treasury Bills + 3% | 8.20% | 4.98% | 4.71% | 27.50% | 42.06% |
Bloomberg Commodity Index | -7.91% | 7.23% | 3.65% | 41.77% | 31.43% |
S&P 500® Index | 26.29% | 15.69% | 13.77% | 107.21% | 167.40% |
Fund Allocation | % of Net Assets |
U.S. Government Bonds and Notes | 51.6% |
U.S. Treasury Bills | 7.6 |
Money Market Funds | 34.5 |
Net Other Assets and Liabilities* | 6.3 |
Total | 100.0% |
* | Includes variation margin on futures contracts. |
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. |
Rob A. Guttschow – CFA, Senior Portfolio Manager, Alternatives Investment Team of First Trust
Beginning Account Value July 1, 2023 | Ending Account Value December 31, 2023 | Annualized Expense Ratio Based on the Six-Month Period | Expenses Paid During the Six-Month Period (a) | |
First Trust Alternative Absolute Return Strategy ETF (FAAR) | ||||
Actual | $1,000.00 | $984.30 | 0.95% | $4.75 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.42 | 0.95% | $4.84 |
(a) | Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2023 through December 31, 2023), multiplied by 184/365 (to reflect the six-month period). |
Principal Value | Description | Stated Coupon | Stated Maturity | Value | |
U.S. GOVERNMENT BONDS AND NOTES — 51.6% | |||||
$12,000,000 | U.S. Treasury Note | 0.25% | 06/15/24 | $11,738,227 | |
12,000,000 | U.S. Treasury Note | 0.38% | 09/15/24 | 11,621,647 | |
12,000,000 | U.S. Treasury Note | 1.00% | 12/15/24 | 11,572,567 | |
12,000,000 | U.S. Treasury Note | 0.50% | 03/31/25 | 11,411,485 | |
12,000,000 | U.S. Treasury Note | 0.25% | 06/30/25 | 11,272,969 | |
13,000,000 | U.S. Treasury Note | 0.25% | 09/30/25 | 12,108,535 | |
12,000,000 | U.S. Treasury Note | 0.38% | 11/30/25 | 11,145,234 | |
Total U.S. Government Bonds and Notes | 80,870,664 | ||||
(Cost $80,478,944) | |||||
U.S. TREASURY BILLS — 7.6% | |||||
12,000,000 | U.S. Treasury Bill | (a) | 03/12/24 | 11,878,830 | |
(Cost $11,876,354) |
Shares | Description | Value | |||
MONEY MARKET FUNDS — 34.5% | |||||
27,094,886 | Dreyfus Government Cash Management Fund, Institutional Shares - 5.25% (b) | 27,094,886 | |||
27,094,886 | Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 5.22% (b) | 27,094,886 | |||
Total Money Market Funds | 54,189,772 | ||||
(Cost $54,189,772) | |||||
Total Investments — 93.7% | 146,939,266 | ||||
(Cost $146,545,070) | |||||
Net Other Assets and Liabilities — 6.3% | 9,928,978 | ||||
Net Assets — 100.0% | $156,868,244 |
Futures Contracts | Position | Number of Contracts | Expiration Date | Notional Value | Unrealized Appreciation (Depreciation)/ Value |
Cocoa Futures | Long | 67 | Mar-2024 | $2,811,320 | $96,389 |
Coffee “C” Futures | Long | 40 | Mar-2024 | 2,824,500 | 22,116 |
Gasoline RBOB Futures | Long | 59 | Jan-2024 | 5,219,411 | 28,332 |
Gold 100 Oz. Futures | Long | 15 | Feb-2024 | 3,107,700 | 96,014 |
Live Cattle Futures | Long | 50 | Feb-2024 | 3,370,000 | (154,358 ) |
LME Lead Futures | Long | 12 | Mar-2024 | 621,750 | (27,900 ) |
Low Sulphur Gasoil “G” Futures | Long | 130 | Feb-2024 | 9,649,250 | (220,673 ) |
NY Harbor ULSD Futures | Long | 60 | Jan-2024 | 6,372,828 | (285,245 ) |
Soybean Meal Futures | Long | 199 | Mar-2024 | 7,681,400 | (285,117 ) |
Brent Crude Oil Futures | Short | 25 | Jan-2024 | (1,926,000 ) | 69,892 |
Cattle Feeder Futures | Short | 35 | Mar-2024 | (3,904,250 ) | 17,388 |
Copper Futures | Short | 8 | Mar-2024 | (778,100 ) | (22,400 ) |
Corn Futures | Short | 568 | Mar-2024 | (13,383,500 ) | 275,697 |
Cotton No. 2 Futures | Short | 210 | Mar-2024 | (8,505,000 ) | (91,694 ) |
Kansas City Hard Red Winter Wheat Futures | Short | 133 | Mar-2024 | (4,269,300 ) | (12,940 ) |
Lean Hogs Futures | Short | 128 | Feb-2024 | (3,480,320 ) | (29,300 ) |
LME Aluminium Futures | Short | 137 | Mar-2024 | (8,154,925 ) | (556,098 ) |
LME Nickel Futures | Short | 28 | Mar-2024 | (2,787,624 ) | (67,812 ) |
Futures Contracts | Position | Number of Contracts | Expiration Date | Notional Value | Unrealized Appreciation (Depreciation)/ Value |
LME Zinc Futures | Short | 38 | Mar-2024 | $(2,530,325 ) | $(161,630 ) |
Natural Gas Futures | Short | 298 | Jan-2024 | (7,491,720 ) | (264,680 ) |
Silver Futures | Short | 55 | Mar-2024 | (6,623,650 ) | 42,563 |
Soybean Futures | Short | 23 | Mar-2024 | (1,492,700 ) | 25,763 |
Soybean Oil Futures | Short | 17 | Mar-2024 | (491,436 ) | (78 ) |
Sugar #11 (World) Futures | Short | 159 | Feb-2024 | (3,664,886 ) | 85,543 |
Wheat Futures | Short | 344 | Mar-2024 | (10,801,600 ) | (365,381 ) |
WTI Crude Futures | Short | 151 | Jan-2024 | (10,819,150 ) | 260,461 |
$(49,446,327 ) | $(1,525,148 ) |
(a) | Zero coupon security. |
(b) | Rate shown reflects yield as of December 31, 2023. |
Valuation Inputs
ASSETS TABLE | ||||
Total Value at 12/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
U.S. Government Bonds and Notes | $80,870,664 | $— | $80,870,664 | $— |
U.S. Treasury Bills | 11,878,830 | — | 11,878,830 | — |
Money Market Funds | 54,189,772 | 54,189,772 | — | — |
Total Investments | 146,939,266 | 54,189,772 | 92,749,494 | — |
Futures Contracts* | 1,020,158 | 1,020,158 | — | — |
Total | $147,959,424 | $55,209,930 | $92,749,494 | $— |
LIABILITIES TABLE | ||||
Total Value at 12/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Futures Contracts* | $(2,545,306 ) | $(2,545,306 ) | $— | $— |
* | 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 Consolidated Statement of Assets and Liabilities. |
ASSETS: | |
Investments, at value | $146,939,266 |
Cash segregated as collateral for open futures contracts | 8,314,160 |
Receivables: | |
Capital shares sold | 1,364,517 |
Dividends | 259,565 |
Interest | 62,840 |
Variation margin | 55,745 |
Total Assets | 156,996,093 |
LIABILITIES: | |
Investment advisory fees payable | 127,849 |
Total Liabilities | 127,849 |
NET ASSETS | $156,868,244 |
NET ASSETS consist of: | |
Paid-in capital | $160,041,709 |
Par value | 57,500 |
Accumulated distributable earnings (loss) | (3,230,965 ) |
NET ASSETS | $156,868,244 |
NET ASSET VALUE, per share | $27.28 |
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share) | 5,750,002 |
Investments, at cost | $146,545,070 |
INVESTMENT INCOME: | |
Interest | $5,434,101 |
Dividends | 3,162,454 |
Total investment income | 8,596,555 |
EXPENSES: | |
Investment advisory fees | 1,734,233 |
Total expenses | 1,734,233 |
NET INVESTMENT INCOME (LOSS) | 6,862,322 |
NET REALIZED AND UNREALIZED GAIN (LOSS): | |
Net realized gain (loss) on: | |
Investments | (14,968 ) |
Futures contracts | (12,629,467 ) |
Net realized gain (loss) | (12,644,435 ) |
Net change in unrealized appreciation (depreciation) on: | |
Investments | 371,477 |
Futures contracts | (5,147,049 ) |
Net change in unrealized appreciation (depreciation) | (4,775,572 ) |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (17,420,007 ) |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(10,557,685 ) |
Year Ended 12/31/2023 | Year Ended 12/31/2022 | |
OPERATIONS: | ||
Net investment income (loss) | $6,862,322 | $1,091,223 |
Net realized gain (loss) | (12,644,435 ) | 5,370,123 |
Net change in unrealized appreciation (depreciation) | (4,775,572 ) | 3,444,705 |
Net increase (decrease) in net assets resulting from operations | (10,557,685 ) | 9,906,051 |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||
Investment operations | (5,353,372 ) | (11,734,498 ) |
SHAREHOLDER TRANSACTIONS: | ||
Proceeds from shares sold | 5,798,426 | 104,591,601 |
Cost of shares redeemed | (40,573,915 ) | (12,976,045 ) |
Net increase (decrease) in net assets resulting from shareholder transactions | (34,775,489 ) | 91,615,556 |
Total increase (decrease) in net assets | (50,686,546 ) | 89,787,109 |
NET ASSETS: | ||
Beginning of period | 207,554,790 | 117,767,681 |
End of period | $156,868,244 | $207,554,790 |
CHANGES IN SHARES OUTSTANDING: | ||
Shares outstanding, beginning of period | 6,950,002 | 4,100,002 |
Shares sold | 200,000 | 3,250,000 |
Shares redeemed | (1,400,000 ) | (400,000 ) |
Shares outstanding, end of period | 5,750,002 | 6,950,002 |
Year Ended December 31, | |||||
2023 | 2022 | 2021 | 2020 | 2019 | |
Net asset value, beginning of period | $29.86 | $28.72 | $26.95 | $25.88 | $26.48 |
Income from investment operations: | |||||
Net investment income (loss) | 1.09 (a) | 0.20 (a) | (0.28 ) (a) | (0.18 ) (a) | 0.36 |
Net realized and unrealized gain (loss) | (2.80 ) | 2.68 | 3.92 | 2.08 | (0.70 ) |
Total from investment operations | (1.71 ) | 2.88 | 3.64 | 1.90 | (0.34 ) |
Distributions paid to shareholders from: | |||||
Net investment income | (0.87 ) | (1.74 ) | (1.87 ) | (0.83 ) | (0.26 ) |
Net asset value, end of period | $27.28 | $29.86 | $28.72 | $26.95 | $25.88 |
Total return (b) | (5.79 )% | 10.02 % | 13.49 % | 7.35 % | (1.27 )% |
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s) | $156,868 | $207,555 | $117,768 | $59,298 | $25,879 |
Ratio of total expenses to average net assets | 0.95 % | 0.95 % | 0.95 % | 0.95 % | 0.95 % |
Ratio of net investment income (loss) to average net assets | 3.76 % | 0.61 % | (0.95 )% | (0.68 )% | 0.88 % |
Portfolio turnover rate (c) | 0 % | 0 % | 0 % | 0 % | 0 % |
(a) | Based on average shares outstanding. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
(c) | Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions, derivatives and in-kind transactions. |
Distributions paid from: | 2023 | 2022 |
Ordinary income | $5,353,372 | $11,734,498 |
Capital gains | — | — |
Return of capital | — | — |
Undistributed ordinary income | $119,634 |
Accumulated capital and other gain (loss) | 1,483,575 |
Net unrealized appreciation (depreciation) | (2,621,030 ) |
Accumulated Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) | Paid-In Capital |
$(2,796,881 ) | $12,637,932 | $(9,841,051 ) |
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) |
$148,035,148 | $1,320,036 | $(3,941,066 ) | $(2,621,030 ) |
Breakpoints | |
Fund net assets up to and including $2.5 billion | 0.95000 % |
Fund net assets greater than $2.5 billion up to and including $5 billion | 0.92625 % |
Fund net assets greater than $5 billion up to and including $7.5 billion | 0.90250 % |
Fund net assets greater than $7.5 billion up to and including $10 billion | 0.87875 % |
Fund net assets greater than $10 billion | 0.85500 % |
Asset Derivatives | Liability Derivatives | ||||
Derivative Instrument | Risk Exposure | Consolidated Statement of Assets and Liabilities Location | Value | Consolidated Statement of Assets and Liabilities Location | Value |
Futures contracts | Commodity Risk | Unrealized appreciation on futures contracts* | $1,020,158 | Unrealized depreciation on futures contracts* | $2,545,306 |
* | Includes cumulative appreciation/depreciation on futures contracts as reported in the Fund’s Consolidated Portfolio of Investments. Only the current day’s variation margin is presented on the Consolidated Statement of Assets and Liabilities. |
Consolidated Statement of Operations Location | |
Commodity Risk Exposure | |
Net realized gain (loss) on futures contracts | $(12,629,467 ) |
Net change in unrealized appreciation (depreciation) on futures contracts | (5,147,049 ) |
February 23, 2024
Dividend Received Deduction | Qualified Dividend Income |
0.00 % | 0.00 % |
Name, Year of Birth and Position with the Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Indefinite Term • Since Inception | Retired; Physician, Edward-Elmhurst Medical Group (2021 to September 2023); Physician and Officer, Wheaton Orthopedics (1990 to 2021) | 257 | None |
Thomas R. Kadlec, Trustee (1957) | • Indefinite Term • Since Inception | Retired; President, ADM Investors Services, Inc. (Futures Commission Merchant) (2010 to July 2022) | 257 | Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association |
Denise M. Keefe, Trustee (1964) | • Indefinite Term • Since 2021 | Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System) | 257 | Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director of RML Long Term Acute Care Hospitals; Director of Senior Helpers (since 2021); and Director of MobileHelp (since 2022) |
Robert F. Keith, Trustee (1956) | • Indefinite Term • Since Inception | President, Hibs Enterprises (Financial and Management Consulting) | 257 | Formerly, Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Indefinite Term • Since Inception | Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 257 | None |
Bronwyn Wright, Trustee (1971) | • Indefinite Term • Since 2023 | Independent Director to a number of Irish collective investment funds (2009 to Present); Various roles at international affiliates of Citibank (1994 to 2009), including Managing Director, Citibank Europe plc and Head of Securities and Fund Services, Citi Ireland (2007 to 2009) | 233 | None |
Name, Year of Birth and Position with the Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INTERESTED TRUSTEE | ||||
James A. Bowen(1), Trustee, Chairman of the Board (1955) | • Indefinite Term • Since Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P., Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 257 | None |
Name and Year of Birth | Position and Offices with Trust | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(2) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since 2016 | Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Derek D. Maltbie (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since 2023 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., July 2021 to Present. Previously, Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., 2014 - 2021. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since Inception | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term • Since Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Roger F. Testin (1966) | Vice President | • Indefinite Term • Since Inception | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Stan Ueland (1970) | Vice President | • Indefinite Term • Since Inception | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
FUND ACCOUNTANT &
TRANSFER AGENT
240 Greenwich Street
New York, NY 10286
PUBLIC ACCOUNTING FIRM
111 South Wacker Drive
Chicago, IL 60606
320 South Canal Street
Chicago, IL 60606
(b) Not applicable.
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant, during the period covered by this report, has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec, Robert F. Keith and Bronwyn Wright are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees (Registrant) — The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $52,000 for the fiscal year ended December 31, 2022 and $58,000 for fiscal year ended December 31, 2023.
(b) Audit-Related Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2022, and $0 for the fiscal year ended December 31, 2023.
Audit-Related Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended December 31, 2022, and $0 for the fiscal year ended December 31, 2023.
(c) Tax Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $28,000 for the fiscal year ended December 31, 2022 and $42,000 for fiscal year ended December 31, 2023. These fees were for tax consultation and/or tax return preparation.
Tax Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor and distributor were $0 for the fiscal year ended December 31, 2022, and $0 for the fiscal year ended December 31, 2023.
(d) All Other Fees (Registrant) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2022, and $0 for the fiscal year ended December 31, 2023.
All Other Fees (Investment Advisor and Distributor) — The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant’s investment advisor and distributor, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended December 31, 2022, and $0 for the fiscal year ended December 31, 2023.
(e)(1) Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent.
(g) The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for fiscal year ended December 31, 2022 were $28,000 for the registrant, $0 for the registrant’s investment advisor and $0 for the registrant’s distributor and for the registrant’s fiscal year ended December 31, 2023 were $42,000 for the registrant, $44,000 for the registrant’s investment advisor and $60,500 for the registrant’s distributor.
(h) The registrant’s audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
(i) Not applicable.
(j) Not applicable.
Items 5. Audit Committee of Listed Registrants.
The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith, Niel B. Nielson and Bronwyn Wright.
Item 6. Investments.
(a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)).
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item [18]. Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 14 Exhibits.
(a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a)(2) | Not Applicable. |
(a)(3) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(4) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) | First Trust Exchange-Traded Fund VII |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | March 11, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | March 11, 2024 |
By (Signature and Title)* | /s/ Derek D. Maltbie | |
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | March 11, 2024 |
* Print the name and title of each signing officer under his or her signature.